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Last Updated: Friday, 16 December 2005, 17:59 GMT
French pay-TV giants agree merger
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, TPS and Canal Plus, are to merge into a new group controlled by media giant Vivendi Universal.

The 5 billion euro ($5.9bn; 3.4bn) tie-up will unite Vivendi's Canal Plus and its rival TPS, which is jointly owned by French TV channels TF1 and M6.

If approved by competition authorities, the group will be 85% owned by Vivendi.

The companies said their alliance would support the French film industry and give wider coverage to sport.

It would 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.

'Astonishing sense'

In a statement, the companies said that continuing to have two satellite pay-TV offerings in France did not make sense.

"The situation, which is exceptional in Europe and now appears to be inappropriate, has resulted in a fragmented and incomplete range of products to the detriment of consumers."

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

"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," she said.

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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