Market Insight

AGCOM halts Vivendi’s Italian ambitions

April 19, 2017  | Subscribers Only

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Vivendi has been steadily increasing the share it holds in the two companies over the last year. It established a 24.9% stake in Telecom Italia in March 2016. Meanwhile, Vivendi’s share held in Mediaset increased to 28.8% in December 2016 despite the two companies being embroiled in a legal dispute. In April 2016, Vivendi agreed to acquire 100% of pay TV business Mediaset Premium. Four months later, Vivendi said that it wanted to amend the terms of the agreement, acquiring a 20% stake in Mediaset Premium and a 15% stake in Mediaset itself over three years. This led to Mediaset bringing the French group to the central court in Milan, alleging a breach in the terms of the preliminary contract.

Vivendi’s response to AGCOM’s announcement disputed the view that it has a dominant influence on Mediaset given that Fininvest, the family holding company of the Berlusconi family, has a 40% stake in the company. Moreover, Vivendi added that it reserves the right to take any appropriate legal action to protect its interest including submitting a formal complaint to the European Commission.

Our analysis:

AGCOM’s announcement comes after a busy year in the Italian telecoms market. Telecom Italia faces a new entrant in the form of Iliad in the mobile sector, whilst its dominance over Italy’s fixed broadband infrastructure is threatened by wholesale provider Enel’s fibre-to-the-premise rollout. Helped by its convergence strategy, Telecom Italia’s performance has improved in the face of these market changes.  Telecom Italia’s mobile subscriber base grew in the last quarter and its subscriber losses have flattened in the fixed broadband market, but the company now faces uncertain times following AGCOM’s ruling.

The decision by AGCOM to intervene in Vivendi’s Italian expansion is motivated by the convergence of the media and telecoms markets, as Telecom operators invest in media and content services. In 2013, BT spent £897 million to secure a three-year deal to broadcast live European football and spent a further £1.2 billion to retain these rights four years later. Orange, Telefónica, KPN, and Proximus have made similar moves to secure rights to exclusive content. While some telecom operators in Italy have been slow to follow this trend, Telecom Italia is increasingly looking to use video services in order to increase ARPU and reduce subscriber churn. It launched a quad play service with Sky in April 2015 and has also recently invested in a number of co-production initiatives. In addition, Telecom Italia could be interested in buying live Italian football rights, currently part-owned by Mediaset, in this summer’s auction.

Despite AGCOM’s announcement, Vivendi appears intent on increasing its influence on Telecom Italia. Short of increasing its share beyond the 25% threshold that would force it to launch a takeover bid, Vivendi can increase the presence of its management team within Telecom Italia via the board  elections on 4 May 2017. Vivendi has listed its current chief executive at the top of its list of proposed directors for Telecom Italia. If Vivendi is successful in this effort, it will increase the influence Vivendi has on Telecom Italia’s strategy even if AGCOM’s ruling prevents it from extending its stake in the company.

Vivendi’s intention is to combine Telecom Italia’s fixed and mobile distribution networks with its extensive content production and distribution assets, as well as Mediaset’s Italian video services. AGCOM’s intervention prevents Vivendi from building a stake in both companies, but there are alternative ways it can achieve its Italian ambitions. The most obvious way is for Vivendi to reduce its stake in Mediaset in return for an agreement to distribute Mediaset content to Telecom Italia subscribers. As a result, AGCOM’s ruling may provide the incentive for the two companies to finally reconcile their differences.

 

 

Geography
Italy Western Europe
Research by Market
Mobile & Telecom
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