Vivendi Universal’s Canal+ unit is set to continue its spree of mergers across Europe.
Vivendi Universal’s Canal+ subsidiary is Europe’s largest pay-TV operator with a combined subscriber base in excess of 10 million households. The French group has been at the forefront of the digital TV revolution, through the aggressive rollout of digital satellite and development of interactive services.
This strategy has been extremely costly, driving Canal+ to merge its subsidiaries with competing satellite operators in an attempt to lower content and customer acquisition costs and improve operational efficiencies. Among others, Canal+ plans to combine its Italian subsidiary Telepiu with Sky Global’s Stream.
Further such deals look likely. Canal+ executives in France are discussing the advantages of merging with satellite operator TPS. Spanish partner Sogecable has gone public over merging its CanalSatellite Digital platform with Telefonica’s Via Digital. As in Italy, these deals would leave the respective market with only one digital satellite platform. Completion of all three deals would leave Canal+ totally dominant in three of Europe’s four largest satellite markets.
Due to the resulting lack of competition for rights to key content and for subscribers, these deals will attract competition bodies’ attention. However, a pan-European operator’s lower costs might allow it to cut consumer prices, outweighing the competition worries. In addition, European governments all have a political goal of encouraging digital TV uptake so they can terminate analog broadcasting. This means they will not allow digital operators to close down. If mergers are the only viable alternative, they must go ahead.
Certainly, there is a clear logic to only having one digital satellite operator in any market. Consolidation in European digital TV is long overdue, and the coming years are likely to see numerous mergers and acquisitions, both across borders and within national markets. This should allow Canal+ to create a pan-European group achieving unprecedented economies of scale.
However, such a group will face intense scrutiny from regulators, particularly as it develops closer links with media groups such as News Corporation, which has similar ambitions but on a global basis.
