Foxtel boss Patrick Delany points to subscriber growth and loyalty as IPO looms

Foxtel boss Patrick Delany has cited the growth and loyalty of its subscriber base, as well as healthy revenue streams, as the key markers of the company’s turnaround.

Foxtel CEO Patrick Delany: ‘The Foxtel business is about maintaining and strengthening the customer base we have, and same with the revenues.”

Foxtel chief executive Patrick Delany has cited the growth and loyalty of its subscriber base, as well as healthy and diverse revenue streams, as the key markers of the company’s turnaround amid continuing speculation of an initial public offering before the end of the financial year.

Speaking to The Australian following the release of News Corp’s second-quarter results on Friday, Mr Delany pointed to the Foxtel Group’s burgeoning subscriber numbers, the return of strong ad revenues, and the fact its churn rate (the percentage of subscribers who discontinue service) had dropped to 13 per cent – its lowest level in more than two years – as clear signs the streaming-led company had momentum.

“We’re doing the things we said we’d do at Foxtel – we’re getting churn down, and we’ll continue to have progress on that, and revenue is on the up,” he said.

“The Foxtel business is about maintaining and strengthening the customer base we have, and same with the revenues.”

Last week’s results showed the total number of Foxtel Group subscribers as at December 31 was 4.08 million, up 21 per cent on the previous year. Revenue-per-user was also up.

Kayo Sports and entertainment streaming service Binge have more than one million subscribers each, with streaming subscribers now representing 56 per cent of the Foxtel Group’s total subscribers. In 2016, that number stood at just 8 per cent.

In September last year, Mr Delany said Foxtel was aiming to have five million paid subscribers in the next three years. “We are well on our way,” he said.

Asked about the ongoing speculation about a public float, Mr Delany said the stability of the company was “very encouraging for all investors”.

“I don’t think much has changed in terms of speculation, but what has changed is that we’re delivering very stable results, which we said we would,” he said.

“Whether the owners (News Corp, publisher of The Australian, has a 65 per cent stake in Foxtel, with the remaining 35 per cent owned by Telstra) decide to offer part of it to the public, or whether we’re talking to debt markets about refinancing, or frankly, our own shareholders, we are building stable value.

“I would like to see our debt levels lower but with our cash flow we could easily pay back debt.

“I think we can cope with whatever structure. It (a potential public listing) really is a matter for the shareholders.”

During an investor briefing following Friday’s results, News Corp chief executive Robert Thomson said: “We are increasingly confident in Foxtel’s future and thus actively looking at ways to maximise its value and ensure that we can build on that success.”

Despite some industry nervousness that customer appetite for streaming products might be softening – subscriber growth for global market leaders Netflix and Amazon has softened in recent months – Mr Delany said the outlook for the Australian market was positive.

“We’re not seeing any slowing acceleration of streaming appetite in our world,” he said. “But that’s probably because we have got a great tech stack and very good content. Although I would see some benefit in investors moving away from the euphoria of the word ‘streaming’ and the euphoria of subscriber numbers, and start looking more closely at underlying revenues.”

Mr Delany said he and his management team felt great pride in the streaming-led turnaround.

“Foxtel was once seen as a bit of a dinosaur but the old dog has learned new tricks,” he said.

“Customers and the financial markets are respecting the company brand again.”