NEWS MONDAY 29 - MONDAY 5 2001

Scroll down page for news in chronological order

WEEKEND NEWS Friday 2nd- Monday 5th November2001

French media giant Chairman, Jean Marie Messier (left), wants its production business back. Former Seagram CEO Edgar Bronfman Jr, sold Vivendi's production business four years ago to Diller for about $1.5 billion. On Tuesday (30/10/01) Messier said he is looking to restructure his arrangement with Barry Diller's USA Networks.

Diller turned Universal's cable TV stations - including USA Networks and the Sci-Fi Channel - into a powerhouse TV and Internet business with $4.6 billion in revenues last year.

Messier's Vivendi Universal owns 43 per cent of Diller's USA - but it's a passive investment. Diller holds the voting power.

Messier said his desire to renegotiate Bronfman's controversial deal 'was no judgement on the past' - only the terms of the deal are now too limited.

Messier would like to bring Diller's TV empire back under Vivendi Universal - with Diller still running the show. A restructured relationship with Messier would only work if Diller was given complete autonomy say commentators.

Vivendi Universal's co-COO, Pierre Lescure, recently confirmed that Messier and Diller have discussed every possible arrangement and acknowledged that, should they strike a new deal, Diller must 'feel free' for it to succeed.

A spokeswoman for Vivendi Universal confirmed negotiations are taking place, but declined to provide details of the talks.

US CommuniComm Cable allegedly used EchoStar's DISH Network antennas and receivers to access local network affiliate signals for distribution to customers.

In its litigation in US District Courts in Colorado, EchoStar is seeking damages for CommuniComm's apparent re-use of its signal.

According to the Federal Court filing, EchoStar's investigation concluded that CommuniComm allegedly used DISH Network equipment activated under residential subscriptions for CommuniComm employees for the reception of local affiliate signals for ABC, NBC, CBS and FOX. Further investigation concluded that signals were allegedly distributed to CommuniComm customers in a number of states including Oklahoma, Texas, Georgia, Louisiana, Colorado, Wyoming, Tennessee, Alabama and Florida, according to EchoStar's litigation.

EchoStar stated that it didn't have a contractual relationship with CommuniComm and the cable firm never obtained EchoStar's consent to rebroadcast the local affiliate channels to its customers. To no one's great surprise, EchoStar intends to terminate the residential accounts in question.

Financial Review

Revenues for the quarter ended 30 September 2001 were £60.1 million, an increase of 10 per cent from £54.6 million in the previous year.

Operating income for the quarter, before charges for the amortisation of goodwill, was £12.4 million, which represents a 13 per cent increase from £10.9 million for the first quarter of the previous financial year.

Conditional access revenues at £25.1 million for the quarter were lower than the same period last year due to a decrease in the volume of smart cards supplied. This is partly attributed to customers drawing down their inventories. The base of active smart cards protecting customers' revenues rose by 1.2 million in the quarter to 25.7 million at 30 September 2001. This compares with 20.0 million at 30 September 2000.

Revenues from integration, development and support for the quarter were £14.0 million, compared to £8.8 million in the first quarter of the previous financial year.

Revenues from new technologies amounted to £6.6 million in the quarter, or 11 per cent of total revenues, which represents a significant increase over the £1.9 million in the previous financial year.
Amortisation of goodwill expense increased from £0.3 million to £1.7 million quarter to quarter, reflecting amortisation of the goodwill arising from the acquisition of Orbis in December 2000.

Diluted earnings per share for the quarter, adjusted to eliminate distortions caused by the amortisation of goodwill rose 18 per cent from 14.3p to 16.9p.

Friday 2nd November

Finance available for EchoStar

It appears that there is no shortage of banks willing to finance US satellite company EchoStar's $2.75billion bridging loan with Hughes vendor General Motors which could be refinanced as early as next week.

US reports say several investment banks have contacted EchoStaroffering to take on the financing, agreed as part of EchoStar's $26 billion acquisition of GM subsidiary Hughes Electronics and its DirecTV US satellite operation.

The surprise GM loan was offered to meet a $2.75billion shortfall after EchoStar rejected the terms of a $3billion financing package from UBS Warburg, EchoStar's financial adviser.

GM agreed to put up the bridge loan after Charlie Ergen, EchoStar's Chairman and Chief Executive, offered $2.75 billion of his personal shareholding in the company as security. Deutsche Bank, EchoStar's other financial adviser, also put up a $2.75 billion bridge loan.

An attraction for the investment banks is the potential to earn fees as EchoStar will need to raise new financing over the next year - but it is not clear to what extent the company's ability to raise finance will be affected by Moody's rating agency.

eTV launches in Norway

Canal Digital, the Norwegian DTH operator, now fully controlled by Norway's expansion-hungry telco, Telenor, is launching the Swedish interactivce shopping service eTV in Norway. The launch is accompanied by a major marketing campaign as 'the first real interactive Tv service, a preview of television of the future.' The Norwegian trade press is raving about 'interactive television now taking a major leap forward,' declaring 'full screen, high quality video and interactivity is now presented in a way, never done before.'

In Sweden, however, eTV, is already a well-established player. Devised and developed by Cell Networks - eTV grew out of the 'new economy' Internet consultants, established in the late Nineties, and part of the media hype balloon. The channel was an early pioneer in the Swedish DTT project, originally and officially launched in April of 1999. Technical problems resulted in eTV not joining the DTT project until late in the autumn of that year.

Recently eTV management has publicly voiced its scepticism over the future of Swedish DTT. To date only some 100,000 subscribers have been recruited. Consequently eTV appears to be aiming at other means of distribution, such as DTH (Canal Digital) and digital cable.

So far eTV is offering e-shopping of CDs, videos, some travel services and weather reports. The introduction of news services has been planned for quite some time.

Taiwan's unauthorised ads opposed

Taiwan's cable TV operators have been accused of costing the pay TV industry millions of dollars in revenue because of the practice of masking international advertising with locally-made adverts.

Delegates to the Cable TV Summit in the Taiwanese capital Taipei heard that cable TV's advertising take is expected to end the year at around $230 million, compared to $289 million in 2000 because of recession and the affect of a series of typhoons.

This downturn has placed even more pressure on cable TV channel providers who reach nearly five million Taiwanese homes. The conference heard that some advertising agencies have created a blacklist of cable TV channels worst affected by the process of masking and can no longer recommend that airtime on these channels should be bought by their clients.

David Dea, Chief Executive of Taiwan Broadband Communications told the conference that the fundamental root of the problem was that cable operators were compelled to carry 80 to 100 channels by the handful of powerful programming cartels who handled the bulk of channels distributed in the market.

"Cable systems have seen their bottom line squeezed in numerous ways in their bid to create revenue and cash flow opportunities. One of the ways to compensate was to look at inserting unauthorised local ads," Dea said.

BBC Worldwide 'bribery'

Hong Kong's BBC Worldwide Director of Global Market and Brand Development, Jeff Taylor, is alleged to be involved in a bribery scandal, according to a Guardian newspaper report.

The HK Independent Commission against Corruption arrested Taylor in Hong Kong following allegations of corruption at EMS, which sells BBC Worldwide merchandise. EMS is claimed to have taken illegal commissions for placing orders with suppliers.

The BBC said today it had cancelled its arrangements with EMS, but was standing by Taylor.

Rupert Gavin, the Chief Executive of BBC Worldwide, said that Taylor is currently being held on bail in Hong Kong, having surrendered his passport. The BBC was giving legal assistance to Taylor, who has been suspended.

Gavin also said that Taylor 'adamantly denies' any allegations that he was party to an alleged fraud. He added that if the allegations of fraud were true, then BBC Worldwide was the victim of the fraud.

He said, "If the allegations are true then EMS may have been surreptitiously taking a commission from the factories without our knowledge or approval.

"If this process were to apply to all the factories that they used (which is not proven at all) the total of these charges might come to about £200,000 per annum over a three year period."

The BBC was conducting its own inquiry into the allegations, and had made alternative agent arrangements in Hong Kong said Gavin.

Orange UMTS delivers triple play

Orange SA, the mobile subsidiary of France Telecom, and Alcatel say they have conducted the first voice, data and video communications on the Orange UMTS mobile infrastructure network installed in Paris by Alcatel.

This pre-commercial network infrastructure carries voice communications in circuit mode and also allows the transfer of data and high-speed video images in packet mode. These communication links were achieved using UMTS terminals called icTerm supplied by Fujitsu.

Voice calls were successfully made between two mobile UMTS terminals, a mobile UMTS terminal and a mobile 2G/GSM terminal, and between a mobile UMTS terminal and a phone connected to the switched fixed network (PSTN), demonstrating the integration of a UMTS network to both the Orange GSM mobile network and France Telecom's fixed network. Calls were conducted from inside a building, from a motor vehicle and by a pedestrian moving around downtown Paris within Orange's UMTS-cell coverage zone.

*Alcatel has also announced that it has been selected by Russia's VimpelCom as sole 3G field trial supplier.

A Memorandum of Understanding (MoU) has been signed for the supply of a 3G/UMTS trial network to its fully-owned subsidiary KB Impuls.

Alcatel will deliver and install its complete Evolium solution including the UTRAN (UMTS Terrestrial Radio Access Network) radio systems, the network systems (CORE), as well as the associated Radio Network Controller (RNC) and multimedia equipment. The radio systems, which include the UMTS base stations (Node B), are developed and produced by Evolium SAS, the joint venture between Alcatel and Fujitsu.

Alcatel reported its Q3 earnings Wednesday (31/10/01) showinga loss of E558 ($506.8 million) compared to a profit of E297 million euros ($269 million) a year ago.

An additional 10,000 jobs are to be cut in Europe on top of 23,000 job layoffs the company made earlier this year.

The company's revenue on a pro forma basis was 5.62 billion euros ($5.1 billion), an 18 per cent decline from a year ago. The company also said it expects continued weakness in its market for the first half of 2002, and is now expecting a full-year loss of about E5 billion ($4.5 billion).

DAB radio in cars

The first DAB digital radios to be installed as standard line-fit in mass market cars will be available by the end of next year (2002) - in Canada.

General Motors of Canada Limited announced on 29/10/01 that GM will become the first automaker in the world to deliver factory installed DAB Digital Radio technology to the automobile marketplace. The Canadian built 2003 Chevrolet Impalas and Monte Carlos will be among the first models available with DAB.

The announcement was made at the Canadian Association of Broadcasters 75th Annual Convention (29/10/01) where President and General Manager of GM of Canada, Maureen Kempston said, "Digital radio is the future of broadcasting in Canada. GM plans to be the automaker of choice when it comes to digital technology and mobile commerce."

Canada has more than 55 DAB stations serving a potential 10 million people in Vancouver, Toronto, Windsor and Montreal, with broadcasting in Ottawa due early next year.

BBC jobs slashed

The UK's BBC is cutting 129 programme-making posts in its factual and learning department, which makes general documentaries and arts programmes such as Omnibus, Airport, When Louis Met... and Timewatch.

The casualties will be mainly in London but BBC production staff in Manchester will also be affected as well as Management jobs in Birmingham.

The long anticipated cuts were expected to be announced yesterday (01/11/01).

The BBC originally planned to introduce the cuts in the summer. But the announcement was delayed because it was feared that the news might send the wrong signal to the Culture Secretary, Tessa Jowell, while she was deciding whether to give the go-ahead for the BBC's proposed new digital TV services.

Phoenix ready for competition

Phoenix Satellite Television Holdings, the leading private sector Chinese broadcaster, does not see Hong Kong and foreign competition into the mainland market as a concern because of its political connections.

Liu Changle, Chairman and Chief Executive of the Hong Kong-listed company, made the comments on Wednesday (31/10/01) at a meeting with international investment analysts in Hong Kong.

"At the end of the day we are a Chinese company, if you know what I mean. We know the guys that matter," Changle said.

Shanghai businessman Changle is a former member of China's military and previously part of the state broadcasting establishment. He controls Phoenix together with Rupert Murdoch's News Corp.

Phoenix TV, which registered in Hong Kong last year, provides a Chinese-language pay-TV service to more than 40 million households in China's wealthy Guangdong province via the local state-run cable operator.

Prior to formally receiving permission for landing rights in Guangdong from the State Administration of Radio, Film and Television this month, Phoenix' service in the province had been technically illegal.

The company now faces increasing competition from international competitors, including its current partner News Corp as well as AOL Time Warner. Both recently received permission to start their own Guangdong services, while Hong Kong channels are providing strong competition.

Thursday 1st November

EchoStar deal faces woes

US satellite group EchoStar's announced $26 billion merger purchase of Hughes Electronics to gain control of satellite TV subsidiary DirecTV still faces regulatory hurdles, but these have been joined by increased financial difficulties.

Tuesday (30/10/01) saw Hughes being downgraded to junk statusby rating agency Moody's, citing rising debt and poor operating performance.The move is a setback for EchoStar which is seeking to refinance a $5.5 billion bridge loan to fund its purchase of Hughes.

Charlie Ergen, EchoStar's Chairman and Chief Executive, said on Monday the company would seek to raise alternative financing in the market to repay the loan.

By mid-afternoon, Hughes shares had fallen 88 cents to $13.48. EchoStar was down 81 cents at $23.27.

Hughes added 425,000 new customers in the third quarter of the year but acquisition costs resulted in a net loss of $277 million, triple its loss in the same period of last year.

Moody's also downgraded the debt of Panamsat, the satellite transmission group which is 81 per cent owned by Hughes. Panamsat said it would attempt to raise about $2bn of debt in the market to repay a $1.725 inter-company loan to Hughes.

Rupert Murdoch's News Corp is reportedly waiting in the wings should the deal fall through, encouraging antitrust action.

Antitrust lawyer David Boies has been brought on board by Echostar to plead its case that a combined DirecTV and EchoStar would present consumers a powerful alternative to cable.

Mike Pausic, Managing Director of Maverick Capital, a shareholder in DirecTV-parent Hughes Electronics has been reported as saying, "In all likelihood the announced deal will not clear the regulatory process. We expect News Corp. and the GM board to revisit this issue in the coming months."

Meantime News Corp is believed to be seeking a content-distribution deal with AT&T Broadband or AOL Time Warner.

Crown quits Italian race

Crown Castle of the USA has asked the Italian state broadcaster RAI to return its 800 billion lire (£230 million) deposit lodged in June for 49 per cent of RayWay, the public group's transmission system.

Now that the deed of sale by RAI has failed, following a 'no' from Minister Maurizio Gasparri, the Texans asked to 'act immediately through the Chase Manhattan Bank, New York, without forgetting legal interests.'

RAI has objected and has contacted advisers to start a legal battle against the Communication Minister. For now President Roberto Zaccaria has only dampened Gasparri's thesis with an order of the day voted by a majority in the board of director, three members on five. "We decided the price of the relay station before September 11 and before the crisis of the new economy. The Texans promised us an enormously important and good development plan,' said the majority members' representatives.

Gasparri replied that 1700 billion lire is too low a valuation for the entire RAI system, the same that IRI made ten years ago. Zaccaria and the two members of the board denied that IRi had never made this evaluation ten years ago, but that RAI made it with a banal internal act with no legal meaning.

Gasparri said also that the sale would have risked the nation security, but again RAI replied that the contract of sale includes redemption in case of strategic emergency, and asked the Minister and the Texan buyers about contacts they had before Gasparri stopped the operation.

The order of the day hasn't been voted by Alberto Contri, counsellor close to the Polo delle Liberta (Italian Prime Minister Silvio Berlusconi's party), who previously voted in favour of the sale. Now he thinks Crown had privileges denied to some other potential buyers. Also, he doesn't agree that legal action, which could destabilise the company, and could only be a pretext to hide the disaster of the advertising revenues which were 350 billion lire below expectations.

"Zaccaria's editorial policy has made RAI a faded copy of Mediaset, depriving it of its public service nature and without any positive commercial effect," he said. Gasparri commented, "RayWay operation is closed. Rutelli and Fassino complained? Ask a business expert for information."

French 'pay' for interactivity

French cable network Noos has found a way of getting subscribers to pay for some of the interactive services, and even had some takers. Stephane Bismuth, Head of Interactive services at Noos, spilled the beans at a seminar last week reported in French newsletter Satellifax.

Noos had introduced a points system for its digital subscribers last year, enabling them to make up their own package of channels up to the number of points (or 'stars') that they have subscribed to and can change the composition of their package each month. Around ten to fifteen per cent of Noos's 300,000 digital subscribers accepted paying one star for an interactive service such as the weather or the news stories from the AFP.

EMTV's F1 disposal

Bondholders holders representing E400m ($363m) of convertible debt at Germany's EMTV have appointed Bingham Dana, a US law firm, to write to EMTV's supervisory board over their concerns about valuation and disposal of the company's remaining Formula One stake to Kirch Gruppe.

The two groups are in discussions over EMTV's remaining 16.7 per cent stake in SLEC, the company that holds the media rights to the Formula One racing series.

Kirch Gruppe holds 58.3 per cent of SLEC and a deal with EMTV would give it a controlling 75 per cent holding.

Kirch is reported in the Financial Times to have offered its 24.2 per cent stake in the E95 million cap media company Constantin, plus its 50 per cent share in Junior TV joint venture with EMTV in exchange for the F1 stake.

Oftel reviews satellite access

On Tuesday (30/10/01) UK telecommunications regulator Oftel announced that it was to review access charges for TV channel carriage on satellites, and would consider whether public broadcasters should pay at all or receive a substantial discount.

UK pubcaster the BBC had been lobbying for Oftel allow cheaper or free access to British Sky Broadcasting's satellite network. Public service broadcasters currently pay the same as commercial channels carried by BSkyB following an earlier Oftel ruling.

Conditional access charges give an incentive for Sky to carry free-to-air channels and make them universally available to viewers with a Sky dish who do not take Sky's programme packages.

Jim Niblett, Oftel's director of broadband and European affairs, was reported as saying that conditional access charges were a "legitimate" way of recouping some of distributing subsidised digital set-top boxes. Free-to-air broadcasters argue they should not have to contribute to Sky's common costs because they benefit less from the investment in set-top boxes.

Government support for CASBAA

In a major policy shift, the Hong Kong government has announced that it will sponsor November's Cable & Satellite Broadcasting Association of Asia (CASBAA) annual convention, in an apparent bid to attract channels and ancillary sectors to site themselves in the Special Administrative Region (SAR) of China.

The move is a reversal of Hong Kong's policy of the 1990s that stated its' low corporate tax rate and its position as a gateway to China were sufficient to attract companies. It also represents a major challenge to Singapore, which has used tax holidays and other incentives to attract channels including CNBC Asia, MTV Asia, Discovery, HBO and ESPN to base themselves there.

The sponsorship has been agreed by InvestHK, the SAR government agency that seeks to attract inward investment. It views the sponsorship as the first step in a drive to increase the number of cable and satellite TV channels and related companies headquartered in Hong Kong.

CASBAA Executive Director Simon Twiston Davies confirmed that InvestHK's Director-General Mike Rowse had agreed "a significant sponsorship deal" at CASBAA 2001 - the association's annual convention from November 28 to 30.

He added that it will feature a speech by a senior Hong Kong Government official who is expected to aggressively outline the SAR's claims' to be "Asia's broadcasting hub."

Twiston Davies commented "InvestHK's decision symbolises a welcome shift in the Hong Kong government's thinking. In the 1990s when pay TV was establishing itself in Asia, Hong Kong declined to offer any direct incentives. However, its officials clearly realise that in the current economic climate that they have to be more proactive."

Hong Kong is likely to position itself as a gateway to China and north Asia markets like Japan, Korea and Taiwan where the pay TV sectors are bucking the recessionary trends of the regional economies as a whole.

BBC 'global news' division

UK pubcaster, the BBC's commercially funded BBC World, is to be merged with government-funded World Service in a new 'global news' division headed by Mark Byford, currently Director of the World Service, according to a report in The Guardian newspaper, Tuesday (30/10/01).

The BBC said the move will allow it to create a "clearer presence in the international media marketplace and improve the impact of BBC services on global audiences."

This move is has infuriated its commercial rivals. ITN has warned BBC's plans will lead to a further blurring of its commercial and public service responsibilities.

An ITN spokesman said, "It seems the BBC is expecting consumers, taxpayers and competitors to accept a merger of publicly funded and commercial operations, the integrity of which is entirely dependent on a fair trading agreement that the corporation has spent the last three years evading."

BBC bosses insisted that the two services would retain their distinct identities and methods of funding.

The National Union of Journalists broadly welcomed the news with an NUJ BBC official at Bush House describing the decision as "a logical move � it is putting back together what belongs together." However, he warned of disparities between the two divisions and said, "Under the BBC World Service regime, there is a long history of local agreements whereas the commercial companies like BBC World tend to be more gung-ho."

If the BBC receives government funding for the loss-making BBC World, it will face hostile opposition from rivals such as CNN and Sky, which operate without public subsidy.

The new division, which will include BBC World Service radio, BBC World television and the BBC's international news websites, will work in partnership with the BBC's newsgathering division, which will continue to provide all English-language news services.

A BBC spokesman said, "The content of BBC World is made by BBC News, but there is no licence fee money going towards funding it," reinforcing the fact that BBC World channel and World Service radio finances would be kept entirely separate.

"BBC News will continue to supply the content. All that will happen is the editorial management of the service will come under BBC World Service Director Mark Byford.

"Not one halfpenny of World Service money will go to BBC World. It will still be a fully commercial channel, funded by advertising and subscription," said the spokesman.

"There are no job implications, it's purely an organisational thing. It doesn't affect how we produce BBC World. BBC News is the contractor that produces output for BBC World."


Greg Dyke, the BBC's Director General said that the move would bring "huge credit back to Britain" at a time when independent and impartial coverage was vital across the world.

Vivendi to take control of Cegtel

Vivendi Universal, Paris-based media and environmental services group, is expecting to take majority ownership of French fixed and mobile telecommunications operator Cegetel soon said Chief Executive Jean-Marie Messier.

"We have pre-emption rights which puts us in a strong position to increase our holding to a minimum of 50 per cent," said Messier. "The future of Cegetel is with Vivendi."

A shareholder pact gives Vivendi rights of first refusal over Cegetel shares until September 2002.

Vivendi owns 44 per cent of Cegetel, which in turn has an 80 per cent stake in SFR, France's second largest and fastest growing mobile operator. British Telecommunications, with 26 per cent of Cegetel, and SBC, with 15 per cent, are expected to seek to sell their stakes.

Vodafone, which owns 15 per cent of Cegetel and 20 per cent of SFR, is likely to fight back against Vivendi for control of the mobile operator.

Analysts say Vivendi plans to gain majority ownership to receive maximum value from a sale of control, most likely to Vodafone.

Messier said that there was "no imminent decision," while BT said discussions were not taking place "as yet."

Vivendi saw 30 per cent growth in its Q3 revenues. The company, which derives less than five per cent of revenues from advertising, met its target of 10 per cent revenue growth for 2001 and 35 per cent growth in earnings before interest, taxation, depreciation and amortisation (ebitda), making it one of a select band of media companies not to issue a profits warning this year.

Messier said, "Our third-quarter results for the media and telecommunications business are strong despite the tough environment."

Wednesday 31st October

Regulatory battle starts for EchoStar
Football league TV deal reviewed
Canadians seek production funds
Phillipines blanks Star
Canal Digital new MD
JDS predicts slowdown
EuroPacketCable forum formed
Iranian satellite ban opposed
Terayon posts Q3 loss
MTV to lay-off 10%
ABCNews in petrol stations
AT&T may keep cable
Comcast tunes on HDTV
Digital TV access charge review
Crown Media cuts

EchoStar's $26bn acquisition of rival US satellite TV group DirecTV and its owner Hughes could entail a 12-month battle for approval by US regulators. On Monday 29/10/01 Charlie Ergen (right), EchoStar's Chief Executive, rehersed his case against regulatory opposition to the deal saying that combining the two largest satellite TV operators was the only way to ensure effective competition with the cable industry.

"Our customers are asking for broadband and local services. This is the only way we can do that," he said. However, this argument does not address the issue of competition in rural US markets not served by the cable industry.

In February, even EchoStar's own submission to the district court of Colorado stated, "For these millions of customers and potential customers (in non-cabled rural areas), if there is no competition between DTV [DirecTV] and DISH Network [Echostar's service], there is no competition at all."

A potential additional satellite TV competitor is the National Rural Telecommunications Cooperative, which sells DirecTV in rural areas - though it is not clear whether or not it would sell a competing DirecTV product next to the DirecTV/ EchoStar combination.

When the deal was announced it was not creation of the country's biggest DBS platform with 16.7 million satellite customers customers that was referred to, but at 14.9 million homes, EchoStar/DirecTV described itself as the second biggest multichannel provider in the country, just short of AT&T Broadband's 15 million cable customers. Some 1.8 million subscribers controlled by NRTC and its affiliates were not counted in the figures.

Another consideration is EchoStar's ability to influence the success of news and entertainment networks through its ability to distribute programming to millions of subscribers. Ergen has said he would be willing to establish a national pricing scale that would offer rural customers the same prices offered to urban and suburban customers where satellite and cable services are in direct competition. The combined company would also be able to better invest in services like high-speed Internet access, adding to competition in that market.

To overcome anti-trust objections, the deal must be given approval by both the US Justice Department and the Federal Communications Commission. Congressmen Democrat Ernest Hollings and Republican Billy Tauzin, respectively the chairs of the Senate and House commerce committees - have already announced their opposition to the deal.

At Consumers Union its co-director Gene Kimmelman is asking the Justice Department's antitrust division to reject the merger unless two conditions are met. It wants EchoStar to offer the same prices, terms and conditions to consumers in rural America as it does to consumers in other parts of the country.

And it wants EchoStar to drop its opposition to a pending license application from Northpoint Technology to offer a competing wireless service. Northpoint wants to transmit terrestrial signals on the same frequencies DBS uses, a move opposed by satellite interests concerned about interference the wireless offering creates for satellite TV signals.

GM said it expects the merger to close in the second half of 2002. If Ergen fails to get regulatory approval for his deal then GM would have to run Hughes itself, seek bids from other media companies such as The Walt Disney Co, AOL Time Warner, Viacom or Sony - or else go back to Murdoch's News Corp seeking a new offer - from a much weaker negotiating stance.

Also at issue is EchoStar's financing as EchoStar needs some $5.5 billion of total financing, which it expects to fund in the capital markets prior to closing. EchoStar has a "bridge commitment" of approximately $2.75 billion from Deutsche Bank, and a similar commitment from General Motors, "the latter of which the parties plan to replace with a commitment from one or more other leading financial institutions in the near future." News Corp described the rival offer as "unfinanced."

News Corp's statement announcing that the company was withdrawing its bid for Hughes said that, "With this saga finally concluded, we will return with renewed vigor and sharpened focus to maximising our worldwide media businesses," emphasising Murdoch's vision is still global.

Football league TV deal reviewed

UK digital terrestrial broadcaster ITV Digital's £315 million, three-year media deals with the country's Football League which represents 72 professional soccer clubs outside the Premiership, are 'under review.'

The clubs have so far received about £165 million, but there are now fears about the potential closure of ITV Digital or its ITV Sport channel, and the possible loss of the remaining £150 million for years two and three of the deal.

The concerns follow financial market clamour for the closure of ITV Sport or even ITV Digital itself, a move ruled out by ITV Chief Executive Stuart Prebble who says he has the continued support of his shareholders, Granada and Carlton Communications.

ITV Digital spread the payment over a longer period, or hand back the Nationwide League and Worthington Cup rights, or that ITV Sport would be more viable if it were screened on BSkyB.

Canadians seek production funds

In a speech to the Canadian National Press Gallery on October 24th, Michael McCabe, the President and CEO of the Canadian Association of Broadcasters asked for Canadian broadcasters to be allowed access to the $100 million a year Canadian Television Fund. Also that Canadian program subsidies be redirected towards market driven programming.

The programming fund is partially funded by cablecos and can be accessed only by independent production houses which use the money to help structure co-production deals. McCabe's argument was based on the hypothesis that, with declining advertising revenues, broadcasters have to be able to generate revenues that only come from owning their own content. This would then allow them to offer it in on-demand basis and the international market.

While nothing at present prevents the broadcasters from producing their own content, they feel they could do so better if they could access government subsidies.

The music television group, MTV Networks, owned by Viacom, is to cut about 450 jobs as part of its first restructuring programme in over 10 years.

Viacom chief operating officer, Mel Karmazin, said that it has to reduce expenses across the company. This is part of its strategy to confront this year's punishing advertising slump that has damaged its revenue and earnings.

Even so, not all was bad news, its cable networks fared well. Several of MTV Networks' businesses posted double-digit increases in advertising revenue, including MTV, VH-1, TV Land and BET. Most of the cable channels saw subscriber increases in the third quarter.

With this costs cutting the company is hoping to post a 10 per cent increase in earnings before interest, taxes, depreciation and amortisation next year - even if the advertising market does not rebound.

Tom Freston MTV Chief said, "These moves are being made in light of many changes in our company and in our industry, and in view of the new economic times."

Freston said in a memo to staff that the restructuring would be the first significant change in the group's organisation since 1989. The layoffs would represent between eight and nine per cent of the total workforce.

Nickelodeon, which is facing challenges in the kids television market, is expected to take the brunt of the restructuring. Two Nickelodeon businesses, Nick at Nite and TV Land will also be consolidated.

MTV's Internet unit will be blended with its core TV operation, a move that will bring the dot.com group into MTV's Times Square offices.

Freston also said MTV's international operations will begin to hire more local employees, while also consolidating MTV and Nickelodeon in Latin America.

"Earlier in the year we cut many marketing and other activities, but it has become evident that a different organisational model was also needed if we were to continue to be leaders," Freston said.

Tuesday 30th October

EchoStar is suing Microsoft's Web TV Networks over past collaboration on its DISHPlayer personal video recorder/interactive TV set-top box and subsequent coopertion with rival DirecTV.

Following collaboration between EchoStar and Web TV, Web TV developd a relationship with rival DBS provider DirecTV. EchoStar says Web TV then joined forces with DirecTV to produce a competing device and service - which became the Ultimate TV service. EchoStar also claims that Web TV sought to solicit DISHPlayer customers to buy the competing device and service.

EchoStar's suit, filed last week in US District Court in Colorado, says that Web TV stopped performing obligations under its agreement, such as failing to pay for its part of DISHPlayer manufacturing costs, customer service costs, charges for excess inventory exposure, and payments related to activation of new DISHPlayers. The company says Web TV owes EchoStar more than $50 million.

Hong Kong cable television operator i-Cable Communications is cracking down on pirates by introducing a jamming device that flashes light at intervals to illegal set top boxes. Reports from Hong Kong claim that 100,000 homes receive pirated signals a substantial proportion of i-Cable's 540,000 subscriber total.

The new unit, called the Intrusive Flashing Unit interrupts illegal viewing that the company claims costs it $3.6 million a year. It can also be reprogrammed if pirates break the code and i-Cable has refused to disclose the name of the manufacturer to try and ensure that security is maintained.

In the immediate wake of the introduction of the IFUs, churn rates have fallen, according to the company, which is Hong Kong's only pay TV platform. It will also be hoping that the move will claw back the six per cent fall in per subscriber revenue that i-Cable experienced in the last year; it had stood at $239. The company has also experienced a slowdown in the rate of new customer sign-ups in 2001.

US satellite broadcaster DirecTV has won permission from the US Federal Communications Commission's International Bureau to launch and operate its new spot-beam satellite, DirecTV 4S in the US.

The satellite will be co-located with the DBS company's existing network of satellites at its main 101-degree orbital location. "This authorisation will allow DirecTV to use its frequencies at 101 degrees more efficiently and expand its programming options, thereby serving the public interest," said the International Bureau in its authorisation order.

However not everybody was happy with the authorisation. The State of Hawaii asked the FCC to deny DirecTV's application and force the company to file a new application that would require the DBS service to use satellite capacity to deliver services to Hawaiian customers comparable to that which is offered in the rest of the country. The bureau denied the state's request.

The spot-beam satellite is a key component of the company's efforts to meet must-carry requirements. The only thing DirecTV needs now is a date to launch the spot-beam satellite, hopefully before January 1st 2002 when must-carry rules, requiring delivery of all local stations in cities served by DBS companies, kick in.

ITV Digital under threat

UK terrestrial ITV companies Carlton and Granada are under threat from Institutional investors seeking a return on the hundreds of millions of pounds spent on launching ITV Digital, the loss-making digital television venture.

Michael Green, the Carlton Chairman, and Gerry Murphy, its Chief Executive, considered particularly vulnerable unless there is rapid restructuring or closure of ITV Digital.

ITV Digital has cost £800 million to date and will need an injection of at least another £300 million before its break-even date in 2003.

At co-owner Granada, Chief Executive Steve Morrison faces similar difficulties.

Green and Murphy are thought to have just two to three months to show that they can rectify the situation. Otherwise the non-executive directors may be approached to force Green to quit.

Against the tide of opposition, Stuart Prebble, ITV's chief executive, has been insisting that ITV Digital will not be closed � but many analysts believe that closure is a serious option despite government opposition to such a move.

Carlton's shares have fallen over 65 per cent this year while shares in Granada, by have fallen by almost 40 per cent.

Speculation on ITV Digital's closure tends to cause the Carlton and Granada share prices to jump, with Mathew Horsman at Investec Henderson Crosthwaite describing the DTT venture as "a lead weight." Investec suggests that a withdrawal could save around £750 million.

A main supporter of ITV Digital is the UK Government which has a vested interest in the success of the digital terrestrial platform, as it is needed to allow switching off the analogue signal within the next 10 years to create 'digital Britain.'

This month the government re-stated its commitment to digital switchover before 2010, and boosting the power of the digital terrestrial signal and its coverage.

The Government's proposal to appoint a 'Digital TV Team Leader' is also expected to aid the push for a mandatory switch to digital TV. ITV Digital's prospects and its competitive position against BSkyB (1.2 million subscribers to Sky's 5.5 million) would be transformed if analogue was switched off everyone with a new TV set would be able to receive its service.

In the short term, the city is likely to call for at least the closure of the ITV Sport digital channel which has seen very poor viewership figures.

So far unsuccessful partnership deals for Carlton and Granada have been discussed, with companies such as NTL, RTL and BT. Alternatively, Carlton and Granada could sell off their subscriber bases to cable companies and Sky and concentrate on producing content.

UK cableco NTL's Broadcast division has won the contract to provide satellite services for the Home Shopping Europe channel, uplinking services using the Astra 2A direct-to-home satellite system.

Home Shopping Europe, a new multi-portal transactional shopping channel, launched on October 17, broadcasts 24 hours a day, seven days a week with 12 hours on live television.

The channel is broadcast from Home Shopping Europe's studios in the UK at St Albans and backhauled over fibre to NTL's compression hub in London. From here the signal is sent via NTL fibre to the Crawley Court teleport near Winchester and uplinked to transponder 37 on Astra 2A for DTH delivery to satellite television subscribers.

Home Shopping Europe has already established shopping channels across Europe in Germany, Italy, France and Benelux following core product lines; jewellery, beauty, personal fitness, electronics, homeware, DIY, collectables and gifts - a route to be repeated with UK Home Shopping Europe.

Richard Barry, Transmission Controller at Home Shopping Europe, said, "NTL offered Home Shopping Europe a solid technical solution for our UK business. We want to give our customers the best and most convenient shopping experience and NTL met our needs in terms of reliability and customer service. NTL also has vast experience in this field. These assurances are an encouraging platform on which to develop a successful working relationship."

Steve Holebrook, business director for media solutions at NTL Broadcast, adds, "We won the business in the face of stiff competition, but Home Shopping Europe required a solution that fitted well with our strengths and experience in satellite delivery. We have not previously worked with Home Shopping Europe and it is always good to establish new relationships and expand our customer base."

Advanced Digital Broadcast (ADB) in Taiwan says it has completed a major upgrade of set-top boxes already provided for its Australian customer, Austar United Communications. The upgrade's chief components are three-fold. They comprise:

A television-mail application based on ADB's E@symail product. The application is a first step for ADB toward its goal of providing full pay-TV interactivity. Austar is marketing ADB's iTV application to its 80,000 subscribers under the trade name T-mail. Market launch took place in Sydney on October 9, 2001.

Secondly, ADB has provided Austar with a 'sidecar', a box device incorporating a high-speed V90 modem, to enable subscribers to send mail messages to Austar's Internet Service Provider, using a wireless, infrared keyboard.

A special feature of the ADB sidecar is that it enables subscribers to avoid the need to replace their existing set-top boxes with new ones.

The third component of ADB's upgrade of Austar set-top boxes has focused on enhancing Austar's TV Portal by integrating OpenTV's EN2 software into the set-tops. This makes possible a significant extension of the range of applications that can be ported onto the Australian service provider's ADB digital receiver decoders.

The EN2 software with its interactive return path, enables Austar, Australia's leading provider of digital interactive DTH pay-TV services, and the country's second largest pay-TV operator, to roll out fully interactive applications to 300,000 regional homes. ADB says the move also makes it the world's first original equipment designer to implement and market the software with Irdeto Conditional Access in a set-top box.

ADB Australia Country Manager Paul Trimble said, "T-mail expands the reach of Austar's e-mail network into non-PC equipped homes, and has the potential to throw open new doors for our emerging ISP business.

Paul Trimble also revealed that ADB's newest-generation G3 set-top box, also custom-designed for Austar, is already in production and due for release next month (November 2001).

Monday 29th October

US satellite broadcaster EchoStar Communications' $25.8 billion bid for General Motors Corp's Hughes Electronics subsidiary and crucially, its DirecTV home satellite network was accepted on Sunday 28/10/01, thwarting rival bidder News Corp's plans of building a global satellite system incorporating DirecTV.

News Corp dropped out of the bidding on Saturday when News Corp Chairman Rupert Murdoch withdrew his offer due to GM's board failing to reach a decision on the sale. ''We are disappointed with the board's inaction in the face of an as-yet unfinanced counter proposal,'' Murdoch said in a statement.

EchoStar's Dish Network is US number two satellite TV providers with 6.7 million subscribers. By combining with DirecTV the new company will create a US pay-TV collosus with 16.7 million subscribers - some 17 percent of the US market. Consequently a major objection to the deal has been the anticipated close regulatory scrutiny.

GM shareholders still need to approve the deal, which GM said it expects to close in late 2002. GM is to spin off Hughes and merge it with EchoStar in a tax-free transaction. To be run by Echostar CEO and pay-TV veteran Charlie Ergen Ergen, the new company will also be called EchoStar but it will retain the DirecTV brand for marketing.

EchoStar is offering $5.5 billion in cash financing, of which it has secured $2.75 billion from Deutsche Bank with the remaining $2.75 billion coming in the form of a bridge loan from GM, which owns 30 percent of Hughes. The offer comprises 0.73 EchoStar shares for each share of Hughes. Based on EchoStar's closing stock price Friday of $25.26, the deal values each share of Hughes at $18.44 - a 20 per cent premium to Hughes's closing share price of $15.35. Hughes shareholders will become 53 per cent owners of the new company in which EchoStar shareholders will own 36 per cent and GM will own about 11 per cent.

"The combination of EchoStar and Hughes is expected to generate very substantial synergies utilising the advantages of direct-broadcast satellite television, and cost savings from the elimination of costly duplicate satellite bandwidth and infrastructure,'' said Ergen. Apart from giving EchoStar DirecTV's more than 10 million subscribers, the deal will also allow it to achieve cost savings and additional revenue of $56 billion.

This summer EchoStar joined stalled negotiations between GM and News Crop with a proposed stock swap and assumption of $2 billion in debt for Hughes and its DirecTV division, which has 10 million subscribers. EchoStar also guaranteed GM a $500 million break-up consideration if regulators reject the deal. It is also reported that should the regulators block the Hughes-EchoStar deal, EchoStar would make a cash bid of about $5.0 billion for PanAmSat, the satellite TV group which is 80 per cent owned by Hughes, if.

Even before the deal was agreed, the President of the National Consumers League had asked the Federal Trade Commission and the US Justice Department to look into the possible implications of an EchoStar takeover of DirecTV, with National Consumers League President Linda Golodner saying, ''This would almost certainly lead to reduced competition, higher prices and poorer service for millions of consumers.''

Hughes lost $481.6 million through the first nine months of the year. Last May, Hughes Chairman Michael Smith abruptly resigned and was replaced by GM Vice Chairman Harry Pearce who was expected to speed conclusion of the deal with News Corp.

News Corp's apparent failure drove down its shares in Sydney, Australia where stock fell more than six per cent to close at A$13.67 in Sydney trade on Monday.

News Corp is new expected to ensure the deal receives the sharpest scrutiny from the regulators, seeking to win support to oppose the EchoStar-Hughes deal. Some suggest the pull out was to avoid becoming embroiled in a bidding war. Many industry analysts believe that Murdoch is unlikely to give up on his global ambitions - but faces a formidable competitor in Ergen. It is expected that Ergen will argue that, whilst he is seeking a near monopoly in US satellite TV, it is just one platform competing against cable, terrestrial, digital terrestrial and ADSL delivered services. Much will depend on the approach of the liberalising regulatory regime of republican appointed FCC head Michael Powell.

Liberty Media eyeing German partners

John Malone's US-based media investment company Liberty Media Corp would welcome partners willing to acquire stakes in its German cable TV business, a senior Liberty official told German Focus magazine on Sunday.

"We can imagine many ways of cooperation but it is true that quite deliberately Liberty doesn't control 100 per cent of a cable network anywhere in the world. Therefore a strategic German partner would be very welcome,'' Senior Vice President Miranda Curtis told Focus.

Liberty Media last month agreed to buy six cable firms from Deutsche Telekom for E5.5 billion, which if it receives regulatory approval, would make Liberty the biggest German cable TV operator.

Liberty has already been reported to be in advanced talks with Deutsche Bank AG to buy its TeleColumbus, the country's number three cable operator.

For the very latest news go to Home Page............................