The James Packer campaign of white-anting Ten Network’s TV strategy and chairman Nick Falloon after the raid on the broadcaster’s share register has worked.

Ten capitulated this morning with this statement:

Ten Network Holdings Limited (ASX Code: TEN) (‘Ten Holdings’ or ‘the Company’) notes recent media speculation about discussions between the Company and Mr James Packer and Mr Lachlan Murdoch following the announcement of CPH’s acquisition of approximately 18 per cent of the issued capital of Ten Holdings.

To keep the market fully informed, Ten Holdings wishes to clarify its position in response to this media speculation.

The Company welcomes the interest of CPH and Messrs Packer and Murdoch in the free-to-air television industry and, particularly, CPH’s investment in Ten Holdings.

The Company has offered Messrs Packer and Murdoch the opportunity to take up two directorships on the Ten Holdings Board, which it considers to be appropriate representation for this shareholding.

The upshot is that Falloon’s role of executive chairman is gone, Ten will give board seats to Packer and Murdoch, but not Paul Bassat, the Packer “mate” who started and who is now retiring and been anointed by the Packer PR team at The Australian and The Australian Financial Review.

The paragraph in the Ten statement “The Company will put in place appropriate Board protocols in relation to decision-making and access to information in order to address any potential conflicts of interest or competition law issues relating to any directors.” is an attempt to get around the obvious conflicts of interest inherent in the board presence of Murdoch (a director of News Corporation and a beneficiary under the various trusts with his brothers and sisters, which would distribute their father’s holding in the event of his death) and  Packer.

Between them, they and their families effectively control pay TV content in this country, via 100% of then most profitable bit Premier Media Group, and 50% of Foxtel.

So why will they be allowed to become directors of Ten if there are conflicts of interest so great they have to be excluded from some Ten boardroom discussions? This is a cop out by Ten and a sign of how large its capitulation has been.

If the two men can’t sit in on all discussions, they can’t be full time directors, can they? As directors both men would have to represent the interests of all shareholders, not just their own stake.

They would have to be excluded from details on sports rights negotiations, program acquisitions, some budgets, programming changes and strategies and launches, ad well as advertising negotiations. What else would be there for them to remain active directors?

No matter how he splits his stake with Murdoch, Packer’s ideas for Ten are also conflicted.

Once they reach 19.9%, Packer and Murdoch will have to move very carefully if their try and buy more Ten shares via the creep method of picking up a parcel every six months (used by Kerry Stokes in Seven). Because there are two people interested in the Ten holding, a case could be made that if they buy shares above the 19.9% limit they could be acting in concert and be required to make a full bid for Ten.

Packer alone would not be so constrained, so the question that no one has asked is why would he want to limit his ability to “creep” up the Ten share register by joining with Murdoch?

A spoiler move against the free-to-air sector to favour his pay TV interests ahead of two very important sports rights negotiations, the AFL and NRL TV contracts?

And finally, the appearance of Murdoch coincided with the presence in Australia of his father last week. Was that a coincidence?

Peter Fray

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