Telecom Italia Sells La7 in Controversial Deal

Silvio Berlusconi standing -P 2013
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Former Silvio Berlusconi crony Urbano Cairo will now take over amid fears the network could fall under Berlusconi's influence.

ROME -- Telecom Italia Media said Monday that it would sell its control of La7, Italy’s smallest national television network, to Cairo Communications, while at the same time revealing financial results that showed an increase in viewership numbers by far weaker financials.

The acquisition deal was controversial because Urbano Cairo, Cairo Communications’ founder and owner, is a former lieutenant to billionaire media tycoon Silvio Berlusconi. There are conflicting media reports as to how close the two men are.

Berlusconi, who is one of three parties embroiled in a political standoff to determine who will be Italy’s next prime minister, already owns three of the country’s seven national networks through his television and cinema giant Mediaset. The fear is that Cairo’s takeover of La7 could give him influence there, especially in terms of editorial neutrality for its news programs.

Additionally, if Berlusconi manages to defy odds and become prime minister, he’d have a say in the operations of state broadcaster RAI, which runs the three remaining networks.

Berlusconi is involved in a battle for prime minister with former PM Pier Luigi Bersani and funnyman-turned-activist Beppe Grillo. Bersani edged Berlusconi to earn the most votes, but none of the three leaders earned enough votes to form a government without support from one of the others.

The complex deal involves Cairo paying Telecom Italia Media just €1 million ($1.3 million), while also agreeing to a recapitalization of the company that will leave Telecom Italia Media with a net positive financial position of at least $115 million. 

The deal, which drove Telecom Italia Media shares sharply lower Monday, does not give Cairo control over Telecom Italia Media’s broadcast infrastructure or its controlling stake in MTV Italia.

Telecom Italia Media has said it wanted to sell La7 to help it pay down debt and to allow the parent company, former state telephone monopoly Telecom Italia, to focus on its core telephony business.

Once the deal gets antitrust approval, it will relieve Telecom Italia of its obligation to support La7 financially, something that would have been welcome in 2012: Results released Monday showed Telecom Italia Media’s consolidated revenue down by $20.3 million to $292 million. Overall, the company lost $315.6 million last year, compared with a loss of $205.8 million in 2011.

But there was some positive news for the company: On Sunday, the Italian media reported that La7’s viewership levels so far this year were up about 5 percent compared with the same period in 2012, the only national broadcaster to show an increase.