Digital TV deal provides short-term gain, little else

Subscriber digital TV network Canal+ was for years the flagship of France’s Vivendi group. The group, whose roots (Lyonnaise des Eaux) lay in water supply services, became during the 1990s – a decade of huge stock market expectations and impressive gains – and especially after the acquisition of US film colossus Universal, one of the dominant global entertainment groups, without selling off any of its other varied activities, from water supply and waste disposal to music portals and mobile telecommunications networks. But times change. A few days ago, the interlocutors of Vivendi’s boss, Jean-René Fourtou, were astounded to hear that Canal+ is for sale, one of the group’s many activities to be sold off in order to help the stock rise. The group’s top managers admit that it will be difficult to sell Canal+ at a time of very little investment on digital satellite TV networks. However, they appear determined to do so. Greek parallels While these are the developments in France, there are certain similarities to Greek developments. Almost a year after the collapse of the Alpha Digital platform, the owners of the remaining digital satellite TV platform, Nova, are entering into an agreement with the big shareholders of Greek listed firm Teletypos, owners of Mega Channel. Nova is owned by Dutch company Netmed NV, itself controlled by South African business interests. The agreement with Teletypos and its shareholders – publishers Christos Tegopoulos, Christos Lambrakis, Giorgos Bobolas and businessman Vardis Vardinoyiannis – is viewed by Netmed shareholders as a strong guarantee that they will at least salvage something out of their investment. At present, Teletypos’s main shareholders own the following stakes in the company: Bobolas’s Pegasus owns 18.23 percent; Tegopoulos owns 12.28 percent and the Lambrakis group 10.76 percent. The Vardinoyiannis group owns less than 10 percent. Whereas in France, the Canal+ managers are radically reassessing the investments made in a period of market euphoria in the name of future profits, in Greece there is still a belief in future profits, less economic than political. Last month’s agreement, which allowed Teletypos to buy into Netmed through the latter’s Cypriot subsidiary, Netmed Cyprus Ltd., is not a surprise. On the contrary, it is the result of tough negotiations, which have lasted for years, between the MIH Limited group – which controls Netmed’s subscription TV holdings in Greece and Cyprus – and the above-mentioned publishers over the participation of Teletypos in the lossmaking commercial company Multichoice Hellas, which manages subscriptions to Nova and analog channels Filmnet and Supersport. With this agreement, the representatives of MIH Limited in Greece will be obliged to acquire, at an agreed price, Teletypos’s stake in Multichoice. Teletypos and MIH are hoping to get the go-ahead from the Competition Commission before the agreement comes into effect at the end of 2003. It should be noted that, despite Nova’s monopoly, MIH is losing money on its investments in Greece, as the number of subscribers has stagnated at a low level. Preparations for the deal have already been made. Teletypos has transferred almost all of its shares in Multichoice to its subsidiary in Cyprus at book value prices, through front companies based in Luxembourg. This complex process of financial transactions will end in Teletypos owning a 12.5 percent stake in Netmed BV. Antenna TV, Teletypos’s main competitor, and a Global Finance fund already own stakes in Netmed. Teletypos and its shareholders are expected to gain about 30 million euros in added value from the transaction, whose total financial value is said to exceed 35 million euros; not a bad gain for a company whose finances have not exactly flourished recently. At the recent annual meeting of Teletypos shareholders, managing director Elias Tsingas announced that, during the first five months of 2003, turnover declined 12 percent, to 51.35 million euros, while pretax profits fell 41 percent, to 4.9 million euros. On a consolidated basis – which includes the Cyprus subsidiary, which managed to eke out a marginal profit – pretax profits fell 37 percent, to 5 million euros. Despite that, Teletypos’s management, having already taken into account the gains from the above-mentioned deal, forecasts that consolidated profit for the whole year will range between 40 and 50 million euros. In any case, the gains from the deal will provide a cushion for the following financial periods, but also plenty of time to digest the fact that any hope for gains through the stock exchange is folly. The deal closes a cycle and opens another, where the dominant forces will be the managers of advertisements of state-owned companies – which still account for the bulk of advertising revenue in Greek media – and certainly not by the investors themselves. The futility of seeking added revenue on the stock market was shown last year when both MIH Holding and Antenna hastily retreated from the New York Stock Exchange, which they had entered with such high expectations. Attempting a similar move in Greece, even with a parallel listing in another eurozone stock market, appears a totally farfetched proposition, not only because the investment is not going to show any returns but also because the businesspeople involved lack any clear vision of what their future strategy will be. Both politicians and businesspeople consider that, regardless of the new partnership’s viability, Netmed and its partners will seek to intervene with the state in order to change the rules of the game concerning the operations of subscription TV, especially regarding costs and sources of revenue. Although it is too early to find out Netmed’s priorities, many think that it will try to play a role in acquiring broadcasting rights for soccer games. After all, and despite the present crisis, soccer is going to provide the bulk of any future subscribers. Another sector where Netmed will be active is alternative marketing and sales networks. One future ally in direct sales through interactive TV is state soccer pools and lottery OPAP, which is already preparing a variety of games of chance.

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