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Furor Over Canal Plus Firing Deepens

Media: A one-day strike is threatened and a regulator says it may revoke company's right to broadcast in France.


French governmental, cultural and business circles reverberated Wednesday from the management upheaval at Vivendi Universal, spawning a new round of street protests, political sparring and talk of strikes against the nation's largest media conglomerate.

French broadcast regulatory agency CSA threatened to yank Canal Plus' right to broadcast in France, a day after Vivendi Chairman Jean-Marie Messier's decision to ax the popular pay TV provider's chairman, Pierre Lescure.

CSA Chairman Dominique Baudis, who has requested a meeting with senior Vivendi executives, cited a 1986 law on freedom of communication that allows the suspension of TV broadcasting rights without notice when there are substantial changes in the conditions under which a broadcast license had been awarded.

The move came at the behest of Socialist Prime Minister Lionel Jospin, who was incensed over what has become known in France as "L'affaire Lescure." Messier, once a darling of the French corporate world, is now a whipping boy among politicians in the last days of a presidential campaign.

About 1,000 employees and subscribers of Canal Plus, some of whom staged on-air protests Wednesday over the ouster, demonstrated in front of Vivendi's headquarters at the Arc de Triomphe, throwing eggs and shouting for Messier to resign.

Union workers at Canal Plus are threatening to stage a one-day strike on Wednesday, when Vivendi Universal will hold its shareholders meeting.

Lescure's ouster, which came four days after Canal Plus' No. 2 executive Denis Olivennes resigned, touched off the firestorm in France, where Messier has been accused of betraying French culture to American interests. Vivendi owns L.A.-based Universal Studios.

Lescure is considered an icon in French movie and television circles and has been at Canal Plus since it was founded in 1984. Canal Plus is the French film industry's biggest financial backer, producing such films as the recent hit "Amelie."

The uproar continued to fuel speculation that Messier may be at risk of losing his grip on the company.

"We would say that a departure of Messier is not unlikely at this stage, although we believe that such a move would be a risk for Vivendi, given Messier controls the whole company's management," ABN Amro analysts wrote in a note to clients Wednesday.

The fallout has created a curious dynamic. Though Messier is being lambasted in France, many analysts view his action at Canal Plus as a necessary step to fix a money-losing division.

Canal Plus posted a loss of $439million last year. The channel's losses and management turmoil have been in stark contrast to Vivendi Universal's music and film divisions. Universal Pictures last year had a string of box-office hits, such as "The Mummy Returns" and "American Pie 2."

"The departure of Pierre Lescure is only the beginning of a very long and uncertain restructuring program that needs to begin at Canal Plus," said Mark Harrington, an analyst with J.P. Morgan Chase.

The company's stock gained for the fourth consecutive day. On the New York Stock Exchange, Vivendi's American depositary receipts closed at $35.14, up 8 cents.

But support from Wall Street hasn't translated in his homeland, where Messier's action continued to create an uproar among French politicians, movie makers and Canal Plus employees, who have been stewing for months about a statement Messier made last year that French cultural exception is dead and fear that Messier wants to back out of Canal Plus. French cultural exception is the policy of using government quotas and subsidies to support French cinema.

"Cinema is a great part of French culture and is doing particularly well at the moment, mainly due to [Canal Plus'] funding," Conservative President Jacques Chirac said on TF1 television. "It is essential that this contract is respected."

In exchange for receiving the right to broadcast, Canal Plus is required under French law to support French cinema. Canal Plus has been involved in as much as 80% of French film productions.

Messier said Canal Plus will respect its commitments for the funding of French film industry and defended the management changes.

"The departure of Pierre Lescure as chairman of Canal Plus Group is not because of personal reasons," Messier said. "The decision was taken purely on the basis of business considerations ... as Vivendi Universal's role is not to continue to bankroll Canal Plus indefinitely, vigorous strategic and operational measures need to be taken."

Lescure was officially fired by the board during a meeting of Canal Plus directors at Vivendi headquarters Wednesday. The board supported Messier's decision to ax Lescure in a 3-2 vote. Dissenters included Jorge Semprun, a writer, and longtime Canal Plus union representative Philippe Gildas. Semprun said Tuesday that he would step down as vice president of the board if Lescure left.

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