Investors buying shares in Ten Network Holdings Limited (ASX: TEN) today could be akin to picking up 5 cents pieces in front of a steamroller.
After falling as low as 35 cents earlier today, Ten's share price is languishing down 18% in afternoon trading. That came after the company released its half-year report which showed a net loss of $232 million – which included a $214 million impairment charge on its television licence.
The problem facing Ten is that the company's $200 million debt facility with the Commonwealth Bank expires at the end of this year. Ten has borrowed $66 million from the facility and seems likely to be forced to borrow again from it before the year is out. As a result, Ten is looking for a new lender to prop it up with a new facility of up to $250 million.
The company's three main billionaire shareholders James Packer, Lachlan Murdoch and Bruce Gordon are expected to decide within the next few weeks whether to stump up more cash or go guarantors for the larger loan.
As usual, the broadcaster blamed the federal government for not cutting TV licence fees, but the network has no one to blame. As we've stated several times, Australia's television advertising market is too small to support three commercial television broadcasters and Ten is looking like the biggest loser. Seven West Media Ltd (ASX: SWM) and Nine Entertainment Co Holdings Ltd (ASX: NEC) easily account for the lion's share of television advertising, leaving Ten to struggle.
And it will only get worse as television advertising revenues move away from the free-to-air broadcasters.
We've long thought (here and here) that one of the broadcasters would be forced to quit the sector as online video services like Netflix and YouTube become more popular, and people spend more time on social media websites for their entertainment.
Ten may not have long left.
