Canal+ lines up new financing; TVP deal more likely

"It's going to be spent both on the digital platform Cyfra+ and on Canal+ Polska," said Gaspard de Chavagnac, the company's general director.
If successful, the credit facility would clear Canal+ Polska's financial situation, which was clouded earlier this year when a DM 129.4 million facility was put on hold because the company was found to be in breach of technical covenants. The financing problem had some market watchers wondering if Canal+ would be able to go the distance in the capital-intensive digital platform race. (See WBJ, March 15-21, 1999)
"The fact that they (Canal+) sorted out the mess with the former credit line and they brought this mess to a good end thanks to the credit, it's an improvement," said Georg Hotar, a London-based analyst with ICE Securities.
In addition to arranging financing, Cyfra moved a step closer to finalizing a deal with Telewizja Polska (TVP) to include the public broadcaster in its programming. The broadcaster's supervisory board approved the deal last week.
"It's a question of days for the agreement to be concluded," said Piotr Szukalski from TVP's press office.
Canal+ officials said that under the agreement Cyfra would have exclusive rights to TVP content. While the public broadcaster, and the Treasury Ministry, had previously balked at such exclusivity, it seems that this sticking point was cleared by TVP agreeing not to broadcast its content on any foreign digitial platforms.
"Due to the agreement, TVP will not be allowed to be on any foreign digital platform," Chavagnac said. He added that Wizja TV is considered to be a foreign broadcaster.
Canal+ has waged a long-running battle against delocated broadcasters, such as Wizja TV, HBO, RTL7 and Polonia1, who broadcast to Poland from abroad on the basis of the Poland-ratified European Convention on Transfrontier Television. (See related story, page 13)
However, Wizja TV remained confident that it can sign TVP onto its platform as well. "I think that it's very likely that TVP will be on (Wizja) very soon," said Ross Newens, managing director of Wizja TV. "As time progresses the reality of a public broadcaster being able to be exclusive to one platform or another becomes more and more ludicrous."
Unlike Cyfra+, Wizja TV has not demanded that those adding content to its platform agree to exclusivity. This led in March to supraregional station tvn deciding to join Wizja TV.
At the time, tvn's President Mariusz Walter said they chose the platform because it did not demand exclusivity.
In April, Polsat joined Wizja after that broadcaster, which was supposed to take a stake in the Polish Digital Platform that was being formed to run Cyfra+, pulled the plug on plans to join with Cyfra+.
While the status of TVP remains unclear, Wizja's status is also far from certain. Its parent @Entertainment is being acquired by Amsterdam-based United Pan-Europe Communications (UPC).
The company has said it will stick with the digital platform, but it remains unclear if UPC ultimately intends to break @Entertainment up selling part or all of its cable and broadcasting divisions. For the moment, Wizja executives said UPC is committed to the platform.
"UPC intends to carry on and expand our business," Newens said. "The digital platform is actually the key because the programming, which we now have on Wizja in Poland, could also become potentially available to other UPC networks, other (digital) environments."
UPC expects to complete the acquisition of @Entertainment in August. Its $19 a share tender for all of @Entertainment's shares will close Aug. 5.
Wizja is also not as worried by Canal+ Polska's new loan facility, although Newens acknowledged that this will give his competitor more fiscal firepower.
"Now, suddenly Cyfra+ perhaps has woken up to the fact that if they really want to compete with us in this market they will have to invest money," Newens said. "But the question is where and when they are going to get money from and how they are going to spend it."
While Canal+'s credit facility is not finalized, Chavagnac was confident the company would have the funding in place. The arranging of the dollar- and zloty- denominated, seven-year credit line is to be guaranteed by ABN AMRO Bank and Citibank.
He added that in addition to providing the company with an operating cash boost, the facility would clear up any past problems it had had with its previous facility. "It will also be used to refinance the existing loan," Chavagnac said.
Even with the new funding, however, Cyfra+ is in some ways playing catch-up with Wizja. @Entertainment has invested about $400 million in its digital platform and at the moment has the edge in terms of content quantity.
Wizja TV, with more than 150,000 subscribers, has been enlarging the number of channels available on its digital platform. It started with 18 thematic channels on Sept. 18, 1998 and a few months later introduced three more channels - Eurosport, Wizja Le Cinema and E! In addition to tvn and Polsat, Wizja also plans to start two new channels by the end of the year and in September will launch a sports channel.
Cyfra+ has 155,000 subscribers. It offers 10 thematic channels and programming from Polish stations TVP1, TVP2, Polsat, Polsat2, Nasza TV, TV Polonia and Polonia1. Cyfra+'s subscribers will soon have access to new channels, such as Marco Polo, a travel channel, Game One, Seasons and two channels to be created with TVP.
"Ultimately, what is going to decide which of the platforms will be sucessful is whose product is going to be better," said Hotar of ICE Securities.