COMMENT: Telstra is set to become a major media Company after cutting an $11 Billion dollar deal with the Federal Government and the National Broadband Network Company. Key to their growth will be the Australian Competition and Consumer Commission who have the right of veto on several aspects of the deal.
$11 Billion On The Way Telstra Set To Become Major Media Group
4Square Media has been told that the ACCC has already been consulted on the deal with questions now being raised as to whether the ACCC will let Telstra keep their 50% of Foxtel or whether the ACCC will have the last say in what services Telstra will be able to deliver and at what price.
During the past few years Telstra and the ACCC have gone head to head on several issues with Telstra losing several of those fights.
Prime Minister Kevin Rudd and Communications Minister Stephen Conroy who earlier today announced the landmark deal with Telstra, knew that they had to cut a deal with Telstra or face an election where the NBN, mining tax issues as well as education and health were all going to be in play as Australian were asked to vote in a Federal Election.
For Telstra their timing could not have been better, especially as the mining tax was creating a major distraction and Prime Minister Rudd could ill afford the NBN to go pear shaped and become another election issue.
Since David Thodey was appointed CEO of Telstra he has quietly gone about restructuring Telstra introducing new revenue streams while still while negotiating with the Government.
Last week Telstra launched their BigPond Movie service via a new set top box called the T Box, they have also signed agreements with several TV manufacturers to deliver their BigPond Movie service, sport and other TV services to TV’s manufactured by LG and Samsung they are also talking to Panasonic along with several other Asian manufacturers.
This content will be delivered to TV’s PC’s and iPad type tablets as well as a new generation of Smartphones and set top boxes.
Telstra recognise that the landscape is changing. Content is set to be king with brands like Google with their new Google TV and Apple with their application stores and entertainment content set to compete with Telstra along with traditional media Companies like the Seven and Nine Networks.
A combination of fibre broadband and content could lead to billions in revenues for Telstra however they need to secure the content if they are to be competitive. To do this Telstra is now embarking on a strategy, which if successful will give them enormous clout in the market. Once they have this Hollywood and production Companies will be knocking on their door to do business with them as they deliver content over the new NBN fibre network.
Via the TV manufacturers Telstra will get their BigPond Movie software onto millions of IP TV’s across Australia during the next few years. They have also launched a $299 set top box (T Box) and some very attractive broadband, data and phone deals in an effort to build a 500,000+ installed base.
The combination of Telstra T Boxes and the audience that the TV manufacturers will deliver, puts Telstra in an excellent position to secure first run movies from Hollywood Studio’s shortly after they have finished their run in Cinema’s.
Telstra is also looking to secure major sporting content for their BigPond TV network and during recent discussions with the Federal Government the issue of anti-siphoning and the potential of Telstra securing access to sporting content like AFL, NRL and ARU games was raised.
Then there is their 50% shareholding in Foxtel which if combined with the expansion of the Telstra BigPond movie and TV network put’s the cashed up carrier in an excellent position to compete up against the free to air networks as well as Apple and Google who during the next five years are set to become major media players in Australia by delivering content and selling advertising.
The Australian newspaper said that details on the deal, dubbed a non-binding financial heads of agreement, were murky. “A heads of agreement really means it’s all preliminary and we’ll work out the details later,” said analyst Greg Canavan.
One telco analyst described the agreement as “business as usual” for Foxtel, but said that in the longer term Foxtel probably would want to be channelled through the faster NBN. Foxtel currently pays an arm’s-length rate to access Telstra’s network.
“Foxtel would probably want to be in the NBN anyway because in 10 years’ time the network will reach every home, rather than 2.5 million households in the major cities,” the analyst said. “In the long term, Fox could be a bigger business.”
Mr Canavan said while details were “pretty thin, in terms of Foxtel, I can’t see that it changes anything at this stage”.
“Eventually the NBN will provide the infrastructure, but Foxtel continues to own the customers and provide the content.”
In the enterprise market Telstra is set to work with education departments where they will deliver education content to schools Universities and training institutes.
They are also working with Health departments to deliver a new generation of health care via high speed fibre network, once this connected to the new NBN network Telstra is in an excellent position to clock up billions in click revenue from a combination of consumer government and enterprise.
They already have a massive customer base, as well as a new billing system which will single bill individuals and organisations for a multitude of services from TV and business content to mobile phone and Foxtel services to their new IP phone systems that deliver HD Voice clarity.
Telstra is set to enter a new era and what CEO David Thodey has recognised is the future is going to be about content service and the delivery of a brand new brand message.
Will the name Telstra survive, maybe not?