By Byron Kaye and Rishav Chatterjee
SYDNEY (Reuters) – Rupert Murdoch’s News Corp has announced it will sell Australian cable television and streaming company Foxtel after a bid was made. The deal would end the company’s involvement in an asset with high overheads that has struggled to adapt to the Netflix era.
News Corp said in a trading update that it was considering the deal. The division reported a 5 percent fall in profit for the June quarter. Total profit for News Corp, which spun off from Murdoch’s Fox Corp in 2013, rose 11 percent in the period, largely due to its property business.
A review of News Corp’s business units “recently coincided with third-party interest in a potential transaction involving the Foxtel Group,” CEO Robert Thomson said in a statement.
“We are currently reviewing the options together with our advisors in light of this external interest.”
A sale of Foxtel would free News Corp., which owns most of the Murdoch family’s print media such as the Wall Street Journal and book publisher HarperCollins, from a business that plays a major role in Australia’s media landscape but is under pressure from cheap, low-margin streaming competitors.
Foxtel once dominated Australian pay TV with its physical set-top boxes installed next to customers’ televisions, but since Netflix, Disney and Amazon launched streaming offerings for a fraction of the price, the provider has lost subscribers who pay about A$100 (US$66) a month for the service.
Foxtel, in which dominant Australian telecom operator Telstra owns a 35% stake, launched its own streaming service alongside set-top boxes in 2020. This offset a decline in higher-paying traditional subscriber numbers but not in subscriber revenue, which rose 1% in the June quarter.
Still, shares in Australia-listed News Corp. rose 8% by mid-market as investors welcomed better-than-expected results and the prospect of a resolution to questions surrounding Foxtel’s future ownership.
News Corp has not put a value on a sale of Foxtel. At a valuation of four to six times gross annual profit, as suggested by Morgan Stanley in 2021, Foxtel would be worth between $1.24 billion and $1.86 billion based on its 2024 earnings.
A Telstra spokesperson confirmed News Corp’s statement but declined to comment further.
“Investors are frustrated by the length of time it takes to officially announce the simplification of the company. But while this process is underway, the financials continue to perform well. Revenue and margins are better than expected,” said Craig Huber, analyst at Huber Research Partners.
(1 US dollar = 1.5168 Australian dollars)
(Reporting by Byron Kaye in Sydney and Rishav Chatterjee in Bengaluru; additional reporting by Sneha Kumar in Bengaluru; Editing by Shilpi Majumdar and Sonali Paul)
