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Telstra ‘weighing Foxtel stake sale’

Australian telco Telstra is reportedly considering selling its 50% stake in local pay TV market leader Foxtel.

The Australian Financial Review reports Telstra would be willing to shed its stake at the right price, concerned by new competitors such as Netflix offering content at lower rates.

Its joint venture partner, News Corp, is believed to have pre-emptive rights over Telstra’s stake, and would likely to interested in a deal, given that the Murdoch family prefer to fully own their media assets.

Foxtel is the clear market leader after it acquired rival Austar in 2011 from Liberty Global. News Corp later acquired another stakeholder, Consolidated Media Holdings, to create a joint venture model.

The AFR put Foxtel’s equity value at A$3.6 billion (US$2.6 billion), which is 7.5 times its earnings before interest, tax, deprecation and amortisation projection of A$900 million plus debt of A$3.1 billion.

News Corp this week revealed Foxtel first quarter earnings were down 21% due to programming costs, costs associated with higher sales volumes and the public launch of triple play.

However, Foxtel is by far the most profitable media business in Australia, and any sort of deal would radically shake up the local market.

The company is now very close to becoming a 15% shareholder in free-to-air broadcaster Network Ten, after gaining more regulatory greenlights this week.

Telstra is best known as a mobile phone and telephony group, but has been a key partner in Foxtel since its inception two decades ago.

A Telstra spokesman told the AFR: “Foxtel remains an important strategic asset. We have a strong working relationship at the most senior levels with News Corp.”