December 4th, 2018

The smoke rings suggest something is afoot at Ten

杭州桑拿, by admin.

Ten chief executive Hamish McLennan sees some small green shoots. Photo: Peter Rae Ten chief executive Hamish McLennan sees some small green shoots. Photo: Peter Rae

Ten chief executive Hamish McLennan sees some small green shoots. Photo: Peter Rae

Ten chief executive Hamish McLennan sees some small green shoots. Photo: Peter Rae

There is too much smoke around the future ownership of Network Ten for there to be no fire.

The chat around the industry and investment circles is that a deal is brewing and one that will involve Rupert Murdoch’s empire either directly or via Foxtel, in which News Corp has a 50 per cent stake.

Any changes in Ten’s ownership would need to navigate around existing media rules; thus the betting is that News/Foxtel will take a 14.9 per cent stake in Ten and private equity will take out the remaining minority investors but will leave the holdings owned by James Packer, Gina Rinehart and Bruce Gordon.

Packer, Rinehart and Gordon are sitting on such large paper losses on their Ten investments that it is barely worth selling; and as none is financially stretched they are taking the view that they will take any upside that a privatised Ten might provide.

One hedge-fund player. Anchorage, and one private equity group, Providence Equity, have already been outed as having interest in Ten. If they teamed up with Murdoch the risk would be defrayed – particularly as they wouldn’t need to buy out the Packer/Rinehart/Gordon holdings.

Ten chief executive Hamish McLennan is clearly pushing for a relaxation of the media ownership regulations – particularly the two out of three rule – that limits a company having radio, television and print in the same market.

For Foxtel to become involved in the deal it would ultimately require a green light from its other 50 per cent owner, Telstra, which sources said yesterday was being advised by UBS.

It is not surprising that buyers are circling Ten given its shares are now trading at the penny-dreadful end of the market and its losses are predicted to extend into the current financial year. Last week it reported $168 million of red ink for the 2014 financial year.

From its current position Ten’s reversal of fortunes has less to do with luck and much more to do with money. It needs access to funding to vie for big-ticket programming – particularly in sport – that will provide it with ratings.

Support from Foxtel could certainly supply the funds and the two groups could bid for programs that would benefit both.

Recent history has shown that turning around this network is a mammoth task. McLennan is the group’s third chief executive since 2010.

Four years ago when a clutch of billionaires decided to take control of Ten, it had all the hallmarks of an opportunistic vulture-like move. The clapped-out third free-to-air network seemed ripe for management and financial renovation. Had it not been for the established wealth of the then new shareholders, James Packer, Lachlan Murdoch and Gina Rinehart, it would have been a shirt-losing investment. For these three (and fellow investor Bruce Gordon) the 80 per cent-plus fall in Ten’s value since was more akin to losing a sock from a financial perspective.

Roll the calendar forward to Monday and it certainly seems that these investors have lost not just money but interest in running the show.

Industry speculation says that News or Foxtel would take on the management rights of Ten, but whether this would pass the Australian Competition and Consumer Commission smell test remains to be seen.

(Some years back the ACCC blocked Kerry Stokes, who controls the Seven Network, from buying a major interest in Foxtel and FoxSports.)

Reports on Monday that Fairfax boss Greg Hywood had sounded out Ten chief McLennan lit a fire under the network’s share price but Fairfax’s ability to fund Ten would have to be questioned.

The fact that Gina Rinehart has apparently decided to quit her board seat – or at least appoint a representative – is testament to the fact that she seems to have abandoned her flirtation with influencing Ten’s management.

While she wants to retain her 10 per cent stake in Ten the message filtering out from her camp is that her focus has turned to the main game – which is the development and opening of her new $11.4 billion Roy Hill iron ore project.

Even if the network secures an offer, it would take a major turnaround and probably several years for Ten’s share price to improve to the $1.50 levels at which these investors could even recoup the money they put in. But better to roll the dice again than cement the loss now.

Packer achieved his objective in Ten many years ago when he managed to have the network ditch its sports digital channel, One, and relaunch it with a more mainstream offering.

In doing so it took competitive pressure off his investments in Foxtel and Foxsports, both of which he later sold. He is no longer a director of Ten.

Lachlan Murdoch, who was far more active in the running of Ten until last year, has now turned his attention to a bigger role in his father Rupert’s empire at 21st Century Fox and News Corp. Having been chairman and interim chief executive he is no longer on the board of Ten.

For now Ten continues to struggle in a fairly weak free-to-air television market against two strong competitors in Seven and Nine.

Some small green shoots were evident earlier this year with success in Big Bash cricket, the Winter Olympics and the last season of MasterChefcombined with the popular Bachelor.

But there have not been sufficient periods of ratings consistency to attract increasing advertising from the all-important media buyers.

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