By Peter Feuilherade BBC Monitoring

Rupert Murdoch's News Corporation is considering legal action to hold French-Canadian media giant Vivendi Universal to an agreement to merge their loss-making Italian pay-TV operations.

The merger is valued at between $420m and $500m. It was first proposed last year, as a way of keeping afloat Tele plus, a unit of Vivendi, and Stream, a 50-50 joint venture between News Corp and Telecom Italia.

Both pay-TV platforms have notched up heavy losses. Last year alone, Tele plus lost $300m and Stream $200m as a result of football deals.

Rupert 'Shark' Murdoch says will sue

On Wednesday , after an Italian regulator imposed conditions on the deal, debt-burdened Vivendi used the stumbling block to signall its intention to pull out.

Italy's anti-trust authority insisted that a merged platform would have to comply with a list of 10 conditions, including a two-year limit on new TV contracts with Italian football clubs and a ban on exclusivity deals.

News Corp maintains that Vivendi's financial problems, topped by debts estimated at $15bn, are "not valid reasons" to pull out of the merger.

Mr Murdoch had earlier warned that he would sue Vivendi if it tried to renege on the deal. The Financial Times quoted him as saying: "Stream will stay in business as a very active competitor. We can continue to fund it and so can our partner Telecom Italia."

EU to probe Spanish merger

Plans by Spanish telecommunications giant Telefonica to merge its digital TV unit, Via Digital, with the pay-TV broadcaster and producer Sogecable have attracted the attention of European competition authorities.

Telefonica said the merger would create Spain's leading pay-TV operator, with 2.5 million customers and revenues of more than 1.3bn euros.

Cross border mergers need careful scrutiny by EU

EU Competition Commissioner Mario Monti says he will scrutinize the proposed merger, which raises possible cross-border issues because French pay-TV operator Canal plus holds a stake in Sogecable, which operates the Canal Satelite Digital platform.

The combined annual sales of Sogecable and Telefonica - over 250m euros in the EU and over 5bn euros in the rest of the world - also mean the case must be examined for compliance with EU legislation.

Confusion reigns

The merger disputes are the latest symptom of the disarray in Europe's commercial TV sector.

They follow the filing for bankruptcy of Kirch Gruppe's pay-TV venture in Germany and the collapse of two digital terrestrial TV (DTT) platforms - ITV Digital in the UK and Quiero in Spain.

Leo Kirch's media group has gone under

However, a report this week by the Geneva-based European Broadcasting Union (EBU) sees good prospects for DTT in other European markets.

It notes that Finland will have a strong DTT offering by this autumn, the Netherlands and Portugal will be on-air with DTT before the end of this year, and France will launch over 30 DTT channels in autumn 2003, including many free-to-air.

"Almost all European countries will have launched DTT by 2005," the EBU reports confidently predicts.

BBC Monitoring, based in Caversham in southern England, selects and translates information from radio, television, press, news agencies and the Internet from 150 countries in more than 70 languages.