Sky TV's return awaited

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 result releases.

''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, he said.

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 Young said.

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.

 

 

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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 company

• Labour calls for a review of broadcasting and video content

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