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Foxtel Heads To Float, ACCC Set To Decide Future Structure

Struggling subscription TV network Foxtel is heading for a major shakeup with current owners News Corp and Telstra moving to combine Foxtel and Fox Sports into a sports and entertainment pay-TV player. The stumbling block could be the Australian Competition & Consumer Commission.

The glue currently holding Foxtel together up against content streaming services Netflix and Stan is sport claim, analysts. The move comes as Telstra who are also struggling to grow market share in the mobile market, moved to slash dividends yesterday, in an effort to build a new marketing war chest. The end game is set to be a major listing of the Foxtel operation which some observers claim is a way for Telstra to get their money out of the struggling TV Company.

Telstra is planning to sell down its half-stake in Foxtel to News Corp, giving the telco a 35 per cent share of the enlarged Foxtel claims The Australian who have already started spinning News Corp’s case for the merger.

At the same time News’s stake in the new company will increase to 65 per cent, from 50 per cent currently, giving News the right to appoint the executive management team, chairman and the majority of the board.

While a deal has yet to be finalised, the two sides kicked off talks and sought regulatory approval. They hope to get the green light from the Australian Competition & Consumer Commission by March next year.

Currently, Foxtel is jointly owned and operated by News Corp and Telstra. Fox Sports is wholly owned by News Corp, publisher of The Australian.

The move will better position the new company for an IPO, with News Corp having a majority stake. Such a move could see Telstra sell down its stake in the new company via an initial public offering.

“The proposed restructuring of Foxtel and Fox Sports will unlock the value for News Corp shareholders and provide a clearer vision into the depth and strength of our Australian assets,” said News Corp chief executive Robert Thomson last night.

“The new structure will simplify management control and ensure that the company is best placed to leverage the skills of its talented Australian employees and program makers.

“There is no doubt that the world of content is becoming more complicated and competitive, and it is important that Australia has a strong local platform for its great sports and for homegrown creativity, as well as a showcase for international programs.”

Telstra chief executive Andy Penn said the planned deal would give the new company the flexibility to respond to the evolving media market.

“Our strategically significant investment in the new company will be an important part of Telstra’s media strategy,” Mr Penn said.

News Corporation claims that a deal would transform Foxtel into a more profitable cable, satellite and streaming company as it comes under pressure from internet-based television services, making it more attractive to investors who want to bet on the soaring value of sports rights.

News Corp’s and Telstra’s pitch to the ACCC is that organisations such as ESPN and beIN Sports is set to compete in Australia and that they are already facing competition for sports rights from Telcos like Optus, which now broadcasts the English Premier League after unseating previous incumbent Fox Sports. They are also pitching the threat from Amazon, Google, Twitter and Facebook in an effort to get the deal over the line.

Foxtel executives believe a merged company would be in a stronger financial position to invest in new technologies, hold its ground against streaming services like Netflix and buy premium sports rights and content.

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