BREAKFAST DEALS: Southern Cross hush

Southern Cross keeps its Nine and Ten cards concealed ahead of possible 'reach rule' reforms, while M2 adds to its ISP stable.

It’s all about media and telecommunications this morning. Southern Cross Media claims it hasn’t made up its mind about a partner post-reach rule, while Seven Group billionaire Kerry Stokes believes the networks should get national broadband network access for free. M2 Telecommunications has bought two more ISPs as the NBN consolidation phase continues. There could be trouble ahead for fibre rollout joint venture company Syntheo, with a trading halt called, plus Optus is thinking of selling or floating its satellite business.

Southern Cross Media, Nine Entertainment, Ten Network

All media eyes were on Canberra yesterday as the bosses of the majority of Australia’s journalists insisted against proposed media reforms, one of which is the abolishment of the 75 per cent reach rule.

That proposal has brought Southern Cross Media firmly into play – the only question is which metropolitan network it will do a deal with, current affiliate Ten Network or rival Nine Entertainment?

Speaking to the parliamentary committee considering the reforms, Southern Cross chief executive Rhys Holleran said the company hadn’t decided on the matter, adding that he had “a number of strategic options”.

“No decision has been taken by the board,” he said to the concerned MPs – remember, this legislation concerns the industry that allows them to talk to voters. ‘‘That is the position,” said Holleran.

Southern Cross has been talking to Nine about a potential deal lately, with rival Ten Network speaking out against the reforms as its regional affiliate started to drift.

Holleran’s chairman Max Moore-Wilton, who can be an outspoken kind of chap when he wants to be, said Ten and Seven were displaying “naked self-interest” by objecting to the end of the reach rule.

Ten has been in a state of ongoing dismay thanks to poor programming decisions and troubles with management. New Ten boss Hamish McLennan officially took over yesterday.

Nine, by contrast, is looking pretty good, with its debt troubles in the rear-view mirror.

M2 Telecommunications, Dodo, Optus

Speaking of the free-to-air broadcasters, in his time with the parliamentary committee Seven Group Holdings billionaire chairman Kerry Stokes said the networks should get free access to the national broadband network.

The NBN was in focus yesterday as M2 Telecommunications purchased rivals Dodo Australia and Eftel for a combined $248 million, continuing the consolidation of internet service providers as the NBN rollout continues – albeit at a slower pace than expected.

M2 is paying $204 million for Dodo and $44 million for Eftel with a combination of debt and scrip. The Australian Financial Review understands that Goldman Sachs is advising on the deal.

The deal means M2 will surpass TPG Telecom as Australia’s fourth largest ISP. The company has been on a buying spree lately, picking up Primus last year for $180 million.

Along with the aforementioned, M2 has in its suite the aaNet, Clear Telecoms, Commander, Engin, People Telecom and Southern Cross Telecom brands.

In the background there are two other potential deals that have been frequently spoken about. The real one is Telstra Corporation's roughly $60 million play for South Australian provider Adam Internet. The hypothetical one is TPG Telecom for iiNet.

Telstra is waiting on approval from the Australian Competition and Consumer Commission, which isn’t coming easy – no Telstra deal comes easy.

Last month, ACCC chairman Rod Sims said the Telstra decision is still some time away, with the big telco having asked the consumer watchdog to suspend the timetable on the regulatory process in January.

Meanwhile, there’s been no movement on a TPG Telecom-iiNet merger, which many have been speculated about with little more than TPG boss David Teoh’s 7 per cent stake in iiNet to go on.

The former is also still bedding down its merger with Internode.

NBN Co, Syntheo, Optus

While we’re talking about NBN-inspired deals, the rollout problems could explode as soon as today on the ASX.

Service Stream, which is a joint venture partner with Lend Lease via Syntheo, went into a trading halt yesterday with an announcement pending on the joint venture, which is rolling out some of NBN Co’s fibre.

Speculation has been mounting that NBN Co boss Mike Quigley might rescind the contract and bring the construction that Syntheo is responsible for in-house as political pressure increases on the government-owned broadband company to lift its game.

The Australian Financial Review understands that NBN Co could admit as soon as this week that its rollout targets for the end of the financial year won’t be met.

While it’s almost certain that Quigley will be out of a job if (yeah right) the Coalition wins the election in September, the Malcolm Turnbull would be well aware that significantly altering the NBN, and the contracts with telcos and construction companies that go with it, would not be a wise move.

Not only would it be a costly exercise, but the NBN now enjoys a popularity rating of 73 per cent amongst Australians, according to Essential Media.

As such, Breakfast Deals doesn’t expect many big changes to the NBN deals.

And as if we didn’t have enough to talk about on telecommunications infrastructure, Optus could be about to offload its satellite business after parent company Singapore Telecommunications announced a review of the business unit.

SingTel will also consider a float of the business.

Wrapping up

Western Australian uranium play Cauldron Energy has lobbed a hostile offer for neighbour Energia Minerals, which soured 31 per cent on the back of the offer.

The one-for-eight share swap deal values Energia at about $10 million. At the moment, its market cap is sitting at $6 million, a big discount on the offer despite the share spike.

Staying with the market movements, coal hauler Aurizon managed a small gain in a very negative session after the Queensland government halved its stake in the company.

Meanwhile, Leighton Contractors has picked up a $656 million contract with MTR Corporation, the Hong Kong rail operator, to build part of a new rail link. Construction is to start immediately, with completion pencilled in for 2018.

And finally, The Australian Financial Review understands that “at least one of the big four banks” is believed to have taken a look at OzForex, the online foreign exchange group backed by Macquarie Group.

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