News Corp explores merger of Fox Sports Australia with Foxtel
News Corp is considering consolidating its broadcasting assets by combining Fox Sports Australia with its 50 per cent stake in Foxtel to create a sports and entertainment pay-TV giant ahead of an $8 billion stock market float.
A deal would transform Foxtel into a much larger and even more profitable cable and satellite broadcaster, making it more attractive to investors who want to bet on the soaring value of sports rights.
Any move by Foxtel to take full control of Fox Sports would represent one of News Corp’s biggest strategic moves since Rupert Murdoch split his media empire in 2013, with the global entertainment assets going to 21st Century Fox and the publishing assets, including
The Australian, going to News Corp.
The media company is working on a deal with advisers Citi and Goldman Sachs. Talks involving News Corp global chief executive Robert Thomson were held in Sydney last week.
News Corp has 100 per cent of Fox Sports Australia and 50 per cent of Foxtel, with the remainder owned by Telstra.
A transaction could give News Corp a larger position in Foxtel along similar lines to its 61.6 per cent stake in REA Group, the $6.95 billion real estate listings portal and operator of realestate.com.au, Australia’s No 1 property website.
It was only after News Corp took a majority stake in REA that the start-up was able to benefit from a clear growth strategy.
While there is no guarantee of a deal, Telstra is planning to sell down as much as 60 per cent of its stake in Foxtel — representing 30 per cent of the pay TV operator — if the company giant embarks on an initial public offering that would net Telstra about $3.7 billion.
Initially, News Corp would own about 51 per cent of Foxtel, leaving Telstra with 19 per cent. Discussions have also encompassed a new wholesale broadband agreement that would enable Foxtel to buy the service from the telco on more favourable terms.
The two companies have also increasingly become competitors with Foxtel now offering 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 cheaper price points to entice new customers, and retain existing ones.