Telstra did not match News Corp in writing down the value of its 50% stake in Foxtel, the country’s declining pay TV operator. News Corp directors last Friday revealed a US$227 million write-down in the value of its stake in Foxtel, and warned that if trading conditions and revenue growth didn’t pick up, a further cut could be needed later this year or in the 2017-18 financial year.

In its half-year profit statement today though Telstra directors did not mention any impairment — presumably that is because the Foxtel stake is in its accounts at a much lower value and one that is not yet threatened by the slide in Foxtel’s performance. When News Corp secured its final 25% stake in Foxtel via the takeover of Consolidated Media Holdings, it paid James Packer, Kerry Stokes and minority shareholders too much and was forced to account for the overpayment by boosting the goodwill and other intangible value of the 50% stake. That was written down last week, and there’s another half a billion dollars or so in the News Corp accounts at risk of further impairment if Foxtel’s trading position does not stabilise.

And it’s rough for the once powerful pay TV giant. Telstra revealed this morning that there was no dividend received from Foxtel for the December half year, compared with $25 million a year ago and $125 million in the six months to December 2014. The dividend for the six months to December 2015 was chopped to allow Foxtel to conserve cash and face growing pressure from new competitors from Netflix, to invest in the now failed Presto streaming service and to finance new investment in programming and subscriber retention.

Telstra also revealed that subscriber numbers fell to 2.82 million from more than 2.9 million at June 30 last year (according to News Corp). That’s a fall of around 100,000 in six months.

Telstra and News Corp still receive interest payments from Foxtel for a shareholder loan. But the interest rate on that was trimmed last June from 12% to around 10.5%, again to help Foxtel’s financial position and ease the outflow of cash. That also means a lower distribution from this loan to the two shareholders. — Glenn Dyer

Peter Fray

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