Located in North Ryde, Foxtel’s headquarters became a focal point in Sydney on 20 June 2012.
Owned predominantly by Rupert Murdoch’s News Corp, the company has indicated a possible divestment of its Australian cable and streaming business, Foxtel, following an unsolicited proposal. The move could mark the company’s exit from an asset-intensive business that has found it difficult to compete during the rise of streaming giants like Netflix.
In its recent financial briefing, News Corp noted a 5% decline in Foxtel’s June quarter earnings, despite an 11% rise in overall earnings driven by its real estate and listings businesses. Since splitting from Murdoch’s Fox Corporation in 2013, News Corp has seen mixed performances across its divisions.
“There has been recent third-party interest in a potential deal involving Foxtel,” said CEO Robert Thomson. “We are currently evaluating our options with the guidance of our advisers, taking into account this outside interest,” he added.
The sale of Foxtel would allow News Corp to divest from a company that, despite its significant presence in the Australian media market, has struggled to compete with more affordable, lower-margin streaming services.
Originally a staple in Australian households with its physical set-top boxes for television access, Foxtel has seen a decline in subscribers who traditionally paid around A$100 ($66) a month, especially as services like Netflix, Disney and Amazon have begun offering much lower-cost streaming alternatives.
Foxtel, which is 35% owned by Australia’s largest telco Telstra, ventured into the streaming market in 2020 with its own service and set-top boxes, slightly mitigating the decline in high-value traditional subscriptions. This strategic move led to a marginal 1% increase in subscriber revenue during the June quarter.
The potential sale did not go unnoticed by the market, as News Corp shares on the Australian Stock Exchange rose 8% at mid-session, buoyed by better-than-expected financial results and the expectation of a resolution to ownership issues surrounding Foxtel.
While News Corp has not disclosed its valuation of Foxtel, Morgan Stanley’s 2021 estimates suggest it is worth between $1.24 billion and $1.86 billion, based on a multiple of four to six times its annual pre-tax profit.
Telstra acknowledged News Corp’s announcement but decided not to release any further comments at this time.
“Despite the protracted nature of these discussions, investors have shown impatience for a definitive announcement. However, the company’s financial health remains strong, with revenue and margins exceeding expectations,” said Craig Huber of Huber Research Partners.
