Southern Cross Media Group Limited (SCA) has signed agreements for the sale of its television licences in the three aggregated markets of Queensland, southern New South Wales and Victoria (3-Agg markets) to Network 10.
SCA currently broadcasts Network 10 programs under regional affiliation arrangements in these markets.
Following a strategic review of its “non-core” regional television assets, SCA has been in negotiations with several parties to sell its licenses in these regions, eventually striking an agreement with Network 10.
Beverley McGarvey, president of Network 10, said in a note the network’s staff the announcement “reinforces Paramount’s commitment to the Australian market and in particular Network 10”.
Completion of the sale is subject to execution of final transaction documentation by the parties and SCA’s broadcast transmission, distribution and playout service providers, and satisfaction of customary conditions including receipt of foreign investment approval. SCA and 10 aim to complete these matters by the end of February 2025.
The terms of the sale will entitle SCA to receive a share of the profit of the 3-Agg market licences for five years after completion of the sale—known as the ‘participation period’.
The consideration to be received—in effect the price promised for the assets—by SCA will be dependent on advertising market conditions over the participation period and will be paid quarterly in arrears.
Based on current and forecast advertising market conditions, SCA said that it expects the the gross consideration to be in the range of $15 million to $20 million. The net present value of this gross consideration on completion of the sale is expected to be in the range of $10 million to $15 million.
SCA will also be entitled to a share of any “digital dividend” received by Network 10 if it surrenders its spectrum in the 3-Agg markets to the Government during the participation period.
On 1 November 2024, the Minister for Communications, Michelle Rowland, announced the Government’s intention to “explore pathways for the future of television, shaped by the possibility of realising a digital dividend” while also stating that the Government had not “identified, or decided to yield, a digital dividend.” There is no current proposal for the Government to pay a digital dividend to Network 10 or any other television broadcaster at any time.
Network 10 will commence operating the 3-Agg Market licences from completion of the sale. SCA will retain its local salesforce in the 3-Agg markets and will provide third party local advertising sales representation services in the 3-Agg Markets for Network 10 during the Participation Period on commercial terms under an advertising sales services agreement.
SCA has agreed with BAI Communications (formerly Broadcast Australia) to excise broadcast transmission services for the 3-Agg markets from SCA’s ongoing contract with BAI Communications and, as a condition precedent to completion of the sale, Network 10 and BAI Communications are to enter a new contract for broadcast transmission services for the 3-Agg markets for the remaining term expiring on 1 September 2034.
SCA will be liable for termination fees under that new contract if Network 10 exercises a right to terminate the contract for convenience after expiry of the Participation Period. But SCA would also be eligible to an offsetting share of any digital dividend received by Network 10 upon surrender of spectrum to the Government between the end of the Participation Period and 1 September 2034.
SCA expects to recognise a liability in its full year FY25 financial report in the range of $3 million to $5 million in relation to that liability. In accordance with applicable Australian accounting standards, calculation of this liability will consider the probability of any liability crystallising due to Network 10 terminating its contract with BAI during that period.
SCA has received interest from several other parties and continues to be in active negotiations regarding sale of SCA’s television assets in Tasmania, Spencer Gulf/Broken Hill, Darwin, Remote Central and Eastern Australia (including the Viewer Access Satellite Television service). SCA intends to apply the proceeds of the sale of its television assets towards reducing its net debt.
