Vivendi Universal and News Corp yesterday confirmed that they have reached a deal for the merger of their their respective Italian pay-TV businesses TELE+ and Stream which will create a single operator called TELE+. Italian regulatory authorities have yet to okay the venture, details of which first surfaced in April.

As part of the agreement, News Corp will sell to Vivendi Universal 50% of the stake in Stream previously owned by Telecom Italia. As a result of this transaction, the TELE+ shareholders (Canal Plus Group and RAI) will own 75% and News Corp will own 25% of the new platform.

News Corp will have an option to increase its stake in TELE+ in the three years following the closing of the deal to a ceiling of 50% to an equal basis with Canal Plus. News Corp holds a call option, exercisable either 18 months or three years after the completion of the merger, whereby it can increase its interest in the merged entity by purchasing shares at fair market value on the date the option is exercised.

The board of directors of the new company will be chaired by Emmanuel Gout, currently chairman of TELE+. This new platform, open to all content providers, will be headed by Olivier Gerolami, currently CEO of TELE+.

The merger is an attempt by News Corp's Rupert Murdoch and Vivendi Universal's Jean-Marie Messier to cut the losses suffered by their respective companies in Italy.