Franco-German TV Picture Gets Fuzzier

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The game of musical chairs among the shareholders of the
major cable and satellite services in France is becoming more difficult to follow amid
signs that German media company Bertelsmann AG and Compagnie Generale des Eaux are
aligning themselves more closely.

CGE, a big French utility and major cable operator, has
strongly denied local news reports that it has signed a wide-reaching agreement with
Bertelsmann that is said to include multimedia, print and TV components.

At the same time, other news reports have speculated that
Belgian banker Albert Frere will sell his interests in European multimedia company CLT-Ufa
-- which he controls together with Bertelsmann -- to CGE. That would pave the way for a
full-fledged Franco-German alliance between CGE and Bertelsmann.

Frere is also expected to expand his presence in media
conglomerate Havas, in which CGE is the main shareholder. Through CGE's holding in
Havas, it also has influence over Canal Plus, because Havas is a major shareholder in that
French pay TV company.

While sources said the talks are ongoing and their outcome
is still uncertain, there is concrete evidence that Bertelsmann and CGE are moving closer
together in other media businesses.

AOL Europe, a joint venture between America Online Inc. and
Bertelsmann, recently said it will merge its AOL France and CompuServe France units with
Havas Online.

The deal will be accomplished by giving 55 percent of
AOL's stake in the venture to Canal Plus and Cegetel, the telecommunications branch
of CGE. It's the first time that the European online alliance of AOL and Bertelsmann
has given up control of one of its national ventures. The newly combined French online
service will have a total of more than 200,000 subscribers.

CGE chairman Jean-Marie Messier called the deal 'a
turning point' in the company's relations with Bertelsmann. Insiders at CGE said
a closer alliance with Bertelsmann and Frere's company, Groupement Bruxelles Lambert,
is the only way for CGE to succeed among global competition in the long run.

The complicated alliance picture in France is more muddied
by speculation of a merger between Television Par Satellite and CanalSatellite, the
country's two digital, direct-to-home platforms. After months of negotiations, the
talks are believed to have stalled because TPS shareholder France Telecom blocked the
deal. Such a merger would have further implications on the relationships between Frere,
Bertelsmann, Canal Plus, CGE and CLT-Ufa.

Canal Plus controls CanalSatellite, while Frere and
Bertelsmann are shareholders in TPS through their stakes in CLT-Ufa.

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