News Corp, Telstra Finalize Fox Sports Australia, Foxtel Merger

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Patrick Delany

Ahead of the June merger, News Corp said it has written down the value of its Foxtel and Fox Sports investment by $1 billion.

Australian pay TV giant Foxtel will merge with sports provider Fox Sports Australia by the end of June, following a formal agreement inked on Tuesday by Foxtel shareholders News Corp Australia and telecommunications outfit Telstra Corp.

Under the merger, plans for which were originally announced in August 2017, News Corp will own a 65 percent stake in the combined entity, and Telstra will have a 35 percent stake. News Corp will appoint four directors, including the chairman, on the combined entity's board, as well as the senior executives, and Telstra will appoint two directors. Foxtel is currently jointly owned by News Corp and Telstra, with News Corp having management oversight, while Fox Sports Australia is owned by News Corp.

Patrick Delany was previously announced as the CEO of the new company.

The new Foxtel and Fox Sports is designed to “deliver premium and innovative content to Australians with…greater quality, variety and efficiency” and combat the continued rise of streaming services like Netflix down under. Foxtel currently has a subscriber base of 2.8 million, including to its Foxtel Now streaming service, while it's estimated Netflix has around 2.98 million subscribers in the country, equal to 31 percent of Australian households.

Indicating the difficulties that lie ahead for linear broadcasters, News Corp said Tuesday in a filing to the U.S. Securities Exchange Commission that it would write down the value of its investment in Foxtel and Fox Sports Australia by $700 million to $1.1 billion when it reports its fiscal third-quarter financials on March 31.

“The launch of the combined company will mark the dawn of a new era for our Australian business, and Foxtel and Fox Sport Australia will together be a formidable force," said News Corp CEO Robert Thomson. "We will be able to use our powerful media platforms to promote the unique sports and entertainment assets in the two companies and improve services for consumers and advertisers. Patrick Delany and his talented team will be absolutely focused on serving viewers compelling contemporary Australian content and superlative sports coverage on personalized platforms."

Telstra CEO Andy Penn said the merged business will remain an important part of the company's media strategy. "Our customers are streaming more and more sport and entertainment on their TV at home and on their mobile devices while on the move," he said. "Telstra will be the exclusive [telecom] sales agent for the combined entity on mobile and IP products, and we will continue with our broadcast reseller arrangements."