Tussle over Ten as Stokes takes a bite

Free-to-air TV broadcaster TEN Network Holdings (ASX: TEN) now has another billionaire on its register, with news that Kerry Stokes’s Seven Group (ASX: SVW) is reported to have picked up 5% of the company in December 2012.

The company now counts James Packer, Lachlan Murdoch, Gina Rinehart, Bruce Gordon and Mr Stokes as significant investors in the business.

The Australian Financial Review (AFR) reports that Mr Stokes, through his group of Seven affiliated companies, which include Seven Group and Seven West Media (ASX: SWM), is believed to have a $40 million holding in Ten. Mr Stokes has a 68% shareholding in Seven Group, which in turn owns 11% of Prime Media (ASX: PRT), 35% of Seven West Media and an $803 million listed investments portfolio. It’s unclear which assets this portfolio holds.

The news comes as the federal government considers plans to relax media ownership rules. Current reach rules prevent metropolitan TV networks, including Nine, Seven and Ten from merging with their respective regional TV affiliates, as part of a prohibition on a TV licence holder from reaching more than 75% of the total population.

Communications Minister Stephen Conroy has pledged to scrap the reach rule and is expected to go to cabinet within two weeks. Should the changes get the green light, we could see an almighty upheaval in Australia’s TV sector, and possibly a five-way tussle over Ten.

Speculation has emerged that, if the media laws were relaxed, Ten could merge with its regional affiliate, Southern Cross Media (ASX: SXL), while Seven West Media may consider a tie-up with its own affiliate, Prime Media.

Foolish takeaway

Fee-to-air TV networks face several headwinds including falling ad revenues and structural threats to their business, as consumers become overwhelmed with entertainment choices. Consolidation may be one way for the sector to fight back.

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