Investors Show Dismay at NewsCorp’s Italian Job

13 June 2002

Rupert Murdoch’s sudden decision to buy Italian pay-TV operator Telepiu from Vivendi Universal for around €1.5 billion ($1.4bn; £1bn) has not gone down well with investors.

NewsCorp saw around $2.28 billion wiped from its stock value earlier this week, as shareholders reacted negatively to the surprise deal.

Murdoch had been trying to offload NewsCorp’s own Italian pay-TV unit Stream, which it co-owns with Telecom Italia, but moved from seller to buyer earlier this month [WAMN: 10-Jun-02]. Instead of improved cashflow resulting from the sale, investors suddenly faced a short-term decline in profits.

However, analysts have been more positive, pointing to the long-term benefits to NewsCorp of owning an effective pay-TV monopoly in Italy.

The acquisition is not complete yet, though. NewsCorp is only willing to take a 50% stake in the merged company, and wants the remainder to be bought by Telecom Italia and other Italian investors. The telecoms firm is yet to agree to this situation, but could face liabilities of up to €1 billion if the deal collapses and Stream is forced into bankruptcy.

Data sourced from multiple sources; additional content by WARC staff