CANAL+ has revealed it has allocated €255 million to fund a write-off programme of its first generation boxes. On a net basis this means €168 million is being used against the book value of the old units, while €52 million will be charged off against existing boxes bought and supplied this year pending delivery of new units. For a number of years Canal+ has operared a business model where it writes-off its set-top boxes over a period of approximately five years.

According to a (April 25) report from investment bankers Morgan Stanley Dean Witter, Canal+ new units will be “net-top boxes” providing full Internet access in addition to digital TV. France lags behind many other European countries in its adoption of PC-driven Internet access because of its dependence on the Minitel system. Morgan Stanley says Canal’s new box will be equipped with a high-speed modem and PC capability.

Canal+ intends rolling out new units towards the end of next year with a two-year swap out programme. By the end of 2003 the swap-out will be complete and, according to Morgan Stanley, annual revenue per subscriber will have grown from a typical €272 today to more than €374 per sub, thanks to the extra spend on interactive television services and e- commerce transactions. Morgan Stanley estimates that Canal+/Canal Satellite will receive an initial 10 per cent commission on e-commerce transactions falling, over time to nearer 5 per cent.

By 2005 the investment bank says income per subscriber should be hitting €430 per annum, or €35.89 per month. Morgan Stanley says the net-top boxes will pay for themselves in roughly 7.5 years, although this could be a very cautious estimate.

However, the boxes have to be paid for and this could lead to greater cash demands on Canal+, which Morgan Stanley describe as “substantial” especially in 2001-2. Morgan’s suggest that Canal+ will raise much of the funding by means of long-term debt, which in turn will affect the overall profitability. Therefore it states Canal’s net loss forecasts for this year (2000) rise from €69 million to €111m, and that 2001’s expected modest profit will now turn into a loss of some €57m