Oreja urges phone giants to bid for EU film-maker

Date: 30/07/1998

By Peter Chapman

CULTURE Commissioner Marcelino Oreja has taken the controversial step of pleading with cash-rich communications giants Deutsche Telekom and Telefónica to save Europe's last remaining big film producer.

Oreja has written to the companies asking them to join the bidding for PolyGram Filmed Entertainment (PFE), Europe's largest film production and distribution unit and the Union's only serious rival to Hollywood's dominance in world movie-making.

"Mr Oreja has written to these telecoms operators," confirmed his spokesman. "So far we have not had a reply, but the offer is still there. The Commissioner has said from the beginning that he supports the idea of finding a European buyer."

Oreja's move is a response to suggestions that Seagram, PolyGram's new Canadian owners, might be ready to offload PFE to buyers from outside the EU.

But it is likely to widen the rift between him and Competition Commissioner Karel van Miert over the Union's approach to the media industry. Furthermore, it is bound to attract criticism in some quarters, given that it is rare these days for EU politicians, let alone Commissioners, to interfere in business decisions.

Competition lawyers also warn that the Commission could be put in an awkward position if an Oreja-backed bid for PFE ran into anti-trust problems with Van Miert and his staff.

Top of the list of foreign suitors is reported to be Paul Allen, the American billionaire co-founder of Microsoft, who owns 25% of the DreamWorks studio set up by a consortium including Steven Spielberg.

Seagram, a drinks conglomerate which also owns Hollywood studio Universal, acquired PFE as part of its 9.5-billion-ecu deal to buy Dutch electronics company Philips' 75% holding in PolyGram.

Seagram is only interested in PolyGram's music business and has given PFE president Michael Kuhn until the end of the year to wrap up the sale of the movie arm - a deal which is expected to net 750 million ecu.

Kuhn, like Oreja, is desperate to find a European buyer for the company he has led since its creation six years ago and seen through the making of international blockbusters such as Four Weddings and a Funeral, Bean and Trainspotting.

Oreja's spokesman said the approach to Deutsche Telekom and Telefónica was "something he discussed with Michael Kuhn and other PolyGram people".

Officially, bidders had until the end of this week to table their offers for the company whose biggest attraction is arguably its massive catalogue of 1,500 films and the popular children's TV series Thunderbirds.

Among the 15 bidders already said to be in the race are the French pay-TV firm Canal Plus, UK media conglomerate Pearson, music group EMI and British television broadcaster Carlton Communications.

In selecting potential buyers, Oreja chose the two telecoms companies which have shown the greatest interest recently in the audio-visual sector.

Deutsche Telekom is Germany's biggest cable-TV network operator and was thwarted by Van Miert only last month in its attempts to form a digital alliance with media giants Kirch and Bertelsmann. Telefónica is a major shareholder in a digital TV venture in Spain and has just struck a deal with rival Sogecable to develop a common platform for digital services in the country.

Oreja believes either telecoms firm might be willing to part with the estimated 750-million-ecu asking price to take over the huge library and production potential of PFE to feed its television plans.

The film company has invested 220 million ecu in European movies since its inception.

In appealing for buyers, Oreja has shown he is unafraid of clashing yet again with Van Miert by seeking to affect the outcome of the PFE auction, just weeks after falling out with the anti-trust chief over the latter's tough stance against Bertelsmann, Kirch and Deutsche Telekom's blocked venture.

EU Culture Commissioner Oreja has suggested to Deutsche Telekom and Telefónica that they might bid for Europe's last remaining big film producer, Polygram Filmed Entertainment (PFE).