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Foxtel boss defends pay TV future

AAP logoAAP 29/09/2016 Lilly Vitorovich

Foxtel chief executive Peter Tonagh has defended the pay-television company's prospects, saying it generated more earnings than the nation's three major commercial television networks combined.

Mr Tonagh - who took over the reins at Foxtel in March - says there have been negative media and industry reports on the pay TV operator amid the rising popularity of streaming services Netflix, Stan and Presto.

"If you look at the commentary about Foxtel, you could be forgiven for thinking that the business was terminating," Mr Tonagh told a business luncheon in Sydney this week.

Foxtel booked earnings before interest, tax, depreciation and amortisation (EBITDA) of $880 million for 2015/16, down 2.2 per cent from a year earlier.

The fall was due to higher programming and customer offer costs as well as continued investment in streaming group Presto, which it owns with the Seven Network.

That compares to the three commercial TV networks - Seven Network, Nine Network and Ten Network - which are expected to collectively book about $577 million in annual EBITDA for same period.

Foxtel has 2.9 million subscribers that are watching exclusive content including US hit show Game of Thrones and sports programming such as NRL, Mr Tonagh said.

Foxtel recently announced another round of price cuts - due to be announced before year's end - plus programming changes for its Play streaming service in a bid to attract more consumers.

Audience numbers for free-to-air have been falling in recent years, with a corresponding hit to advertising revenue and earnings.

Morningstar analyst Brian Han said Foxtel is doing better than traditional TV companies through retaining customers by cutting prices and giving away set-top boxes, which also double as a hard drive.

"They've got a lot of ammunition up their sleeves to keep you if you decide to leave," Mr Han said.

"The programming suite is much more comprehensive than anywhere else."

But Foxtel isn't doing as well as streaming companies, which are strongly growing customer numbers on the back of lower prices, Mr Han said.

"Comparing (yourself) to a declining medium is always easier than comparing to an emerging medium."

Mr Tonagh was tight-lipped on the possibility of a Foxtel float, saying it was a matter for its two shareholders, News Corp and Telstra.

"That's really a shareholder issue, rather than management issue," he told the American Chamber of Commerce lunch event on Wednesday.

Foxtel - which was launched in 1995 - will need to show a rise in customer numbers following the latest round of price cuts before proceeding with any possible ownership changes, Mr Han said.

"They need a bit more runs on the scoreboard to sell an IPO story right now," said Mr Han, who has an $8 billion enterprise valuation on Foxtel.

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