Frankfurt, Germany -- Word surfaced recently of two
possible equity alliances that could significantly alter the pay television landscape in
Europe over the coming months.
Bertelsmann A.G. chairman Thomas Middelhoff confirmed that
the German media company and Microsoft Corp. are in talks that could see the two companies
jointly acquire the cable systems of Deutsche Telekom A.G., the German telco and one of
the world's largest MSOs.
At the same time, Patrick Le Lay, chairman of French
broadcaster TF1, is speculated to be interested in acquiring a stake in Luxembourg TV
group CLT-Ufa, which is controlled by Bertelsmann and Belgium's Audiofina S.A.
If either deal gets done, it would heighten
Bertelsmann's involvement in the multichannel-TV business. In recent months, its
CLT-Ufa subsidiary largely exited the pay TV business in Germany by selling off its stake
in pay TV service Premiere to The Kirch Group.
A stake in Deutsche Telekom's cable systems would give
Bertelsmann a big multichannel-TV presence. However, its interest in the systems is seen
more as an effort to secure broadband capacity for its growing Internet business.
In France, TF1 is already a pay TV player, with a 25
percent stake in local digital direct-to-home platform Television Par Satellite. French
private broadcaster M6, which CLT-Ufa controls, also owns a quarter of TPS.
Rèmy Sautter, CLT-Ufa's CEO for France and other
international markets, recently said the broadcaster is interested in developing digital
services for TPS.
While a TF1 investment in CLT-Ufa would provide Bertelsmann
with greater corporate connections to French pay TV, any such ties could be limited
because Bertelsmann is concentrating its investments on Internet activities.
For Microsoft, a Deutsche Telekom agreement would follow a
series of other recent European cable deals that include stakes in United Pan-Europe
Communications N.V. (UPC), Europe's No. 2 MSO; Portuguese systems company TV Cabo
Portugal S.A.; and British MSOs NTL Inc. and Telewest Communications plc.
Deutsche Telekom officials have stated that they are
seeking some 30 billion deutsche marks ($16.29 billion) for the systems, which include 6
Microsoft is also reportedly in talks to invest
independently in Deutsche Telekom's multimedia businesses. German industry sources
said $1.8 billion has been earmarked for any such investment.
Observers noted that while Deutsche Telekom has put the
systems up for sale, some managers have decided that the company should keep the business
in its own hands.
The proposed sale of the cable systems had been a reaction
to pressure from the European Commission, which wants to separate Deutsche Telekom's
telephone infrastructure from its cable infrastructure.
But the EC is not fully operational at present, and the
regulator's weakness is helping to heighten differences within Deutsche
Telekom's management ranks.
If Deutsche Telekom sells off the systems, it will still
remain a force to contend with in the cable business: It supplies the backbone system to
independent cable operators, and it is trying to maintain control over the distribution
and marketing of multichannel services.