TECHNOLOGY SPECTATOR: Telstra's billion dollar options
In this week's tech deals Telstra boss David Thodey has plenty of choice when it comes to spending the telco's NBN riches, and what does iiNet's Hollywood moment mean for the rights holders?
Tech Deals is a weekly column covering the latest deals in one of the busiest sectors for M&A. To read previous articles go to our Tech Deals page.
What to do with Telstra’s NBN billions
After ruling out the prospect of a near-term share buyback last week, Telstra boss David Thodey is now busy throwing as many alternative options up in the air as possible when it comes to spending the telco’s ever-burgeoning cash pile. Telstra is set to receive free cash flow of between $2 billion and $3 billion over the next three years and with so much money burning a hole in the its pocket there are plenty of growth opportunities out there for Telstra to pursue.
While Thodey has already spelled out his interest in James Packer’s stake in Foxtel, should the mogul decide to put Consolidated Media Holdings on the block, the Telstra CEO has also highlighted cloud computing and expansion across Asia as potential areas of investment. Both are areas where Telstra’s war chest could be put to good use, especially if Thodey and his team are serious about cementing the telco’s position as the premier player in a changing landscape.
Speaking to ABC Inside Business yesterday, Thodey said that Telstra was looking at new growth areas that will be facilitated by the NBN: "Things like cloud computing, things like how we manage our media assets, how we look at growth across Asia (and) how we look at new over-the-top (OTT) initiatives.”
Telstra has already earmarked $800 million in investment over five years in cloud services and is in partnerships with the likes of Cisco, Microsoft and Accenture. Thodey’s comments to the ABC would indicate that the telco may utilise some of the NBN billions to enhance its network-hosted services offerings.
Another area that could warrant increased interest from Telstra is the growing competition in the mobile space from OTT players like Skype, Viber and Google. With traditional telephony and SMS revenues taking a hit, telcos are already gravitating towards developing their own OTT-style services and given Telstra’s scale this is an area that could prove to be very lucrative for the telco. The recent deal with MOG to enter the music streaming market is just one of many OTT initiatives that Telstra can use its cash to pursue.
With regards to Asian expansion, the recent appointment of Motorola China president and former Microsoft regional chief executive, Tim Chen, on Telstra’s board shows that the telco is keen to build stronger Asian connections. Chen brings with him a wealth of experience which should come in very handy for Telstra’s plans in China. China isn’t the only focus for the telco, which has also recently acquired two new telco operating licences in Singapore and Japan to add to its three new licences in India. As Thodey says Telstra has 45 points of presence across Asia and there is still ample scope for growth in the region.
The main focus of the market for the time being will be on Telstra’s media ambitions and Thodey is right on the money when he says that "content is king” and gaining access to the right type of content will be a crucial factor in Telstra’s game plan. Picking up a larger stake in Foxtel is obviously in Telstra’s best interest but the ACCC might have a thing or two to say about that. Still, Telstra’s robust balance sheet means that it has more than enough firepower to buy whatever it wants be it exclusive content or stronger distribution channels, and that’s enough to give its rivals plenty of sleepless nights.
iiNet trumps Hollywood
Perth-based ISP iiNet has emerged victorious in its struggle with the coalition of the world's largest film and television companies and the outcome of this long-running fistfight should not only prompt rights holders to pursue a different strategy to protecting their content but also provide the federal government with some pointers with regards to giving the copyright law a tune-up.
Given the fact that iiNet was on the winning side of a federal court ruling in 2010 it's no surprise that the ISP has again managed to fend off the challenge posed by the group of 34 international and Australian companies, including Warner Bros, Disney and the Seven Network.
The reason for that is simple: the movie companies still can’t provide the smoking gun that definitively proves that iiNet had the direct technical power to prevent its customers from using the BitTorrent file sharing system to infringe copyright.
In some ways the High Court trial was always going to be about setting the new playing field for the inevitable legislative process required to bring copyright laws up to speed. After a four-year trial and millions of dollars spent on a futile endeavour, the onus now rests on the right holders to intensify the lobbying pressure on the government. Luckily, the High Court has given the Australian Federation Against Copyright Theft valid ammunition to make their appeal to the government
"Both judgements in this case recognise that copyright law is no longer equipped to deal with the rate of technological change we have seen since the law of authorisation was last tested,” AFACT managing director Neil Gane said in a statement.
No arguments there but the real challenge for AFACT now is to see how quickly the wheels of legislative change come into motion. Changing the copyright act could be easier said than done and any amendment could take an inordinate amount of time. The other option for right holders could be to perhaps prioritise their efforts with regards to building legitimate channels that provide users with content. There’s no reason why this can’t be achieved with a little help from ISPs.
The shoe could have well been on the other foot had iiNet lost the case but as far as ISPs are concerned they are quite satisfied with the way things stand right now. Of course that situation will change over time as an industry-wide code of conduct is hammered out, but the ISPs will approach that process from a much stronger position.
Ten’s smart TV moves
Staying in the media sector, Ten Network is reportedly set to launch its first internet channel on a smart TV late next month. According to The Australian Financial Review, Ten has partnered with Sony for a catch-up TV service on the manufacturer’s internet-enabled Bravia television sets and Blu-ray players.
Ten’s head of digital media, Vincent Dempsey has told the paper that the network would offer most of the shows on its domestic roster and is in talks with US suppliers to obtain distribution rights for smart TVs.
He added that there are more smart TV partnerships in the pipeline.
Catch of the Day’s vino appeal
Finally, Catch of the Day has taken another step in its strategy to target niche areas with the retailer now turning its sights on wine. Catch of the Day, which also runs group buying site Scoopon and GroceryRun.com.au, has taken a majority stake in the daily deal wine site, Vinomofo.com.
Adelaide-based Vinomofo was founded 12 months ago by well-known digital wine entrepreneurs Andre Eikmeier and Justin Dry (of Qwoff fame) and the deal not only gives Catch of the Day access to Eikmeier and Dry’s online business acumen but more importantly Vinomofo’s 30,000 active subscribers and a Twitter following of 25,000. The cost of the transaction was undisclosed.