Foxtel’s owners, News Corp and Telstra, took extraordinary steps to restrict cash outgoings by the pay TV giant in the year to June as it battles stronger competition from streaming video services such as Netflix and Stan (owned by Fairfax and Nine) as well as Optus. It also faces a possible major restructuring and possible float by the owners next year, which could also account for the change in policy as the duo seeks to improve the financial picture at Foxtel from past years.

The moves by the shareholders and Foxtel management (which are appointed by News Corp) are detailed in the brief accounts for the pay TV operator included in News Corp’s 2015-16 annual report filed with the US Securities and Exchange Commission early Saturday, our time. Chief among the moves was the slashing of cash distributions from Foxtel to News and Telstra, as well as cutting the interest rate (and dividends) on a controversial $902.6 million in shareholder loans. As well, Foxtel decided to extend the depreciable life of its assets by 50% — from four to six years, which had the impact of cutting the company’s depreciation bill and boosting profits. And the accounts also reveal a nasty “temporary” multimillion-dollar impairment of its shareholding in the Ten Network. But the most important move was cutting cash distributions and the interest rate and dividends on the shareholder loans.

Peter Fray

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