By Elvira Pollina and Amy-Jo Crowley

MILAN/LONDON (Reuters) – German media group ProSiebenSat.1 and European pay-TV operator Sky have revived talks over a combination of their businesses in Germany, four sources familiar with the matter said on Monday.

German broadcasters are struggling to reshape their business to compete with online streaming players such as Netflix and DAZN. Under a potential transaction, Sky would pay hundreds of million of euros to sell its operations in Germany to Prosiebensat.1, two of the sources said.

Shares in Prosiebensat.1 closed 1.8% higher.

Comcast, which acquired Sky Deutschland as part of a $40 billion buyout of European pay-TV broadcaster Sky in 2018, is working with advisory firm PJT Partners, sources have previously said. Sky also operates in Italy and Britain. Prosiebensat.1 declined to comment. Sky declined to comment Comcast did not immediately respond to a request for comment.

If any deal goes ahead, it could represent a loss for Comcast, which bought Sky Deutschland as part of a $40 billion buyout of European pay-TV broadcaster Sky in 2018.

“For Comcast the issue is about sending a message of decisiveness to investors,” said François Godard, senior media and telecoms analyst at Enders Analysis, adding that Sky did not have enough scale to compete in the German market.

“ProSieben and their Joyn platform could be the solution,” he said.

Sky Deutschland was worth roughly 4.44 billion pounds ($5.60 billion) in 2014 when BSkyB took it over as part of a deal involving Sky Italia. Sky Germany has suffered partly because of competition from DAZN over football rights and a general decline in the television market.

Talks are at an early stage and there is no certainty any deal will go through, the sources said. All asked not to be named because the talks are not public.

They added that no decision had been reached regarding the structure of any merger.

One of the sources said Prosiebensat.1 could buy only some parts of Sky’s operations.

A potential combination between Prosiebensat.1 and Sky in Germany had been explored last year. At that time, Prosiebensat.1 had not been interested in pursuing a deal.

Since then, it has hired a new CEO and replaced its chief financial officer.

A combination with Sky in Germany could complicate any potential buyout approach for Prosiebensat.1, one of the sources said.

Czech investment group PPF has built a 13% stake in ProSiebensat.1 over recent months, becoming its second-largest investor behind MFE-MediaforEurope, controlled by the family of former Italian Prime Minister Silvio Berlusconi, which has a potential 29% stake, when including derivatives.

($1 = 0.7923 pounds)

(Additional reporting by Alex Huebner in Berlin; Editing by Matt Scuffham and Barbara Lewis)

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