Now comes the tough part
By : Anna Kocinska
Merger talks between rival digital platforms Cyfra+ and Wizja TV are set to be concluded soon, although questions still remain about the kind of roles either station will play in the combined company.
The high-level talks are being held outside Poland between Netherlands-based United Pan-Europe Communications (UPC), owner of Wizja TV, and France-based Vivendi Universal, parent company of Canal+, which controls Cyfra+.
Industry insiders said the audit results will be the key to final plans over which company is to play a stronger role in a merged platform. Meanwhile, both companies remain tight-lipped about details of the negotiations. "The audit is going on," said Paulina Krasinska, spokesman for Canal+ last week.
Sources close to the deal said Wizja TV's financial records are being examined by Arthur Andersen, while Cyfra+ is being audited by Baker McKenzie and the date the deal is sealed depends on when the auditors finish the job.
Future programming
But despite the continuing silence by both companies, market watchers said future programming could be a difficult issue raised during the talks. The future of the HBO movie channel, now available through digital platform Wizja TV, is a case in point.
"It's an important question because what Cyfra+ is, is movies and sports," said Przemyslaw Szmyt, former chief executive officer of Wizja. "So it's interesting what role HBO will play in that transaction (merger)."
Canal+'s sports and movie programs are the core of the company's operations in Poland. But Wizja TV has also focused on sports by creating its own channel, Wizja Sport. Feature films, though, are known be one of Wizja TV's weaker points.
But a source close to the negotiations said the companies could reach a compromise over HBO because an extra movie channel would add to the attraction of the merged digital platform.
Also, the choice of a future satellite for the platform's signal might be another bone of contention between the two companies. Wizja TV is broadcasting its programming via Astra, the Luxembourg-based Societe Europeene des Satellites, while Cyfra+ uses Eutelsat, a Paris-based operator.
Choosing a satellite
According to sources, after signing an agreement both companies will need a transition period of about eight months. After this they will decide which satellite to choose and to establish a joint managing board for the merged platform. But before the agreement can take effect, the companies will need the antimonopoly office (UOKiK) to accept the merger.
"The verdict of the antimonopoly office will depend on how the media market will be defined," said Stanislaw Piontek, a media-law professor at Warsaw University. "If (the UOKiK's) definition of the market on which the merged platforms are going to operate is wide and involves not only pay TV operators but also cable operators and terrestrial broadcasters, they (UOKiK) will accept the merger because the new platform won't be able to dominate the market."
UPC has 380,000 digital customers and more than 1 million cable customers in Poland while Canal+ has more than 400,000 digital and cable subscribers. Both platforms have been competing fiercely through promotions and special subscription offers.
Wizja TV risked its reputation in a bid to attract more subscribers by including in its offer public TV channels and the Private Gold pornographic channel, which raised a storm with the media watchdog KRRiT.
Meanwhile, Canal+ introduced a special promotion for subscribers of its terrestrial service who switched to digital.
But unofficially both companies admit it would be difficult to dramatically increase the numbers of subscribers. "The market is reaching maturity and we are beginning to reach the upper limits of growth as far as the number of subscribers are concerned," a market observer close to Wizja TV said.
Mounting losses
Meanwhile, annual losses by UPC in Poland could amount to as much as $70 million. Likewise, Canal+ Polska is also generating losses and its parent company, Canal+, is having problems outside Poland.
As a result, the talks between the two companies could involve mergers in other countries where Canal+ and UPC are competitors, the Business Journal learned. Vivendi Universal's chief executive officer, Jean-Marie Messier, who industry insiders said is key to the negotiations, is also working on mergers elsewhere and Canal+'s operations in Italy and Scandinavia have come under scrutiny recently. The Financial Times of London said Vivendi Universal is to shed more than 6% of Canal+'s workforce.
