Udenrigsminister Per Stig MØLLER Asiatisk Plads 2 DK - 1448 København K
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EUROPEAN COMMISSION Brussels, 04.VIII.2008 C(2008)4224 final In the published version of this decision, some information PUBLIC VERSION has been omitted, pursuant to articles 24 and 25 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying WORKING LANGUAGE down detailed rules for the application of Article 93 of the EC Treaty, concerning non-disclosure of information This document is made available for covered by professional secrecy. The omissions are information purposes only. shown thus […]. Subject: N 287/2008 - Denmark Rescue aid to TV2 Danmark A/S I am pleased to inform you that the European Commission has assessed the Rescue aid to TV2 Danmark A/S notified by the Danish authorities and decided to consider the aid to be compatible with the EC Treaty. I. PROCEDURE (1) By letter registered on 16 June 2008, the Danish authorities notified to the Commission, pursuant to Article 88 (3) of the EC Treaty, their intention to grant a state loan to TV2 Danmark A/S as rescue aid for a firm in difficulty. Further information and documents were submitted thereafter by the Danish authorities, ultimately, on 18 July 2008. II. CONTEXT The activities of TV2 Danmark A/S (2) TV2 Danmark A/S is the parent company of the TV 2 Group, which has interests in twenty different companies involving fully owned subsidiaries, associates, joint ventures and minority holdings. TV2 Danmark A/S operates the public television channel TV 2 as well as a number of commercial channels including TV2 Zulu, TV2 Udenrigsminister Per Stig MØLLER Asiatisk Plads 2 DK - 1448 København K Commission européenne, B-1049 Bruxelles – Belgique - Europese Commissie, B-1049 Brussel – België Telefon: 00-32-(0)2-299.11.11. Charlie and a news sport television channel TV2 Sports. TV2 Danmark A/S activities are nearly exclusively focused on the TV broadcasting market and other media-related markets in Denmark, where TV2 Danmark A/S channel TV 2 and Danmarks Radio are the largest public service broadcasters. However, through its subsidiaries, TV2 Danmark A/S acquires and sells audiovisual rights on international markets (e.g. Euro 2008 or Olympic games) which it can broadcast itself or resell, in competition with other competitors broadcasters in Denmark. It also advertises, in competition with them, products from other Member States intended for sale in Denmark. (3) In that Member State, TV2 Danmark A/S competes with other undertakings in the provision of broadcasting and media-related services, such as DR, a public undertaking which is exclusively financed by a licence fee and operates two public service channels; Viasat, which is owned by Swedish Modern Times Group A/S; SBS A/S, which is owned by German ProSiebenSat; and Discovery. The combined viewers' market share of TV2 and DR in 2007 was around 72%, TV2 having around 40% of the viewers' market. (4) TV2 Danmark A/S was incorporated in 2003 as a private limited liability company wholly owned by the Danish State. The company took over the activities of the autonomous public institution TV 2, which was created in 1986. The public support to the activities of TV2 prior to the incorporation and subsequent recapitalisation of TV2 Danmark A/S were the object of, respectively, Commission decisions of 19 May 2004 and of 2 February 2005. The former decision mandated the recovery of incompatible aid to TV2 whilst the latter raised no objections on the compatibility with the common market of the recapitalisation consisting of a capital injection of DKK 440 million and a further debt-equity swap of DKK 394 million1. Both decisions are the object of applications for annulment before the Court of First Instance, which are still pending. (5) According to the Danish Broadcasting Act, the overall public service broadcasting activities in Denmark shall - via television, radio and the internet or similar media - provide the Danish population with a wide selection of programmes and services comprising news coverage, general information, education, art and entertainment. The range of programmes provided must aim at quality, versatility and diversity. Freedom of information and expression shall be a primary concern in the planning of programmes, and the coverage of information must be objective and impartial. Programming shall ensure that the general public has access to important information on society and public debate. Furthermore, particular emphasis is placed on Danish language and culture. Programming shall cover all genres in the production of art and culture and provide programmes that reflect the diversity of cultural interests in Danish society. (6) The Danish authorities state that, according to its licence, which is valid until the end of 2013, TV2 Danmark A/S is obliged to respect the above mentioned requirements on its public service channel, TV 2. Besides, the public service licence lays down specific obligations: 1 Commission Decisions 2005/217/EC, OJ EU L 85 of 23.3.2006, p. 1-21 and case N 313/2004, OJ EU C 172 of 12.7.2005, p.3. 2 − Obligation to broadcast a certain amount of news programmes, including an obligation to broadcast at least one main news programme in prime time. As a general rule, the news programmes must be produced in-house. − Obligation to purchase –as a general rule- other programmes than news programmes from external producers until the end of 2008. − Obligation to broadcast a certain amount of high quality programmes for children. − Obligations regarding the purchase of Danish films. − Obligations regarding broadcasting services for disabled people. − Obligation to make slots available on TV 2 for regional programmes from regional public service broadcasters according to mutual agreements. − Obligation to broadcast TV 2 on free-to-air basis. The deterioration of TV2 Danmark A/S financial situation in 2008 (7) According to the Danish authorities, during 2008, TV2 Danmark A/S has experienced serious liquidity problems as a result of a combination of four factors in 2007-8, namely the cash-flow effects of heavy investments initiated in 2005 and 2006 which i) have not performed as expected, in particular as to radio activities from TV2 Radio A/S, ii) have performed as expected or better but have not realised yet their revenue potential, iii) lower than expected advertising revenues and iv) increased interest charges. (8) These financial difficulties are evidenced by losses before tax and negative net cash flow worth respectively DKK 213 million and DKK 550 million incurred in 2007 and expectations of losses and negative net cash flow worth DKK […]∗ and DKK […] for 2008. Further evidence stems from an expected reduction of the net assets value from DKK […] to DKK […] between 2006 and 2008 and a decrease by […]% of the company's turnover between 2007 and 2008. Initiatives taken to address the liquidity problems (9) Faced with these difficulties, the management of TV2 Danmark A/S introduced cost saving measures in January and April 2008 consisting of a 20% staff reduction, a divestiture of its majority interest in radio activities and a reduction or postponement of investments, with limited liquidity effects expected in 2008, however. (10) In parallel, the management of TV2 Danmark A/S tried to secure additional external funding from their regular bankers, but this attempt failed by mid-May 2008. The main reasons reported by the Danish authorities were the concerns about the long-term financial viability of the public service channel given the recent decline in audience and advertising and the switch to digital terrestrial television in 2009, as well as the ∗ Business secret 3 uncertainty regarding the outcome of the pending court cases on the compatibility with the common market of state aid granted to the company in the past. Discussions with other banks in view of obtaining finance have also failed, for the same reasons. (11) The company turned then to the Ministry of Culture, which instructed independent auditors to review the prospective cash flow budgets for 2008 prepared by TV2 Danmark A/S. On 13 June 2008, PriceWaterhouseCoopers assessed in a report to the Danish Ministry of Culture the liquidity needs of TV2 Danmark A/S for 2008. The conclusion drawn by PriceWaterhouseCoopers, subject to the necessary caveats as to the occurrence of subsequent events and deviations from assumptions, is that it would be necessary for TV2 Danmark A/S to obtain a significant amount of funding to meet its short term cash flow needs. III. DESCRIPTION OF THE MEASURE (12) On that basis, the Ministry of Culture obtained the approval of the Ministry of Finance to table to the Danish Parliament a request for approval (Aktstykke) of the notified measure. Substantive elements of the measure (13) The legal basis of the measure is the Aktstykke approved on 23 June 2008 by the Finance Committee of Parliament (Folketinget) for inclusion in the supplementary appropriations act 2008. The Aktstykke authorises the Minister of Culture to give TV2 Danmark A/S access to loans covering the company's liquidity needs in the form of relending of State loans from the National Bank, with a maximum limit of DKK […]. According to the Danish authorities, the need to provide contingence for unforeseen events in a worst case scenario led the Danish authorities to decide on that ceiling for the amount of credit facility to TV2 Danmark A/S. (14) Following the approval of the Danish Parliament, the company and the Ministry of Culture entered into a loan agreement. Under the terms of the agreement, the Ministry provides a credit facility for the amount of DKK […] agreed by the Folketinget. The loan will bear interest at […]. That margin is reportedly the one which the company banks apply to TV2 Danmark A/S current overdraft facilities.