Foxtel profit, between the lines

By David Knox on February 20, 2008 / Filed Under News 1

Foxtel today released details of its half-yearly earnings to 31 December 2007 with a mix of good and bad news. It showed an EBITDA figure of $165m. In comparison, EBITDA for the year ended June 30 2007 were $237m*.

Profit in the six months dropped slightly to $73m, down from $76m in the previous year*.

Direct subscribers were at 1,335,000, although in January the Pay TV king passed the 1.5m mark in direct and non-direct subscriptions.

However, there was also an increase in non-renewals too.

Foxtel advises, “There was a slight increase in churn over the half to 13.5% (annualised). The increase in churn on the previous year could be attributed to some economic factors such as interest rates and a large body of contract maturities where a small percentage of customers elected not to renew. Foxtel’s churn rate remains low in comparison with most international counterparts.”

Its churn for the previous six months was below 12% (non-annualised)*.

Significantly, many of the financial comparisons focus on the second half of 07 to the corresponding period of 06, rather than the preceding six months in 07.

Press Release:

FOXTEL today announced continued growth in subscribers, improved profitability and a solid revenue increase for the half year to 31 December 2007.

FOXTEL’s earnings before interest, tax, depreciation, and amortisation (EBITDA) rose by 62% to $165m for the half year to 31 December 2007 from $102m in the first half of the 2007 financial year. FOXTEL in the latest half recorded a $73m profit (before tax and refinancing charges, after depreciation and interest and including joint ventures) representing a $51m improvement on the previous corresponding half.

At 31 December 2007, FOXTEL had 1,335,000 direct subscribers, an increase of 13% over the year ended December 2006. FOXTEL’s total subscriber base, including wholesale customers, grew by 12.7% to 1,492,000. In January 2008 FOXTEL passed the milestone figure of 1.5 million total subscribers – securing a 29% penetration of Australian homes within FOXTEL’s operational areas. In Sydney, the most populous market in the nation, FOXTEL is now available in the homes of 38% of all television viewers.

FOXTEL’s total revenue for the half was $805m, a 17% increase on revenue of $687m in the previous corresponding period. FOXTEL’s subscription revenue increased 17% from $591m for the half year ended 31 December 2006 to $689m for the 31 December 2007 half. The increase was driven by growth in both subscriber numbers and average revenue per user (ARPU). ARPU increased to $84 as a result of higher take-up of additional services such as the FOXTEL iQ and Multi-Room services and penetration of the highest level Platinum package. FOXTEL iQ personal digital recorder penetration is now over 20%, while Platinum continues to be above 40% take-up by the direct subscriber base.

There was a slight increase in churn over the half to 13.5% (annualised). The increase in churn on the previous year could be attributed to some economic factors such as interest rates and a large body of contract maturities where a small percentage of customers elected not to renew. FOXTEL’s churn rate remains low in comparison with most international counterparts.

FOXTEL continued to increase its share of television viewing. For the year to 31 December 2007, in subscription television homes FOXTEL recorded a 60.2% share of all TV viewing, compared with a 56.6% share across calendar 2006.

FOXTEL’s Chief Executive Officer and Managing Director, Kim Williams AM said, “FOXTEL’s story is one of consistent commitment to creativity and innovation which focuses carefully on consumers. FOXTEL continues to grow its subscriber base, its revenues and profits through the appeal of our product and service and from product innovation which enhances that appeal. The company persists in its commitment to strong financial disciplines. FOXTEL will continue to create new entertainment horizons for Australian consumers and raise their expectations of television with a variety of new product releases scheduled for 2008.

“FOXTEL’s first innovation in 2008 will see the launch of our High Definition Television service, FOXTEL HD+, in mid 2008. FOXTEL HD+ will lift the television experience for Australian consumers to another remarkable dimension”, Mr Williams said.

About FOXTEL
FOXTEL is Australia’s leading subscription television provider and is connected to more than 1.5 million homes on cable and satellite through retail and wholesale distribution. FOXTEL strives to ensure subscribers find TV they want to watch every time they switch on through delivery of more than 100 channels covering news, sport, general entertainment, movies, documentaries, music and children’s programming. FOXTEL is owned by Telstra Corporation Ltd (50%), The News Corporation Ltd (25%), and Consolidated Media Holdings Limited (25%).

FOXTEL FACTS (2008)

At the end of January 2008, FOXTEL passed the milestone of 1.5 million total connected subscriber homes, a reach of more than 5.5 million Australian viewers.

At 31 December 2007 FOXTEL had 1,335,000 direct subscribers, 13% more than at the end of December 2006.

FOXTEL’s national penetration has grown to 29% (in marketable households*) with 38% of television viewers in the key Sydney market having access to FOXTEL in their homes.

Over 20% of FOXTEL’s direct subscriber base has FOXTEL iQ and FOXTEL’s Platinum Package continues to be above 40%.

FOXTEL enjoys a strong viewing share in FOXTEL homes. For the year to 31 December 2007, subscription television in homes with the service achieved a 60.2% share of viewing, compared to a 56.6% share in the corresponding 2006 period.

FOXTEL recorded an EBITDA for the 6 months to 31 December 2007 of $165m, an improvement of $63m (62%) on the EBITDA for the first half of the 2007 financial year. In the latest half FOXTEL recorded a $73m profit (before tax and refinancing charges, after depreciation and interest and including joint ventures).

FOXTEL’s total revenue for the half was $805m, a 17% increase on the revenue generated in the previous corresponding period.

FOXTEL is now 100% Digital, with the migration of all subscribers to the Digital platform in January 2007 three years after the launch of the FOXTEL Digital platform.

FOXTEL expects solid consumer demand to continue for its products as a result of the unveiling of its new HD+ service (to be launched by mid 2008).

* Marketable households* calculated in August 2007 as: ABS Census 2006 occupied Households within the FOXTEL Footprint with an assumed annual growth rate applied and multiplied by 93% to represent FOXTEL Marketable Households (ie excluding ‘unwired’ apartments and managed residential estates).

FOXTEL’s VISION FOR 2008 AND BEYOND

On 30 January 2008, FOXTEL unveiled details of its new High Definition (HD) service – known as FOXTEL HD+ and revealed the initial exclusive channel lineup at the launch would include some of the world’s strongest subscription television brands: BBC HD, Discovery HD, National Geographic HD, FOX SPORTS HD and ESPN HD, plus the introduction of blockbuster movies in HD and On Demand through FOXTEL Box Office.

FOXTEL’s HD+ service will be launched in mid2008. FOXTEL is committed to expanding the HD+ service from as early as 2009 with the launch of a brand new satellite and access to increased cable capacity.

In 2008 FOXTEL will launch two new iQ’s; the first is a state of the art High Definition version, simply called iQ2, which will be our vehicle for high definition product delivery henceforth. The iQ2 will have a 320 GB disc drive expanding the recording space for consumers together with the ability to record 2 shows and watch a third show live. The iQ2 will be capable of broadband connection making it future proof. The second is an updated, improved version of the successful existing standard definition iQ.

FOXTEL AND NINE SECURE AUSTRALIAN BROADCAST RIGHTS TO THE 2010 VANCOUVER WINTER OLYMPICS AND THE 2012 LONDON SUMMER OLYMPICS

On 13 October 2007, FOXTEL and the Nine Network Australia announced they had jointly secured the exclusive broadcast rights (terrestrial TV, subscription TV, Mobile and internet rights) from the International Olympic Committee for the 2010 Vancouver Winter Olympics and the 2012 London Summer Olympics.

The 2010 Vancouver Winter Olympics and the 2012 London Summer Olympics will be broadcast by FOXTEL in High Definition.

FOXTEL AND NETWORK TEN SECURE AUSTRALIAN BROADCAST RIGHTS TO THE DELHI 2010 COMMONWEALTH GAMES

On 16 January 2008, FOXTEL and Network TEN announced they had secured the exclusive Australian broadcast rights to the 2010 Commonwealth Games in Delhi, India. Under the landmark partnership agreement TEN and FOXTEL will share all broadcast rights, allowing both TEN and FOXTEL to broadcast simultaneous live coverage of all events. Both networks will have coverage of the Opening and Closing Ceremonies, with TEN exclusively live.

The 2010 Commonwealth Games will be the first to be hostbroadcast produced in full High Definition.
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TEN and FOXTEL will also look to on sell the radio rights, with FOXTEL securing the exclusive subscription television and exclusive new media rights, including mobile, internet and digital video broadcast handheld (DVBH).

FOXTEL AND DIGITAL RETRANSMISSION

On February 14 2008, FOXTEL and the Seven Network signed a retransmission deal which will see FOXTEL retransmit the Seven Network’s signal on FOXTEL’s digital platform. The retransmission deal will provide cable retransmission of Seven’s digital signal on FOXTEL’s platform, ensuring a clearer digital experience, in addition to Electronic Programming Guide information, for FOXTEL subscribers watching Seven. It will be available to FOXTEL’s cable subscribers in Melbourne, Sydney, Brisbane, Adelaide, Perth, and the Gold Coast in a matter of weeks. FOXTEL’s satellite subscribers in Melbourne, Sydney and Brisbane will receive digital retransmission in early 2009 – as soon as the new Optus D3 satellite is operational.

The retransmission deal with FOXTEL and the Seven Network now means that FOXTEL has retransmission agreements with all networks.

The Seven deal has taken four years and follows the announcement by FOXTEL and Network TEN on 7 August 2007 which secured digital retransmission of Network TEN on the FOXTEL platform.

FOXTEL’S COMPREHENSIVE NEWS PLATFORM

FOXTEL in January 2008 added Australia’s first dedicated 24houraday television business news channel, SKY NEWS BUSINESS CHANNEL to its platform.

FOXTEL subscribers now have access to eight dedicated news channels including three dedicated business channels.

* Additional source: Foxtel previous annual results to 30 June 2007

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One Comment »

  1. Stan February 20, 2008 at 2:34 pm -

    The Foxtel’s comment about the low churn comparing to international counterparts is very misleading and funny. If the international counterparts were dealing with some much competition as Foxtel does they would probably had the same level of churn. Nobody enjoys the monopoly in pay-tv market as much as Foxtel. I’m glad we have Internet as an alternative.

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