A battle over content delivery looms in Australia with Telstra, who could be forced to divest their 50% interest in pay TV operator Foxtel secretly planning to launch their own TV network according to sources.
Two senior executives of content companies in the USA have told me that Telstra has approached them to buy TV programmes and movies. It is also known that Telstra has spoken to the Ten Network about a possible relationship or shareholding.
The Telstra TV network will be delivered via a new generation of set top boxes made by French Company NetGem it is believed that the Telstra versions of the device will include a modem and wireless capability.
In recent months several Telstra competitors have proposed to the Federal Government that that Foxtel should be structurally separated, and forced to sell its 50 percent shareholding in Foxtel and its HFC cable network.
This would leave the way open for Kerry Stokes owner of the Seven Network to buy a major shareholding.
Local ISP Primus, has told the Federal Government in its submission on legislative framework of the National Broadband Network, that the majority ownership of Foxtel and control over content gives Telstra an unfair advantage in the communication s industry. And it says its ownership of the country’s largest cable network is a significant block to development of competition that would not be tolerated in other jurisdictions.
“Telstra should be required to divest its ownership of these assets ahead of deployment of the NBN,” the Primus submission says.
If Telstra is forced to sell its shareholding in Foxtel is doubtful as to whether they would sign a “no compete” contract say analysts.
Currently Seven Media boss Kerry Stokes is attempting to position himself for a run at Foxtel by investing in minority shareholder Consolidated Media owned by James Packer.
Consolidated Media has a 25% stake in Foxtel along with News Ltd.
For Stokes who has already lost millions in various court cases involving Foxtel and Fox Sports the attraction is Foxtel’s fast-growing revenue and subscriber numbers and the 1.6 million homes that Foxtel is currently connected to.
In July, Stokes launched a raid on Packer-controlled Consolidated Media by buying shares to build a 19.9% stake in the company — the most he can own without having to make a full takeover offer.
Mr. Packer, who until recently held a 38.4% stake in Consolidated Media, responded by boosting his stake to 40.7%.
Analysts say that any sale by Telstra would open up opportunities for others to gain or build their stake in Foxtel. Telstra says it wants to keep Foxtel and a spokesman for the company wouldn’t comment further.
Recently new Telstra CEO David Thodey hesitated when I asked him whether he would like to own 100% of Foxtel “Yes but I doubt whether our competitors would let us and I doubt whether the other owners would sell”.
A big advantage for Telstra is that content is fast moving to being delivered over a broadband network to a new generation of IP enabled TV’s as well as to portable viewing devices such as phones, portable TV’s and Smartphones.
If Telstra can take control over content such as sport, movies gaming and music they are in an excellent position to compete with any TV Company as they have the network to deliver the content, relationships with millions of consumers and a new billing system.