Kirch And Clt-Ufa Agree On Pay-Tv Deal

The battle to control digital pay-television in Germany appeared close to a truce on Monday when KirchGroup and rival media company CLT-Ufa announced a compromise. The two companies, which have spent more than a year fighting, said they had agreed to work together to develop digital pay-TV around Premiere, a subscription channel in which both are shareholders but where CLT-Ufa has management control.

The compromise deal, which is subject to regulatory approval, is a welcome respite for Kirch, whose financial health has been the subject of speculation. Last year, the privately held company made heavy spending commitments in output deals with Hollywood studios for pay-TV rights to films and other programmes.

 

The deals succeeded in scuppering plans by CLT-Ufa, which is half owned by the Bertelsmann media group, to launch its own digital pay-TV network. But they failed to give DF-1, the loss-making digital pay-TV network launched last year by Kirch, the intended boost. So far, DF-1 has only managed to sign up some 30,000 subscribers - a fraction of the number forecast in the business plan. The development of DF-1 was also hampered when Deutsche Telekom, the partly privatised telecoms company which owns most of Germanys cable television network, refused to allow the network to be carried on the cable system.

The companies said yesterday they had also agreed on Kirchs d-box decoder as the uniform technology for the unscrambling of digitally transmitted signals. The companies said they were in talks with Deutsche Telekom to provide open access to the d-box technology. Kirch holds a 25 per cent stake in Premiere, while CLT-Ufa has a 37.5 per cent share.

Canal Plus of France holds the remaining 37.5 per cent. Under the terms of yesterdays deal, the French group would sell its share to give Kirch and CLT-Ufa 50 per cent each. Following yesterdays announcement, the future of DF-1 is unclear, as Premiere is set to become the broadcast platform for much of the output from Kirchs Hollywood deals. With 1.4 million subscribers, Premiere offers Kirch the necessary mass to meet guarantees of audience size made to the studios. German cartel authorities yesterday warned they took a critical view of the new deal.

However, European cartel authorities are likely to be ultimately responsible for deciding the case.

Financial Times

Yesterdays agreement coincided with the pricing of a 17.5m-share initial public offering by Pro Sieben, a free TV network controlled by Mr Thomas Kirch, son of the founder and owner of Kirch Group. At a price of DM66-DM72 a share, the issue could raise more DM1.2bn ($692m). The bulk of this will go to Mr Thomas Kirch, who will also continue to own 60 per cent of the voting stock. Pro Sieben said the issue was significantly oversubscribed. Trading in the shares, which were priced yesterday in the grey market at DM110-DM120, begins in Frankfurt on July 7. Copyright Financial Times Limited 1997. All Rights Reserved.