The two will pay Vivendi €470m in cash for Telepiu and assume €450m in debt as part of the deal, talks about which have been ongoing for some months.
Murdoch will combine his latest acquisition with Stream, the existing joint venture with Telecom Italia, to create Sky Italia, which will become the dominant pay-TV firm in Italy. Sky Italia will be 80% owned by News Corp, with 20% owned by the Italian telecoms firm.
In line with Sky's position in the UK, which had been built on American imports and sport, Sky Italia controls the Italian soccer rights through to 2003-2004.
Commenting on the deal, Murdoch said: "This is a world-class property in an untapped market without cable competition. We would expect to see immediate subscriber growth, the elimination of piracy, and compelling programming."
The talks between News Corp and Vivendi have been ongoing for months. Originally, Vivendi had been looking for as much as €1.5bn. However, as the troubled Franco-American group pushes ahead with its €12bn debt sell-off the price came down, allowing Murdoch to please investors.
It is already being forecast that Sky Italia will be reporting a positive cash flow of €16m by 2004, with revenues rising from €1.17bn in 2003 to €1.63bn in 2004.
As the deal went through, Murdoch also shed light on his view on DirecTV, the US operation snatched from his grasp by rival US satellite business EchoStar, which is now facing the prospect of its deal collapsing in the face of trenchant opposition from regulators.
Asked, while speaking at a Goldman Sachs conference, if he was still interested in DirecTV, which would have come together with the rest of his satellite business to form Sky Global, Murdoch said he would proceed with caution.
"Should GMH [General Motors Hughes -– the DirecTV parent] come around again we would look, but we'd look very, very carefully," he said.
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