Foxtel And Fox Sports In Merger Talks To Create Local Pay TV Behemoth

Pay TV provider Foxtel could be merged with Fox Sports under a new deal by owners News Corp to create a TV giant that would be floated on the stock market with the potential to raise as much as $8 billion.

The plan, outlined in media circles this morning, would make the new hybrid are far more attractive proposition for investors who want to bet on the soaring value of sports rights.

According to a report on The Australian’s website yesterday, a plan is already being drawn up by investment firms Citi and Goldman Sachs.

The Australian Financial Review has reported that Telstra (who owns half of Foxtel) has indicated to News Corp (who owns the other half of Foxtel and all of Fox Sports) that it wants the two entities to merge ahead of floating 60 per cent of the telco’s stake in the pay TV giant.

If there’s one jewel in the Foxtel/Fox Sports crown it’s live sport, something it has thus far been able to protect from the arrival of SVOD operators such as Netflix. The SVOD players have so far successfully managed to find local viewers keen on things like drama and comedy but at a much cheaper cost than to Foxtel’s subs rates.

Aussies appear happy to pay for live high quality sport and that would make any merger highly attractive to investors.

Interestingly, News’ Peter Tonagh starts today as the new Foxtel CEO following the surprise departure of incumbent Richard Freudenstein last week.

Fairfax Media is reporting that how the final cards in nay merger could fall is anyone’s guess: “It is understood that several different potential structures are being discussed for a merger of Foxtel and Fox Sports: Foxtel could buy Fox Sports, or Fox Sports could be blended into Foxtel with Telstra either paying a balancing payment and getting 50 per cent of the combined entity, or paying nothing and getting a reduced stake in the combined entity.”

Foxtel is imperative to News’ financial health in Australia and reportedly helps prop-up its ailing print newspapers, while Telstra has made rumblings in the press of late that it is less and less interested in the pay TV operator and would prefer to invest into new technologies.

And, as The Australian reports, both Foxtel and Telstra are increasingly becoming rivals.

It reported: “The two companies have increasingly become competitors as Foxtel now offers pay-TV, broadband and home phone services in its so-called triple play offering, while Telstra has marketed its own video services.

“This could enable Foxtel to offer triple-play bundles at lower price points to entice new customers and retain existing ones under a brand makeover to give the company a more compelling and easily understood consumer proposition.”

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