Italy's antitrust watchdog has cast a deep shadow over the planned merger of Italian cable TV giants, Telepiu and Stream. Despite widespread industry confidence that the merger would receive swift regulatory approval, the antitrust authority has opened an investigation into the deal which had been agreed by the pay-TV groups' parent companies, News Corp and Vivendi Universal in July.

Vivendi and News Corp had reached an agreement for the merger of their respective pay TV operations in a bid to curtail massive financial losses and create a major single pay-TV entity in Italy. As part of the agreement, News Corp is set to sell to Vivendi 50% of the stake in Stream, which was previously owned by Telecom Italia. And as a result of the deal, Telepiu shareholders (Canal Plus Group and RAI) are set to own 75% of the new platform, with News Corp owning the other 25%.

The Murdoch-owned News Corp also has a three year option to invest a further $500m in the operation and increase its stake to 50%.

Explaining the reasons in a statement for the inquiry into the merger, Italy's watchdog body said that a single pay-TV operation could lead Canal Plus to "gain a position of monopoly" in Italy, and would mean that it could impose higher prices on customers without having to worry about improving services.

The Antitrust Authority is also expected to evaluate the impact of the planned merger on what is, to date, the pay TV market's core and most lucrative investment: television: soccer rights. At the same time, it will examine the potential effects of the merger on movie rights. Telepiu, in particular, is one of the key Italian financiers of film, and invests more than $42.1m (90 billion lire) each year in the local movie industry.