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Orange offers guarantees to control Canal + distribution

French financial newspaper Les Echos is reporting that Vivendi-backed Canal Plus and telco Orange are in “active talks” regarding a deepening of their distribution agreement.

The article reports Orange would get more control over the distribution of Canal Plus to its subscribers (the ability to create its own channel packages and directly collect subscription fees…) and will in exchange give Canal guaranteed minimum revenue which could amount “hundreds of millions of euros” which would help Canal bidding on sports rights. The article also reminds readers that the Champions League football rights auction for the next three seasons opened a few days ago.

The article also mentions that Orange could demonstrate interest in Canal’s Poland and Africa activities.

Commenting BNP Paribas says: “Such a deal would be consistent with our view that Orange is going to become a more and more important distributor for Canal. We believe a deal would potentially be very positive.
In our recent report [on Vivendi] we showed that
• Canal is a fixed costs business because Canal hasn’t managed to penetrate the French pay TV market as Sky did over the last 10-15 years in UK (even if this requires packages with lower ARPU and less control over the subs base)
• triple play offers a real opportunity.

“Canal France situation remains difficult, we have so far seen the “ugly” part of the restructuring put in place by management a year ago. But we believe we should see gradual improvement in 2017-18. This is one of the key arguments of our recent upgrade to Outperform: the tipping point for Vivendi.”

“Regarding a potential deal around Canal’s International Pay TV we would read it cautiously as Africa is now the main growth driver at Canal and is core to group’s strategy,” adds the bank’s report.

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