Time running out for cable TV merger

Date: 10/10/1996

By Chris Johnstone

THE European Commission is preparing to ban the Spanish cable television joint venture Cablevision because the companies involved have failed to offer enough concessions to calm its competition worries.

With just over a month to go before he is due to deliver his verdict on the venture between Telefonica de España and Sogecable, Competition Commissioner Karel van Miert warned this week: “We do not have a solution yet ... time is running out.”

The Commission has until mid-November to give a final ruling on the Cablevision case under its rules for vetting large mergers.

An in-depth investigation into the venture was launched in July, with the Commission warning that the combination of Spain's national phone company Telefonica and Sogecable SA, which belongs to French cable television firms Canal Plus and Spain's Promotora de Informaciones SA, raised serious competition worries.

The companies want to pool their know-how and offer services jointly to audio-visual and cable television operators.

Commission concern is focused on the likelihood that the powerful combination would prevent new cable companies from starting up in Spain and could, in the future undermine attempts to boost telephone competition.

Spain is one of Europe's last untapped cable television markets, with only about 200,000 households subscribing from a population of around 40 million.

Under new rules agreed by EU governments, cable companies should be able to compete head-on with established telephone companies by offering their own phone services from 1 January 1998.

The directive was scheduled to be implemented in full on 1 October, but there are already signs that some countries might try to slow down the process by imposing extra licence conditions on cable companies wanting to take advantage of the change.

A telephone tariffs war has already started in the UK, where cable firms are allowed to offer voice services in competition with established phone company British Telecom.

Boosting cable company involvement in phone and data transmission business is a cornerstone of the Commission's forward-looking strategy to use competition between existing phone companies, cable operators, and soon-to-be satellite phone companies to force down prices and improve service in Europe's telecoms sector.

The Cablevision case has already provoked a clash between the Commission and the Spanish government.

Madrid refused at first to notify the Commission of the deal, saying that it was a purely national affair and going so far as to clear it after imposing certain conditions.

But the Commission argued that it had the power to intervene because of the EU-wide implications of the deal and the fact that parent company Canal Plus France could influence decisions at its Spanish subsidiary - an argument which won the backing of the European Court of Justice.

The Cablevision case is being observed with interest by a series of big name television, cable, and telephone companies which have advanced merger and joint venture plans. With the arrival of digital compression, audio-visual, phone and computer technologies are all well on the way to converging.

The Commission is also expected to examine cooperation plans between Canal Plus and Nethold, a South African owned pay-television company already heavily involved in the European market, and plans by British cable company BSkyB to expand in Germany through alliances. BSkyB is said to be interested in taking a stake in Premiere, Germany's biggest pay-television channel.

Van Miert underlined the importance the Commission attaches to the cable market last month when he said that the decision by Compagnie Luxembourgoise de Télédiffusion (CLT) and Germany's Bertelsmann to drop pay-television would ease clearance of a merger of their television interests.

CLT is the owner of the RTL television empire which spans France, Germany, Belgium, and the Netherlands. The merger, which was cleared this week, creates Europe's biggest television company.