Little substance to rumors about Wizja, Cyfra merger

But while the parties involved said they were "talking," they both said the discussions were only in the initial stages.
"In no way can we talk about any breakthrough or new development," said Lew Rywin, president of Canal+ Polska. "And while our talks have been very irregular and they were less than effective, the truth is that we never stopped talking."
The two parted last summer after an unsuccessful attempt to combine their digital offerings and refrain from shedding each other's blood over the relatively small market of 12 million households.
While the split was everything but amicable, neither of the parties ever dismissed a possibility of reentering negotiations.
The two companies went their own ways after failing to come to terms over how ownership in the combined company would be split. Canal+ was reportedly pushing for the majority of shareholders' votes, which was unpalatable for the relatively large @Entertainment. @Entertainment has a market capitalization of about $333.1 million.
Paradoxically, the talks between Canal+ and BSkyB fell through last week for precisely the same reason, with the French group reportedly pressing for too much control over what was to be the largest pay-television group in Europe.
With a market capitalization of $9 billion, Canal+ in Europe certainly has the weight to make demands, industry executives said.
In Poland, the media group holds only 33% of the Polish venture with Canal+ Polska being a relatively small business for it. Therefore, some executives thought that the group was overstating its importance in previous talks with @Entertainment.
"A deal at any cost, particularly for @Entertainment is not desirable," said Georg Hotar, an analyst with ICE Securities in London.
Hotar also said that while a merger of the Polish digital platforms was probably more likely than a possible teaming of France's Canal+ and Rupert Murdoch's BSkyB, it was not likely to happen any time soon.
The merger rumors bounced around again last week after the Wall Street Journal March 3 reported that talks were back on for the two groups.
The very next day, however, both entities were busy denying the rumors, blaming the leaks on each other, and each claiming his competitor was trying to put the deal back in play.
But @Entertainment officials also denied responsibility. "Generally, we don't make any leaks to the press," an executive said.
@Entertainment's Nastaq-listed shares closed Thursday at $9.12. That's half of its year high of $19.37.
The company's performance is far behind analysts' expectations. Merrill Lynch said it expected the shares to hit $17 this year, as did ICE. The company reported a $124.8 million net loss at the end of the year, but still managed to secure $160 million through debt and equity offerings for this year.
If the talks do restart, Canal+ may come into them in a slightly different negotiating position, executives said. Observers have questioned the company's ability to pay for its Cyfra rollout, particularly since its Polish partners, Telewizja Polska (TVP), private Polsat station and Aster City Cable, have not been willing to cough up any real cash.
"Also, in case of Canal+, there has been a lot of uncertainty as far as their ability to finance Cyfra," said a source who wished not to be named.
Cyfra's parent company, Telewizyjna Korporacja Partycypacyjna (TKP), posted unaudited net losses of zl. 132.8 million ($37.94 million) for the first three-quarters of 1998, according to publishing group Agora's offering prospectus. Agora holds a 20% stake in the company. TKP is currently also renegotiating a DM 129.4 million credit facility it has breached due to weaker than expected Ebitda (earnings before interest, taxes, depreciation and amortization) last year.