Rupert Murdoch's News Corp and Kerry Packer's Publishing and Broadcasting Ltd (PBL), which together own 50% of Australian pay-TV platform Foxtel, reportedly plan to switch allegiances and sign a significant programming deal with competitor Cable & Wireless Optus (C&W Optus).
News Corp-owned newspaper The Australian reported today (June 20) that the two companies would pull out of Foxtel due to their frustration in dealing with its third shareholder, the half-privatised telecommunications giant Telstra. Clashes between the two sides have been documented in Australia's media for several months, but given Foxtel's dominance in the local pay-TV market, abandoning the platform would be an extraordinary move.
Shareholders of C&W Optus' UK-based parent company, Cable & Wireless, recently approved the proposed sale of C&W Hong Kong Telecom to Richard Li's Pacific Century CyberWorks, creating uncertainty about the future of the Australian subsidiary. It is able to supply internet and mobile phone services - unlike Foxtel which focuses only on pay-TV - but subscriber numbers have remained static.
The move could be connected to the impending float of Murdoch's global TV platform Platco which has been tipped to take place this week.
None of the players would comment on The Australian's unsubstantiated story.
Meanwhile, Austar United Communications, the parent company of Australia's third pay-TV player Austar, has made a $14.5m (A$24m) bid for the embattled internet company eisa, which recently failed in its attempt to acquire the country's second biggest internet provider, Ozemail.
The deal would need the approval of the Foreign Investment Review Board and includes a short-term $4.5m (A$7.5m) loan facility to be used as working capital. Eisa's directors have recommended to shareholders that it be accepted.
Austar chief executive John Porter said the transaction makes "tremendous sense" because it is currently building an internet business and eisa's 85,000 subscribers would give them a kick-start. Also, both companies have concentrated on regional Australia to date, although Austar has been open about moving to capital cities in the future.
"International experience shows that 100% of broadband subscribers start out as dial-up users," said Porter.