Mediaset and Vivendi at war over stalled deal

Mediaset has threatened to take legal action against Vivendi if the French media company fails to respect the terms of its contract with the Italian broadcaster to take control of Mediaset Premium, the company has said.

Mediaset’s board yesterday emphatically rejected the revised proposal put forward by Vivendi this week, which would see it take a smaller stake in the Italian pay TV outfit.

The board said that the revised proposal submitted by Vivendi was incompatible with the binding contract already signed by the two parties. The board authorised “all necessary measures” to ensure that the terms of original deal are respected. Should this fail to happen, it authorised legal action, whether civil or criminal, to defend its interests.

Vivendi responded by saying that its disagreement with Mediaset concerned the latter’s business plan, which had served as the basis for the April 8 agreement. The company said that forecast of a breakeven for Mediaset Premium by 2018 was based on “unrealistic assumptions”. It cited as evidence a due diligence report commissioned by it from Deloitte in June, which stated that “the business plan appears unachievable and would need to be seriously downgraded in order to be realistic”.

Vivendi added that it was still open to an agreement with Mediaset.

According to French paper Le Monde, citing an unnamed French source, Mediaset had predicted 700,000 new subscribers a year between now and 2018 and an increase in average revenues per subscriber of 20%..

The ratcheting up of the conflict between the two companies came as Mediaset posted better than expected first-half financials, with the company’s bottom line continuing to be hit by costs associated with Mediaset Premium despite a strong uptick in the core advertising market.

The company posted a net loss of €27.8 million compared with a profit of €24.2 million for the same period last year. EBIT for the period fell from €137 million to €97.3 million for the first half, pulled down by negative EBIT in Italy of €52.8 million compared with a positive €26.5 million for the same period in 2015.

The costs of sports rights – particularly European Champions League rights – figure large among the reasons for the fall in EBIT and profits. Mediaset said that the rights would help ensure the continued growth of the client base and revenues of Premium. Premium in fact posted a loss of €37.1 million for the quarter, less than the budgeted loss of €39.8 million. The company maintains that the pay TV unit will reach breakeven in 2018.

Mediaset’s first half performance was boosted by a strong increase in revenues. The company reported first half revenues of €1.87 billion, up from €1.72 billion for the first half of 2015. Spanish advertising revenues grew significantly, but there was also growth in Italy. Overall, advertising sales growth accelerated to 4.6% year-on-year in the second quarter.