European Powerhouses Show Their Cards

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This story was reported by Dieter Brockmeyer, Chris Forrester and Janet Stilson, and
written by Stilson.

Cannes, France -- Three of the most powerful European media
companies gave attendees of the annual MIPCOM program market here a glimpse into their
future alliance and acquisition strategies. And News Corp. figured into more than one of
them.

Of the trio -- Germany's The Kirch Group,
France's Vivendi S.A. and Spain's Telefónica de España -- the last made the
biggest splash.

The telco-turned-media conglomerate trotted out the top
executives of its newly formed Telefónica Media unit for a press conference, followed by
a splashy party that attracted the crème de la crème of American programming executives.

TM president and CEO Jose Antonio Ríos said his unit will
be listed on the Spanish stock exchange in the first quarter of 2000, and it is
contemplating a listing on NASDAQ, as well. J.P Morgan & Co. is serving as an adviser
on the process.

But as for its expansion plans, Ríos would only say,
"Production and content are very important to us. Broadcast TV is very important. We
will take decisive and quick action" in buying more media properties.

However, informed sources reported that TM's shopping
list in Latin America includes:

• Buying up the interest in Argentina's No. 1
broadcast network, Telefe, beyond the 26 percent it already owns;

• Buying a greater interest in powerful Argentine
sports-programming company Torneos y Competencias;

• Buying Brazilian broadcast network SBT if current
Brazilian legislation is passed allowing foreigners to own stakes in broadcast networks;

• Creating a Latin American film-production company;
and

• Buying broadcast networks in Peru, Colombia, Chile
and Venezuela.

All of this would come in addition to TM's already
considerable cable-systems and telephony-company holdings in Latin America.

Meanwhile, Vivendi chairman and CEO Jean-Marie Messier
discussed the likelihood of a merger between two of its partially owned companies --
British Sky Broadcasting Group plc and Canal Plus S.A. He termed such a marriage
"obvious." Vivendi owns a controlling stake in Canal Plus and 25 percent of
BSkyB.

Messier said Vivendi and News Corp. (which owns 40 percent
of BSkyB) were already working together. "I think when we are looking at what we can
achieve with Sky, we look at the key growth of the media -- newspapers, TV stations -- and
we think that someday they are going to merge. It may be one month, six months,
whenever."

The most immediate goal between News Corp. and Vivendi, he
said, was "organizing the convergence of the technologies for the next generation of
the Web set-top box. This is going to be a de-facto fully European standard." Messier
added that this would create considerable leverage with box manufacturers.

In other news, officials at Kirch said its newly launched
direct-to-home platform, Premiere World, is enjoying significant success early on.

The platform -- which combines the largely unsuccessful DF1
platform and premium-movie-channel group Premiere -- relaunched over the Oct. 1 weekend,
generating about 25,000 new subscribers. Subsequent days drew slightly less than 10,000
each, according to Jan Mojto, general manager of Kirch's BetaFilm distribution unit.

When Premiere World launched Oct. 1, it had about 2.1
million subscribers, including 900,000 digital subscribers.

Those gratifying results for a venture largely considered a
failure before may be why rumors are now spreading that Premiere World is angling to sell
small equity stakes to several major Hollywood studios -- probably as a
program-distribution bargaining chip.

Kirch officials would not comment on that speculation, but
Mojto did say that Premiere would be a rich bride that could be selective about its
suitors.

Murdoch had been negotiating on and off for a stake in the
German DTH platform's earlier incarnation, DF1, for about six years. Each time an
agreement seemed likely, it was blocked by one of the platform's partners. Those
equity players have changed with time, and they currently include Kirch's Pay TV unit
(95 percent) and CLT-Ufa (5 percent).

Regardless of whether Murdoch joins forces, a stronger
boost in the platform's customer base is likely to come in November, when Deutsche
Telekom starts selling its digital set-top box -- the so-called d-box -- in all of its
shops across Germany, along with subscriptions for Premiere World.

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