Vivendi sparks row with Murdoch

LONDON, England -- Rupert Murdoch's News Corp. says it will fight Vivendi Universal's decision to abandon plans to merge their Italian pay-TV operations.

Vivendi said late on Wednesday it was scrapping the merger of its loss-making Italian pay-TV unit Telepiu with rival Stream -- part owned by News Corp. -- after Italian authorities attached conditions to the deal.

"The companies had already indicated that they could not accept more constraining conditions," Vivendi and its Canal Plus pay-TV unit said in a statement. "Recent developments in the pay-television market have only reinforced their feeling that they cannot make additional concessions."

However, News Corp. said it had not rejected the conditions of the merger and was prepared to go ahead with it.

"Their rejection of this transaction is contrary to terms of the original merger agreement," News Corp. said in a statement. "Vivendi's current financial constraints are not valid reasons for failing to comply with the agreement."

News Corp. added that it "intends to enforce all of its rights under the merger agreement."

The move raises questions about how Vivendi -- led by Chief Executive Jean-Marie Messier -- will turn around its money-bleeding Italian operation. Telepiu's losses have weighed heavily on the company and some investors saw the Stream merger as a means of stemming those losses.

The merger would have created a single pay television body in Italy and ended a fierce battle for subscribers which hurt the two operators.

The deal called for Telecom Italia to sell its 50 percent stake in Stream to partner News Corp. Vivendi would then have bought 100 percent of Stream's capital through its Canal Plus unit and combined it with Telepiu.

Earlier this week, Italian regulators set out 10 conditions for the merger, which was agreed to in February pending a 45-day investigation into concerns it could restrict competition. Last year, regulators blocked an original merger plan between the two loss-making companies.

One of the conditions imposed by the regulator is a restriction on the length of Telepui's rights to broadcast football games and an outright ban on exclusive deals with individual teams.

Telepiu broadcasts games involving Italian teams Inter Milan, AC Milan and league champions Juventus, while Stream carries matches with Rome clubs Lazio and Roma.

Vivendi (PEX) was up 1.1 percent to 33.38 euros in midday Paris trading on Thursday.