BREAKFAST DEALS: Telstra warning
The ACCC is concerned over Telstra's Foxtel plans, while both major telcos await today's mobile sport broadcasting rights ruling.
Telstra, Foxtel, Consolidated Media Holdings
Australia’s consumer watchdog has warned Telstra Corporation that any attempt at gaining a greater slice of the pay TV market would be met with strict scrutiny. Australian Competition and Consumer Commission chairman Rod Sims said the prospect of Telstra using its already considerable muscle to gain a firmer grip on the content of pay TV "would give us concerns”.
Telstra chief executive David Thodey was surprisingly open about his desire to secure a larger stake in Foxtel should James Packer’s Consolidated Media Holdings, which holds 25 per cent, be open to it. It’s thought that Packer would be willing to part with his 50 per cent stake in ConsMedia to focus on his Sydney casino push. However, if the ACCC stands in Telstra’s way, that’d put Rupert Murdoch’s News Corp and Seven Group billionaire Kerry Stokes, who owns a slice of ConsMedia, in good position.
Meanwhile, Telstra is reportedly targeting up to $3 billion in new service deals with the government and private sector in the next 12 months. The Australian says the telco has a particular focus on resources and financial services. Telstra has signed $1.5 billion in renewals and new contracts through its enterprise and government arm in the last year, including deals with National Australia Bank, Qantas Airways and Westpac Bank.
Telstra, Optus, AFL, NRL
Whatever the outcome of today’s Federal Court appeal by Telstra, the AFL and the NRL against Optus and its TV Now services, there’s a strong chance that this case could be headed for the High Court. The verdict on the appeal is due today from Federal Court justices Desmond Finn, Authur Emmett and is due to fall sometime today and Telstra’s five-year, $153 million exclusive mobile broadcast deal with the AFL is at stake. Optus allows users to record the broadcast and then watch the games on their mobiles on only a slight delay, undermining Telstra’s exclusivity.
Whatever the outcome, some expect whoever loses today’s court decision to push for a hearing in front of the High Court. The question is whether the Optus service is in the same league as recording a broadcast using your digital set recorder at home – or a VCR for the traditionalists out there – or does this service take things a step further. While the NRL hasn’t signed an exclusive broadcast deal negotiations are in motion and the lack of certainty around what a deal would mean with any one carrier has complicated matters.
Sundance Resources, Sichuan Hanlong Mining
Sundance Resources has until today to secure approval from the Cameroon government to proceed with its Mbalam iron ore project if it’s to meet its target. Sundance recently won the blessing of the Republic of the Congo – the project straddles the border between the two counties. But Cameroon has always been seen as the more difficult nut to crack and Sundance, in conjunction with suitor Sichuan Hanlong Mining, set April 27 as the day to secure the approvals from Cameroon and Congo. The government approvals are a condition of Hanlong’s $1.4 billion, 57 cents a share takeover offer. Well, today’s the day.
The market has been sceptical about this deal for some time. While government approvals can take a long time, the market is more focused on the likelihood that Hanlong will be able to secure the financing to fund the deal. The shares closed at 46.5 cents each yesterday, more than 18 per cent beneath the offer price.
Atlas Iron, QR National, Brockman Resources, Wah Nam International
Atlas Iron and QR National might have put a smile on the face of smaller operators in the Pilbara yesterday, but they might have given Hong Kong’s Wah Nam International a small headache. Wah Nam is currently trying to mop up Brockman Resources, seen as the key beneficiary of any rail project that could come from the feasibility study that Atlas and QR will conduct.
The trouble is, Wah Nam is stranded at 83.5 per cent and the going has been extremely tough convincing shareholders to sell at $1.50 a share and 18 Wah Nam shares. While it only needs a few more percentage points to reach 90 per cent and push the company into compulsory acquisition, news that Brockman could be poised to benefit from a new train line for the little guys in the Pilbara might make the remaining shareholders a little more stubborn. The deal is set to expire on May 31.
Spotless Group, Pacific Equity Partners
It looks like Spotless Group will have to suspend trading in its shares this morning, without a firm sign that a deal is being settled on. Reports indicate that talks between Spotless and private equity suitor Pacific Equity Partners are progressing, but the target is due to come out of a trading halt today. Given that negotiations are continuing, Spotless would have little choice but to suspend its stock until it can deliver investors some clarity, especially given that some of the speculation in recent days has centred on a deal worth up to $744 million and Spotless has a current market cap of $653 million.
Seven West Media, CVC Asia Pacific, Nine Entertainment
Seven West Media had a bad day yesterday and the ramifications could be felt at rival Nine Entertainment. Seven was seen as the most likely bidder for Nine’s ACP Magazines division, which the network’s owner CVC Asia Pacific has put up as a possible sale candidate. The price tag has reportedly dropped to $300 million. It’s not much, but it’s crucial that CVC pays down as much of its $2.7 billion debt as soon as possible before it matures early next year.
When Seven’s name was initially thrown up, the concern was that the company would dominate too much of the magazine market for the competition regulator to approve such a deal. That might not matter anymore. Seven lost over $500 million in market value yesterday thanks to its unexpected profit downgrade, announced late on Tuesday. Needless to say such a fall gets a company talking about costs.
Alexium International had a stellar session yesterday, rising almost 15 per cent after the US textiles distributor Duro signalled its intention to use the company’s flame retardant treatment on the nylon range for of work wear for military and industrial workers.
Meanwhile, Citigroup says Paladin Energy will still have to jettison assets in order to meet its debt payments, despite comments from chief executive John Borshoff that the company’s $US274 million convertible bond issue has settled its short-term problems.
And finally, Kagara Mining has suspended its shares again amid efforts to refinance its debt facility. The Perth-based miner announced earlier this week that it has temporarily shut down its operations at Balcooma and polymetallic sites at Mount Garnet. Both operations are in Queensland.