Vivendi Plan for Mediaset Said to Include Telecom Italia Role

  • Phone carrier would form partnership with Premium pay-TV unit
  • Feuding companies would unite to fight Sky in Italian market

Vivendi SA is preparing a new plan to settle its dispute with Mediaset SpA, which would allow them to team with phone carrier Telecom Italia SpA in the Italian pay-TV market, according to people with knowledge of the discussions.

France’s Vivendi, led by billionaire Chairman Vincent Bollore, and Mediaset, founded by former Italian Prime Minister Silvio Berlusconi, would work together to challenge rival Sky Plc, the market’s biggest pay-TV player, said the people, who asked not to be named discussing private negotiations. Vivendi and Mediaset would each own 44.5 percent of Mediaset’s Premium pay-TV business, the people said.

Telecom Italia, which hasn’t yet signed on, would become Premium’s preferred partner and use its broadband network to promote the brand, with the option to buy in later. For the time being, minority owner Telefonica SA would retain its 11 percent stake in Premium, the people said. Vivendi may present the new plan as early as this month, they said.

Adding Telecom Italia to the mix would fulfill Bollore’s goal of creating a potent rival to Sky, while strengthening Premium’s delivery as the global television market goes online. Italy’s former phone monopoly -- whose largest shareholder is Vivendi -- would promote Premium on its digital platforms, the people said, giving it a potential edge against emerging broadband rivals including the utility Enel SpA.

As an added benefit, none of the partners would have to consolidate Premium’s ongoing operating losses, the people said. In July, Vivendi backed out of an agreement to buy Premium in a stock-swap with Mediaset that valued the network at about 810 million euros ($893 million), citing the prospect of future losses at the business, which lost more that 100 million euros in first nine months of 2016.

Vivendi and Mediaset have been bickering in court over Premium since then, with Mediaset insisting on damages. Resolving it, however, would relieve Mediaset of the expense of funding the channel, which carries movies from Comcast Corp.’s Universal movie studio, Time Warner Inc.’s Warner Bros., and has shelled out for rights to Champions League and Serie A, Italy’s top soccer league.

Spokesmen for Mediaset and Telecom Italia declined to comment. A Vivendi spokeswoman declined to comment.

In late September, Telecom Italia’s chairman, Giuseppe Recchi, told reporters in Brussels that there were no talks involving Mediaset Premium. “There’s nothing ongoing about Mediaset Premium,” Recchi said then.

A three-way alliance, if it came to pass, would potentially drive a wedge between Telecom Italia and Sky, Vivendi’s biggest television rival across Europe. Telecom Italia Chief Executive Officer Flavio Cattaneo is seeking to review terms of a contract with Sky for its customers to watch satellite-TV over the web, one of the people said. Sky on Thursday reported a 4 percent jump in like-for-like revenue in Italy during its fiscal first quarter, its fastest growth since 2009.

A spokesman for Sky declined to comment.

The original deal in April was billed as a broader alliance that involved a 3.5 percent stake-swap between Vivendi and Mediaset. Three months later, Vivendi backed out, proposing instead to purchase just a 20 percent stake in the pay-TV unit, with an option to increase its stake in Mediaset to 15 percent in three years with a mandatory convertible bond.

Mediaset rejected that proposal, claiming the decision by the French company has cost Mediaset about 1.5 billion euros. On Wednesday, Mediaset asked a Milan court to freeze a 3.5 percent stake in the French conglomerate. The ongoing court battle remains a major obstacle to any resolution, including a deal like the one Vivendi is considering.

Shares of Mediaset declined 2.5 percent to 2.54 euros at 3:04 p.m. in Milan. Vivendi fell 1.3 percent to 18.01 euros in Paris.

— With assistance by Phil Serafino

    Before it's here, it's on the Bloomberg Terminal.