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Sunday, June 13, 1999 Published at 11:44 GMT 12:44 UK

Business: The Company File

French threat to BSkyB

The battle for pay TV across Europe is heating up

The French conglomerate Vivendi is poised to become a significant player in the European pay television industry following its acquistion of a stake in BSkyB.

Vivendi now has a 16.7% stake in BSkyB, as well as a 34% in Canal Plus, the French cable operator which was in abortive talks with Rupert Murdoch about a merger with BSkyB.

[ image: Rupert Murdoch faces a new rival]
Rupert Murdoch faces a new rival
Jean-Marie Messier, Vivendi's dynamic chairman, now says that he is looking for ways to co-operate with News Corporation, Mr. Murdoch's parent company.

But analysts believe he may have bigger ambitions.

"I suspect this is a way of keeping Sky out of Europe by camping on its doorstep. This is part of a wider strategy - Messier wants to be in control of pay television in Europe," said one analyst.

Vivendi acquired its stake in BSkyB from Pathe, whose boss, Jerome Seydoux, must now stand down as chairman of the UK satellite television operator.

Mr Murdoch takes the chair

Rupert Murdoch has decided to take over personally as BSkyB's chairman as the company enters a critical stage in any future negotiations.

[ image: The struggle for new customers has proved costly]
The struggle for new customers has proved costly
Profits at BSkyB are under pressure as the company has made a heavy investment in launching a digital satellite television service, in competition with ONdigital.

The company's profits dropped sharply to £100m in 1999, as it offered free digital decoders to spur take-up of its new service.

Mr Murdoch has made no secret of his desire to move into Europe, and has recently concluded deals with pay television companies in Italy and Germany.

But he is facing regulatory hurdles, and is reluctant to conclude any deals which would cede a controlling interest to other companies.

From bins to pay TV

Vivendi has turned itself into an aggressive player in the media industry in the past year, moving far away from its origins as Generale D'Eaux, the Paris water-supply company.

Under chairman Jean-Marie Messier, Vivendi has moved from utilities into the fast-growing areas of telecommunications and the media.

"Few companies have changed as much as we have in the last few years," he told shareholders.

Vivendihas created the second-largest mobile phone operator in France, SFR, with 40% of the market, and has taken a 44% stake in Cegetel, another French telecoms joint venture with British Telecom and Germany's Mannesmann.

It is now considering a bid for One2One, Britain's fast-growing mobile operator.

Vivendi already has a substantial presence in the UK, running the privatised waste management firm Onyx, which cleans the streets in a number of London boroughs, and Connex Southeastern trains.

It has also launched itself into the Polish telecoms market, and acquired American water company USFilter for $6bn (£4bn).

Mr Messier has moved swiftly to realise his ambitions. Talks with Pathe only began 10 days ago, and he reached the deal within to acquire Pathe's pay TV assets within a week.

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