Telecom Italia may eventually try to sell its 50 per cent stake in Italian pay-TV operator Stream in exchange for a minority interest in Rupert Murdoch’s new holding Sky Global.

Speculation that Telecom Italia might sell the holding in loss-making Stream has been prompted by an announcement last month that Telecom Italia is in talks with Gruppo Cecchi Gori about buying the TMC and TMC2 TV channels.

Telecom Italia is merging Seat with its Internet unit Tin.It, creating a company worth more than E40 billion through which it hopes to launch the bid for Cecchi Gori’s TV interests. Negotiations between Telecom and Rupert Murdoch were also running in parallel aimed at redefining the shareholding structure of Stream. A solution that seems to be surfacing is that Telecom will sell its stake in Stream to Murdoch’s News Corp in exchange for a 2 per cent stake in Sky Global.

Murdoch is currently grouping all his worldwide pay-TV assets – including Stream – into Sky Global ahead of a float in the US later this year. Partners in individual platforms are being offered stakes in Sky Global – sometimes in return for their existing holdings. Telecom Italia’s management has concluded that pay-TV isn’t compatible with its other activities and its direct involvement in Stream is a drain on resources. In fact, figures from 1999 show that Stream produced a debt of L458 billion (E236.54 million) on a turnover of L87 billion (E44.93 million) and it is estimated that similar losses have already been accumulated during the first quarter of the current year.

Telecom Italia’s change in strategy is in line with Murdoch’s impelling need to make peace in Italy with French rivals Vivendi, which controls Tele+. Vivendi holds a 25 per cent stake in UK pay-TV operator BSkyB and is a candidate to become a shareholder of Sky Global. In this context, the rivalry between the two media groups on the Italian pay-TV is not sustainable and for this reason Murdoch wants to take complete control of Stream to bring it as dowry for the merger with Tele+ – creating a single Italian digital platform.

A similar merger would have been unthinkable only a year ago, when the Italian government firmly opposed the arrival of Murdoch. The opposition was so strong that an ad hoc law was emanated which introduced a 60 per cent limit on the TV rights to Italian league football one pay-TV operator can own. With this solution that seems to be emerging, the one- time obstacles would not be insuperable any more. Article 2 of the said law establishes that “in the case that the conditions of relative markets determine the presence of only one buyer, the indicated limit can be exceeded, but the contracts for the exclusive rights must have a duration of not longer than three years”.

The political opposition seems to have evaporated with the TMC operation. On one hand, Telecom takes over, both content and Cecchi Gori’s debts, thus ensuring the birth of an alternative TV pole to RAI and Mediaset. On the other hand, it gets the green light to the transfer of the ownership of the pay-TV operator to a foreign media group. However, it seems that the go-ahead seems to have been granted only on the condition that Murdoch’s News Corp will have a minority stake in the merged Stream-Tele+ company.