BRUSSELS: The European Union has given Rupert Murdoch's News Corp the go ahead for buying Italian pay-TV firm Telepiu from Vivendi Universal. A new entity Sky Italia will be created by the merger. However, strict riders have been attached.
 

A Reuters report indicates that under the terms of the 900 million euro ($970 million) deal, Italian telecoms operator Telecom Italia will hold a minority stake of up to 19.9 per cent. Competition Commissioner Mario Monti said, "I am satisfied that the Commission, after an in-depth investigation and intensive negotiations with the parites, has established the right conditions for the pay-TV market in Italy to remain open and to evolve in a competitive way on a lasting basis to the advantage of the consumers".

While Sky Italia is expected to do better than previous offerings, the challenge before Murdoch will include Italy's rampant pay television piracy. In addition, to match the pay-TV success he has managed in Britain with BSkyB, he will have to install the technology.

It is worth noting that neither Stream nor Telepiu have made a profit since their launch in 1996 and 1991 respectively. Given this track record it could take many years before Sky Italia makes inroads into the Italian market. A critical mass of around 25 per cent penetration is not expected till 2012, according to UBS Warburg, the report says.

Though the country watches nearly five hours of television a day, Sky Italia will face stiff comeptition from 14 free-to-air national channels and 700 local ones -- a choice that has helped glue Italians to their screens but may have left them satiated.