Time Ripe for Sale of TV2, says Bank

The Government should cash in on a shake-up in Australasian media ownership by selling TV2, a move that could rake in $436 million for the taxpayer, investment bank Goldman Sachs JBWere says.

Goldman analyst Rodney Deacon suggests that, with TV2 sold, TV1 could be transformed into a BBC-style, commercial-free, public channel fulfilling TVNZ charter obligations. Mr Deacon values TV2 at $392 million but said that, based on recent media deals, it could fetch $436 million.

“TVNZ’s recent trading record and the rising value of Australian TV stocks has presented an opportune time for the New Zealand Government to review its ownership of TVNZ,” he said.

Imminent Australian law changes will relax media ownership across the Tasman and shake up the ownership structure of New Zealand media. Just last week, Irish billionaire Tony O’Reilly’s Independent News & Media, in partnership with two American private equity funds, offered A$6.05 a share for the 60 per cent of New Zealand Herald publisher APN News & Media that it does not own. The offer values APN at A$3.8 billion (NZ$4.2 billion).

Canada’s CanWest Global, which owns 70 per cent of TV3 parent CanWest MediaWorks New Zealand, is reviewing its stake.

Possible TV2 bidders include pay TV group Sky Network Television, CanWest MediaWorks, Australia’s Seven Network, Dominion Post publisher Fairfax Media and private equity funds, Mr Deacon said.

A sale now, with TV2’s ratings set for a boost from the return of hit shows Lost, Desperate Housewives and Grey’s Anatomy in February, could be near perfect timing for the Government. Total Media estimates TV2 had 23.9 per cent of prime-time audience share among 20-54-year-olds during November compared with TV3’s 27.6 per cent and TV’s 23.5.

“Recent transactions in Australia suggest that TV2 would be a sought-after asset and likely to attract a sizeable premium,” Mr Deacon said.

He acknowledged that privatising key assets was “not within the psyche” of the Labour-led government. But splitting TVNZ now made sense. TV1 had lost 26 per cent of its prime-time audiences since the charter was put in place on March 1, 2003. TVNZ had struggled to fulfil its obligations as a state-owned, commercial broadcaster.

“This is because the role of the Government as both owner and regulator has interfered with TVNZ’s strategy.”

He estimates TV2 accounts for about 55 per cent of TVNZ’s revenue and half its costs. In 2006 the company had revenue of $410 million, 82 per cent of it from advertising. TVNZ’s earnings before interest, tax, depreciation and amortisation were $35.6 million.

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  • Anonymous

    Privatise the friggin thing! i wonder if we get tax reductions now that it’ll soon be out of tax payers misfortunes

  • bobscoffee

    Why would we be getting tax reductions after selling TV2? TV2 earns TVNZ just over half its revenue. How will a non-commercial TVONE pay for itself?