The sell-down in Sky Network Television by Rupert Murdoch's
News Corp has prompted investors to sell out of existing
investments in readiness for when Sky TV returns to the
market, possibly today or tomorrow.
Sky shares are in a trading halt as the media group sold its
43.6% stake into the market at a price of $4.80 - a 7%
discount to its $5.17 closing price on Friday.
The price gives News Corp's nearly 170 million shares a value
of around $815 million.
At the closing on Friday, the market capitalisation of Sky TV
was listed at $2.01 billion.
As the news of the sell-down hit the markets, the NZX-50
dropped 45 points, or 1%. Fletcher Building and Trade Me were
both down - 11c per share and 14c respectively. Brokers
expected shares in other companies to fall as profit takers
sold out to ready themselves for Sky TV returning to trading.
Forsyth Barr broker Peter Young said News Corp's departure
meant very little for Sky TV.
''It will be business as usual for Sky in New Zealand. News
Corp has had a minimal contribution to the running of Sky TV,
with the management being driven by New Zealand staff led by
chief executive John Fellett.''
It was INL, led by the late Mike Robson, that acquired the
stake in Sky, not News Corp, Mr Young said. In the News Corp
full-year 2012 result, there was no mention at all of its
investment in Sky TV and that was also the case in previous
''From our perspective, News Corp's investment in Sky TV
didn't fit into its reorganisation, which will result in News
Corp's businesses being split into two distinct publicly
traded companies with a northern hemisphere focus - media and
entertainment and publishing.''
News Corp's largest customer in New Zealand was MediaWorks,
not Sky TV, he said.
Content deals done in New Zealand were priced based on the
commercial value in New Zealand. Again, the perception News
Corp fed Sky TV cheap content was incorrect. As expected,
both entities acted in the best interests of their respective
businesses. The battle Sky TV had in negotiating the price of
content with News Corp's subsidiaries was just as tough as it
was with any other content producer.
News Corp did not assist in the renewal of the Sanzar
five-year rugby broadcasting rights. The deal was done
directly between local broadcasters and the respective rugby
unions in New Zealand, Argentina and South Africa.
The common perception was that News Corp was the key player
in securing the global rugby rights. That might have been the
case five or more years ago, but it was not longer the case,
While Sky TV might win the broadcasting rights, it was the
additional cost in people and infrastructure to produce the
content that added to the cost. Recovering the investment
required gaining the rights to a broad range of local sport
beyond rugby. Rugby by itself would not be enough to recover
the cost of producing and broadcasting the Sanzar content, Mr
The sell-down by News Corp would add to the liquidity of Sky
TV shares and add further depth to the market.
Labour Party communications and IT spokeswoman Clare Curran
said the exit of News Corp gave the Government an opportunity
to review broadcasting and video content.
''Today's announcement is a clear signal by Rupert Murdoch
that Sky's dominant market position has changed forever with
the increase in online video content.''
The Commerce Commission had said ownership rights of content
were the critical factor behind the successful uptake of
ultrafast broadband in New Zealand. The commission was also
investigating Sky TV's contracts with telecommunication
companies which might be restricting competition, she said.
At a glance
• News Corp sells its 43.6% stake in Sky Network Television
• NZX falls as investors take profits to buy into Sky TV
• Brokers say business as usual for subscription television
• Labour calls for a review of broadcasting and video content