Premiere deal with Arena wins approval

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COLOGNE, Germany -- German pay TV group Premiere scored a golden goal Wednesday when regulatory authorities approved a soccer deal between Premiere and its main rival, Arena.

Under the deal, Arena can sublicense to Premiere the broadcast rights to the next two seasons of Germany's premiere soccer league, the Bundesliga.

Both sides declined comment on the price Premiere will pay, but sources near the deal said it was "substantially" above the €220 million ($303 million) per season Arena parent Unity Media paid to secure the rights from Germany's Soccer League.

For Premiere, it means a de facto monopoly on the German pay TV market.

Soccer is the driving force behind pay TV subscriptions in Germany. Sources near Arena said the company will not bid to extend Bundesliga rights when they come up for renewal in 2009, leaving the field to Premiere.

"The message the German cartel office has given to the international investment community is: Stay out of the Germany pay TV market," a source familiar with the agreement said. "This firms up Premiere's monopoly position (in Germany) and puts the bar even higher for future competitors."

That's certainly how traders interpreted Wednesday's decision. Premiere shares shot up 4.1% in late afternoon trading to €19.97 ($27.50)

"Even paying a premium for the Bundesliga, this is a win situation for Premiere," one Frankfurt trader said. "They can use the rights to leverage new subscriptions and start raising prices again."

Arena and Unity Media come out of the Premiere deal with a small profit but having failed in their attempt to establish a competing pay TV platform. Arena already has shut down its production operations and will in the future act in the pay TV field mainly as a distributor of Premiere content.

Critics blame management at Unity Media for failing to properly package and promote the Bundesliga.

Unity scored a major coup in December 2005 when it beat out Premiere to secure Bundesliga rights and launch its own pay TV platform, Arena.

But without Premiere's brand name and distribution network, Arena struggled, losing €200 million ($275.6 million) during its first Bundesliga season. Adding to its problems was the €50 million ($68.9 million) Arena spent launching a largely unsuccessful satellite platform.

Premiere and Arena said they are finalizing the agreement and hope to sign in the coming days. One unresolved issue is a clause in which Unity Media will take a 17% stake in Premiere.

In a statement Wednesday, the cartel office indicated Unity would have to sell the stake when the Bundesliga deal expires in 2009. Unity dismisses this. A spokesman for the cable group said that the cartel office has no jurisdiction over the equity stake, as it is being held by an independent financial institution on behalf of Unity.
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