ConsMedia expects Austar deal approval as sport TV rights rise

THE pay TV investment company Consolidated Media Holdings, controlled by James Packer, expects Foxtel's bid for Austar to overcome competition concerns but says Fox Sports will continue to battle higher programming costs, including inflated pitches for NRL rights.

By InvestSMART · 24 Aug 2011

By InvestSMART ·
24 Aug 2011

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During its annual results briefing yesterday, the executive chairman, John Alexander, said he expected the Austar takeover to proceed, but he did not detail the basis of that expectation other than to say it made sense for Foxtel, of which it owns a quarter, also to own the regional operator .

The Australian Competition and Consumer Commission raised three "serious" issues with the bid last month and has delayed its final decision after seeking more information from the parties.

Mr Alexander declined to tell analysts what information had been sought, and the company did not take questions from journalists.

Consolidated Media reported a 74 per cent slump in net profit after tax for the past financial year to $102 million but said the preceding year was unusual as it included proceeds from the sale of its stake in Seek. On continuing operations, its profit constituted a 22 per cent rise, mainly thanks to increased revenue from Foxtel. While subscriber numbers are relatively flat, they are spending more. Mr Alexander said he did not expect that trend to continue indefinitely. But it was an indication that people "once they have Foxtel, want more of it".

Consolidated Media is half-owned by Mr Packer's Consolidated Press Holdings, with the Kerry Stokes-controlled Seven Group owning 24 per cent. The company's other key asset is a half share of Fox Sport's holding company, Premier Media. Its revenue rose 6 per cent, but earnings slipped 5 per cent through a 12 per cent increase in sports rights costs.

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Frequently Asked Questions about this Article…

What did Consolidated Media Holdings say about Foxtel’s bid to buy Austar?

Consolidated Media Holdings (CMH) said it expects Foxtel’s bid for Austar to proceed and to overcome competition concerns. CMH executive chairman John Alexander said the takeover “made sense” given CMH already owns a quarter of Foxtel, but he did not set out detailed reasons for that expectation.

Why has the ACCC delayed its decision on the Foxtel–Austar takeover?

The Australian Competition and Consumer Commission (ACCC) raised three described “serious” issues with the Foxtel–Austar bid and has delayed its final decision while seeking more information from the parties. The article notes CMH declined to say what information had been requested.

How did Consolidated Media Holdings perform financially in the past year?

CMH reported a 74% slump in net profit after tax to $102 million for the past financial year. The company said the prior year was unusual because it included proceeds from the sale of its stake in Seek. On continuing operations, profit rose about 22%, mainly due to increased revenue from Foxtel.

What is driving the rise in revenue from Foxtel for Consolidated Media?

CMH said Foxtel’s subscriber numbers are relatively flat but existing subscribers are spending more, which boosted revenue. John Alexander cautioned he did not expect that higher spending trend to continue indefinitely, but said it indicates people who have Foxtel often want more of it.

Who are the major owners of Consolidated Media Holdings and what are its key assets?

CMH is controlled by James Packer and is half-owned by his Consolidated Press Holdings. The Kerry Stokes–controlled Seven Group owns about 24%. A key asset for CMH is its half share of Premier Media, the holding company for Fox Sports.

How are rising sports rights costs affecting Fox Sports and CMH’s earnings?

The article says Fox Sports will continue to face higher programming costs, including inflated pitches for NRL rights. CMH’s half-share holding (Premier Media) saw revenue rise about 6%, but earnings slipped roughly 5% because sports rights costs increased by about 12%.

What did the company say about questions from journalists at the results briefing?

During the annual results briefing, CMH’s executive chairman declined to tell analysts what information the ACCC had sought, and the company did not take questions from journalists, so no further detail was provided publicly at that time.

What key issues should everyday investors watch regarding CMH and the Foxtel–Austar deal?

Based on the article, investors should watch the ACCC’s final decision on the Foxtel–Austar takeover, trends in Foxtel subscriber spending versus subscriber growth, and rising sports rights/programming costs (including NRL rights) that have pressured earnings at Premier Media and could affect CMH’s profitability.