In all the reporting of the possible sale of the Nine Network, ACP Magazines and Ninemsn, it has been assumed by analysts and commentators that the assets are all attractive.

There are some qualifying comments about Nine being a poor performer at the moment but the valuations so far seem to make a case that Nine is worth around $2.1 billion or more. Morgan Stanley put a valuation out yesterday around that figure and today analysts in UBS’s broking arm valued Nine at $2.472 billion (11 times 2007 EBITDA of $236 million), which is an optimistic call.

That seems overly generous if you look at the current market valuation of the Seven Network which is more profitable and has better prospects, even with the C7 court case in the way.

At Monday’s closing price of $9.35, Seven was valued at $2.083 billion and yet it earns far more than Nine on an EBITDA basis. Nine’s EBITDA fell more than $50 million to $215 million, Seven’s EBITDA from its broadcast operations jumped almost $80 million to $256 million .

And next year there’s every chance Seven will have higher revenues and earnings again: it is trying for a 9.5% lift in ad rates in prime time, but will probably settle for something a bit less.

So you can mount a case that if Nine is worth $2.1 billion, Seven, with a superior profit in 2006 and superior earnings outlook would be worth a lot more: another 50% more to a private equity buyer. Seven is the real value in TV at the moment, despite the uncertainties.

Nine is facing immense programming problems next year, as we are seeing in the closing weeks of the 2006 ratings year. Nine lost last week and will lose this week. That’s apparently after another big loss to Seven last night and another in store tonight with Dancing with the Stars on Seven. Nine trails the week already 28.3% to 25.3%. It stands to suffer a big loss in Sydney as well.

Nine had planned to hit the end of the year with a burst of wins and good programs. Nothing like that has happened.

It does have the cricket over summer which will be exciting and profitable, but you can’t base a $2.1 billion valuation on that, especially with only the Rugby League next winter as the main sport and the AFL on Seven.

Peter Fray

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