Murdoch's TV digital alliance falls into tatters

Rupert Murdoch's high-stakes digital TV alliance with three Continental broadcasters was last night in tatters as doubts about the viability of the partnership threatened to escalate.

At issue was the role played by the media giant Bertelsmann, one of two German companies set to launch pay-TV services in Europe's biggest untapped market. Bertelsmann has enraged two of its partners, Canal Plus and BSkyB, Mr Murdoch's 40 per cent owned satellite broadcaster, which have accused the German company of dragging its feet on preparations for the introduction of digital TV in Europe. The fourth partner, Havas, made no comment.

"When we have a marriage, we think it should mean something," a source at Canal Plus said. "You don't wander off with someone else after you exchange vows."

Only weeks after the pan-European alliance was announced in March, Bertelsmann unveiled a controversial merger of its TV interests with CLT, the Luxembourg- based broadcaster that competes directly with Canal Plus in key markets.

"It is not only because of CLT," the Canal Plus source stressed, however. "A partnership should be a partnership."

It is believed that Mr Murdoch shares that view. He sent a letter early this week to Bertelsmann asking for clarification of the company's intentions regarding the alliance. Mr Murdoch was believed to be particuarly concerned about the effects the CLT link could have on regulators in Brussels, who have already expressed reservations about large-scale alliances in the media sector.

He is also frustrated that BSkyB has been stopped so far from taking a stake in Premiere, the German pay-TV company jointly owned by Bertelsmann, Canal Plus and Leo Kirch, the Bavarian media magnate.

Doubts about the partnership sent shares in Canal Plus plunging in Paris yesterday. At one point, the stock was off more than 7 per cent. BSkyB was also weaker in London trading, losing 8p to close at 438p. The companies had planned to launch a digital platform for Germany as early as this autumn.

The Kirch Group, a main competitor of Bertelsmann in the digital arena, has pushed for its own decoder. The Bertelsmann-Canal Plus-BSkyB alliance was meant to use Canal Plus's decoder, which has alrady been launched in France.

Analysts said yesterday that a battle between the two standards could imperil the profitability of digital TV. European Union industry chief Martin Bangemann will meet executives from Bertelsmann, CLT, Kirch and others on Saturday, in part to see if the impasse can be ended.