The shares of Ten Network Holdings Limited (ASX: TEN) could cease trading forever today if the company decides to enter voluntary administration.
The commercial television broadcaster problem is that a $200 million loan facility is due to be repaid in December, but Ten doesn’t have the cash. The company would need to get another loan from somewhere else, but wherever it turns, potential lenders are turning it away.
We’ve highlighted the issues in Australia’s free-to-air sector for many years (including here and here), which essentially boil down to the fact that our sector is too small to support three commercial broadcasters. Seven West Media Ltd (ASX: SWM) and Nine Entertainment Co Holdings Ltd (ASX: NEC) dominate the advertising revenue market with shares of around 40%, leaving very little for Ten.
The one hope that Ten could hold out for is that a white knight comes to its rescue. It’s possible that News Corp (ASX: NWS) could look to take Ten over, but the diversified media company needs the media reach rule to be abolished. The rule states that one company can’t reach more than 75% of the Australian population. There’s also the “two out of three” rule which prohibits a person or company from controlling two out of three media platforms – in the form of radio, television and newspaper.
News Corp already owns 7.7%, Bruce Gordon owns 15%, while pay-TV operator Foxtel owns 13.9%. News Corp owns half of Foxtel too.
The problem News Corp faces is that the Senate is blocking the government from changing those rules.
Newspaper reports suggest that Ten is looking at other measures to keep itself alive, including renegotiating onerous content contracts with US studios CBS and 21st Century Fox which cost Ten more than $150 million a year.
There have been plenty of warnings in the media and from us over the past five years about Ten and investing in the company. It was clear that the broadcaster wasn’t investment grade, and there were plenty of other opportunities out there.
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