NEWS Monday 2nd - Monday 9th September 2002

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Friday 6th September 2002

Telenor buying Swedish media
By Goran Sellgren

Norwegian telecom and media operator Telenor has long found its home territory too small for its expansionist ambitions and now appears to be eying major media acquisitions in Sweden.

Telenor is already well represented in Sweden, both as a cable, mobile and Internet service operator etc, and its nowadays wholly-owned pan-Nordic DTH platform Canal Digital, has the lion share of its over a million subscribers in Sweden. But Telenor obviously has bigger ambitions for the Swedish market.

Not only does Telenor seem willing to honour the deal to acquire Swedish broadband and Internet supplier Song Networks, a deal with fell through only a month after it was struck last spring: Telenor is now also considering major deals such as the acquisition of Com.hem, Sweden's market-leading cable operator, and Comviq, one of Sweden's three biggest mobile phone services.

These plans have been revealed in an interview with Jon Fredrik Baksaas, who succeeded the controversial Tormod Hermansen as MD end of June earlier this year. The report was published in Swedish business daily FinansVision, owned by Modern Times Group, MTG, part of the same family as Comviq.

When Baksaas took over the helm many expected this to be the end of the expansionist Hermansen period. In fact Baksaas has put the brakes on excess expenditure and a focus on cost-saving and consolidation rather than expansion at any price.

So it certainly raised quite a few eye-brows when Baksaas publicly admited the renewed interest in Song Networks. Especially as this was a deal called off by Telenor as 'financially adventurous.'

"It is not that we cannot live without Song, but that deal would certainly improve our business position," says Baksaas.

Telenor has long been considered the most likely new owner of Com.hem, which has a 65 per cent market-share in Sweden, and over 1.3 million households connected. Its founder and present owner is Telia, Telenor's Swedish counterpart and rival. Telia has been instructed by the EU to divest itself of Com.hem, in the shadow of the present merger plans between Telia and its Finnish counter-part Sonera.

But Telenor's interest in Comviq - part of Jan Stenbeck's telecom family Tele2 - took the Scandinavian media industry by total surprise. Comviq had not been considered as being for sale, but the sudden death a couple of weeks ago of Jan Stenbeck has opened up broad ranging speculation.

Described as a "cost-cutter" Baksaas admits he is not too fond of 'visions.' "We are presently in a phase where expansive visions don't pay off too well. Then one has to be realistic, now we focus on surviving through this phase, in order to be ready for the next phase."

Major Telenor operations in Sweden include Sweden On Line, SOL, and a number of smaller cable operators, ISP and telephony operator Telenordia, formed in partnership with BT and Danish TeleDanmark, but for the last few years wholly-owned by Telenor. Mobile operator Djuice - with a focus on young users - is also active in Sweden, as are many other parts of the Telenor empire.
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NC Numericable updates offering
By Sotires Eleftheriou

NC Numericable, France's number three cable operator, a subsidiary of Canal Plus, is to remodel its product range and introduce some new packages as well as bundles combining TV and internet access.

The digital packages now start at E13.90 a month (plus E8/month rental for the digital decoder) up to 60E a month. Several a la carte channels can also be added. An analogue package of 22 channels is also available for E27.9 a month, without the need for a decoder.

NC Numericable has recently introduced a new lower cost Internet service at E25 a month for a speed of 128 kbps. "This is more than twice the speed of a dial up modem, doesn't tie up the phone line and includes unlimited access," pointed out NC Numericable CEO Bernard Cottin.

The high speed access, 512 kbps, remains at E40 a month, a little under the current ADSL prices. There is also a higher speed offer for professional users. Subscribers taking both TV and Internet get an E5 reduction. Some 60 per cent of new clients take the combined offer.

NC has found that the lower price offer does not canibalise sales of the high speed offer; rather it attracts people who do not yet have Internet or who use a dial-up modem.

The operator currently has 400,000 TV subscribers, of which 180,000 are digital. It expects to have 30,000 Internet subscribers by the end of the year, about double the figure at the end of 2001 (16,000). In areas where it is in head-on competition with ADSL it splits the market approximately evenly. Plans for cable telephony have been quietly dropped.

Negotiations with France Telecom over the acquisition of the network, which have been going on for over a year, are still in progress, slowly. NC has also been up for sale for over a year, but the France Telecom issue needs to be settled first.

Finally, it hopes to be EBITDA positive around the end of this year, "making us the first French cable operator to do so," said Cottin.
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Kirch cuts jobs
By Dieter Brockmeyer

By the end of this month Kirch Media will make 82 of its 544 current employees redundant.

In 2003 another 69 jobs will be cut so that the company ends up with a slimmed down organisation of 355 employees, making it easier to attract new investors to the insolvent core business of Germany's KirchGroup.

Also Kirch Media's TV sports group Deutsches SportFernsehen, DSF, is continuing its path of consolidation. At a presentation to advertising clients in Hamburg, DSF Managing Director Stefan Ziffzer said that in order to make the channel and the connected TV production service unit survive, more job cuts would be necessary. He didn't mention any further details, however, in the last few months a quarter of the former 400 employees were made redundant.

Ziffzer assured delegates that the channel would survive in the future and tried to prove it by indicating the season's new program highlights. In the future DSF also is going to present live games from the major German ice hockey league
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HK's ATV gets China access
By Owen Hughes

After years in the shadow of Hong Kong's dominant terrestrial channel Television Broadcasts (TVB), Asia Television (ATV) continues to hit the headlines with speculation about its future ownership and by becoming the first overseas terrestrial channel to be granted carriage on cable TV systems in southern China.

ATV's majority owners, Lai Sun Development, had been in talks with tycoon Li Ka-shing about selling their stake to his multimedia company Tom.com for much of the summer. But the deal foundered amid opposition from many in Hong Kong who said that Li-owned companies already dominate much of Hong Kong's retail, property, shipping and telecommunications sectors, but also after the billionaire complained he was unable to conduct due enough diligence on ATV.

Now another shareholder and ATV Chairman, Liu Changle, the former People's Liberation Army soldier who is also Chairman of the satellite-delivered Phoenix stable of channels, wants to increase his stake, along with Chan WIng-kee. Between them the two men currently own 62.25 per cent of ATV.

As Li withdrew his interest in ATV, the station announced that Chinese regulators had granted it permission to be carried on cable TV platforms in the neighbouring Chinese province of Guangdong for both its Cantonese-language Home, and English-language World channels. Although Hong Kong returned to Chinese control in 1997, its media are still classed as 'foreign' by Beijing.

However, both TVB and ATV have been viewed by millions of people in Guangdong since the 1980s as a result of 'accidental overspill' of signals. Cable operators in the province have for some time taken the transmissions and stripped them of Hong Kong-originated advertising and sold the timeslots locally. Cynics observe that the agreement will allow only ATV to get a slice of the advertising revenue that has been stolen from them, as well as allowing Chinese censors to more closely monitor the network's output.
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NDS activates Nickelodeon

Children's channel Nickelodeon teamed up with NDS Group plc, a News Corporation company, to launch an interactive quiz in the UK based on the show Sabrina The Teenage Witch.

The move is described as the start of a long-term strategy to take interactivity to all Nickelodeon viewers. Nickelodeon's Sabrina Magic Spell Game is being broadcast around the advertising breaks of the new series, between 4 to 6pm every day for four weeks and started on September 2 2002.

The Nickelodeon Sabrina Magic Spell Game is multiple choice; at the end of the advert breaks viewers are asked a question about Sabrina, responding with the remote control. The correct response and individual viewer's score are then displayed before the beginning of the next show. Eight games are broadcast per day with cumulative points gained for each correct answer, and final scores can be entered into a prize draw via the return path.

The system uses NDS's Value@TV system. Further interactivity is planned during the "Ultimate Sabrina Marathon" in November 2002.

"Nickelodeon's programming content provides superb scope for interactive enhancement to generate additional channel loyalty and new revenues streams in an increasingly competitive youth market," said Paul Thompson, Vice President Interactive TV, NDS Group plc. "The Nickelodeon interactivity in conjunction with NDS will enable them to maintain a competitive lead in the market while delivering enjoyable and compelling interactive experiences to its viewers."

Eddie McKendrick, Nickelodeon UK Director of Technologies, commented, "Nickelodeon chose NDS as a result of the unprecedented success of previous co-developed applications, and NDS's position as a leader in the iTV industry. Nickelodeon has always set the standard when it comes to interacting with kids. We are going to continue to provide our viewers with the best programming and technology available and see NDS as a natural partner in the iTV space."
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Bulgarian Arris reseller appointed

Arris has appointed Digital Solutions Ltd of Sofia, Bulgaria as a European Value Added Reseller.

Digital Solutions will market the ARRIS Broadband product range, including DOCSIS 1.1 and EuroDOCSIS 1.1 certified and approved cable headend and access systems, to cable operators. ARRIS' scalable broadband technology assists cable operators, with subscriber bases of all sizes to increase revenues from existing or newly developed infrastructures.

"We were impressed with the breadth of experience that Digital Solutions' staff possesses. This coupled with intimate local and regional business knowledge and a broad communications product portfolio represents the ideal platform to promote ARRIS Broadband Voice and Data applications to cable operators in these regions," said Stefan Obst, Regional Sales Director at ARRIS.
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Vivendi in share lawsuit

A US lawsuit has been filed alleging that French-owned media giant Vivendi Universal and its former CEO, Jean Marie Messier, artificially inflated the price of its American Depository Shares to fund an acquisition binge between 1998 and 2001 that resulted in E18 billion in debt.

The lawsuit seeking class action status has been filed in the United States District Court for the Southern District of New York on behalf of all persons who purchased or otherwise acquired publicly traded securities and the American Depository Shares of Vivendi Universal SA from April 23, 2001 through July 2, 2002, inclusive. Also included are all those who acquired Vivendi securities through its acquisition of USA Networks and Houghton Mifflin

Vivendi is alleged to have represented that it was successfully implementing recent mergers and that it was not as susceptible to economic problems as competitors. On the back of these false statements Vivendi ADR prices rose to as high as $68.80 each. Late in June 2002 news of Vivendi's vast debt drove the price per ADR down, then July 3, 2002, when Messier was forced to resign, confirmation of the debt caused the ADRs to plummet to $15.65, taking billions of dollars off Vivendi's value.

Damages are being sought on behalf of all Class members with the plaintiff represented by the law firm of Schatz & Nobel PC. Investors seeking more information are advised to contact attorneys Andrew M. Schatz or Nancy A. Kulesa at (800) 797-5499, or by e-mail at sn06106@aol.com.
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ITV News editor quits

Nigel Dacre, the award winning UK editor of ITV news programmes including News At Ten, is to quit and be replaced by David Mannion once coverage of the anniversary of the 11 September attacks is completed next week.

In addition, Mannion will take charge of the ITN News Channel, which goes out on digital TV, and the ITV News website. ITN also provides news bulletins for ITV as well as Channel 5.

Dacre had been with ITV for 20 years; ITN chief executive Stewart Purvis said of his tenure, "Nigel has been an outstanding editor of ITV News."
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TV Corp's E21 m loss

Independent UK TV production and facilities company Television Corporation reported a E21 million pre tax loss for the first half of the year, attributed to a write off its investment in a US post production business.

The TV Corp chairman, Terry Bate, was reported in the Guardian newspaper as saying he planned to maximise the price for selling the company's stake in Californian post-production outfit Pacifica. However, TV Corp's interim results for the first half of 2002 include a complete write-off of its E19.3 million investment in Pacifica to date.

Consequently TV Corp had a pre-tax loss of E21 million for the period, after making a E1 million profit in the first half of 2001. Total turnover for its UK production arm was E50 million with an operating profit of E2.5 million. Turnover was adown by E5.6 million year on year, primarily due to a seven per cent drop in revenue from TV production subsidiaries Mentorn and Sunset + Vine.

*TV Corp has also reached agreement with Siemens to buy its 50 per cent stake in Hawk-Eye, the 3D virtual replay technology used in Channel 4's cricket coverage.
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Thursday 5th September 2002

Callahan seeks cooperation

US cable investor Dick Callahan's Callahan Associates, which owns networks in Germany, Belgium and Spain, said yesterday (4/9/02) that it has had a positive response from rival cable operators throughout Europe to the suggestion that they share costs to more effectively compete against incumbent telecoms carriers.

By sharing technology investments and negotiating single television programming deals Callahan suggests that savings of 20 to 30 per cent can be achieved on operating costs.

Callahan's President of European operations, Andy Sukawaty, is reported by Reuters to have already spoken to most of the bidders for the Deutsche Telekom cable assets for sale in six German states as well as holding talks with Holland-based pan-European cableco UPC, controlled by US-based Liberty Media.

In an interview with Reuters Sukawaty said, "For us, to fragment ourselves creates a competitive disadvantage with telecom incumbents like Deutsche Telekom, which already sells broadband Internet access nationwide in Germany under a single brand."
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Danish TV2 seeks quick sale
By Goran Sellgren

The new Liberal-Conservative Danish government's plans for Denmark's TV2 entail a 'quick-as-possible' sell-off of TV2's shares so that the company is privatised before the end of next year.

The plans for privatisation were announced last May but the project has recently stepped up a gear. A price tag, "in the region of, or slightly over one billion krone," (E135 million) has been proposed by Jens Rohde, the political Chairman of the biggest government, party, Liberal Venstre.

Rohde himself admits that this price tag may be on the rather low side (according to several analysts the real market value of TV2 should be around three to four billion krone), but the government has decided that it wants a rapid sales process. Several media operators that have already indicated an interest have all stressed the importance of a 'reasonable price tag' as a prerequisite of running TV2 at 'a good public service quality level' in the future.

So far the only party that has officially announced its interest in investing in a privatised TV2 is Egmont, Denmark's oldest and biggest media group. Egmont is an important media player in the Nordic region, and since 1992 has held a major share (33 per cent) in Norway's TV2.

Other major Nordic media operators that have indicated they are interested in TV2 are Modern Times Group, MTG, of Sweden, and Norwegian investment group Orkla. Orkla has a major presence in the Norwegian media market, and last year became a major shareholder in Denmark's leading newspaper group, Berlingske. Berlingske's domestic newspaper rivals, Politiken and Jyllands-Posten, are expected to discuss various options to gain control of TV2.

TV2 was launched in 1988, and has become one of Denmark's most watched stations, competing with public service DR1 for the No 1 position. Some years ago TV2 launched an 'alternative' service, Zulu, for a 'young, urban' audience. TV2 is a state-supervised foundation, mainly financed from advertising, but it also gets a share of the Danish licence fees.
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Telewest cuts 1000 jobs

Heavily indebted UK cableco Telewest's new Chief Executive Charles Burdick, formerly the company's Financial Director, is implementing cost cutting measures that could see a further 1,000 job cuts in addition to the 1,500 announced earlier in the year.

The move, as part of an overall restructure, includes the closure of three customer service centres, leaving just five. Due for completion by the end of 2003, the staff cuts will reduce the workforce to around 8,000.

Burdick is reported as saying, "There are no specific cuts planned. (But) through attrition, working smarter, focusing on costs ... we will have a smaller workforce next year."

Spending is set to fall by a third, with annual capital expenditure to be reduced from E700 million to E470 million - having already been cut by E236 million earlier this year.

The cuts are reported by the FT newspaper to be in preparation for a debt-for-equity swap with bondholders owed E5.7 billion. Interest payments will then fall by some E470 million a year, though the company will still owe E2.8 billion. A merger with rival NTL, which is already undergoing its own debt-equity restructure, will be more likely once the two companies have reduced their debt load.
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Macau pirates negotiate
By Owen Hughes

A cable TV operator in the former Portuguese colony of Macau is to hold talks with pirates who have reduced its planned subscriber uptake by two-thirds since it started operations in 2000.

Macau Cable TV is considering offering the pirates shares in the company to stop them from illegally retailing the service to householders. Finance Director Antonio Silva Aguiar said that Macau Cable TV currently has 7,000 subscribers and that without the pirates this total would be 20,000.

However, some estimates suggest that 80 per cent of Macau's 100,000 homes watch cable TV illegally.

Former Portuguese run Macau reverted to Chinese sovereignty in 1999. Among the unlicensed operators are TV maintenance firms that tap into the company's cables, as well as intercepting the satellite feed relaying international channels into Macau Cable TV's dish farm.

Aguiar said that piracy was the main reason Macau Cable TV was posting a E125,000 loss each month, adding that the problem could delay the planned breakeven target of financial year 2004/2005.

Piracy remains the single biggest reason for cable and satellite TV operations remaining in the red in Asia.
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Anti-piracy boosts i-Cable profit
By Owen Hughes

A subscriber influx lead by the World Cup and measures to crack down on the pirating of signals has allowed Hong Kong's i-Cable Communications to post a 34 per cent year on year rise in profits to E13.4 million for the first half of 2002.

The company's turnover rose by 20 per cent during the period to as subscriber numbers rose by seven per cent to exceed 600,000. Meanwhile the monthly average revenue per user (ARPU) increased by two per cent to E31.8

Hong Kong's poor economic fundamentals and a fall in the price levied on consumers for broadband access caused by intense competition among operators meant that these figures were nevertheless a disappointment to the market which caused the share price to fall at the time of the announcement. Broadband subscriber numbers rose by 92 per cent to 192,000 in the first half but i-Cable's share of the market declined from 28 per cent in January to 25 per cent in June.

Even the increase in subscriber numbers was tempered by Chairman and Managing Director Stephen Ng Tin-hoi's comment that the additional income derived from obtaining the exclusive rights to the World Cup - nearly E13 million - had been spent on production and marketing costs.

Going forward, Ng anticipated that the broadband operation would continue to experience double digit growth. It was noted that with an operating margin of more than 50 per cent, the service had the potential to undercut competition as forecasters expect more fierce competition for subscribers.

The broadband division, which recorded operating profit of E4 million on turnover of E31.8 million, had an operating margin of 51 per cent, leaving it room to undercut competitors with price reductions.
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Open in Chinese iTV development

Jiangxi Cable Network, a three million subscriber Chinese provincial cable network, has selected Open TV and its local partner, Beida Jadebird Huaguang (Jadebird), to facilitate delivery of digital and interactive television.

Digital TV (DTV) services are expected to be available in about three months, to be followed by interactive television (iTV) services. This contract is the first joint win for OpenTV and Jadebird since the companies partnered in April to deploy OpenTV's iTV solutions to Jadebird invested cable TV networks throughout China.

Jiangxi is the fourth Chinese network to have selected OpenTV, joining CBSat, Shanghai Cable and Henan Cable.

OpenTV's solution provides full support for Chinese characters, character entry, local television set-top box manufacturers, and all approved conditional access vendors throughout China.

Jiangxi General Manager, Zhuqing Wang, commented, " In building a network that supports digital and interactive TV services, we aim to fulfil the demand from our subscribers who are eager for greater convenience and easy access to value added services. We believe OpenTV is clearly the most committed iTV solutions provider to the Chinese market and most suitable to assist us in meeting our goals."

Jeff Brown, OpenTV Managing Director for the Asia Pacific region, added that the deal reflected the strength of the Beida Jadebird partnership, and that the company would be helping deploy both locally developed interactive television services specific to Jiangxi Cable's network and subscriber base, as well as centrally distributed enhanced TV content via cooperation with programmers such as CCTV.
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Viacom expansionary

While European-owned media giants such as Vivendi and Bertlesmann are turning their back on acquisitions, Sumner Redstone, Chairman and Chief Executive of Viacom Inc says he is still looking to expand.

"After CBS I used to say 'We're done,'" Redstone was quoted saying in Vanity Fair magazine regarding the possible acquisition of Walt Disney Co. "But we're not done - we're never done. We look at everything that we should."
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CSG opens new European offices

CSG Systems, a provider of customer care and billing solutions, has opened three new offices in Europe - in Belgium, Spain and Italy. CSG says this will enable the company to better serve operators in mainland Europe with professional services expertise, support staff and sales representatives and in closer proximity to their own operations.

CSG Systems delivers billing and customer care solutions to more than 60 communications service providers in Europe, Middle East and Africa. These customers use the CSG's Kenan suite of billing and customer care solutions every day to support more than 70 services across all sectors of the telecommunications market.

"CSG is committed to ensuring that current and prospective customers are served in a way that best meets their needs. These offices illustrate CSG's commitment to the region and our understanding of the importance of locating staff in key parts of Europe," said Gary Burch, Vice President and Managing Director of CSG's Europe, Middle East and Africa region.
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French DTT delayed

By Sotires Eleftheriou

The new French government is widely believed to be reticent about the launch of DTT, partly because the project was initiated by the previous government.

Also, it is mindful of the powerful lobbying by the incumbent private analogue channels, who have supported the ruling party politically.

An element of confirmation for this view came last week, when the new Minister of Culture, Jean-Jacques Aillagon, speaking at the annual new media symposium in Hourtin, outlined the government's thinking on the subject. He pointed out that 20 years ago the TV scene was completely different to its state today, with just three TV channels all in the public sector and very few VCRs. In 20 years time it will be very different again. "It is our responsibility to consider very carefully any decisions we take as they will affect TV for years to come."

The government's thinking, said Aillagon, is based on two principles: maintaining a strong public sector broadcaster; and that the free evolution of the private sector should be accompanied with a close monitoring of financial and cultural equilibrium.

Specifically on DTT, whose implementation has been entrusted to the CSA (the French broadcasting regulator), "all [the Minister of Finance, Minister of Culture, Minister of the Economy, the CSA] agree that a number of questions have been left open" and need profound reflection before taking any decision. Questions like the number of channels for the public sector, the rules governing local channels, the details and financing of changing the frequency plan, or allowing TV advertising of more sectors.

"This is why the government has initiated a report, being carried out by Michel Boyon, to enlighten the government on how DTT should be implemented for a harmonious development of broadcasting, currently in a fragile state. In view of the profound nature of the reflection necessary, the mid-September deadline for the report is unlikely to be met."

While some people may follow the government's thinking, fervent proponents of DTT point out that detailed study of DTT has been going on for more than two years and see the new study as little more than a delaying tactic. Aillagon said that this was not the case, commenting, "if anyone else had been the Minister, DTT would not see the light of day before 2004 since it is not technically ready."

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VIVA merger announced

By Dieter Brockmeyer

German Viva Media AG has combined the operational and marketing activities of its two German music channels, Viva and Viva Plus.

The move was announced by the group over the weekend. This step is intended to optimise the group's structure after AOL Time Warner became one of the main shareholders.

VIVA plus, which launched at the end of last year with the intention of becoming the 'CNN of music television' - with its own correspondents in the global music capitals - has been hit hard with 70 staff facing redundancies. VIVA CEO Dieter Gorny said that the company no longer needs the staff 'as it now', however, he refused to comment on rumours that all the jobs will be go.

The new concept for VIVA Plus is to be the same as the Dutch VIVA daughter 'the box' which was launched as an interactive channel. Interactive in this case means that the audience can influence the play list via phone calls. As Gorny confirmed, this new strategy is also a reaction to the difficult economic situation.

At the end of July the group announced that revenues will remain behind expectations this year. Profits now are forecast to shrink from an expected E37 million to E15 million with revenues down to E109 million from E125 million.

VIVA Plus was just launched last Autumn as a joint venture with AOL Time Warner; the latter organisation recently increased its shares in the entire group and is expected to take over other shares soon to gain operational control of the entire venture.

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