TVNZ sale of Sky shares seen as pay-TV signal

By Geoff Senescall

Television New Zealand is poised to sell its shareholding in Sky TV, worth around $140 million at present market prices.

Broker Credit Suisse First Boston is understood to have been given the mandate to handle the sale on behalf of the state-owned broadcaster.

Industry sources suggest the decision could signal TVNZ's desire to enter the lucrative pay-TV market in its own right.

TVNZ, one of the original investors in Sky, once had designs on being a major player in the pay-TV company but those plans are believed to have been thwarted by the Commerce Commission.

It has since cut its Sky holding from around 25 per cent to 12.6 per cent.

TVNZ still has one seat on the Sky board, but its influence has steadily waned. This has been especially so since Sky went public nearly two years ago and the media group INL took a controlling stake.

Some industry analysts liken the situation at Sky to the one which prevailed when Qantas held seats on the Air New Zealand board. Whenever the board met, so it was said, a separate meeting would be held after the Qantas representatives left.

TVNZ has had numerous scoping studies done on its operations by corporate finance teams from Ord Minnett, Southpac and Bancorp.

The reports are believed to say that TVNZ gets little value from its Sky shareholding.

In fact, being on the Sky register is holding TVNZ back. Media analysts agree that TVNZ, because of its Sky stake, has sat back and essentially left the subscription TV market to Sky.

The problem with this approach, say analysts, is that the TV advertising market is not forecast to grow much from its present $500 million or so a year.

The subscriber TV market, on the other hand, is now worth more than $100 million and forecast to grow fivefold in as many years.

Proceeds from any sale of the Sky stake should be enough to finance TVNZ into the pay-TV market. But such a move would have to be sanctioned by TVNZ's owner, the Government.

Although Sky has the big-ticket sports end of the pay-TV market sewn up, TVNZ could still look at the cheaper end of the market. Through its programming connections around the world it could offer a low-cost pay-TV channel.

Meanwhile, the decision to sell Sky raises the question of what TVNZ plans to do with its transmission business, BCL. TVNZ has long been rumoured to be selling this asset, estimated to be worth more than $300 million.

This is based on the ritzy price of $A600 million ($727 million) which the Australian company National Transmission Agency sold for recently.

Industry sources interpret the decision by BCL managing director Geoff Lawson to stay on as an indication that TVNZ wants the asset to remain in a safe pair of hands while its future is decided.