Telstra and News Corp have announced their intention to combine Foxtel and Fox Sports Australia into a new company with the aim of aligning ownership and management to better compete in Australia’s rapidly evolving and competitive pay TV marketplace.
Under the new arrangement, News Corp will have a 65% stake in the new company, and Telstra will own the remaining 35%. News Corp will appoint the chairman, the majority of the new company’s board and senior executives. Telstra will appoint the remaining directors. News Corp also intends to consolidate the new company into its financial statements.
News Corp chief executive Robert Thomson said in a statement the proposed restructure of Foxtel and Fox Sports will “unlock value for News Corp shareholders and provide a clearer vision into the depth and strength of our Australian assets. 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.”
Thomson also said the merger is a response to a “more complicated and competitive” content marketplace – not just in Australia, but globally.
Earlier this month, technology analyst firm Telsyte issued a new report saying that SVOD subscriptions in Australia reached 3.7 million at the end of June, a year-on-year increase of 30%, and were on track to outnumber traditional pay TV subscribers by June next year. Telsyte noted that close to half of Australian households currently subscribe to either pay TV or SVOD services – but not both.
Telstra CEO Andy Penn said in a blog post the new combined company would be better positioned to invest in local written, produced and directed programming, deliver a wider range of new and innovative products and packages across devices and platforms, invest in premium content and technology, expand distribution channels for Foxtel and Fox Sports products, and develop greater operating efficiencies across the combined businesses, including distribution.
Penn also said the arrangement would will better position the new company for an IPO in the future, with News Corp having a majority stake.
“Our strategically significant investment in the new company will be an important part of Telstra’s media strategy,” Penn said. “Under this arrangement, Telstra will continue to support the company with our broadcast reseller arrangements which is a major strategic component for us.”
Telstra and News Corp aim to finalize the transaction, to include obtaining regulatory approval, in the first half of 2018.