NEWS Monday 25th February - Monday 4th March 2002

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WEEKEND NEWS Friday 1st to Monday 4th March

ESPN Classic Sports in France
ITV consolidation 'inevitable'
Kirch reviews soccer deal
DISH ditches WildBlue
Telewest beats expectations

ITV consolidation 'inevitable'

Consolidation of Britain's ITV commercial broadcasters is inevitable, Carlton Communications Chief Executive Gerry Murphy, told Reuters reporters during the company's annual shareholders' meeting on Thursday (28/2/02).

Murphy was reported as saying that, despite the previous day's cancellation of talks about a E8 billion ($7billion) merger with Granada Plc, "We think it (a merger) will happen at some point... The direction of ITV is towards consolidation and we are in favour of that."

Carlton Chairman Michael Green told shareholders the company was unaware of any approaches from European media firms, quashing speculation that German media giant Bertelsmann AG might make a bid for the company.

Carlton and Granada jointly own loss making digital terrestrial broadcaster ITV Digital which has begun financial restrucuring and cost reviews under advisers from accountancy firm Deloitte & Touche.

Differences over future funding of ITV Digital was cited by some in the FT as reasons for the deal's collapse, with Carlton believed to want the venture closed and Granada wanting to keep it open.

Central to the cost cutting plans is ITV Digital's E516 million three-year Nationwide League pay TV rights contract, due to run until summer 2004. ITV Digital has paid E223 million and is now seeking to renegotiate two further payments of E146 million each, due for this August and next.

One ITV source quoted in the Guardian said, "Unless they (the soccer clubs) accept a lower price the whole deal could be scrapped and, when it comes to the next round of bidding, BSkyB will be the only people at the table. Murdoch will be able to name his price - and it won't be high." If ITV Digital was liquidated the clusb would not receive any money.
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Kirch Groupe in Germany is seeking to renegotiate its E1.5 billion contract for the television broadcast rights to the Bundesligasoccer (the German soccer league) which runs until 2004.

Werner Hackmann, chairman of the German Football League (DFL), told a news conference that he expects Kirch to honour existing obligations.

Georg Kofler, head of Kirch's loss-making Premiere pay-TV unit said on Thursday (28/2/02) that it was natural that Kirch would seek to reduce the fee it pays for some film and sports rights, but added that soccer remained an important part of the unit's programming.

Franz Beckenbauer, Vice President of the German Football Association (DFB) and president of Bayern Munich, said the clubs should be ready to cut a new deal with Kirch.
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DISH ditches WildBlue

EchoStar is reported to have completely written off its E57.7 million investment in Ka-Band licensee WildBlue, a move that came as EchoStar Chairman Charlie Ergen called satellite broadband efforts so far "a disappointment."

Ergen was reported by Sky Report as saying that EchoStar "just doesn't see that business (WildBlue) moving forward." In its 10-K filing with the Securities and Exchange Commission detailing fourth quarter results, EchoStar said WildBlue has suspended most of its operations. EchoStar also said it took E57.7 million for impairment charges during 2001 to reduce the carrying value of WildBlue to zero.

EchoStar also has a stake in StarBand, the Ku-Band satellite broadband company that is partly backed by Gilat. In its SEC filing, EchoStar said the ability of both Starband and WildBlue to raise additional capital in the future is uncertain, and independent accountants questioned StarBand's ability to continue as a going concern.

"Broadband has been a disappointment. We have some tough decisions to make there." Ergen was reported as saying on Thursday. Nonetheless, Ergen sees satellite broadband as a worthwhile endeavor if his company can complete its E30 billion merger with DirecTV.

Ergen said he believes that the merger with Hughes will be approved by US regulators the FCC by June - although a separate review by the Justice Department could take longer.

Ergen's comments came as EchoStar reported fourth quarter revenue of E1.32 billion, up 43 per cent from a year ago and ahead of Wall Street projections. Earnings before interest, taxes, depreciation and amortisation totalled E192.6 million, below some forecasts of about E203.4 million.

The company added 400,000 net new subscribers in the fourth quarter, slightly below some estimates. The subscriber growth rate was about 19 per cent lower than in the fourth quarter a year earlier. Ergen said he expects to have eight million subscribers by the end of the year, up from seven million now. Average revenue per subscriber was up 7 per cent from a year earlier to E57.5.

Higher than expected costs, at E149 million compared to Merrill Lynch estimates of E99.3 million, resulted in a net loss of E49.4 million, or 9 cents a share, compared with analysts' estimates of 2 cents per share. The previous year the company lost E212.6 million.
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Telewest beats expectations

UK cableco Telewest reported better than expected results for 2001, with earnings before interest, tax, depreciation and amortisation (ebitda) at E523 million ($452 million), 26 per cent higher than the previous year, and ahead of the E475 million to E491 million range many analysts had been expecting.

Total sales for the year to the end of December rose 17 per cent to E2.16 billionn, against estimates of E2.04 billion.

"All the raw indicators of performance are heading in the right direction, but the best number is the excellent growth in high-speed internet connections. Growth in 2001 was 1,135 per cent, proving there is a need for speed." Chief Executive, Adam Singer was quoted as saying. The company reports signing up 107,000 broadband internet users - but prices are set to increase - as rival BT reduces its prices, thus the rate of growth is expected to slow. BT announced it hoped to sign up 1m broadband customers by next summer, while cable operators Telewest and NTL also hope to have around 500,000 broadband customers between them by 2003.

Telewest also announced a E1.85 billion non-cash write-down relating to its acquisition of Flextech, the television programmer it bought for E3.76billion with shares then valued at more than 300p each.

Net loss for the year was E3.11 billion, compared with a E1,157 million loss for 2000.

Singer dismissed suggestions that the company needed to restructure the debt to cover a funding shortfall saying that the company had sufficient liquidity to meet its financial obligations, as long as it continued to meet its own forecasts.

Capital expenditure for 2001 was E1,070 million, a E39 million reduction from the previous year, and forecast to fall rapidly this year.
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Friday 1st March

RTL shareholders reject Bertelsmann
Norwegian 'yuppie channel' closes
F1 stake to be sold?
Granada/Carlton merger expected - eventually
ADSL becomes viable in UK
Liberate Australian launch
OpenTV Aussie launch

RTL shareholders reject Bertelsmann

Bertelsmann is being taken to court by minority shareholders in RTL who have rejected the terms of Bertlesman's buyout offer as being unacceptable. Investas, a Luxembourg association which represents the rights of minority investors, issued a statement saying it, "..Finds the offer unacceptable and recommends its members (RTL shareholders) not to accept it"

Bertelsmann owns 89 per cent of Luxembourg-based RTL and is seeking to buy out the remaining 11 per cent from minority shareholders for E44 a share. Reuters reports that the offer is part of its strategy to wholly own core assets ahead of a possible public flotation in 2005.

Investas says its members should get the same treatment as Belgian holding group Groupe Bruxelles Lambert, which swapped its 30 per cent stake in RTL for a 25 percent stake in Bertelsmann last year.
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Norwegian 'yuppie channel' closes
By Goran Sellgren

Metropol, widely regarded as the Norwegian 'yuppie channel' has announced that it is to close-down, effective immediately, after months of desperate searching for new funding. The main investors, Telenor, through its affiliate Telenor Plus, and Italian media investor MB Venture Capital, finally had enough, trying to cover for an expected 20 to 30 million krone (E2.5 million to E3.8 million) deficit, with no new investors in sight. TV2, Norway's biggest private channel, has been heavily courted, after several partnerships had been developed, but some days ago it decided not to get involved.

Metropol was launched in September 1999, then built on a licence for local terrestrial TV throughout greater Oslo - a licence which had earlier been abandoned by a 24 hour news service which went bankrupt. Since the launch Metropol has expanded throughout Norway, covering all major Norwegian cities by terrestrial TV, satellite or cable, reaching almost 40 per cent of the Norwegian audience, with a particular focus on the 20 to 40 age group.

Some weeks ago the management of Metropol, headed by MD Jan Erik Pedersen, decided to put all domestic productions on ice and to give notice to all external programme hosts. A staff of 24 permanently employed were informed about the closure on Wednesday.
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Liberate Australian launch

Optus is running an iTV trial to subscribers in Sydney, Australia using new content and services from Liberate Technologies, running on Liberate's TV platform software, delivered via Optus' hybrid fibre coaxial networks.
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F1 stake to be sold?

Josef Ackermann, the designated Chairman of Deutsche Bank, and Leo Kirch, are reported by the FT to have discussed plans to sell part of the German Kirch Group's stake in SLEC (which owns Formula One motor racing rights) during a meeting in Munich last Friday (22/2/02).

Deutsche Bank, which has denied knowledge of such a plan, is believed to have abandoned earlier restructuring and asset sale proposals which were seen by Kirch as moves to break up his media empire.

Kirch has also sought a retraction of comments made by the bank's outgoing Chairman Rolf Breuer which Kirch says exaggerated Kirch Gruppe's debt position.

Under the new proposal, the bank would be mandated to negotiate the sale of part of Kirch's stake in SLEC - of which it directly and indirectly controls 75 per cent - to the five carmakers that run the F1 teams.

The manufacturers had threatened to launch a competing championship when the Concorde agreement, which binds them to SLEC, expires in 2007 - and this had affected the value of the 100 year SLEC/F1 deal.

The carmakers are though by the bank to be seeking a 50 per cent share in SLEC for any new Concorde rather than the 25 per cent Kirch has said it was ready to sell.
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Granada/Carlton merger expected - eventually

Failed merger talks between UK terrestrial TV companies Granada and Carlton Communications (see News 28/2/02) have reportedly not hit industry and company hopes for an eventually merger - which could even still occur in the short term. Expectations of ITV consolidation prior to proposed changes to media ownership law remain strong.

Carlton's share price rose 14 per cent on Tuesday on market rumours of the two being close to agreeing an all-paper takeover of Carlton by Granada, the larger of the two groups. The merged entity would have been valued at close to £5 billion (E8 billion) on Tuesday's closing prices. However, structural savings - via merged back office operations, production houses and transmission facilities - have been put at just £50 to £60 million (E82 million to E98 million)per year. But the companies agreed to back away from the deal rather than have negotiations almost in public.

Had the deal gone ahead this week, it is believed that Carlton's annual general meeting would then have announced Michael Green as Chairman of Carlton, and the combined group, with Charles Allen, Chairman of Granada, made Chief Executive.

The UK government is to scrap the rules barring one company from controlling 15 per cent or more of the national audience or owning both London franchises. The revised rules are expected to become law some time next year, subject to approval by the competition authorities.

The two companies have invested £800 million (E1.3 billion) in digital terrestrial service ITV Digital, while advertising income is forecast to be £200 million (E326 million) down by the year end - yet £300 million (E464 million) more is needed to reach break even.

Carlton and Granada have appointed Deloitte & Touche as advisers for an "urgent restructure" of the pay-TV venture, including seeking renegotiation of ITV Digital's £315 million (E514 million) Nationwide and Worthington Cup soccer deals and the price it pays BSkyB for its premium channels.
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ADSL becomes viable in UK

UK dominant telco BT's Chief Executive Ben Verwaayen announced this week that it is to slash the heavily criticised high cost of broadband services, and wholesale ADSL prices will drop from £25 (E41)per month to £14.75 (E24) per month from 1 April.

Beneficiaries will include ADSL providers and users, such as London-based Video Networks whose Chief Executive Simon Hochhauser, was reported by Broadcast magazine to be planning to launch a 20-channel TV service over BT ADSL connections this summer. He told the publication that the development was a significant boost to his plans adding, "There is no question now that we will be launching a multichannel TV service this year."

Video Networks has 15,000 subscribers in London and is seeking expansion to compete with the cable industry, offering TV, internet and telephony via ADSL. BT's announcement related to ADSL internet carriage, but Broadcast reports that BT is expected to apply the price cuts to broadband video services shortly.
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OpenTV Aussie launch

Middleware and interactive TV applications company OpenTV launched the latest version of its interactive television content creation tool, OpenTV Publisher, into Australia at Digital Media World Australia 2002.

OpenTV Publisher is used by network operators, broadcasters and content providers to quickly develop iTV applications and services including t-commerce and communication applications such as short message services and chat.
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Thursday 28th February

Profitability barriers in pay-TV
Granada /Carlton merger abandonded
France's merged Mezzo
TeleColumbus -new buyer sought
Irish Internet channel launched
DBS spectrum bids made
Ball/Murdoch spat at BSkyB
ProSieben results, 2002 forecast
PanAmSat Raises $2.05 billion

Profitability barriers in pay-TV
By Owen Hughes

Excessive regulation, high content acquisition costs and far-reaching curbs on showing sports events - each has been identified as a major barrier to Australia's cable and satellite TV platforms achieving profitability and greater penetration, according to the CEOs of each of Australia's three main players Delegates to the Australian Subscription Television & Radio Association (Astra) in Sydney heard Foxtel boss Kim Williams say at the opening of the two-day event that, "If we don't change key elements of the environment in which we operate our business, the prognosis for our industry is troubled. Eighty per cent of Australian homes do not have subscription television and three out of four Australians are not watching it."

Williams, along with his counterpart John Porter at second-ranked Austar, and Optus' Martin Dalgleish itemised the difficulties that the industry faced - and outlined what they saw as the steps needed to be taken by both the government, the free to commercial broadcasters and Hollywood studios to boost its fortunes.

Williams said that pay TV providers were, "saddled with an extraordinary amount of regulations," adding that Australian politicians, "behaved as if this was a settled business. It is time for a wake-up call. We have to face facts - we lack scale and this is a tiny market in the world landscape. With our geography, it is horrendously expensive to serve the Australian market. It is time for regulators to wake up and take some reality pills. Only by growing the sector can we serve the community."

With 770,000 subscribers Foxtel is the market leader, but it lags behind Austar and Optus because it has not started to digitise its network. The partners behind the company, 50 per cent owner Telstra, half of which is in government hands, and News Corp and PBL with 25 per cent each, cannot agree on spending $250 million (E289 million) to upgrade the system. Williams said the shareholders will not invest until officials permitted a "reasonable" access tariff for third parties.

Porter warned that it was "unsustainable" for the industry to continue to pay content charges levied by Hollywood studios. Australian content deals were negotiated in 1994 when the pay TV industry was being set up and competing platforms drove prices up. The Australian dollar was worth 82 cents at the time, compared to 51 cents currently.

Williams commented, "The movie studios have no right to slow the growth of the industry by pricing it into oblivion." He added that it was in studios' long-term interests, as well as the pay TV providers, to shift from the content providers getting high returns per subscriber with a new model that would build subscriber volume. The initiative was vital in building Australia's pay TV penetration beyond the current 21 per cent of TV homes total, he added.

"None of the three would disclose any figures, but Porter said they were paying "very substantial" margins, ranging between 35 and 50 per cent, with Williams saying that some programming was in effect subsidised to pay TV subscribers.

A strong pay TV sector was vital in driving the take up of digital TV, Williams claimed. He noted that since digital TV was introduced in January 2001, just 15,000 set top boxes (STB) had been sold. In contrast the 1.5 million homes subscribing to pay TV each had a box that could ultimately carry digital signals. Austar already had 380,000 digitally enabled STB homes and Optus was currently trailing digital interactive offerings to 3,000 of its 260,000 subscribers.

Foxtel's two sports channels are the platform's most successful offerings, but Williams said the company was hamstrung by an anti-siphoning regime that prevents the pay sector from obtaining exclusive rights to events deemed to be in the "national interest."

In practice these are limited to sports events. Williams accused the three commercial terrestrials of not showing 75 per cent of the hours on the list either live, or delayed live. He advocated "culling 75 per cent of the sports on the list" and creating more opportunities for dual pay and free to air rights.

But in another Sydney gathering, Broadcast World 2002, Julie Flynn of the free to air trade body, the Federation of Australian Commercial TV Stations (FACTS), said the anti-siphoning list offered "maximum opportunities for Australian viewers," and that dual rights would not work because advertisers and sponsors expected exclusivity and were concerned about ambush marketing undermining their investment. Speaking at the same event, the Chairman of the Australian Broadcasting Authority, Professor David Flint, affirmed the body's support for the anti-siphoning list.

These echoed Communications Minister Richard Alston's remarks at Astra when he said, "The government remains committed to ensuring that viewers in all parts of Australia continue to have access to those high-profile sports which traditionally have been available on free-to-air television." Yet he also said that the government had been, "concerned for some time about the limited coverage of major sporting events by free to air broadcasters who have bought the rights, but decide not to broadcast live and in full." In support, he cited the public outrage over the perceived paucity of coverage Australia's 2001 Ashes cricket tour to England and the uncertainty about how much of the World Cup 2002 will be shown after Australia failed to qualify.

Alston also offered Astra strong hints that he was prepared to loosen the regulations surrounding the industry. He agreed that pay TV had been the major force behind the take up of digital TV in markets like the UK and that it was an "essential component" of Australia's desire to create a competitive broadband market nationally. He would consider "providing upfront regulatory certainty in relation to the digitisation of pay TV networks in way that provides reasonable access for access seekers."

Astra interpreted this as tacit encouragement of an access holiday under which platforms would upgrade their networks in return for exclusive use of them for a set period. Alston's counterpart with the main opposition Labor Party, Lindsay Tanner told Astra delegates that he was "broadly sympathetic" to an access holiday.

The Minister also signaled that officials are looking closely at Telstra's role as a pay TV investor and the owner of the last mile copper telephony wire into the bulk of Australian homes to see if it discouraged competition. "If Telstra were to have effective control of the last mile in terms of copper, cable and satellite, this could significantly reduce the possibility of facilities-based competition in voice, data and pay TV."
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DBS Spectrum bids made

In the US at least two companies have sought DBS spectrum for satellite TV operations from the Federal Communications Commission should the government approve the pending EchoStar - DirecTVmerger.

According to Sky Report, the latest applicant is R/L DBS, a DBS licensee at 61.5 degrees controlled by New York area MSO Cablevision. In a filing at the FCC, R/L DBS was reported as saying, "Given the impact of the proposed merger and the potential strength of the merged entity, a greater allocation of spectrum at 61.5 degrees to R/L DBS would facilitate the development by (the company) of a more robust product offering."

R/L DBS reportedly intends to dedicate most of its current DBS frequencies to local programming - possibly up to 148 DMAs. "Consequently, given the limited number of remaining frequencies that can be used for national programming, the 'out-of-spot' national program offerings of R/L DBS - those that will be available to many of the rural markets that are the topic of concern among merger commenters - will be limited," the company was reported as saying in its support of its claim for more spectrum.

WSNet recently told the FCC that the agency could approve the merger with conditions, including providing the Texas-based company with permanent access to satellite facilities "so that rural consumers may be provided with a viable alternative." That includes at least one of the orbital DBS slots that would come under the control of the merged company should the merger go ahead.
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Ball/Murdoch spat at BSkyB

BSkyB Chief Executive Tony Ball is reported to have clashed with Chairman Rupert Murdoch saying he does not want anything to do with Kirch, the indebted German media group, according to a report in the Daily Telegraph, a UK newspaper.

Ball apparently told Murdoch that he does not want BSkyB to be further involved in Premiere, the Kirch cable television subsidiary in which it has a stake. His preference is for BSkyB to exercise its put option forcing Kirch to buy back its stake for £1.1 billion (E3.47 billion) - or accept other assets instead. Kirch Gruppe owns the World Cup football rights and Formula 1 motor racing.

Ball is reported to have convinced Murdoch that it would be wrong to spend hundreds of millions of pounds more on the loss-making operation.
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PanAmSat Raises $2.05 billion

Some $2.05 billion (E2.37 billion) in debt and long-term notes has been raised by PanAmSat. The financing comprises a $1.25 billion (E1.44 billion) bank debt and $800 million (E925 million) in 10-year senior notes sold in a private placement.

The new financing replaces debt owed to Hughes totaling $1.725 billion (E1.994 billion) set to mature in 2003 with long-term bank debt and senior notes distributed in capital markets. Joseph Wright, PanAmSat president and CEO said that the new revolving credit facility, together with PanAmSat's cash position and cash generated by operations, "will provide us with liquidity to pursue growth opportunities."

Wednesday 27th February

Kirch appoints insolvency experts
DT to seek new bidders
Lachlan takes TV role
Gay channel launch by MTV
Satellite delivers US local TV
Comcast/AT&T merger benefits Microsoft

Kirch appoints insolvency experts

On Monday (25/2/02) Kirch Gruppe's creditors forced the debt-laden German company to appoint three insolvency experts as consultants to advise Kirch Holding, the parent company, on its restructuring. The consultants are Wolfgang van Betteray a Dusseldorf-based insolvency and restructuring lawyer; Klaus-Hubert Gorg, a lawyer appointed to the supervisory board of construction group Holzmann during its 1999 insolvency filing; and Hans-Joachim Ziems, an insolvency and corporate crisis consultant.

Creditor banks were reportedly unhappy with the level of information being received from Kirch, which they needed to decide whether further loans in a rescue bid, or an insolvency process would best minimise their losses.

The FT reports that Bakred, the German banking regulator, has estimated total banking exposure to Kirch from German banks at more than E7billion and reported its concern about several lenders' level of exposure to the group.

On Tuesday (26/2/02), representatives of Rupert Murdoch, Saudi investor Prince Al Waleed and US investment bank Lehman Brothers were due to meet at Kirch headquarters in Munich to discuss plans for a restructuring and refinancing of Premiere World.

The meeting is expected to discuss the group's liquidity crisis.

Separately, the banks, will appoint an intermediary next week to represent their interests in talks with Kirch.
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DT to seek new bidders

The German Bundeskartellamt (Cartel Office) officially announced late yesterday (Tuesday 26/2/02) that it is blocking the planned E5.5 billion acquisition of 55 per cent of Deutsche Telekom's six regional cable television systems by Liberty Media. The Cartel Office handed a written document highlighting the reasons for its decision to Liberty yesterday (26/2/02). The cartel view was that, "The (cable takeover) plan would reduce... competition in monopolistically structured markets."

Had the deal been approved, Liberty Media would have become Germany's and Europe's largest cable operator with 10 million subscribers, - some 60 per cent of the German market. When combined with its proposed purchase of Telecolumbus, which controls end-connection to the subscriber's homes, ownership of wholesale and direct-to-customer cable operations would have given Liberty industry dominance in Germany. A major concern of the regulator was that this would enable Liberty to set prices and force out competitors - and the concern was increased because Liberty was a major content provider in its own right, said Kartellamt boss Ulf Boege.

Deutsche Telekom - which needs the sale to reduce E65 billion debt - will now have to launch a new auction, requiring another regulatory review, which could extend beyond the year end.
DT issued a statement saying, "Deutsche Telekom is open to new negotiations with interested parties. The program of systematic debt reduction shall continue."

Any new bidder may also be required by the regulator to upgrade Deutsche Telekom's network to a capacity of 862Mhz for telephone and Internet services - something Liberty declined to do. Liberty had planned to spend $7.2 billion by 2010 on upgrading the system, but with the focus on TV delivery.

Many believe that the move is a set back for German TV as there are expected to be few bidders willing to pay the sums offered by Liberty, which would result in new jobs especially in Bavaria and Berlin, as well as offering smaller local and international channel operators new distribution channels for their content. But Germany's public broadcasters and commercial networks are pleased to see the elimination of a major competitor before it even entered the market.
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Lachlan takes TV role

Rupert Murdoch's 31-year-old son and heir apparent, Lachlan Murdoch, has expanded from controlling the company's print operations to include a TV management role over Fox TV.

Mitch Stern, who oversees the Fox TV station group, previously reported to News Corp President Peter Chernin but began reporting to Lachlan in January.

However, Broadcast & Cable reports that Tony Vinciquerra, who runs the business side of the Fox network, and Sandy Grushow, who oversees the entertainment side and TV production arm, continue to report to Chernin.
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Gay channel launch from MTV

A subscription-only gay channel is planned to be launched by Viacom's MTV Networks and Showtime Networks.

Announced last month, the venture is still in the pilot phase of development, says Betsy Frank, Executive Vice President of Research and Planning at MTV Networks, adding, "We are looking at a mix of acquisitions and original (programming)."

Based on the British version, Queer as Folk became the highest-rated Showtime original series in prime time, which, it is suggested, could have been the stimulus for Viacom to approve the launch of a gay network.

The channel is to be a hybrid premium pay service supported by license fees and sponsorships, as well as advertising.
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Satellite delivers US local TV

Nation-wide satellite delivery of local TV channels has been promised across all 210 designated market areas in the US.

EchoStar Communications Corp and its $30 billion (E34.6 billion) acquisition (subject to regulatory approval) Hughes Electronics Corp made the proposal yesterday (26/2/02).

A new spot-beam satellite is proposed in a joint filing to the FCC, to be launched and operated by the two companies, potentially providing local TV via satellite to every consumer in the continental United States, Alaska, and Hawaii.

EchoStar and Hughes' DirecTV currently deliver local broadcast channels via satellite to consumers in 42 metropolitan markets. By merging, more than 500 identical channels would be eliminated. The companies say that this move, coupled with spot-beam satellites, will enable local channel delivery in all US designated markets.

In addition to concerns about a US satellite monopoly, approval for the merger has been opposed by those who say that it would create a rural pay TV monopoly.

Countering this argument ," EchoStar Chairman and Chief Executive Charles Ergen issued a statement saying, "Today, approximately 42 million TV (US) households do not have the option to receive local channels via satellite, and as such, have no choice but to subscribe to cable. Without this merger, many of those will never see local channels on satellite and have no choice of local television providers."
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Comcast/AT&T merger benefits Microsoft

Microsoft's beleaguered interactive TV platform may find it gets more benefit from the $5 billion (E5.76 billion) it invested in AT&T than any investments made in European cablecos NTL, Telewest, TV Cabo and UPC.

The filing, reported in dotcomscoop, says that, "In connection with the exchange agreement, Microsoft and Comcast Cable Communications Inc. have entered into a three-year agreement pursuant to which the parties will conduct a trial during 2002 of an interactive television platform, including set-top box middleware."

Microsoft will be hoping the trial is a success for the filing also states that, "If the trial results meet agreed technical standards, the platform meets defined competitive requirements and a launch would meet Comcast Cable's reasonable business objectives, Comcast Cable has agreed that it will commercially launch the Microsoft platform to at least 25 per cent of its newly installed middleware customer base."

Microsoft's earlier deal with AT&T Broadband failed to materialise. Microsoft in turn was called upon to exchange $5 billion (E5.76 billion) in debt owed to it by AT&T for common stock in the newly created AT&T Comcast. Despite Comcast CEO Brian Roberts saying that the exchange agreement had "no strings attached," the move is not a surprise in the industry.

Microsoft also gets preferential treatment in offering Internet services over AT&T Comcast's cable line. The terms of the deal mean that if another Internet service provider wanted to offer its services over AT&T Comcast's lines, Microsoft would have to be offered the same deal.

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Tuesday 26th February

US deregulation to boost mergers
Interactive intelligence test
DVD 'piracy' enabled
Simply Shopping
EchoStar satellite 'uninsured'
No 2 Belarus channel

US Deregulation to boost mergers

Increased deregulation following last week's US Federal Appeals Court rejection of limits on broadcast and cable cross-ownership, plus expected scrapping of the 35 per cent of viewer ownership cap, are expected to spark a new round of media consolidation. Legislation was always a bigger barrier to mergers than availability of cash - though companies struggling with debt could well miss out on merger opportunities.

AOL Time Warner Inc, NBC, Viacom Inc, Walt Disney Co and Comcast Corp are all expected to consolidate their disparate assets.

Recent acquisitions have already caused Viacom and News Corp to exceed the 35 per cent cap through but now they may not have to sell off any stations to stay within the limits.

The US Federal Communications Commission (FCC) has been ordered to rethink its national broadcast ownership cap - which is now forecast to rise from 35 per cent to between 45 and 50 per cent. It should prove a pleasant task for FCC Chairman Michael Powell who opposed the current 35 per cent national audience cap.

Ultimately the major media conglomerates want to run national broadcast networks to build national brands, AND own vast cable systems to deliver repackaged versions of their content.

One potential deal now possible, and therefore being speculated upon, is AOL TW buying up General electric Co's NBC - no longer prevented by AOL TW's ownership of Time Warner Cable. Alternatively NBC could increase its broadcast properties, or add a cable system.

It has been suggested that Comcast, recent acquirer of AT&T Broadband, is eyeing Disney and its ABC broadcast network - resulting in Disney stock rising.

Also, most big media companies have seen their share price hammered over the past several months, and could try to boost their stock prices before using shares in any purchase deals.

Among those opposing the change is Republican senator Edward Markey, who authored legislation setting the 35 per cent cap and called for, "Diversity and localism ã especially in an era of big media consolidation," adding, "I strongly urge the Commission to work in the coming months to develop the record sufficiently to justify continuation of the rule on diversity and competition grounds."
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Interactive intelligence test

French terrestrial channel M6 is to test the intelligence of the French population, or at least as many of them as want to, in March during a four-hour long live programme. Around 60 questions, which have been tested with a panel of 800 people monitored by psychologists, will be put to the studio audience.

Viewers at home may take part by a variety of means, including the M6 web site in real time or by filling in forms in the TV listings magazines. M6, always keen to make the most of an opportunity for derived products, will publish a magazine of its own specifically for the show.

The concept is that of the Dutch production house Eyeworks, which has already produced similar events in the Netherlands and Germany.
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DVD 'piracy' enabled

This week the DVD Copy Control Association in the US will present its counter-appeal against Andrew Bunner, a software specialist who facilitated 'illegal' viewing of DVDs.

In November 2001 Bunner's appeal overturned an earlier court injunction which banned him from putting source code on a web site which would allow Linux (computer operating system) users to break encryption that barred them from viewing DVDs on their computers.

The US California Supreme Court now needs to define the scope of the state's trade secrets law, as Bunner's earlier appeal successfully established that the first injunction violated his First Amendment rights to free speech.

The entertainment industry's right to protect its trade secret was described by the court as, "not an interest that is 'more fundamental' than the First Amendment right to freedom of speech or even on equal footing with the national security interests or other vital governmental interests that have previously been found insufficient to justify a prior restraint."

Electronic Frontier Foundation (EFF) intellectual property attorney Robin Gross, was quoted by Newsbytes as saying she was "not terribly surprised" that the high court decided to review the case in light of its implications for First Amendment and trade secrets protections.
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Simply Shopping

UK-owned home shopping network Simply Shopping's latest channel launch is Simply Home which starts broadcasting on March 4.

Simply Shopping says it is the UK's fastest growing multi-channel, multi-genre shopping platform.

Simply Home follows December 2001's three-channel roll-out of Simply Music, Simply Holidays TV and Simply Health & Fitness - which in turn were preceded by October's launch of Simply Jewellery.

The company's aim is that the Simply brand should become one of the most powerful and instantly recognisable brands in the UK home shopping market.

The UK TV shopping market is currently estimated by the company to be worth £500 million (E800 million) with forecasts of over £1billion (E1,600 million) predicted in the next three years.

Simply Home, like its sister channels, will broadcast initially on the Sky Digital platform, although it is anticipated that Simply Shopping will become a multi-platform operation at a later stage, covering DTT, cable, and streaming on the Internet.

Simply Shopping Managing Director Henry Scott comments, "The launch of Simply Home underlines Simply Shopping's commitment to being the most wide ranging TV home shopping service in the UK. It is our firm intention to provide a service that is equipped to cater for aspects relating to consumer needs, the length and breadth of the country." He suggested that the company is fast, "becoming the pre-eminent force in the burgeoning UK home shopping market."
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EchoStar satellite 'uninsured'

The EchoStar VII satellite was launched last Thursday from Cape Canaveral, USA, aboard an Atlas IIIB rocket in a launch directed by Lockheed Martin's International Launch Services.

Recent reports say that while the launch was insured, EchoStar had not procured in-orbit insurance for the satellite.

EchoStar said that its back-up capability and the current market conditions for in-orbit insurance compelled the company not to get in-orbit insurance for EchoStar VII.

EchoStar VII is a high-powered satellite built by Lockheed Martin, featuring spot-beam capabilities for the delivery of extra programming, including more local TV channels - a point which is likely to be highlighted in current US DirecTV/Echostar merger talks.
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No 2 Belarus channel

President Alexander Lukashenko of former Soviet state Belarus has signed a decree to create a private joint-stock company, the "Second National TV Channel."

The decree says that the government is establishing the channel to provide the country with "complete, truthful and timely information." The state will control 51 per cent of channel.
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Monday 25th February

Kirch discussions today
Liberty E5.5 bn DT deal dead
NTL and Energis buyers emerge
DirecTV/Echostar hearing set

Kirch discussions today
By Dieter Brockmeyer

Leo Kirch, the 75 years old founder of Germany's KirchGroup, commented on the financial problems of his group for the first time in a rare interview with German news magazine 'Der Spiegel.' If it came to the worse he says he would give everything to Rupert Murdoch, who he described as a shark. Kirch's deputy, Dieter Hahn told the magazine that the group's debt was exactly E6.5 billion. That Kirch may have had a very simple reason for speaking right now. The German press reports that today (Monday 25/2/02) negotiations are being held with a group of banks to rescue Kirch.

Earlier, German politicians, including Federal Chancellor Gerhard Schroeder, said they would prefer a "national solution" that would keep Murdoch out. According to the press, the banks, including Bayerische Landesbank, Dresdner and HypoVereinsbank, could take over all the groups assets including Premiere World which is blamed for the group's financial troubles - currently loosing E2.3 million a day. Executives and investors in the digital platform will be discussing the financial restructure today.

Premiere's supervisory board and representatives of strategic investors in the business, including executives from Rupert Murdoch's News Corporation and British Sky Broadcasting, will attend the meeting in Munich. Prince Al-Waleed, the Saudi investor, and Lehman Brothers, the US investment bank, have also been invited to send representatives according to an FT report.

In addition the Premiere CEO Georg Kofler says that the operational costs of the venture could be reduced to make the operation profitable with 3 to 3.5 million subscribers (it currently has 2.5 million subscribers). This would include renegotiating contracts for TV and film rights running up to 2008. Previously Kirch was targeting 4 to 4.5 million subs to achieve profitability.

It was also confirmed that the merger of Kirch Media AG - in which Kirch's highly profitable TV production and rights business is bundled - with its commercial TV holding ProSiebenSat.1 Media, has been postponed. It had been scheduled for the end of June. The evaluation of the group's assets, many of which are now for sale, is currently quite complex. However, the merger is still said to be on schedule. A new date is supposed to be agreed on at a shareholder meeting in May.
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Liberty E5.5 bn DT deal dead

Liberty Media attorney Frank Montag told a news conference on Friday (22/2/02) that US media magnate John Malone does not expect the company's planned E5.5 billion Deutsche Telekom cable acquisition to get approval by Germany's regulators. A final judgment on the deal is to be made by the cartel office on Thursday. In Berlin, DT chief executive Ron Sommer echoed the view telling Bloomberg News, "The chances that the Liberty sale will go ahead are very slim. But I don't give up hope."

DT still owns the cable networks in 13 of Germany's 16 lander. The regulators had been willing to overlook the cable dominance that Liberty's purchase would achive if Liberty had been willing to upgrade the systems to provide telecommunications competition against DT. However, Liberty took the view that it did not want to incur the cost of such an upgrade, and wanted to pursue its deal 'without strings'.
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NTL and Energis buyers emerge

Indebted UK cableco NTL, and share crash victim Energis have both had approaches by private equity companies according to an FT report.

Blackstone and Kohlberg Kravis Roberts are reported to have contacted NTL after it said it was seeking a new cash investor to restructure its near-E20 billion debt.

Apax Partners, in which former Energis chief executive Mike Grabiner, is a partner, is among those looking at Energis.

A slump in communications company valuations have cut their access to capital markets for expansionary investment.

Energis, in danger of breaching its banking covenants, said it would sell its non-UK assets, and focus on its UK business, which is close to generating pre-tax profits and is seen as attractive to a financial buyer.

The FT reports Gary Klesh, a distressed debt specialist, as saying, "The UK business has an EBITDA of about £175 million (E285 million). It has bank debts of about £600 million (E980 million). If we assume the worst and 100 per cent of the bonds are changed into equity, its total debt would only be about three times EBITDA, which is very low."

In spite of the interest from private equity groups, one telecoms banker said the best buyer for Energis's UK assets would be a strategic one, such as Cable and Wireless. Telefonica, which owns alternative networks in Germany, Austria and Italy, could be interested in buying Energis's European assets. In response to a question by advanced-television.com (in an interview to be published on this site in March) Kingston Inmedia MD Nick Thompson suggested that the sort of acquisitions that it would seek would be complementary infrastructure, "like Energis."

NTL has also been approached by GE Capital, General Electric's financial services arm which is reported to be considering extending its existing investment in the company.

From the US media investment group Liberty Media, and AOL Time Warner are also said to be interested in taking equity stakes in NTL.
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DirecTV/Echostar hearing set

A hearing to examine the proposed merger of EchoStar and DirecTV has been set for March 6.

The Senate Judiciary Subcommittee on Antitrust, Competition and Business and Consumer Rights will consider whether the merger is in the best interests of the public. The proponents - DirecTV Chairman and CEO Eddy Hartenstein and EchoStar Chairman and CEO Charlie Ergen -will argue that the merger creates a credible competitor to cable which holds local monopolies.

Opponents, such as Subcommittee Chairman Herb Kohl and Ranking Republican Mike DeWine counter that consolidation in the subscription television market reduces consumer choice.

"We continue to believe that more competition, rather than additional consolidation, is needed in this industry," Kohl and DeWine said in a joint statement. In June, the two men declared "the subcommittee will work to ensure that media consolidation does not diminish the diversity of viewpoints available to consumers."

The subcommittee has oversight over the Justice Department, which is the body that can decide whether a merger is likely to substantially lessen competition in the subscription TV market.
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