Telstra reaps the rewards as Foxtel riches stream in

Telstra is continuing to reap the benefits of its stake in Foxtel, as the subscription streaming service builds on its sports and entertainment arms, Kayo and Binge.

Foxtel’s streaming services Kayo and Binge are enjoying an ‘exponential evolution’. Picture: David Caird

Telstra is continuing to reap the benefits of its 35 per cent stake in Foxtel, as the subscription streaming service builds on the “exponential evolution” of its sports and entertainment arms, Kayo and Binge.

Telstra CEO Andy Penn is likely to field questions about the telco’s ongoing investment in Foxtel during Thursday’s annual investor call, which will be webcast to Telstra’s shareholders. Despite recent speculation that Foxtel (which is 65 per cent-owned by News Corp, publisher of The Australian) is considering an initial public offering, Morningstar analyst Brian Han said Telstra would be content to maintain its significant investment in the pay-TV company.

“Telstra probably doesn’t want to be sending any mixed signals to the market at this point,” Mr Han said.

“Given the current state of affairs, and how Foxtel has really positive momentum right now – especially on the streaming side of things – this is the time that Telstra should really throw its full weight behind Foxtel.

“Telstra wouldn’t be looking to monetise its stake in Telstra before any possible IPO.

“Monetising the 35 per cent stake would be best done, if at all, through an IPO pathway. To consider doing anything before then would only complicate matters.”

Mr Han said Foxtel’s strong performance over the past couple of years had been a solid pillar for Telstra during the pandemic: “Foxtel … has done well in the lockdown environment, so you’re going to make hay while the sun shines.”

Last month, in handing down News Corp’s end-of-financial-year results, News Corp chief executive Robert Thomson said the number of Foxtel subscribers eclipsed two million in the 2021 fiscal year, a year-on-year increase of 155 per cent – a result he described as “a profound escalation”.

“The Foxtel narrative is particularly positive, as our early emphasis on streaming and on securing long-term, valuable sports and entertainment rights has put the company on a decidedly upward trajectory,” Mr Thomson said.

“We are obviously pleased with the exponential evolution of both Kayo, our sports streaming product, which has rights to Australia’s most popular sports, and Binge, our entertainment streaming service, as they combine world-class technology, clever user interfaces and high-quality, compelling content.

“It is worth pausing for a moment to consider how the Foxtel narrative has changed decisively and positively over the past 18 months. Then, we were being asked whether we would need to put extra funds into Foxtel, and now we have attractive options for a growing, thoroughly contemporary business.”

Telstra’s investor day will include presentations from Mr Penn, as well as the telco’s chief financial officer Vicki Brady.