Terry Television has had a look at all the latest figures and wonders what is the story at Foxtel?

In his quarterly chat with reporters and analysts on Thursday morning, Rupert Murdoch didn’t mention Foxtel, the Australian pay-TV operation that, stacked up against News’ other interests, is just a small part of the empire, especially with attention turning to integrating Direct TV and using it as the platform for the next expansion.

In Crikey’s coverage of the News results we looked at Foxtel, noted the News version of the year with higher debts from the digital roll out and higher subscriber numbers and increased losses.

News put its 25% share of the losses at $19 million after tax and Telstra put its share (for 50%) at $44 million. News said pre-tax losses for Foxtel were $142 million and post tax $109 million. All due to higher marketing costs which are part of the cost of the digital conversion, the higher debt (at $323 million) and higher depreciation charges.

Sort of par for the course for a media organisation still growing but also in the midst of a significant change in technology. But the shareholders remain confident that Foxtel is on track

But delving further into the News report, looking at the Telstra accounts and chatting to odds and sods, it’s clear that while still bleeding badly, Foxtel is not bleeding for no purpose.

The hope remains that the digital conversion will eventually stabilise the operation and give it a platform to boost revenues and produce earnings, which would no doubt be welcomed by shareholders, who include News, PBL and Telstra.

The group says its ‘churn’ has fallen to the lowest level in its history, 16%. But with 904,000 subscribers that means well over 140,000 thousand people will ‘churn’ over the next year if that level is maintained and not improved. (Still, Crikey would love a churn rate of only 14 per cent.)

That’s an improvement on previous years when Foxtel says the churn the year before was almost 20% and well over 23% in 2002. But it’s still a big cost, despite the joy that the lower figure brings.

Tarbs subscribers were never in the equation. The wholesale customers are from Optus and Trans ACT. But looking at the figures for 2003 and 2004 for total subscribers and the Foxtel managed subscriber base, it’s clear there has been a drop in the number of wholesale subscribers.

When Foxtel talks about its ‘managed subscriber base’ it’s talking about all those who come through its operations. All 904,000 of them at June 30. Foxtel says this rose by 8.3% in the year, and the total number, including the wholesale customers, rose by almost 4%.

Foxtel disputes claims that there are still delays to being hooked up to digital. They delay is now put at three weeks. Only five per cent of customers are taking the basic service, compared to 20% in the analogue service. It’s claimed by sources that around half of the digital subscribers are taking the premium package, which isn’t bad but way below the equivalent figure at Sky Italia where more than 80 per cent of subscribers go for the premium package.

Around 310,000 orders have been taken by June 30 according to the News and Telstra briefings and the weekly rate is around 15,000. Some 226,000 people had been connected by June 30 to the digital service, so around 130,000 have taken the top package. That means the stated aim of being cash flow break-even by 2006 is still on track, according to sources from the shareholder groups.

Of the 310,000 orders for digital, around 90,000 were from new customers. A promising level, but not a flood of new people flocking to a new toy! The fourth quarter saw 37,000 net new customers added to the managed base, so that would indicate, more promisingly, that there is an acceleration in the take-up.

Foxtel revenues rose 18% to $767 million in the June year, that’s a not too bad result and would have come from the combination of higher revenues from subscribers and some advertising. Total costs are more than $900 million and that’s the gap that has to be closed.

Will it ever make a lot of money, like BSkyB, which seems to be the model for all these businesses in the News camp. It’s too hard to say, but if it was wholly owned by news, you might like to put a bit of money on Foxtel achieving a lot of milestones much more quickly than it does now with the suspicion and infighting that goes on between PBL, News and Telstra at the shareholder level.

You can bet that Foxtel is one media asset Kerry Packer will never let Rupert Murdoch get total control over, such is his fear of the Murdoch touch and power. News Corp has nominal management control but it can’t do too much without board approval and it needs Telstra and PBL support for that.