Foxtel lost around 100,000 subscribers in the six months to December 2016, underlining why News Corp chopped the value of its stake in the pay TV operator of A$300 million (US$227 million) in the quarter. 

News said in this morning’s financial results release that Foxtel had “more than 2.8 million subscribers as at December 2016. That compares with “approximately 2.9 million” reported at the end of the first quarter at September 30 last year and “more than 2.9 million” at the end of June 2016.

Foxtel said closing cable and satellite subscribers numbers were flat compared to the prior year period. In the second quarter, cable and satellite churn was 15.6%, “which was comparable to churn in the fiscal first quarter, primarily driven by newer customers under no-contract offers and seasonal sports disconnections.”

And that subscriber weakness, increased competition in the Australian market, plus weak revenue and earnings growth, or falls, helped drive the big non-cash write down in the final quarter.

“As a result of Foxtel’s performance in the first half of fiscal 2017, the competitive operating environment in the Australian pay-TV market and management’s revised projections, the Company determined that the fair value of its investment in Foxtel declined below its $US1.4 billion carrying value to $US1.2 billion. The carrying value had previously been written up in connection with the acquisition of Consolidated Media Holdings Ltd. (“CMH”) in November 2012 and at that time a non-cash gain of $0.9 billion (US$900 million) was recognized on the Foxtel investment.”

Looking at the results for Foxtel, News said revenues for the second quarter increased US$4 million, or 1%, to US$602 million from US$598 million in the prior year period, But in Australian dollars Foxtel revenues fell 3%. But Foxtel’s net income of US$24 million is more than halved from US$52 million in the prior year period, primarily due to a US$17 million loss resulting from the change in the fair value of Foxtel’s investment in Ten Network Holdings and US$5 million in losses associated with the continued operation of Presto.

Foxtel’s earnings before interest, tax, depreciation and amortisation (EBITDA) fell US$11 million to US$144 million from US$155 million in the prior year. In local currency, Foxtel’s EBITDA fell 10%, primarily due to lower revenues and planned increases in programming costs, specifically investments in local productions and sports, partially offset by lower transmission costs. Foxtel’s operating income for the three months ended December 31, 2016 and 2015 was US$93 million and US$99 million respectively. “Operating income decreased primarily as a result of the lower revenues and increased programming spend noted above, partially offset by the positive impact of foreign currency fluctuations,” News said. — Glenn Dyer