Ten faces fight for future after A$232m loss

Australia’s third largest TV channel, Network Ten, has warned its future is in danger after recording a huge half-year loss.

Paul AndersonThe company share price continued to fall – it is down 60% in a year – after it posted a first-half loss of A$232 million (US$173.3 million), mainly relating to licence fee writedowns.

The broadcaster’s directors warned the Australia Securities Exchange the business was in a perilous position that would worsen if it cannot renegotiate a A$200 million debt facility to free up cash by the end of the year.

“As a result of the matters disclosed, there is a material uncertainty that may cast significant doubt on the group’s ability to continue as a going concern,” the company warned in a stock market statement. “Therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.”

This effectively means Ten is relying on shareholders Lachlan Murdoch, Bruce Gordon and James Packer to guarantee a debt facility of around A$250 million.

The trio currently guarantees the existing facility, and own significant stakes in the business, along with Gina Rinehart.

However, Ten told the market it was “reasonable” to assume it would be able to renegotiate the facility and costly programming agreements, plus find a way to lower the cost of annual licence fees paid to government.

The channel has struggled against rivals Seven and Nine, and was in a similarly challenging financial position before News Corp-backed pay TV rival Foxtel acquired a 15% stake in the business in June 2015.

Ten’s half-year TV revenue of A$341.4 million was actually up 2.1% year-on-year, and increased its revenue market share by 1.8%.

The television unit made a loss of A$2.4 million, which was well down on a A$10.1 million profit a year before. This was offset, however, by a huge impairment charge of A$214.5 million relating to the value of its TV licences.

“The above-market revenue growth and increase in revenue share during the first half of the 2017 financial year was driven by investment in local content and the audience momentum Ten has built in recent years, along with the continued success of our partnership with Multi Channel Network Pty Ltd [MCN],” said Ten CEO Paul Anderson (pictured).

“However, as we flagged in the February 16 trading update, the growth in revenue was not enough to offset the weak conditions in the television advertising market and the company’s increased content and other costs.”

Anderson pointed to the local version of I’m a Celebrity… Get Me Out of Here and Australian Survivor as two strong formats, but noted The Biggest Loser: Transformed was “not performing”.

One potential outcome of the situation could be Foxtel moving to buy Ten, according to several local news reports.

Though current guidelines stop Foxtel co-owner News Corp from owning pay TV, radio and free TV assets at the same time, the Australian government is thought to be keen on relaxing the rules.

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