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Last Updated: Monday, 12 December 2005, 14:23 GMT
French pay-TV giants plan tie-up
Vivendi Universal head office in Paris
Vivendi reported profits of 2bn euros for the first half of 2005
France's two biggest pay-TV companies are in talks about a 5bn euro ($5.9bn; 3.4bn) tie-up.

The deal would involve Vivendi Universal's Canal Plus service and its rival TPS, which is jointly owned by French TV channels TF1 and M6.

"Together the companies would be in a better position to meet the increased competition from telecommunications and internet companies," Vivendi said.

Vivendi shares rose 3.5% on the news, with TF1 up 7.2% and M6 rising 6.8%.

Vivendi said that there would be no further comment until the negotiations were over.

Price war

A tie-up would consolidate one of Europe's last fragmented satellite television markets.

It could also bring an end to the current price war between TPS and Canal Plus and enable them to share the costs of acquiring expensive football broadcasting rights.

Last year Canal Plus outbid TPS for the rights to broadcast France's top football league, paying 600m euros a season.

Football coverage is vital for both companies, with Canal Plus estimating it brings in 25% of subscribers.

"This deal makes astonishing sense," said Theresa Wise, a partner in the media and entertainment practice at consultants Accenture.

"There will be enormous economies of scale from combining the two operations and they would have much more negotiating power when bidding for things like football rights."

Although a deal is likely be examined by France's competition authorities, Ms Wise said it was unlikely to be blocked because precedents for satellite monopolies had already been set in countries such as Italy and the UK.

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