THE Competition Commission (CC) yesterday found that the arrangement between subscriber channel LTV and its platform administrators Multichoice was in violation of competition laws.
LTV dominates the pay-TV market in Cyprus with some 60,000 subscribers.
The CC’s decision is expected to have a real impact on a mammoth deal between LTV and the Cyprus Telecommunications Authority (CyTA).
The preliminary agreement provided that LTV and Alfa would remain on Multichoice’s satellite platform until 2010, while at the same time LTV and Alfa would supply miVision – managed by CyTA – with entertainment content.
A great deal is at stake as CyTA is set to rake in over £300 million from its 15-year collaboration with LTV.
But this arrangement itself is under the scrutiny of the competition watchdog, after private telecom providers and over-the-air television networks complained of the creation of a super cartel in the market.
The crux revolves around the switchover to digital television in 2012. Any company wishing to offer pay-TV will need to either go digital – meaning they’re dependent on CyTA’s infrastructure and grip on the market – or they’ll have to settle for the more conventional satellite transmission, which supports a limited number of channels by comparison.
In the wake of the extensive media coverage, LTV and CyTA decided to put the deal on ice.
Though the two cases are separate, in reality they are inextricably linked.
Multichoice are taking legal action against LTV for breach of contract, saying that they have been left out in the cold with the CyTA deal. LTV counters it is not bound to its partner.
In an aggressive move, LTV has offered to buy out 100 per cent of Multichoice’s shares. That would then untie its hands to close the agreement with CyTA.
But a clause stated the offer was good only if the CC found that LTV’s own arrangement with Multichoice was illegal.
The Catch 22 was partly solved yesterday with the CC saying the arrangement between Multichoice and LTV “placed barriers to healthy competition”.
The two companies were at fault for the exclusive distribution of LTV content and due to the “long duration” of their agreement.
Though the development might have come as a relief to LTV executives, the subscriber channel will not get off scot-free.
Like Multichoice, LTV is now liable to stiff penalties, as high as 10 per cent of its turnover, according to Competition Commissioner Giorgos Christofides.
That means LTV’s some 13,000 junior shareholders will not welcome the news.
Christofides said yesterday that the amount of the fines would be announced next week.
“We are aware of each company’s annual revenues, and the Commission shall decide on the penalties based on the companies’ co-operation in the investigation… and the degree to which they placed barriers to competition,” he said.
