France Telecom, Canal+ in cable TV venture

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PARIS--France Telecom has signed a deal with French pay-TV leader Canal+ to combine their separate holdings in cable TV operator NC Numericable. The deal will provide a wide range of media and telecommunications services to a potential subscriber base of about two million households.

Under the deal, France Telecom, which owns the cable infrastructure granting access to 1.6 million households nationwide, will hold 42.5% of the new company, while Canal+, which operates the NC Numericable network, will hold about 28%.

North American financial investor Extante -- whose investors include Bank of America, GE Capital Structured Finance and Montreal-based bank Caisse des Depots du Quebec -- will hold the remaining 28% share.

The companies say the transaction will allow NC Numericable to become a full-fledged cable operator capable of offering broad band services including TV channels, Internet and telephony via cable.

France Telecom's role will be limited exclusively to investment, leaving the day-to-day operations to Canal+ with its experience in marketing pay-TV, and Extante, which offers expertise in fixed-telephony and Internet via cable.

The France Telecom-Canal+ partnership comes just three months after the telecommunications leader inked a similar agreement with cable operator Suez Lyonnaise des Eaux concerning joint holdings in the 2.2 million-strong Lyonnaise Cable network. In each case, France Telecom has crafted an exit strategy from the cable TV sector built around the sale of itsholdings in the media companies on capital markets in the coming three years.

France Telecom has been seeking for some time to abandon its cable TV operations, developed in the 1980s when the company was still a national monopoly. Suez Lyonnaise des Eaux was chosen as the principal partner for operating cable networks in Paris and other major metropolitan areas, and the two companies split the limited revenues from cable television operations run on France Telecom-owned infrastructure. NC Numericable was formed later and also reached agreements for using existing infrastructure.

NC Numericable has posted moderate growth in the last two years, adding 31,000 subscribers, bringing its total to 390,000, and raising the number of channels offered from 70 to 100. Its revenues have risen from $115 million to $140 million in the same period.

Copyright December 1999, Crain Communications Inc.

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