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Orange already in Canal+ buy talks

Analysts at Exane-BNP/Paribas are commenting on numerous press reports (Bloomberg, Les Echos) that “sources are confirming that Orange is discussing with Vivendi the acquisition of Canal+, that TI is not part of the discussion, and that Vivendi would not be holding a stake in Orange at this stage.”

The bank’s report stresses that there is no confirmation from any of the players involved, and any such deal would be “complex” under French rules, but logically adds “there are ways for Orange and Canal to cooperate both in France, outside France (Africa) and in Content without a full deal. The level of cooperation between both groups is already increasing.”  But Vivendi says it is not part of these C+/Orange discussions.

However, there is a broader read-across: such statements confirm Telecoms’ hunger for content in Europe. This is driven by a multitude of factors (which can vary by market) such as risk of commoditisation/need for content to justify investments in fiber/broadband but also, importantly, the existence of “existential threats” in some markets for some players (Sky for BT in the UK) – in the case of Orange, this is clearly SFR-NC-Content approach which makes it a very potent potential competitor in the long term (notwithstanding the current operating issues SFR is facing).”

But should such a deal happen – and it is always wise to utter ‘never say never’ – it could represent a major headache for satellite operator SES. Exane-BNP/Paribas’s report says that any tie-up between Orange and Canal+ could be negative for SES in the longer term. “Canal+ is distributed vis SES satellites. SES renewed last year a multi year agreement with Canal Holdings to distribute Canal in West Africa,” says the bank. “[SES] renewed its main agreement for 24 transponders with Canal Plus France in 2012 (contract length is unknown but likely to be 7-10 years at least). This suggests no imminent financial risk in the short to medium term.”

“However, we note that some operators (Eutelsat) argue that in the long term television content is likely to be distributed over IPTV and Satellite as content owners would want to preserve competition between distribution technology vendors. An Orange-Canal tie up would go against that view and pose the risk of Satellite distribution technology being cancelled or at least sidelined. Note that Orange recently cancelled the distribution of its Orange TV through Eutelsat (to focus on its own network). Industry participants argued that Telefonica may do the same with Hispasat.”

“Overall, the multiplication of telcos and pay TV mergers (ATT-Direct TV last year, Orange now?) is likely to be a negative driver of sentiment on the stock. However, we see no imminent financial risk given the long term nature of distribution contracts,” concludes the bank.

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