SENSIS/FOXTEL MERGER?
I would again like to raise the issue of finding a solution for the anomaly of Telstra’s 50% ownership of Foxtel.
This has been one of the main reasons that we were slow to embrace broadband and it is also a key reason our broadband services are proceeding at a relatively low pace. This has allowed Telstra to continue to protect its interest in Foxtel, hampering any moves towards a competitive environment.
The sad part of the story is that, with every passing year, the chances of turning Foxtel into a competitive alternative are disappearing. The company continues to lose money and will never become profitable without a separation from Telstra. Once the opportunity is lost for a competitive network to obtain a foothold in the market it will be hard to retrieve that advantage. By 2006 we will have 2.5 million broadband users, mainly on Telstra’s DSL network, and the longer we wait to turn Foxtel into a competitor the further Telstra will have penetrated this market.
However, it is not too late yet.
For some time I have been suggesting that the solution could be to put Telstra’s Foxtel business into Sensis and then float Sensis off as a separate media company. This would solve most of the problems in one go. For Telstra, Foxtel’s ownership remains a political hot potato. It doesn’t need it to grow its own business – the reason for maintaining ownership is a defensive one. Floating it off would generate new opportunities and a higher value for the business.
In general, telecoms and media companies don’t mix well. As a matter of fact, there have been many attempts to merge such businesses, but I am not aware of a significant success story anywhere in the world.
Again, there is more value in Sensis if it is separated from the telco. Not only would that be good for Telstra, it would also be good for competition in the cozy media environment. It is about time this market got a shake-up. It contains some very fat cats whose only concern is to protect their vested interests – they have no interest whatsoever in new media opportunities. Look at their pathetic attempts to prevent the arrival of digital TV in Australia. And what innovation do we ever see from them? What about interactive TV, datacasting, broadband TV, etc – nowhere do we see any action from the key media players.
Sensis could put the cat amongst the pigeons. It will be a totally new player in this space, and it has already shown that it has an appetite for other media acquisitions. The old media guard would definitely be put on notice by such a move.
Strategically, this would also be good for Telstra, since, no matter how you look at this market, in the long run the competition will evolve between the telcos and the media companies. By putting Sensis squarely into this space it will be competing with the media companies on their own media turf.
I received some fierce opposition about my views on this, mainly from some financial analysts and the Federal Government – surprisingly, not so much from Telstra.
I also believe that the appointment of Sensis chief, Bruce Akhurst, as the chairman of Foxtel is a wise move in this very interesting game. This could pave the way for a scenario such as the one I have painted above.
Bruce replaces Sam Chisholm. I have said on several occasions that there was far too great a conflict of interest here, with Sam serving several masters. When I made comments of this nature during the sacking of, first, Bob Mansfield and, later on, Ziggy, I was told by my journalist colleagues that I was one of the few people who dared to be openly critical of this powerful media personality, so I now feel somewhat vindicated.
The fact that he is still able to hang onto a Foxtel board position is a further demonstration of the power Sam Chisholm wields in today’s business world.
Paul
I offered Sensis the opportunity to respond to the above article, and here is their feedback.
Dear Paul
Thank you for the opportunity to comment on the proposed article you sent through to Karina White earlier today. Telstra would like to make the following comments.
First, it is simply not true that Telstra is hampering Foxtel’s development. Rather, Telstra has a very long track record of investing heavily in Foxtel in the interests of continually improving and enhancing this service. Telstra was instrumental in leading the digitisation of Foxtel and has worked harmoniously with all Foxtel shareholders to ensure the newest technologies and products are introduced to Foxtel’s subscribers at the most reasonable prices.
We believe you would be better advised to focus on the need for changes to current anti-siphoning rules so that PAY TV operators like Foxtel can ensure their services are even further enhanced by providing the best of content to our growing number of subscribers.
We also refute your comment that Telstra’s Foxtel shareholding is restricting broadband services and take-up, and the move towards a more competitive environment in the PAY TV and DSL industries. In fact, it is the reverse. Telstra actively supported the move to give Optus access to the Foxtel service, including Foxtel under-writing hundreds of millions of dollars of MSG obligations to allow this to happen under the original deal with Optus. In respect of Telstra’s own broadband service, far from suffering because of Telstra ownership, we have, in fact, led the industry take-up over the past 12 months to now have over one million subscribers; this is 15 months ahead of schedule.
Regarding organisational issues in relation to Foxtel and Sensis, these are matters for the Telstra Board and the Australian Federal Government. As we have said previously, there has been no decision to make any changes at this point in time.
Again, thank you very much for the opportunity to comment on your article and please don’t hesitate to call me if you want to discuss this further.
Kind regards,
Felicity Hand. General Manager Sensis Corporate Affairs and Government Accounts
Postscript from Paul
It was interesting to note that the response from Sensis did not touch upon my suggested solution of incorporating Sensis and Foxtel, but rather focussed on defending Telstra’s position in Foxtel.
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