MILAN (Reuters) - The board of Telecom Italia (MI:TLIT) (TIM) has approved the creation of a joint venture with French media group Vivendi's pay-TV unit Canal+, strengthening the link between the Italian phone group and its biggest shareholder.
Pooling resources will allow Canal+ and TIM to drive a harder bargain in the content war with bigger rivals such as Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN).
It will also step up the convergence between TV content and distribution that is at the heart of the strategy pursued by Vivendi (PA:VIV), which holds a 24 percent stake in TIM, to create a southern European media empire.
"The joint venture with Canal+ will in fact allow us to seize new opportunities for growth in a market undergoing continuous evolution through a commercial offer of fiber connectivity combined with premium video content," TIM Chief Executive Amos Genish said in a statement.
TIM will have a 60 percent stake in the joint venture, with Vivendi's Canal+ holding the remaining 40 percent. The venture's board will have five members, three appointed by TIM and two by Canal+, while its chief executive will be chosen from among the TIM-appointed directors.
One source close to the matter told Reuters last week that Mediaset could become part of the joint venture at a later stage, also as a way to help to settle a dispute between the Italian broadcaster and Vivendi.
Vivendi and Mediaset have been at loggerheads since July last year, when Vivendi pulled out of an 800 million euro ($942 million) contract that would have given it full control of Mediaset's pay-TV arm Premium, saying the unit's business plan was unrealistic.
The French group also received the strongest sign yet that Rome intends to rein in Vivendi's growing influence over former state phone monopoly TIM, announcing this week that it wants a say in TIM's decisions regarding assets of national interest.
TIM said on Friday that, while it shared Rome's worries about the protection of national security and defense interests, it would examine the government's decisions and measures it is asked to implement in greater depth.
The company plans, "irrespective of any further evaluation in legal terms, to engage in all useful discussions with a spirit of full collaboration", it added.