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Monday, 6 December, 1999, 09:47 GMT
Murdoch's German breakthrough
For a decade, Rupert Murdoch tried to get into the German market

Media tycoon Rupert Murdoch has made his long-awaited move into the German market by taking a 24% stake in Kirch group, worth 2.9bn Deutschmarks (0.9bn - $1.48bn).

He is making the investment through satellite broadcaster BSkyB, which will pay 1bn Deutschmarks (320m) in cash.

BSkyB's Chief Executive Tony Ball said the acquisition would give BSkyB the opportunity "to acquire a significant foothold in the German market".

The deal will be funded by the issue of new BSkyB shares, plus the issue to KirchPayTV of 78 million new BSkyB shares. The new shares represent about 4.3% of BSkyB's enlarged share capital.


It's a key strategic development for us. There are very good long term-growth prospects in that market
Tony Ball
German and European regulators will have to approve Mr Murdoch's move, though, and may attach conditions before it can go through.

In May 1998, the European Commission blocked a German TV alliance between Kirch Gruppe, Bertelsmann and Deutsche Telekom on the grounds it would have created a monopoly in Germany.

BSkyB's stake in KirchPayTV should not pose such problems.

KirchPayTV is the leading pay-TV service in Germany, it's main revenue coming from digital channels DF1 and Premiere. The channels, recently rolled into one as Premier World, have some two million cable and satellite subscribers, or about 6% of the German market.

Germany is Europe's largest TV market, with some 33 million homes. However, the widespread availability of free-to-air channels has limited growth in pay TV.

The Kirch Group has other media interests as well, among them the rights to one of the largest German-language film archives.

Dieter Hahn, vice chairman of managing directors of Kirch Gruppe, will be appointed a non-executive director of BSkyB.

No synergies, but market opportunities

BSkyB said it does not anticipate any synergies in conditional access technology, or sports and movies programming rights to arise from the deal.

However, the company hopes that the investment will create long-term incremental value for shareholders.

Money could come from a flotation of KirchPayTV on the stock market. BSkyB has pencilled in the year 2003 for such a move.

Mr Hahn said: "BSkyB's confidence in KirchPayTV confirms our strategy for a long term successful development of the German digital subscription market and we are delighted that this transaction will also enable us to participate in the future prospects of BSkyB through our investment."

Shares surge

The news boosted the share price of News Corp, Mr Murdoch's media holding company.

"It's significant simply because it's expanding the pay-TV distribution platform into wider Europe. At the moment News Corp's only really in the UK, and Germany is a much bigger market in terms of people and disposable income," said one media analyst at a U.S. investment bank.

Mr Murdoch has been trying to get involved in the German media scene for many years.

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See also:
15 Jun 99 |  The Company File
Murdoch takes the reins at BSkyB
02 Jul 99 |  The Economy
Murdoch's Internet challenge
28 Oct 99 |  The Company File
Murdoch sees profits fall
25 Mar 99 |  e-cyclopedia
Tax free: Rupert Murdoch's zero status

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