Telstra Board Tipped To Be Considering Sale Of Foxtel Stake
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Days after rolling out a multimillion dollar advertising campaign for their new Roku Telstra TV box, it has emerged that the Telstra board is considering it’s 50% shareholding on Foxtel.
Rumour has it that Telstra is considering an exit from Foxtel and may instead expand their own streaming TV service in direct competition with Foxtel.
New Corporation who are the other 50% partner in Foxtel pre-emptive rights over Telstra’s stake, in the event that it actually chose to sell.
A spokesman for Telstra said: “Foxtel remains an important strategic asset. We have a strong working relationship at the most senior levels with News Corp.”
Some analysts believe that Foxtel has peaked and that the once big cash cow is now under pressure from the likes of Netflix and next year Optus in partnership with Fetch TV who last week announced that they have snared the English Premier League from Fox Sports.
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According to sources Foxtel is concerned that they will be forced to bid significantly higher for sport content rights as revenues for their premium packages slip.
Last week Foxtel moved to assure furious fans who have besieged its Facebook page by telling them it is willing to talk to Optus about buying back the rights to the English Premier League.
According to Fairfax Media the Telstra board is concerned that Foxtel has peaked and to get a premium price for their 50% shareholding in the Company they need to consider selling their shareholding now rather than later.
They claim that Telstra’s board will well remember the Sensis debacle. Telstra rejected calls to sell the Yellow Pages company in 2006, when it could have got close to $20 billion.
Instead the business was disrupted by the internet, capital markets caved in, and it ended up offloading 70 per cent of Sensis for just $454 million in January 2014 to US private equity firm Platinum Equity.
Foxtel is Australia’s most profitable media company, making more than the three times the metropolitan free-to-air television networks combined. It is also managing to grow subscribers, and reduce churn, albeit it at an upfront cost.
CBA values Foxtel’s equity at $3.6 billion, or 7.5 times the broker’s 2016 forecast for earnings before interest, tax, depreciation and amortisation of $900 million plus Foxtel’s $3.1 billion of debt.
Currently Foxtel whose life saver following the launch of Netflix is sport, is preparing a list of sporting events for the federal government that it believes should be taken off the anti-siphoning list because they are not of national and cultural significance.
It is understood that Foxtel will bring the list of sports to Communications Minister Mitch Fifield in the coming weeks as the government prepares for changes to media regulation.
Among the events that will stay protected is the National Rugby League, Australian Football League and the Melbourne Cup.
Despite losing the Premier League Foxtel will argue that sporting events such as the FA Cup final, could be removed.
It is believed the pay TV provider will also highlight that the anti-siphoning list only impacts Foxtel and that the scope of the legislation needs extending beyond traditional broadcast to become platform neutral.
It’s a point highlighted by Australian Competition and Consumer Commission Chairman Rod Sims last week, noting that Yahoo and America’s National Football League in October partnered for the first free global live stream of an NFL match which garnered 15 million users.
“If this trend of streaming live sport is replicated in Australia, particularly via paid subscription models, the anti-siphoning regime may need revisiting, but we are not there yet,” Mr Sims said.
Last week, Optus secured the English Premier League, bidding between $50M and $64 million per season. The deal highlights the growing competition for rights that TV broadcasters face for premium content.
Senator Fifield is receptive to re-examining the anti-siphoning regime, and free-to-air network Nine Entertainment Co is open to some minor events being removed.
Fairfax Media understands that the government is preparing amendments to media regulation and will look to move before Christmas.