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Canal Plus Seeks to Boost International Footprint

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By Ruth Bender

PARIS—Vivendi /zigman2/quotes/202179234/delayed FR:VIV +1.47% SA's pay-TV group Canal Plus is on the lookout for opportunities to strengthen its position abroad but is having trouble finding the right targets.

Eight years after the group narrowly escaped bankruptcy following an acquisition spree by former Vivendi CEO Jean-Marie Messier , Canal Plus is ready to expand its global footprint, Chief Executive Bertrand Meheut told Dow Jones Newswires in an interview.

"In pay-TV, we are still very dependent on France and one of our objectives is to develop our footprint internationally," Mr. Meheut said, speaking in his office at the company's headquarters in the Parisian suburb of Issy-Les-Moulineaux.

The broadcaster of topflight soccer games and blockbuster Hollywood films has a limited international presence. Out of a total 12.5 million subscribers, only around three million are abroad, mainly in Poland, French overseas territories and North Africa.

It isn't easy developing pay-TV activities across the world as you constantly have to adapt your offers to local tastes, Mr. Meheut said.

A year ago, Canal Plus launched a joint-venture with Vietnam's public broadcaster VTV. However, larger expansion plans, such as Vivendi trying to join forces with Telefonica /zigman2/quotes/202434549/delayed TEFOF +14.15% SA to buy Spanish pay-TV Digital+ from Promotora de Informaciones /zigman2/quotes/201931044/delayed ES:PRS -1.40% SA, failed. "We were interested in Spain but not up to the point to pay an unreasonable price," Mr. Meheut said.

Canal Plus has no immediate acquisition opportunity in sight but "there could be some upcoming," the CEO said, adding that the group remains interested in opportunities in Spain, where pay-TV still offers great growth potential. "For now, it is without us, but why not," he said. "There are rather few opportunities in Europe though."

According to Mr. Meheut, Canal Plus would prefer to make purchases in countries where there is either a strong growth potential or the opportunity to turnaround a loss-making business. "We have demonstrated our ability to successfully turnaround a business and we also know how to realize a successful merger."

Indeed, since Mr. Meheut took over the reins of the company in 2003, things have changed drastically at France's largest broadcaster. "In 2002, Canal Plus had over €5 billion of debt and was losing about €500 million a year...the situation was very serious," Mr. Meheut said.

Over the past seven years, Canal Plus has sold assets worth around €1.7 billion, restructured the business to save around €300 million to €350 million of annual costs and has replaced around 100 out of 110 of its top managers. Meheut also engineered the acquisition of rival pay-TV operator TPS in 2006, which gave the group a dominant position in the French pay-TV market.

Last year, Canal Plus posted revenue of €4.55 billion, making it Vivendi's second-largest revenue contributor, while adjusted earnings before interest and tax, or EBIT, rose 15% to €652 million, despite the recession.

Since his arrival, Mr. Meheut has boosted spending on content to lure in new customers, especially in 2004, when the group spent EUR1.8 billion to secure exclusive rights to French soccer games over three years.

In total, Canal Plus spends about €2 billion a year on acquiring and producing content for its channels, with the bulk going towards sports and films, Meheut said. On top of that, the group's film production and distribution unit, Studiocanal, spends another €150 million a year on producing and co-producing major films such as 'The Tourist,' featuring Angelina Jolie and Johnny Depp .

58-year old Meheut is constantly on the lookout for new content ideas, scanning TV channels on the 20 television sets in his office. "I know all numbers by heart," he says while switching to one of his favorite channels: 'Yacht and Sailing.'

The CEO wants to continue investing in in-house produced TV series such as "Braquo" and "Carlos," which was sold to 39 countries. "Such programs are value-enhancers as they are exclusively accessible to Canal Plus subscribers," Mr. Meheut said, noting that investing in original content is important for luring in new subscribers in the group's home market, which still offers important growth potential.

Canal Plus currently has around 6.5 million pay-TV subscribers in France but the group has the potential to sell its offers to 18 million households, Mr. Meheut said.

In 2010, Mr. Meuheut expects subscribers to increase more than last year,

excluding the impact of the final switch-over from analogue to digital TV, which could lead to the loss of some clients. "The first five months have been very satisfying," he said.

But the next major step for the group could come in early 2012 when Canal Plus, along with other French broadcasters, will receive a new digital frequency following the final switch-off of analogue TV. "This could be an opportunity to create a free channel," Mr. Meheut said. "We haven't made a decision on this yet...but it would be a shame not to seize such an opportunity."

Write to Ruth Bender at Ruth.Bender@dowjones.com

/zigman2/quotes/202179234/delayed
FR : France: Euronext Paris
11.75
+0.17 +1.47%
Volume: 2.60M
Jan. 20, 2022 5:35p
P/E Ratio
11.17
Dividend Yield
5.11%
Market Cap
€12.12 billion
Rev. per Employee
N/A
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/zigman2/quotes/202434549/delayed
US : U.S.: OTC
$ 4.76
+0.59 +14.15%
Volume: 99.00
Jan. 19, 2022 3:09p
P/E Ratio
2.23
Dividend Yield
N/A
Market Cap
$26.03 billion
Rev. per Employee
$429,389
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/zigman2/quotes/201931044/delayed
ES : Spain: Madrid
0.64
-0.0090 -1.40%
Volume: 358,808
Jan. 20, 2022 5:38p
P/E Ratio
2.07
Dividend Yield
N/A
Market Cap
€455.27 million
Rev. per Employee
€80,502
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