Italy's Mediaset Shares Keep Rising Despite Weak Results, Legal Woes

Silvio Berlusconi
Jacob Raule/Getty Images

In 2009, Murdoch's Sky Italia accused the Italian prime minister's Mediaset of violating antitrust laws. At an August hearing on the hacking inquiry, Murdoch said News Corp. in Italy is "a particularly difficult situation" and that Berlusconi is a "particularly tricky competitor."

Silvio Berlusconi faces potential jail time after two criminal convictions, but his newfound government influence could help the company.

ROME – Shares in Italian cinema and television giant Mediaset have continued their march forward this week, despite poor financial results and the continuing legal woes of the company’s founder Silvio Berlusconi.

Mediaset shares closed trading Wednesday at €2.36 ($3.07), more than double the company’s all-time low of €1.17 ($1.52) set nine months ago. That comes despite minimal gains on the overall stock market in Italy, poor economic growth in Italy, weakening financial results for Mediaset -- as well as two criminal convictions for Berlusconi and prosecutors’ request for six years in jail and a lifetime ban from politics in a third case.

According to analysts, there are a variety of reasons why Mediaset shares are zigging while most of the market is zagging: the company is doing a good job keeping expenses low and maintaining (and, in some cases, growing) its market share in a difficult market; there is also speculation that Berlusconi’s return to the political arena could be good for the company.

“The panic that helped drive prices lower last year may have been overblown,” said ABS Securities analyst Oliviero Fiorini. “Mediaset is hurting, but relative to the sector it may be weathering the storm OK.”

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Earlier this week, Mediaset announced it would achieve its goal of cutting costs by €450 million ($598 million) in the 2012 to 2014 period ahead of schedule. That was the good news in an earnings report in which the company announced profits fell 7.9 percent in the first quarter, but that compares to a 19 percent contraction in the advertising market in the same period.

To help hold off a strong challenge key rival Sky-Italia, a subsidiary of Rupert Murdoch’s News Corp., Mediaset is reported to be in talks with France’s Canal+ or Qatar’s Al Jazeera about a possible partnership.

The shrinking ad market isn’t the only factor hurting Mediaset: Berlusconi, the three-time prime minister who is the company’s leading shareholder, was sentenced to four years behind jail in a tax fraud case related to Mediaset, and then a further year in a wire tap case. Both are under appeal. Then last week, prosecutors in Milan asked for six more years behind bars and a lifetime ban from politics in a case alleging he paid underage erotic dancer Karima el-Mahroug for sex and then abused his position as prime minister to get her off on a minor theft charge. That verdict is expected June 24.

Meanwhile, Berlusconi is one of the key backers behind the shaky coalition government led by Enrico Letta. Though he does not hold a formal position in the government, it’s possible his influence in the government could be a net aid to Mediaset.

Twitter: @EricJLyman