Under the terms of the deal, which will allow the company to break even in 2003, News Corp will buy the 50% of Stream that it does not already own from Telecom Italia. Vivendi, which owns Telepiu, will then buy 25% of that stake.
News Corp's 75% holding in Stream will then be merged with Telepiu and Vivendi's holding in Stream. The new company will be 75% owned by Vivendi and 25% by News Corp, which will be given the option to increase its stake to 50% during the next three years.
Italian competition regulators are said to be concerned that the joint ownership of a single pay-TV platform by two of the world's largest media companies would shut out potential new entrants into the market.
If authorities do block the deal, it could put a strain on the relationship between News Corp and Telecom Italia, which jointly own Stream.
Telecom Italia has said it will liquidate its investment in Stream if the merger is blocked, which would effectively reverse the sale of its stake to News Corp. While Canal+'s ambition to merge its way into profitability relies on regulators passing mergers which will leave certain markets with only one pay-TV provider.
Yesterday, however, Canal+ won regulatory approval to merge its Polish pay-TV operation Cyfra+ with Dutch-based cable giant UPC's Wizja TV.
The French company was also awarded EU clearance yesterday for its plan to fold its sports rights business into Jean-Claude Darmon, the Paris-listed sports marketing company, creating the largest pan-European sports rights company.
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