Bundling Foxtel pays dividends for Telstra as media division homes in on $1bn
Telstra has seen its media portfolio grow by 4.6% and is fast approaching becoming a billion-dollar division, led by a successful bundling drive for Foxtel and Telstra.
Overall Foxtel subscriber numbers were up 4.6% to 2.9m, although this figure continues to include a couple of hundred thousand subscribers to low-margin streaming service Presto.
Telstra’s overall net profit after tax from continuing and discontinued operations was up 35.9% to $5.8bn.
But Foxtel in its own right has seen a drop in earnings before interest, tax, amortisation and depreciation (EBITA), down by 2.2% due to increased investment in programming to support subscriber growth as well as the continued investment in Presto.
Telstra’s Foxtel investment also saw higher broadcast churn, up from 10.9% to 12.2% due to the increased use of “no fixed term contracts in 2016”.
The company highlighted the ongoing success of the Foxtel-from-Telstra offer, noting its contribution to media product portfolio total revenue of $974m.
“Foxtel from Telstra revenue increased by 8.6% to $719 million,” the report said.
“We continued our strategy to bundle these products with our core fixed products with a 20.5% growth in Foxtel from Telstra subscribers. There are now 300,000 Telstra TV devices in market since the launch in October 2015.”
Telstra CEO: Andrew Penn
Telstra CEO, Andrew Penn, said it had been a strong year for the media side of the business – highlighting record-breaking consumption due to the Seven Network’s content from Rio on mobile devices.
Telstra’s marketing of Seven’s Olympics app was the subject of a failed court bid by the Australian Olympic Committee ahead of the Games to stop Telstra from advertising links with Rio.
“It has also been an important year for our media business and we have signed long-term agreements for exclusive digital media rights for the AFL, NRL and Netball, Australia’s biggest broadcast and grass-roots sports,” said Penn.
“These leverage the growing trend of watching live sport on your mobile – which has never been more evident than the (record-breaking) mobile consumption of the Rio Olympics this week, enjoyed for free only for Telstra customers.”
“We are using these media assets to enhance the value of our fixed and mobile services to customers. For our fixed customers, we now have more than 300,000 Telstra TVs in customer homes following launch in October of last year. 2016 was also our biggest year ever for Foxtel from Telstra, with 20% growth in customers. Already more than 750,000 mobile customers are enjoying premium sport and music content experiences through their Telstra mobile plans.”
Penn also commented on Telstra’s brand refresh, saying it had been well received.
“During the year we took the next step in the evolution of our brand, in line with our vision. We launched to market in July and we are extremely pleased with the overwhelmingly positive response from our customers,” he said.
Telstra CFO, Warwick Bray, said with Foxtel there was an improvement in earnings before interest and tax on the Foxtel business.
“EBIT improved 8.8% to $558m, including lower depreciation resulting from the increase in the useful lives of cable and satellite installations,” Bray said.
“In Telstra’s books, the distribution received from Foxtel was down 70.4% to $37m due to Foxtel’s investment in Ten Network and focus on debt management. We received no distribution from Foxtel in 2H16. ”
He said the role of media was giving customers a differentiated content experience that complementing the network’s advantage.
“We also launched Telstra TV in October. By the end of FY16, we had 300,000 Telstra TV devices in market,” Bray said.
“IPTV revenue was up 4.2%, including increased revenue from Telstra TV device sales and SVOD. This revenue growth was partly offset by the continued migration of our higher value Foxtel on T-Box customers to Foxtel from Telstra.”
Then telco also announced a $3bn three-year investment in ist network on the back of a series of failures.
Penn said the investment would look to the future of digitisation and significantly improve customer experiences.
“Our customers and our networks are our biggest assets. We must invest to set new standards and deliver excellent experiences for our customers,” Penn said.
“There are a number of immediate actions that we believe will improve customer experiences. We will simplify products and platforms – we need to retire old technology and systems that slow down and complicate how customers are served.”
