Kirch to revamp pay-TV unit

February 25, 2002 Posted: 1308 GMT

LONDON (CNN) -- KirchGruppe is expected to consider restructuring plans this week for its pay-TV business, as the German media giant's debt problems mount.

The company will present executives and investors -- including Rupert Murdoch's British Sky Broadcasting – with a new business plan for the Premier pay-TV unit at a meeting in Munich, the Financial Times said.

Also attending the meeting will be Saudi investor Prince Al-Waleed and U.S. investment bank Lehman Brothers, the newspaper said. On the agenda will be plans to cut Premier's costs and alter its marketing strategy, it said.

Premier's programming costs are estimated to be double those of BSkyB, while it revenues per user are only two thirds of those of its London-based counterpart.

Premier has come under financial pressure after buying subscriber rights at inflated prices. It said the unit has paid TV rights for 4 million subscribers, even though it only has 2.5 million subscribers, the FT said. The majority of the subscriber rights are believed to run until 2008.

Premier provides a large chunk of profit for KirchGruppe, which itself has piled up at least $5 billion in debt in recent years.

Kirch would not comment on the forthcoming meeting but sources told CNN that the supervisory board would be meeting to discuss current issues.

The Munich-based group has been attempting to restructure its overall debt, negotiating with its main lenders and investors. 

Murdoch already owns part of KirchGruppe's pay-TV business through BskyB. In early February, BSkyB wrote off its investment in Premier, although it still has an option to force KirchGruppe to buy back the 22 percent stake in October if the company has not been publicly listed by that time.

KirchGruppe, which has the biggest film library outside of the United Sates, also owns the home shopping network HOT and Spanish broadcaster Telecinco.

In addition, it has a 40 percent stake in Axel Springer Verlag, the group which publishes the influential newspapers Bild and Die Welt. KirchGruppe also has the rights to Formula One racing, through its 58 percent stake in the company SLEC, and the rights to World Cup football.