UPDATE 4-Vivendi's Canal Plus in talks to buy Orange's film and pay TV units - source

Vivendi's Canal Plus TV arm is in exclusive talks to buy the film and pay TV operations of Orange in a deal that would allow it to add nearly 3 million subscribers and close in on Netflix in France, a source told Reuters on Friday.

Vivendi's Canal Plus TV arm is in exclusive talks to buy the film and pay TV operations of Orange in a deal that would allow it to add nearly 3 million subscribers and close in on Netflix in France, a source told Reuters on Friday. Informal talks between Vivendi's Canal Plus, which already owns a third of the OCS pay TV business, and Orange - France's biggest telecoms group - have been going on for months.

In addition to OCS, Canal Plus would also buy Orange Studio, the content division in charge of co-producing, selling abroad and distributing select films in France. Orange and Canal Plus declined comment on the talks, which were first reported by trade publication Variety.

A tie-up would have to be approved by the French competition authority, said the source with direct knowledge of the talks. The authority blocked a similar deal in 2011, before Netflix and other streaming services shook up the pay TV market. Netflix boasts more than 13 million subscribers in France, ahead of Canal Plus which currently has 9.6 million, and OCS with 2.9 million subscribers.

OCS is France's second-biggest pay-TV service after Canal Plus. It's known for being the sole distributor of HBO series in France, including blockbuster "Game of Thrones". However, the company is loss-making and its pricey multi-year deal with HBO only has a few weeks left and is not expected to be renewed, leading some industry observers to play down the medium-term significance of a deal with Canal Plus. An Orange spokesperson said the HBO partnership would run out at the end of 2022.

An industry source said there was usually a sort of "inertia" among pay TV subscribers before they realise they are not getting the same content as before and switch to another service, adding both companies might be betting on that. (Additional reporting by Piotr Lipinski; Writing by Silvia Aloisi, editing by MarkPotter and Emelia Sithole-Matarise)

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