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NEWS Monday 12th August - Monday 19th August 2002
Scroll down page or click below for news - latest first
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Friday
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Friday 16th August 2002
Record
loss at News Corp
NTL due out of bankruptcy
Vivendi
downgrade, E10 bn asset sale - inl Echostar
AOL/TW
discloses false accounting
Sweden's
digital interest declines
AB
results posted
US
sat buys UK soccer
Playjam
goes back to the future
Record
loss at News Corp
Rupert Murdoch's News Corporation has posted losses of E6.42 billion during
the last year, primarily due to two investments - an E2 billion charge
against earnings in for the drop in value of its stake in TV Guide and
iTV EPG provider Gemstar in the US, and a loss of some E2 billion through
its investment in the now insolvent Kirch Groupe in Germany. In addition,
there were other partner-related losses, with the value of its holding
in Italian pay-TV provider Stream also adjusted downwards, as were the
value of its broadasting rights for US sports, and its Latin American
partnerships. The company is still pursuing the merger of Stream with
rival platform Telepiu which it is buying from France's Vivendi Universal.
In response to the loss, Murdoch said, "We will not be making any investments
where we do not have complete control or a considerable level of control."
Murdoch said he saw evidence of a solid improvement in the advertising
market in the US and internationally with the company "in an excellent
position for continued profit improvement," despite a 12 per cent fall
in his UK newspaper advertising.
The value of News Corp's 42 per cent stake in Gemstar halved following
the loss of a June court battle over a claim of patent infringement on
its interactive programme guide - resulting in a fall from E90 to less
than E4 in just two years. News Corp executives were described as "working
closely" with managers at the business to "take the necessary steps to
restore the value of that important asset," suggesting Gemstar could rise
again.
Excluding the charges above, News Corp saw an 11 per cent increase in
fourth quarter revenues and a 25 per cent increase in operating profits.
New Corp's film operation Twentieth Century Fox, saw profits rise by E212
million to E483 million and the Fox Television Stations unit saw profits
rise by E26 million, through the "improving" ad market and syndication
success.
The company plans to exercise an option sell its joint venture shareholding
in Rainbow media by the year end, valued at E1 billion, and seen as a
blow to co-owner US cableco Cablevision.
Separately, it is reported that some minority shareholders at News Corp
are uneasy about Rupert Murdoch's succession plans and suggestions that
the successor might be his son, Lachlan.
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NTL due out of bankruptcy
By September 5, the UK's leading cable operator, the endebted NTL, should complete its restructuring and emerge from bankruptcy, but it will continue to face a difficult time as its subscriber base continues to decline in the face of fierce competition from BSkyB and BT.
The company has lost 246,000 subscribers since the beginning of 2002 leaving it with 2.7 million subscribers, while BSkyB won 214,000 new subscribers in the April to June period, to put its total subscriber base at 6.1 million - clearly the chief beneficiary of the demise of ITV Digital.
NTL Chief Executive, Barclay Knapp, whose expertise as a deal maker and fund raiser created the giant, has not suffered the same extent of calls for resignation as his opposite numbers at UK number two Telewest, or European rival UPC - though board changes will be announced in September in line with bondholders recommendations. It may well be because the consolidation phase is not yet complete in the UK, though Knapp, commenting on the likelihood of a merger with Telewest, said, "I think putting the companies together would be a good idea, but it is impossible to predict when it will happen." Knapp added that he had not held any discussion with Liberty Media's John Malone, who had been seeking to boost his 25 per cent equity stake in Telewest ahead of any restructure at that company.
Knapp has also announced that the company has already applied for re-listing with the New York Stock Exchange and would apply for listing in London in 2003.
The group reported a loss of E562 million for the second quarter of 2002, compared with losses of E940 million the previous year. Underlying earnings of E272 million in the April to June period were slightly lower than the previous quarter's E277 million. Ebitda increased from E173 million in the previous year's quarter to E274 million. The company spent E205 million on capital expenditure in the second quarter compared to E167 million in the previous quarter. Operating expenses fill from E445 million to E422 million.
One analyst reported in the FT suggested that the company's UK business would still have about E6.5 to E7 billion debt following its current restructure debt for equity swap, and would therefore remain too leveraged. Knapp however counters that the company, "..will be at six time debt to Ebitda, and that metric is in line with the consrvative end of the cable industry. In the current environment you wish it could be less."
Knapp adds, "Although we wouldn't wish to be in this position in any way, shape or form, we do believe that coming out of the process, we'll be able to restart our growth." But this would not be the capital intensive growth of the past, as he continued, "We're going to be very prudent about how we spend money and how we emerge from the process and how we restart growth."
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Vivendi downgrade, E10 bn asset sale - inl Echostar
Vivendi's shares fell 25 per cent to E11.89 in Paris and its American depositary receipts fell 24 per cent to $11.66 this week amid fears that Vivendi Universal SA's plans to sell E10 billion of assets over the next two years to reduce its debt, as rating agency S&P downgraded its debt to Junk status and Moody's rating went from junk to B1, a non-investment grade.
A huge write-down of E11 billion, primarily related to the value of Seagram which was bought for E53 billion, resulted in a first-half net loss of E12.3 billion. Now Vivendi hopes to raise E5 billion over the next nine months to solve its short-term liquidity problems. But Vivendi faces E5.6 billion in loan-refinancing requirements by March, and S&P expressed doubts that the proposed sale would be sufficient and both agencies said further downgrades - which would increase the cost of borrowing - would follow if the cash was not raised.
When the new Chief Executive, Jean-Rene Fourtou, was asked if the company's 10 per cent stake in US satellite TV operator EchoStar Communications Corp could be an asset for sale, he responded, "Yes. Depending on the loss, that is something we could do immediately if we wanted."
Vivendi paid E1.54 billion in December 2001 for a 10 percent stake in EchoStar, which yesterday posted revenues up 21 per cent to $1.17 billion from $966 million a year ago (see below). However, there are prohibitions on Vivendi selling or disposing its DISH shares before the closing of EchoStar's pending merger with DirecTV and Hughes. Once the merger is complete - or if it fails - Vivendi can sell its DISH shares, subject to certain restrictions.*
Other assets to be sold include US educational publisher Houghton Mifflin bought for E1.74 billion a year ago
Vivendi's debt now stands at E35 billion. Last year the company reported a net loss of E13.6 billion after goodwill writedowns of about E15 billion.
Vivendi has been negotiating a E2 billion credit line with its lenders for the past six weeks; the company currently has access to just E1.6 billion in cash and untapped short-term credit lines which is not enough to get it through the end of the year.
*EchoStar Communications Corp reported a second quarter profit of E37.7 million compared with a loss of E6 million a year earlier, helped by subscriber growth at its Dish Network service. Revenues rose 21 percent to E1.19 billion from E986 million. EBITDA rose to E242 million from E137 million. Shares fell 2.6 percent in Wednesday's trading on the news that French media firm Vivendi Universal would consider selling its 10 per cent stake.
Subscriber growth slowed slightly over the first quarter (335,000), but still added 295,000 net subscribers in the quarter to reach a total of 7.46 million subscribers - on target for eight million subscribers by year-end. Churn was down and Arpu (monthly average revenue per user) totalled $48.85, up 1 per cent from the first quarter but down 2.3 percent from a year ago due to promotions to attract subscribers from cable. Second quarter subscriber acquisition costs were E386 per new subscriber, down from E430 in the first quarter but up slightly from E384 a year ago.
The company's 2002 revenue growth forecast lower is now 20 per cent, down from its forecast three months ago of 20 per cent to 25 percent, with the sluggish economy cited as the reason. However the company's 2002 EBITDA growth forecast remains at 80 per cent to 100 per cent.
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AOL/TW discloses false accounting
Although it was 'only' E50 million that AOL Time Warner disclosed as potentially 'inappropriately recognised as revenue' at its America Online unit over a period of six quarters, the revelation is seen as damning as it only came out three weeks after the US Securities and Exchange Commission and the Justice Department launched inquiries into the accounting practices at AOL.
The company says that the disclosure is based on information it learned within the past 10 days. It adds that payments received by AOL from third parties in three transactions may have been incorrectly recognised as advertising and commerce revenues, and that it is reviewing these transactions and others at the online unit.
Chief Executive Richard Parsons and Chief Financial Officer Wayne Pace had certified the company's financial reports in compliance with the new Securities and Exchange Commission rules.
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Sweden's digital interest declines
By Goran Sellgren
Swedish digital development has taken a temporary halt. According to media research company Mediavision, usage of digital reception in Sweden has gone down from 19.5 per cent in Q1 of 2002 to 18.2 per cent in Q2.
It appears that it is mainly the younger part of the population that seems to have lost faith in digital television. On the other hand interest and usage among the 56+ age group is going up. But the future looks bright: asked about plans to invest in digital equipment in the next twelve months as many as 25 per cent of 15 to 74 year olds gave a positive answer.
Among the three present digital options DTH comes out a clear winner, with Canal Digital leading the race. Now this is a 100 per cent Norwegian operation after the Norwegian telco Telenor recently finalised its year-long negotiations to buy out its former 50/50 partner French CanalPlus from pan-Nordic Canal Digital. Canal Digital has a total of 788,000 Nordic digital subscribers, some 315,000 estimated to be in Sweden, and recent Canal Digital reports claim a constant increase of subscriber figures.
Its main rival, MTG's Viasat, has had a bad last half year, with a log of churn, and luke-warm reactions to recent subscriptions campaigns. Recent figures from Viasat report a total Nordic digital up-take of 577,000 households, some 230,000 of which are in Sweden.
Over the last few years digital TV has enjoyed an average 10 per cent quarterly increase in Sweden, but during the second quarter of 2002 figures have instead gone down by seven per cent.
The big losers are DTT and digital cable operators. In the cable arena both market leader Com.hem - owned by market leader Telia, but soon to be sold off, after orders from the EU, following Telia's plans to merge with Finnish counterpart Sonera - and UPC have problems finding new subscribers. After almost five years since Com.hem launched its digisation in November of 1997 Telia has only managed to attract 10 per cent of Sweden's 1.3 million households. Entirely unofficial figures attributed to UPC suggest that only some 10,000 of its 265,000 households in the greater Stockholm area have moved to digital. On the other hand UPC entered this arena very late. After years of delay, due to 'technical problems', UPC Sweden shipped its first Motorola set-top boxes in December last year.
Swedish DTT was launched in April 1999, but despite the fact that more than 90 per cent of the country is reached by digital transmitters only some 100,000 households have subscribed to the heavily state-supported services.
According to Christina Jutterstroem, Director General of Sveriges Television, SVT, Sweden's public service broadcaster, and one of the most ardent supporters of a quick transition from analogue to digital transmission, the recent falling figures of digital interest in Sweden might be explained by the fact that many Swedish households are waiting for the introduction of the 'people's box'. This is an initiative from Jutterstroem and her colleagues to introduce a simple DTT set-top box to be distributed free of charge to all Swedish licence payers.
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AB results posted
By Sotires Eleftheriou
French production house and channel supplier AB Groupe posted a sales figure of E75.8 million for the first six months of 2002, an increase of eight per cent on the corresponding period in 2001.
The increase is due mainly to strong sales of television programmes during the first quarter of 2002. This activity undergoes considerable variations from one quarter to another and was up 53 per cent in the first quarter this year compared to the same period last year.
The growth was attenuated by a 10 per cent drop in the activity of its thematic channels, attributed to the downturn in advertising.
AB Groupe first six months results
(millions of euros)
Thematic channels 2001- 47.8; 2002 - 42.8
TV programmes
Distribution 2001- 13.2; 2002- 20.2
Production 2001 - 4.8; 2002 - 7.4
Merchandising 2001 - 4.3; 2002 - 5.4
Total 2001 - 70.1; 2002 - 75.8
AB Groupe supplies a total of 19 channels to cable and satellite operators in France and neighbouring countries and also operates its own mini-bouquet. Its flagship channel, RTL9, reaches 6.199 million homes (30/06/2002), followed by AB Moteurs (3.199 million), AB1 (2.954 m). Specialist hardcore channel XXL has 1.015 million subscribers. The group also controls the German channel Onyx, with 11.5 million subscribers.
The group has applied for 10 channels for French DTT, eight of which are for new channels.
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US sat buys UK soccer
DirecTV has agreed a two-year deal with Fox Sports International to be the exclusive US commercial distributor of the Barclaycard English Premier League pay-per-view package, which will include Saturday and Sunday matches beginning August 17 and delivered through to May 11 2003. In addition to commercial establishments, DirecTV residential customers also can purchase the package for E270 for a full year of coverage.
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Playjam goes back to the future
Interactive television entertainment channel PlayJam, operated by OpenTV subsidiary Static2358 has reintroduced several of what it describes as its 'classic' game formats as a result of audience demand.
A study conducted by Millward Brown found that more than 70 per cent of viewers wanted PlayJam re-introduce old favourites such as Thievin' Monkeys and Tapeworms.
In addition to new content launches planned for PlayJam during 2002, the company decided to re-launch classic content in a dedicated area within PlayJam. Called "The Conservatory", viewers will be able to choose from a range of five individual games in addition to the seven available in the main channel area.
Jasper Smith, CEO of Static 2358, said, "We believe that it's a real testament to the creativity and hard work of the team at Static that the viewers have asked us to bring back their old favourites. We believe that this will be our strongest offering to date, including the fantastic new content we plan to bring out over the Summer."
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$3bn
Russian digitisation
Norwegian
DTT - just one bid
RTL Group takes n-tv stake
Telnor
says 'so long' Song
Onyx
ups distribution
SMG
stake for sale
UPC
Q2 ¯ operational self-sufficiency
$3bn Russian digitisation
Gennady Sklyar, the head of Russia's state-owned Television and Radio Broadcasting System, RTRS, formed last year, has called for an accelerated switch from analogue to digital broadcasting - over five years rather than by 2015 - and suggests that the Russian government raises $3 billion (E3.037 billion) loan-funding for the project.
"If Europe switches to digital and we remain in analogue, we will become an enclave unable to develop," said Sklyar.
He adds, "Since there is no money in the [state] budget to modernise the system, I think a large-scale state credit is necessary to switch Russia's television and radio to digital broadcasting."
The vast state TV and radio conglomerate, RTRS, which includes some 15,000 television transmitters, more than 3,000 radio transmitters and relay lines, is currently in a dilapidated state. About 80 per cent of working transmitters should already have been decommissioned, says Sklyar, pointing out that replacing them with new analogue equipment would mean paying twice because they would have to be replaced later with digital - hence the call for the government to take out a loan and pay for the investment.
The transmission systems were broken off from the Communications Ministry in 1998, and joined with the systems of the state-owned television and radio company VGTRK. This reform was expected to make it easier for RTRS to find strategic investors, and now RTRS technically does not report to either the Communications or Press Ministries.
RTRS is not going to be privatised says Sklyar, but it could form a subsidiary joint-stock company to attract a strategic investor - with several un-named European telecoms companies claimed to have expressed interest.
Stanislav Glubokov, Head of the Television and Radio Broadcasting Department at the Communications Ministry said, "The country is not ready for it right now, and people are not ready," adding that no decision has been made on which digital standard to adopt, US, Japanese or European. Glubokov says that the Communications Ministry plan to be issued by the year end calls for parallel work on the existing analogue system ahead of a switch to digital by 2015.
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Norwegian DTT - just one bid
By Goran Sellgren
Interest in Norwegian DTT appears feeble at best; one month after Norway's liberal-conservative government of put three digital terrestrial multiplexes out for tender so far only one applicant has bothered to apply.
Norges Televisjon (Television of Norway) is the sole bidder, a joint venture of the two leading Norwegian television players, public service broadcaster NRK and its main commercial rival, TV2.
Norwegian press reports say that TDF - the transmitter operator which is a subsidiary of France Telecom active in Finland - had shown a great interest in establishing itself on the virgin Norwegian DTT market last autumn. It had also reportedly had several meetings for 'technical information' with the Post- og Teletilsynet (the Norwegian Post and Tele Authority) - but so far nothing has come out of that.
"We would have heard if there had been any interest from other parties. But we haven't heard anything more from TDF, nor from others wanting 'technincal information', Vibeke Grevstad from the Post og Teletilsynet admits.
One thing that seems to have scared potential applicants away is the fact that a main condition is that as much as 99.6 per cent of Norway is expected to be covered by the future DTT network. This is an unusually high figure considering the country's sparse population and its many high mountains. The high investment costs in combination with the present international telecom recession is also expected to have added to the problems in attracting potential bidders.
Initially there was a third partner in Norges Televisjon, Norway's major and aggressive telco operator Telenor. But by last winter Telenor had pulled out of the project, pointing at its 'too high financial risks.'
No particular worries are seen at the Norwegian department of culture where Roy Kristiansen, Head of Media at the Ministry of Culture, comments, "We don't want to speculate on how many applicants there will be at the end. We feel we have given the satisfactory information required by potential applicants."
The application deadline for the Norwegian DTT project licences expires on October 1. Licencees for the expected 15 to 18 services (NRK and TV2 are guaranteed a 'substantial' number of channels) will be given for up to 12 years licence period.
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RTL Group takes n-tv stake
By Dieter Brockmeyer
As expected, the Luxembourg-based RTL Group in which Germany's media conglomerate Bertelsmann is bundling its international TV and radio activities, is taking over the 47.3 per cent stake in the German news channel n-tv and 12 German radio stations from the German publishing group Georg von Holtzbrinck for some E170 million.
The other major shareholder is AOL Time Warner which, via Turner Broadcasting and Time Warner, owns over 50 per cent in the news venture. The package RTL acquired for E170 million also contains all the shares of the Holtzbrinck radio holding AVE which holds stakes in 12 German radio channels. n-tv, based in Berlin, had revenues of E72 million in 2001 and has a market share of 0.7 per cent of the total German television audience.
RTL Television and its CEO Gerhard Zeiler will be in charge of the stake; RTL Television's Information Director Hans Mahr will be responsible for the operational cooperation with n-tv.
The deal still needs the consent of the antitrust authorities and the n-tv co-shareholders which own the right of first refusal.
A no seems quite unlikely from AOL Time Warner which was looking for a partner for its expansion of its international news business. About two years ago the 25 per cent Time Warner stake was meant to be taken over by RTL which then was blocked by Holtzbrinck - which instead increased its stake.
It still seems possible that RTL might also take this AOL stake a second step to gain full control in the news venture. However, this will depend on the new Bertelsmann strategy where former CEO Thomas Middelhoff was recently replaced by Gunter Thielen who is reassessing the group's strategy. However he has already said there will be not much of a change in the TV business.
RTL is currently valued at E5.5 billion.
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Telnor says 'so long' Song
A little over a month ago Telenor, the state-dominated Norwegian telco, announced its acquisition of the Swedish data, broadband and telecommunications operator Song Networks (formerly Tele1 Europe), thus saving the crisis-ridden company from imminent bankruptcy.
Now Telenor and its subsidiary Telenor Business Solutions have decided to say so long to Song. Telenor is pulling out of the deal, which among other things had meant a commitment from Telenor to support a financial reconstruction of Song. However, this was apparently not accepted by several of Song's bonds owners: the conditions for the 'restructuring' were found too complicated.
A committee of the bonds owners claims, however, that they are remain positive about the options for Song carrying out a restructure, and foresee a plethora of alternatives. Thomas Franzen, MD of Song networks, shares this optimism. "We have a number of alternative solutions; that's all we can say today, until we have confirmation from the various parties involved."
"The failure of the Song deal does not scare us from seeking other partners in the Nordic countries to secure a future strong position for Telenor in broadband and new telecommuncations areas," Morten Lundal, MD of Telenor Business Solutions, comments. "But now we will focus on financially healthy objects."
In recent years Song has become a major Nordic player in high speed fibre optics, focusing on local access networks with broadband capacities for businesses. To achieve this Song has arranged several spectacular bond loan facilities.
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Onyx ups distribution
The Cologne-based German music TV channel Onyx, which is mainly controlled by the French AB Groupe, has increased its distribution by 250,000 cable homes, mainly in the Baden Wurttemberg area. Potential distribution has increased to encompass some 12.1 million of Germany's 33 million TV homes. The channel claims to have successfully conquered the 14 to 39 year old niche target group. However some outside analysts consider the venture to be superfluous.
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SMG stake for sale
Indebted UK number two cableco Telewest has put its 17 per cent, stake in Scottish Media Group (SMG) up for sale. Telewest Managing Director Charles Burdick has described the activity as no longer core to the company's business, and the proposed sale would help reduce Telewest's E5.6 billion debt said Burdick.
Schroder Salomon Smith Barney has been hired to manage the sale of the holding, valued at some E81 million based on its share price. However some analysts suggest that the company's TV franchises could be worth up to E470 million.
Shareholders approval has been sought for the proposed sale, which will be discussed at an extraordinary general meeting on 4 September. Telewest would then have the option of disposing of the stake within 12 months if it were agreed.
ITV companies Carlton and Granada are seen as potential bidders, both having said they would like to own the SMG-held TV regions of Scottish and Grampian - though as the two look at their own consolidation, it is not clear if they would bid against each other to strengthen their own position prior to a merger of the two. Granada has long owned a 16.9 per cent stake in SMG and buying another stake this size would force it, under takeover rules, to make an outright bid for the whole of SMG.
Finance groups have eyed the organisation for break up of its various media activities, with Capital Radio, among others, reported interested in SMG's Virgin Radio. The company has debt of about E636 million. Changes to UK media law would also allow a European bidder by next year.
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UPC
Q2 ¯ operational self-sufficiency
Europe's biggest cableco, UPC (United Pan-Europe Communications NV) has
just reported that has reached operational self sufficiency in its Q2
operating results for 2002.
In year on year comparisons (ie Q2 2001 compared to Q2 2001) the results
show the company has increased its triple play (video, voice and data)
revenues by 15 per cent ¯ up from E277million to E319 million.
Total consolidated revenues from continued operations grew 36 per cent
to 359 E277million from E265 E277 million and average revenue per user
per month (ARPU) increased by nine per cent to E13.27 from E12.16 for
the second quarter 2001
New Services saw revenue generating units increase by 30 per cent to 1,185,000
during Q2 2002 from 911,000 for the second quarter 2001
UPC's consolidated Adjusted EBITDA improved E121 million to positive E67
million during Q2 2002 compared to negative E(54) million for the second
quarter 2001. The company's consolidated Adjusted EBITDA margin was positive
19% for the second quarter 2002 from negative (15)% for the second quarter
2001
Looking at progress during this year, by comparing Q2 2002 results versus
Q1, 2002, the results show less dramatic, but still sustained growth.
Triple play revenues for Q2 2002 grew three per cent to E319 million from
E310 million for the first quarter 2002. Total consolidated revenues grew
four per cent to E359m from 346 million for the first quarter 2002. Some
34,000 subscribers were added during the three months to June 30, 2002.
UPC consolidated Adjusted EBITDA for the second quarter 2002 reached positive
E67 million compared to E55 million for the first quarter 2002.
Commenting on UPCªs results, John F Riordan, President and CEO of UPC,
said, "UPC has continued to demonstrate operational improvement and strong
financial results, with all businesses benefiting from cost controls to
improve their cash flow generation. Our reviewed strategy ‹ is focused
on the delivery of profitable triple play to analogue customers, driving
up penetration of Internet, analogue television, NPV (net present value)
positive telephony and a measured digital NPV positive rollout.
"Our working capital management has reduced the cash tied up in our debtor
book and good progress was made this quarter in the normalisation of trade
payables. These actions will ensure that, over time, our working capital
contributes positively towards the funding of the company. At the same
time, revenues from continued operations grew 36 per cent compared to
the second quarter of 2001.
"Despite the seasonal nature of the quarter, UPC added 57,000 residential
RGUs during the three months to June 30, 2002. Revenue growth in Q2 2002
compared with Q1 2002, is in line with that achieved by our cable peers
in the United States, despite the noise surrounding our restructuring.
The dramatic growth in our EBITDA, an improvement of E121million from
our operating performance of one year ago, means that in Q2 2002 UPC self
funded all of its operating expenses and more than 95 per cent of its
capital expenditures in the quarter.
"These results highlight the progress UPC is making towards becoming free
cash flow positive. Restructuring Update: we are in the process of restructuring
UPC's balance sheet and capital structure, to financially deliver the
company at the corporate level. I am pleased to say that on July 24, 2002
UGC and the Bondholder Committee announced that they had reached an Agreement
in Principle regarding the recapitalisation of UPC. This announcement
was an important and welcome step and UPC is now participating in the
negotiations for a definitive agreement. It is expected that the recapitalisation
of UPC's balance sheet will be completed during the first quarter of 2003.
I am also delighted that UPC's banks continue to be supportive regarding
the restructuring of the companyªs balance sheet. Following the recent
announcement by UGC, which was obviously a major step in the negotiation
process, UPC was able to announce a 45 day extension to waivers granted
by senior lenders and UGC."
Gene Musselman, Chief Operating Officer of UPC comments. "The strong focus
on execution in 2002 continues to produce solid results. ARPU grew 9 per
cent during the twelve months to June 30, 2002 and we now achieve an average
ARPU of E13.27 from E12.16 a year ago. We continue to focus on improving
the service we offer our customers and have been working to launch country
web sites to offer an increased level of product information for customers
as well as an online customer care function. We are introducing new and
more transparent billing systems in the Netherlands so as to give our
customers more detailed information. We are preparing for fully automated
online billing and are able to offer new customers the chance to subscribe
online.
In addition, we are rolling out a new self-help diagnostic tool ('Quickfix')
for chello subscribers, which can be downloaded on to home computers in
the Netherlands. First reactions are that this will prove popular in quickly
resolving the more basic customer issues. The continued strong growth
in positive Adjusted EBITDA achieved in the second quarter again demonstrates
the successful implementation of operational improvements and efficiencies
and the benefits of scale economies available through the operation of
a pan-European platform. We continue to see opportunities for further
cost savings."
UPC's core operations continue to be focused into three principal divisions
split as follows:
UPC Distribution ¯ the residential business delivering the triple play
of television, digital, Internet and telephony plus DTH and Other businesses.
2. UPC Media ¯ comprising our chello internet / data and programming businesses
under a single management team. Products are sold to UPC and third parties.
3. Priority Telecom¯ a separately listed, but majority owned subsidiary,
targeting the business market.
(Also see Thursday press releases)
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Champions
challenge underway
BSkyB and the BBC are reportedly preparing a rival bid to ITV to steal
away the broadcaster's Champions League football rights when the current
contract expires at the end of this season.
Bidding for the next three years rights is expected to get underway next
month. ITV which holds the rights has suffered a severe fall in advertising
revenue and still suffers hostility from many in the UK soccer community
for its handling of the ITV Digital debacle. An example of the continuing
bitterness is First Division football club Burnley which has banned ITV
cameras from its home ground after losing nearly E7.8 million from the
collapse of ITV Digital, which it blames on parents Carlton and Granada;
it is also urging other clubs to follow suit.
However, in contradiction of the reported frosty relationship between
the Football League and Carlton and Granada the organisations are reportedly
set to sign a new £6m three-year deal for Football League highlights.
Added to the league's £95m, four-year deal with Sky, it can now expect
£100m in TV rights - a third of its old ITV Digital deal. ITV is described
as clear favourite to win further rights in which the BBC and Channel
5 had also shown an interest.
The Champions League rights are being sold by governing body Uefa and
are marketed by TEAM. There are two live packages available: one gives
the first and third pick of games being broadcast that week; the other
gives the second and fourth choice. A separate highlights package is also
available. All three broadcasters plus Channel 5 are expected to consider
bids.
The Guardian newspaper quotes analysts suggesting ITV could retain some
rights, and would be expected to focus its efforts on retaining Tuesday
games to avoid affecting its Wednesday evening soap Coronation Street.
In 1998 ITV paid E391 million to broadcast live Champions League games
and post-match highlights over a four-year period.
A BBC spokeswoman said, "As a public service broadcaster we have an obligation
to consider all sports rights as and when they become available. We're
interested in rights that fit our portfolio of sports and are available
at the right price for the licence fee payer." The pubcaster has bought
the rights for Manchester United's qualifying round game for the tournament
tonight (Wednesday 14/8/02).
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Bertlesman continues family focus
Christoph Mohn, 37, great, great grandson of Carl Bertelsmann, founder of the German media conglomerate, appears to be staking claims to be heir apparent, supporting the company's retreat from globalisation charactersied by former chairman, Thomas Middelhoff.
Middelhoff's departure was reputedly facilitated by Liz Mohn, the second wife Reinhard Mohn, because she feared his drive to take Bertelsmann public would erode her family's control over the company, and the likelihood of Christoph taking over. Christoph Mohn currently runs Internet portal Lycos Europe, a joint venture of Bertelsmann and Terra Lycos.
Middelhoff was reportedly pushing the Mohn family to reduce its stake in the company to enable a share offering. The family had agreed to a stock swap with a Belgian financial holding company, which gave that firm the right to sell its 25 per cent stake to the public in 2005. But Middelhoff apparently wanted to go further.
In contrast, Mohn says Bertelsmann has the resources to invest in its businesses without going public. The company earned E979 million, on sales of E16.6 billion, in its 2000-2001 fiscal year, and has only E409 million in debt. He also said that the company has no appetite for the kinds of acquisitions that would cost billions of dollars.
Bertelsmann's new Chairman, Gunter Thielen, has pursued a similar policy expected to involve shutting down money-losing ventures like the Bertelsmann-backed Napster. Mohn's company Lycos Europe is not immune to the cut backs. It gets 20 per cent of its revenue from a E56 million, two-year advertising contract with Bertelsmann and has been told that the contract will not be renewed when it expires in October. Lycos Europe is forecast to break even on a cash-flow basis in the fourth quarter of this year - a target that may need to be achieved for Mohn to progress.
Thielen has further demonstrated the company's policy reversal by scraping a multi-million euro advertising campaign to build a global brand - further stengthening suggestions that plans for a public listing by 2005 have been abandoned,
*Bertelsmann broadcasting unit RTL was expected to announce the E180 million acquistion of a 47.3 per cent stake in German news channel N-TV yesterday, buying the stake from publisher Holtzbrinck.
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ITV advertises on satellite
In a significant policy switch Granada and Carlton's ITV in the UK is to spend E1.6m of its E7.8 million marketing budget advertising on satellite TV channels for the first time.
Mick Desmond, the joint Managing Director of ITV was quoted in the Guardian newspaper as saying that the campaign was designed to reassure advertisers that ITV is capable of improving its audience share, which hit a low of 22.5 per cent in July. The company needs to reverse decline in its audience ahead of its autumn schedule when some of its biggest advertisers come up for renewal.
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Lithuanian cable licence sought
Lithuanian TV operator Viginta is seeking a licence to set up a cable TV network in the capital reports Europe Media.
Viginta operates Vilnius-based TV station Vilsat which is controlled by US company International TelCell.
Local business newspaper Verslo Zinios quoted Vilius Macijauskas, Managing Director of Viginta, as saying, "The cable TV stations operating in Vilnius do not come up against severe competition, as they all are accustomed to one another. The situation will change, however."
Viginta currently has some 18,000 subscribers in Vilnius with sales of about E1 million. Now Vilsat is extending its existing wireless cable TV service by laying optical cables to increase the number of channels and additional services it can deliver. International TelCell is expected to invest about E3.45 million in 100-kilometers of optical cable, with a 10 year pay back period.
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Gilat supplies Intelsat
Gilat Satellite Networks has won a E10.2 million contract from Intelsat to provide broadband satellite communications equipment and through to 2003.
Intelsat will buy from Gilat's US subsidiary, Spacenet Inc, initially to provision satellite-based broadband connectivity to service providers in Latin America.
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Casbaa forum inaugurated
The Cable & Satellite Broadcasting Association of Asia (CASBAA) has inaugurated its second CASBAA Satellite Industry Forum with an audience of 200 senior industry professionals drawn from across the world.
"We estimate that our speakers, sponsors and delegates collectively represented 85 per cent of the global satellite communications industry," said Simon Twiston Davies, the CEO of CASBAA. "We are particularly pleased with the support given to CASBAA by member companies such as Boeing, AsiaSat, Intelsat and Arianespace."
The issues debated during the CASBAA Satellite Industry Forum are the agenda setters for an Asian market covering three billion people under a footprint running from Japan to the Middle East, from China to Australasia. The programme tackled issues such as new satellite services, new satellite technologies and the financing required to underpin the launch of a dozen satellites into geostationary orbit over Asia over the next five years, each satellite being worth up to US E256 million.
Bill Wade, the Chairman of the CASBAA Satellite Industry Committee that organised the Forum, explained that his committee remains dedicated to encouraging an 'open skies' regulatory environment for satellite-based services across Asia. "We see market access issues as running in parallel with the need to develop innovative new solutions and revenue flows to support an industry that is still little more than 10 years old in Asia."
Keynote speakers at the CASBAA Satellite Industry Forum included Romain Bausch, the Chairman of SES Global, operators of the Astra fleet in Europe and carriers of the BSkyB DTH package, Takuya Yoshida, the CEO of JSAT (Japan Satellite), Dan Goldberg, CEO of New Skies Satellites, the privatised arm of the UN-mandated Intelsat system, Randy Brinkley, the president of manufacturer Boeing Satellite Systems and Jean-Marie Luton, Chairman and CEO of Arianespace, Europe's leading launch system operator.
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Low cost DTH system launched
Tandberg Television and Irdeto Access have announced that at this year's IBC show in Amsterdam they will jointly launch their Earlybird, end-to-end system for low cost start-ups and speed to market for new satellite operators by providing a complete solution from content encoding through to the set top box.
Tandberg Television and Irdeto Access say that they have joined forces to design Earlybird because both companies realised that for new operators the economics of direct to home satellite broadcasting is presently undergoing a major paradigm shift. This shift is taking place because new DTH operators need to find ways to launch successful services with subscriber break-even levels that have reduced over the last few years from over 1 million to presently around 100,000 subscribers.
The main drivers of the shift are increasing audience fragmentation and the growing importance of niche broadcasting and local language platforms. In the future, Tandberg Television and Irdeto Access expect that for many DTH broadcasters it may even be necessary to find ways to be profitable with consumer take up as low as 20,000 households. It is for these new DTH operators that the two companies have extended their long association by collaborating on the design and launch of the Earlybird system. Earlybird is aimed at DTH operators with up-to 100,000 subscribers. However, it has been developed so that it can be seamlessly upgraded as the operator's offering flourishes.
"Realising that DTH operators in many markets around the globe will need to be able to break even with smaller audience figures, we set ourselves the challenge of designing a solution that radically lowers the financial barriers to entry. By starting with a clean white board the Tandberg Television and Irdeto Access design teams had the freedom to produce a system that minimises the initial investment in broadcast infrastructure, reduces running costs and crucially cuts to the bone the investment necessary in the consumer set top boxes," says Gwyn Pugh, CEO of Tandberg Television."
"Thanks to Tandberg Television and Irdeto Access the operator can concentrate on content and marketing their satellite offering," says Graham Kill, CEO of Irdeto Access. "Another advantage of Earlybird is that because it is a complete solution, operators can slash the time it takes them to get on-air, which produces revenues earlier and is critical if the operator is in a race with a rival for first mover advantage."
There are three major components included in the Earlybird package:
Compression, modulation and multiplexing; Conditional access, scrambling and smart cards; Digital receiver or Set Top Box. (Also see press releases and IBC preview for product details).
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Kirch
bidders dwindle |
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Kirch bidders dwindle
Rupert Murdoch's News Corporation and the Berlusconi family's Mediaset group have reportedly withdrawn from bidding for Leo Kirch's KirchMedia.
The report in German news magazine Der Spiegel gave no reason for News Corp's withdrawal but said that Silvio Berlusconi himself had described Mediaset's continued involvement as too politically sensitive.
German chancellor, Gerhard Schroder, had previously described the potential sale of a key German media company to the family of the head of a foreign government as having far-reaching diplomatic consequences.
Although the Mediaset and News Corp consortium is claimed to be out of the bidding for KirchMedia, Der Spiegel says that a consortium which groups together existing minority shareholders in KirchMedia has bid E2.5 billion for KirchMedia's assets. The other members are understood to be investment bank Lehman Brothers, the German retailer Rewe and the Saudi Prince Walid's Kingdom Holdings.
The other consortia which reached the final bidding stage include an alliance between the US film producer Haim Saban and the French broadcasting group TF1, which bid E2.6 billion, and a consortium of Germany's Commerzbank and Hollywood studio Columbia TriStar, which bid E2.3 billion.
The administrators intend to decide on a buyer for KirchMedia by the end of the month.
*Dr Alexander Liegl, Managing Director Sports Rights at KirchMedia has left the company prior to any purchase by new investors. Under the current restructure sports-rights trading and film-rights trading are being combined under one director, rather than two as previously.
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AOL 'advertising inflated'
The US Securities and Exchange Commission is investigating AOL-Time Warmer over allegations it inflated its online division's advertising sales in the last two years by about E500 million.
Now shareholders are claiming damages against the company for fraud. The lawsuit seeks damages for anyone who bought shares in the company between October 2000 and July this year.
*The company's new management team is reported likely to start unwinding its complex entertainment venture with AT&T Corp, possibly as early as this week.
AOL Time Warner could offer up to E2 billion in cash, some AOL stock and about a 20 per cent stake in a publicly traded cable TV business for the stake in Time Warner Entertainment held by AT&T and Comcast Corp, which agreed to buy AT&T's cable operations earlier this year. Then AOL Time Warner would gain full control of HBO and Warner Bros Studios, plus be able to offer AOL high-speed Internet service on AT&T and Comcast cable systems.
AOL Time Warner's combined value has fallen from just under E600 billion in 2000 to about E90 billion.
*There is speculation that further executives at AOL, including Chairman Steve Case could leave the company, following the footsteps of AOL Time Warner former Chief Executive Gerald Levin and former Chief Operating Officer Robert Pittman. However, some commentators say this is unlikely given his support for the new Chief Executive, Jonathan Miller and while Miller is not expected to institute wholesale job cuts, his restructure is thought likely to encourage departures.
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ITV complaint upheld
UK regulator, the Independent Television Commission found free-to-air UK terrestrial broadcaster ITV guilty of breaching the 1996 broadcasting act for switching live coverage of a football World Cup match from analogue (ITV) to digital (ITV2) half way through the match but it will not receive any fine or other sanction.
Viewers complained that the second half of the South Africa v Paraguay match was moved to digital only channel ITV2 on Sunday June 2 because the second half of the match clashed with England's first World Cup game against Sweden, which was broadcast in full on ITV1.
"The decision to move coverage of the match without application to the commission put the network in breach," said the ITC. It added that ITV should have sought prior permission to transmit a listed sporting events such as the World Cup on a channel that is not available to all viewers even though the ITC accepted that the decision to put the England game on the terrestrial channel was acceptable as there was more interest in the England game, and the breach related only to a small part of the listed event.
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DirecTV Fights California Dish Tax
A proposed five per cent satellite dish tax in California has been described by satellite operator DirecTV as anti-competitive and an apparent attempt by the cable industry to gain a competitive advantage by burdening satellite TV customers with a tax that is not imposed on cable TV customers.
The planned DBS (Direct Broadcast Satellite) tax is included in a budget bill that was narrowly defeated in the California Assembly last week, but which is likely to be re-introduced this week by Assembly Speaker Herb Wesson (D-Culver City). California leads US satellite TV viewing with more than 2.3 million subscribers.
Roxanne Austin, President and COO at DirecTV comments, "If the satellite TV tax is approved, what other consumer services will be taxed next? This may well open the floodgates," adding that Californian satellite subscribers already pay between E14 and E25 state sales taxes when buy DirecTV equipment.
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RR Satellite awarded quality standard
Israeli-based RR Satellite Communications Ltd has been audited by the Institute of Quality and Control and by the Bureau Veritas Quality International (BVQI BV) which verified that the company is in compliance with the requirements of the quality standard ISO 9002: 1994.
This certification is valid for the following scope of activities: uplink, downlink and turnaround services via satellite for television, radio and data channels, integration, mobile and stationary uplink and downlink satellite systems. RR describes the award as an additional assurance that its services are at the highest level in the market.
RR Satellite Communications provides global distribution services via satellites for television, radio and data channels.
The company operates SNG, flyaway and transportable uplink and downlink systems, also teleports with dishes for C-band. Ku-band and Ka-band, authorised by Intelsat, Eutelsat, Panamsat, Arabsat, Nilesat,Thaicom, LMI, Loral and Amos.
It also operates a service of television information that can be accessed by computer.
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Tandberg Spanish order
Tandberg Television has won a digital cable TV system contract from Spanish consortium Enditel Soluziona.
The order is to fulfil a contract awarded to the consortium by the Spanish cable operator, AunaCable, for the launch of its new digital cable system later this year. The value of the contract to Tandberg Television is expected to exceed E4 million.
Tandberg Television expects to provide a wide range of solutions and services to bring digital video delivery and systems monitoring to AunaCable's planned 'triple play' consumer service, which will combine telephony, high-speed internet and broadcast quality television.
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BBC 24 criticised
BBC News 24 has been criticised in a UK government commissioned report
on the channel for not having any 'value for money' targets, questioning
its audience figures and expenditure. Its audience put variously at 3.3
million per week, or 7 million per week, the latter if overnight transmissions
on BBC1 are included is seen as small relative to the expenditure invested.
While satellite operator BSkyB complains about licence fee money being
used to fund a minority channel that not all viewers can see, its main
concern appears to be recent Barb (British Audience Research Bureau) figures
showing BBC24 has overtaken Sky News as the most watched News channel
(3.8 million viewers to 3.7 million).
The review by Richard Lambert, criticises the channel because it spends
about E78 million - double its rivals Sky News and ITN. The BBC is had
agreed to spend 10 per cent of its E4 billion licence fee on digital services,
but actually spent E500 million; some E1.25 billion has been spent to
date on digital channels.
A clear definition of the BBC's digital public service remit is required
or it is likely that the BBC's digital channels will be criticised for
wasting tax payers money if the audience is low, and for competing with
commercial broadcasters if the audience is high.
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Two
Kirch bidders remain |
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Two Kirch bidders remain
Only two bidders have reached the final stage of the auction for KirchMedia - US media investor Haim Sabam in a joint bid with French TV group TF1, and a consortium of Japan's Sony, and German banking group Commerzbank.
Despite the deadline being passed last week, a third group may be shortlisted, as seller KirchMedia is reported to have asked a consortium including Axel Springer and Heinrich Bauer to increase their initial bid as a precondition to reach the final stage. The consortium had offered E1.4 billion for Kirchmedia's broadcast television assets and film library, but declined to bid more without access to further information. Members of Axel Springer's consortium could also join one of the two remaining bidders, as they are not interested in the sporting rights assets.
An offer by a consortium led by Italian TV group Mediaset for KirchMedia's 52.5 per cent holding in German commercial broadcaster Sat.1 is expected to be rejected by creditors with loans secured on the company's film library.
Any successful bidder is likely to make a full take-over offer for ProSiebenSat.1, and the company's shares have declined due to the expectation that any such buyer will not be German.
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FCC orders digital TV by 2007
By July 2007 virtually all television sets sold in the US will include a digital tuner thanks to yesterday's vote at the Federal Communications Commission - barring any successful legal challenge from the new law's many opponents.
It's a E70 billion issue - the amount Congress has written into its federal budgets to be raised by auctioning off analogue TV broadcast frequencies once they all go digital, expected to be bought by mobile communication companies.
Thursday's 3-1 vote also requires that TVs 36 inches or larger must have the tuners by July 2004, while most smaller sets will get them by July 2007. Sets smaller than 13 inches are exempt. The move would add E200 to the cost of a TV set at today's prices - though tuner costs are forecast to fall.
Consumer groups - and Television makers - plan block the decision arguing that the move amounts to unwarranted government intervention pandering to special interests at the public's expense. Certainly it is not the kind of free-market policy expected of US lawmakers. TV tuners exist in the VCR, and cable or satellite receivers so some consumers are asking why should they pay for a digital tuner that they don't need or use built inside a monitor.
Consumers with older sets will be able to buy set-top boxes, costing about E250, to receive digital signals.
"Someday, analogue broadcasting will cease. When that time comes, consumers will expect their televisions to go on working in the digital world just as they do today," commented FCC Chairman Michael Powell.
Congress had set a target of December 2006 for the switch, but faced reluctance from broadcasters, local TV stations, cable systems and television makers to incur the expense of switchover for no significant return. Just 15 per cent of US TV owners still receive TV via an antennae, and they will indeed get improved reception. The rest will get better quality pictures and sound, and digital's greater channel capacity, but there is no guarantee that broadcasters and cable companies will make HDTV widely available after the switch to digital.
The Consumer Electronics Association calls the requirement a 'TV tax' that would cost the industry and consumers about E7 billion. Mark Cooper, Director of research for the Consumer Federation of America, predicted the new rule would hit consumers and won't lead to increased availability of HDTV programming.
In the US an estimated three million high-definition TV sets have been sold, but only 12 per cent of buyers have digital tuners, with the rest using their sets to watch DVDs or satellite broadcasts.
The FCC also agreed that digital TV transmissions will include a 'broadcast flag' designating shows that may not be copied freely (see News archive), permitting consumers to record broadcasts only in lower-quality analogue or encrypted digital formats. Reacting to Consumer Group criticism, Susan Mort, an attorney in the FCC's Media Bureau, said the process would recognise "privacy and First Amendment concerns (and) consumers' ability to make secure copies of digital TV content for personal use."
A vote on a final set of regulations is expected by late this year or early 2003, following a few months consultation process.
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Barb Chief to change
Nigel Walmsley, the former Chief Executive of UK terrestrial TV company Carlton, is set to replace Nick Phillips, the Chairman of the UK Broadcasters Audience Research Board (Barb) according to a report in the Guardian newspaper, yet to be confirmed while both men are on vacation.
Barb is jointly owned by Channel 4, Channel 5, BSkyB, ITV, BBC and the Institute of Practitioners in Advertising, and its audience figures - both size and demographics - are the currency with which UK TV advertising is bought and sold. Barb's viewing panel homes are equipped with devices that register the programmes being watched or recorded on a video, while the panellists record the number watching.
Consequently ITV has been concerned about its devalued currency, with January Barb audience figures showing ITV's adult viewing figures had dropped by a dramatic 25 per cent and Channel 4 had a steep drop-off in its key target audience of the 16 to 34 age group. In addition unexpected swings in audience figures have continued throughout the year following Barb's introduction of a new 5,200 home panel to measure the audiences of programmes at the start of this year, the first change to the entire panel in 30 years.
The old panel was perceived as having not kept up to date with digital TV while the new households have had problems using the equipment, hence Barb has been unable to produce a regionally and demographically representative audience recently.
ITV is seen as being behind the move to change the man at the top, while officially Barb has issued a statement saying, "The whole Barb board and all of its shareholders wish to state unequivocally that all decisions Barb reaches are by consensus and are supported by each and every one of them, equally."
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S-A/Motorola link to 'Adelphia fraud'
US pay-TV giants Motorola and Scientific Atlanta have become embroiled in the US Securities and Exchange commission investigation into Adelphia cableco, which now seeks to discover their knowledge of a scheme by the cableco allegedly designed to inflate its earnings when the manufacturing companies agreed to revise supply contracts with the company.
The fraud is reported to have entailed Adelphia paying an additional E26 per decoder to the manufacturers who returned the same amount to the company in the form of marketing support payments.
The SEC is now looking at these marketing support payments made by Motorola and S-A, which it says allowed the company to overstate EBITDA earnings by some E95 million at a time when the company was in danger of falling short of expectations. These payments are part of the federal criminal fraud case against Adelphia executives, including founder John Rigas.
Both S-A and Motorola are reported in the FT to have stated that they accounted for the payments properly, but they now need to show that they did not know Adelphia planned to book the deals in an improper manner.
Sales to Adelphia accounted for 18 per cnt of S-A's 2.5 billion revenues in 2001, from two per cent in 1999 and 2000. Motorola described its sales to Adelphia as very small.
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ITV chases Airey
Dawn Airey, head of UK terrestrial Channel 5, has reportedly been approached again by Granada Chairman Charles Allen to become the ITV network's Chief Executive.
When first asked in May she said she would not be willing to leave Channel 5 and had previously declared she was not in the running to take over from David Liddiment as ITV Programme Director.
The Guardian newspaper reported one source as saying, "They are still talking to Dawn and they want to get it sorted out before the Edinburgh TV Festival."
Carlton's Chief Executive, Gerry Murphy, is also said to be involved in the talks but ITV it is suggested that Granada and Carlton wanted to have an agreement in principle before Allen went on holiday this week. Airey could earn more than E1.6 million if Channel 5 is sold.
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Mark Le Goy died
Microsoft TV's London-based Marketing Director Mark Le Goy has died following a motorcycle accident.
Le Goy adroitly handled the challenging role of promoting the Microsoft TV family of products across the region at a time when the company was coming under criticism within the industry. Prior to Microsoft Le Goy was with the online retailer iMVS.com and had previously carried out consultancy on the European and Asian TV markets for Booz Allen and Hamilton, following a career in the diplomatic service, including in the Middle East.
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