While News Corp was gloomy about its Australian newspaper businesses — with forecasts of more pain and cost cuts to come in the 2013 financial year — its about to be 50% owned associate, Foxtel, confirmed that it is not only the biggest and most profitable media company in Australia, but it is about to become even bigger and more profitable in the wake of the Austar takeover.
News forecast a flat year for its about-to-be-divorced publishing business because of more cuts and weak revenue expectations for the Australian newspapers. But no such concerns for Foxtel: after the $2 billion Austar takeover, it’s heading for earnings before interest, tax and depreciation and amortisation (EBITDA) of more than $950 million, perhaps a billion, for the current financial year.
Foxtel, which is 50% controlled by Telstra (and News Ltd will grab the other 25% owned by Cons Media to add to its 25% when the Cons Media bid goes through), this morning reported record EBITDA (before one-off, transaction and integration costs and consolidation of Austar) of $598 million, up 8.5%. Given Austar earned an EBITDA of $335 million for the 2011 financial year and Foxtel said this morning it had already identified cost savings of $40 million from the merger and made them, the company should be able to boost gross earnings to close to $1 billion by June 30 next year.
At that level it will be bigger than Seven West Media (which is expecting EBITDA for the 2011-12 financial year of around $473 million. It will be more profitable than Foxtel, and News Ltd, according to some analysts.
Foxtel’s revenues for the year were up by almost 4% to $2.2 million. With the $710 million plus from Austar, that will rise to close to $3 billion this financial year. Including the costs associated with the merger from May 23 and other costs, EBITDA came in at $558 million. On that basis, the company will earn well over $900 million this financial year.
Foxtel said subscriber growth was subdued, up to 1.68 million net from 1.65 million at the end of June 2011. Subscriber numbers fell in 2011-12 to 1.58 million at the end of last December, then rose 10,000 in the June half year, perhaps helped by the bigger AFL offer which is supposed to drive subscriber growth in Victoria in particular.
Foxtel said that its subscriber churn was 13.2% in the full year, down fractionally from the 13.4% level at the end of last December.