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Pro-Forma Ownership StructurePro-Forma Ownership StructurePro-Forma Ownership StructurePro-Forma Ownership Structure

Italia

News Corp. and Telecom Italia to Merge Stream and Telepiu to Create a Single Pay-TV Platform in Italy

80%80% 20%

News CorporationNews Corporation

Creates Creates THETHE Pay-TV Platform in Italy Pay-TV Platform in ItalyCreates Creates THETHE Pay-TV Platform in Italy Pay-TV Platform in Italy

Italia

Creates Creates THETHE Pay-TV Platform in Italy Pay-TV Platform in ItalyCreates Creates THETHE Pay-TV Platform in Italy Pay-TV Platform in Italy

Italia

• Sole pay-TV platform in Continental Europe’s 3rd largest economy

• Rapid subscriber growth through elimination of piracy, compelling product and simplified offering

• Leverages News Corp’s expertise in running pay-TV platforms

• High value creation with limited upfront investment

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Summary of Proposed TransactionSummary of Proposed TransactionSummary of Proposed TransactionSummary of Proposed Transaction

Effective Purchase Price Per Sub €300

• Pays all outstanding accounts payable at closing

• Leaves all receivables (€300- €325M)

• Telepiu has already paid soccer teams through 2003-2004 season

Italia

• Assumes outstanding debt of €423M

• Cash payment of €470M

• Acquisition includes digital terrestrial licenses

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Transaction RationaleTransaction RationaleTransaction RationaleTransaction Rationale

Lucrat

ive

Mar

ket

for P

ay-T

V

Compelling and

Secure Programm

ing

Benefits from

Single PlatformExp

erience

d

Pay

-TV O

perat

or

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Italy Offers Significant Potential for a Italy Offers Significant Potential for a Single DTH PlatformSingle DTH Platform

Italy Offers Significant Potential for a Italy Offers Significant Potential for a Single DTH PlatformSingle DTH Platform

Source: Zenithmedia (July 2001); Italmedia Consulting/La Repubblica 4 July 2002, Kagan(1) Counts cable TV as one platform

• Largest untapped pay-TV market in Europe

• No cable industry to compete with

• Very low pay-TV penetration

• TV-centric culture focused on soccer

Italy UK

21.6M 24.5M

52% 30%

8 5

1 2

9% 38%

Television Households

% of advertising spent on TV

Free-to-air channels

Pay-TV platforms(1)

Pay-TV penetration (2001)

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All Key Movies and Sports On A Single Platform

Italia

Basic Channels

Major Studios

Soccer Serie A

19 0% 9 teams

25 100% 9 teams

40+ 100% 18 teams

Merger Creates Single Premium Content PlatformMerger Creates Single Premium Content PlatformMerger Creates Single Premium Content PlatformMerger Creates Single Premium Content Platform

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Unified Platform Will Eradicate PiracyUnified Platform Will Eradicate PiracyUnified Platform Will Eradicate PiracyUnified Platform Will Eradicate Piracy

Today:

• Estimated 2-3 million pirated signals in Italy which is approximately 50% of the market

• Telepiu easily hacked and smart cards were easily obtained

• Satellite dishes and decoder boxes are commonly sold without subscriptions

NDS Technology Will Combat Piracy

(1) Source Makro (Milan-based media institute), company reports

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News Corporation – Experienced Pay-TV OperatorNews Corporation – Experienced Pay-TV OperatorNews Corporation – Experienced Pay-TV OperatorNews Corporation – Experienced Pay-TV Operator

BSkyB DTH Sub. Growth BSkyB Annual ARPU

1999 2000 2001 20021999 2000 2001 2002

Over 6 million DTH subscribers at June 30, 2002 – on target to hit 7

million by end of 2003

£269£287

£313£347

(In Millions)(In Millions)

4.5

5.56.1

3.5

8

BSkyB Annual Churn % BSkyB Sub Acquisition Cost

0

4

8

12

16

20

24

£250£234

£210

20022002 2003200320012001

News Corporation – Experienced Pay-TV OperatorNews Corporation – Experienced Pay-TV OperatorNews Corporation – Experienced Pay-TV OperatorNews Corporation – Experienced Pay-TV Operator

19981998 19991999 20002000 20012001 20022002

Est. Italian Market

BSkyB

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(in € millions except subs) 2003 2004 2005 2006

Average Subs. (in 000’s) 2,187 2,769 3,225 3,535

Revenues 1,172 1,627 1,987 2,260

Programming Costs 876 995 1,007 959

Operating Income (342) - 342 675

Operating Cash Flow (378) 83 325 672

Lease Repayments 39 24 4 -

Net Cash Flow (471) 16 263 602

Summary Calendar YearSummary Calendar YearFinancial ProjectionsFinancial Projections

Summary Calendar YearSummary Calendar YearFinancial ProjectionsFinancial Projections

Peak Funding Complete After Year One

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Impact of the Transaction on Impact of the Transaction on News CorporationNews Corporation

Impact of the Transaction on Impact of the Transaction on News CorporationNews Corporation

• News Corp’s cash investments into Stream/Sky Italy will approximate $550 million in fiscal 2003

• Gross debt at June 30, 2003 will increase by approximately $400 million from current levels

• Operating income effect will be approximately a reduction of $150-200 million in fiscal 2003

• No effect on News Corp.’s credit rating

Note: Assumes one Euro equal one US Dollar

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Italia

Tom MockridgeChief Executive Officer

Stream S.p.A.

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(in € millions except subs) 2003 2004 2005 2006

Average Subs. (in 000’s) 2,187 2,769 3,225 3,535

Revenues 1,172 1,627 1,987 2,260

Programming Costs 876 995 1,007 959

Operating Income (342) - 342 675

Operating Cash Flow (378) 83 325 672

Lease Repayments 39 24 4 -

Net Cash Flow (471) 16 263 602

Summary Calendar YearSummary Calendar YearFinancial ProjectionsFinancial Projections

Summary Calendar YearSummary Calendar YearFinancial ProjectionsFinancial Projections

Peak Funding Complete After Year One

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Key AssumptionsKey AssumptionsKey AssumptionsKey Assumptions

2002E2002E((1)1) 2003E2003E 2004E2004E 2005E2005E 2006E2006E

Average Subs Average Subs (in 000s)(in 000s) 2,177 2,177 2,1872,187 2,7692,769 3,2253,225 3,5353,535

Churn RateChurn Rate 20.5% 20.5% 19.5%19.5% 17.0%17.0% 15.0%15.0% 14.0%14.0%

ARPUARPU €€3535 €€3838 €42€42 €45€45 €47€47

Subs driven by compelling consumer offering and piracy elimination Churn reduced through improved customer service

Italia

(1) Estimated combined Stream and Telepiu at 12/31/02.

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A Stronger Consumer OfferingA Stronger Consumer OfferingA Stronger Consumer OfferingA Stronger Consumer Offering

Basic Channels:19 25 40+

Hollywood Studios: None

20th Century Fox, Dreamworks,MGM,

Disney, Warner, Columbia, Paramount

20th Century Fox, Dreamworks,MGM,

Disney, Warner, Columbia, Paramount

Soccer Serie A: 9 (includes Lazio and Roma)

9 (includes Juventus, AC Milan and Inter

Milan)Full Serie AFull Serie A

Merger Benefit To Subscriber

•19 additional basic channels for €4 extra per month•Hollywood movies•All football•More sports

•13 additional basic channels at no additional cost•Better Italian movies•All football•Wimbledon

•World class basic World class basic offering for offering for €26 per €26 per month month •Italian and Hollywood Italian and Hollywood moviesmovies•Complete sportsComplete sports

Italia

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Programming ImperativesProgramming ImperativesProgramming ImperativesProgramming Imperatives

Single Platform Fosters Programming Efficiencies

Scale Scale PurchasingPurchasing

Program Program RationalizationRationalization

Contract Contract Renewals Renewals

• Current agreements fixed by nature

• Larger scale creates purchasing power

• Drop redundant/non-essential channels

• Unified and simplified consumer offer

• Explore programming contract renegotiations upon expiration

• No reductions to existing contracts built into business plan – all upside

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Elimination of PiracyElimination of PiracyElimination of PiracyElimination of Piracy

(1) Source Makro (Milan-based media institute), company reports (2) Source: Telepiu – introduced new programming package in August

• Estimated 2-3 million pirated signals(1)

• June 2002 Telepiu card swap resulted in:

• New sub additions at record levels

• Substantial upgrades to higher tiers

0

5

10

15

20

25

30

35 Telepiu New Sub Activations (’000s)(2)

Week Prior to Announced Termination of Old Telepiu Cards

June July August

2002

2001

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Elimination of PiracyElimination of PiracyElimination of PiracyElimination of Piracy

• Sky Italia will convert all Telepiu subscribers to secure NDS conditional access system

• Pirate conversions will only require a smart card swap out – not a full set-top box replacement

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• Increase in-house call centers• Utilize best practices from BSkyB• Common technologies of NDS• Data mining

0

7

14

21

2002 2003 2004 2005 20060

7

14

21

1998 1999 2000 2001 2002

Reduce Churn to 14.0% per year by 2006Reduce Churn to 14.0% per year by 2006Reduce Churn to 14.0% per year by 2006Reduce Churn to 14.0% per year by 2006

BSkyB Annual Churn % Sky Italia Annual Churn %

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Increase ARPU to Increase ARPU to €€47 by 200647 by 2006Increase ARPU to Increase ARPU to €€47 by 200647 by 2006

• Effective up-selling

• Elimination of irrational discounting

• Standardized service and technology

• Deployment of easy to use new features

• Exclusive content that customers desire

• Video on Demand

• Focused advertising towards customer preferences

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TimelineTimelineTimelineTimeline

• Transaction subject to:

• Approval of News Corp. and Vivendi boards

• Regulatory approval

• Closing conditions include:

• “Bring-down” due diligence at Telepiu

• Minimum Audited Telepiu subscriber count

• Standard representations and warranties

Dec. ‘02 July ‘03October ‘02

Regulatory Approval

Begin Approval Process

SMS Integration

BeginConversion

to NDS Conditional

Access

Close Transaction

June ‘03

Full Relaunch

Sept. ‘03

BSkyB Type Box Available

April ‘03

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Sky Italy: Sky Italy: TheThe Pay-TV Platform Pay-TV PlatformSky Italy: Sky Italy: TheThe Pay-TV Platform Pay-TV Platform

Lucrative Market Lucrative Market for Pay-TVfor Pay-TV

• Over 20 million television households

• Limited competition with no cable industry

• Large percentage of advertising spent on TV

Experienced Experienced Pay-TV OperatorPay-TV Operator

• Global DTH operating experience

• Replicate BSkyB • In-house call centers

Compelling and Compelling and Secure ProgrammingSecure Programming

• Exclusive Hollywood and local movies

• Exclusive soccer and worldwide sports

• NDS technology eradicates piracy

Benefits From Benefits From Single PlatformSingle Platform

• Economies of scale in production, marketing and operations

• Develop direct relationship with consumer

Italia

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