Although investors were focused primarily on the Telstra Corporation Ltd (ASX: TLS) share price and its decision to cut its dividend in FY 2018, it wasn't the only thing the company announced yesterday.
After the market closed the telecommunications giant released a joint announcement with News Corp (ASX: NWS) which revealed plans to combine Foxtel and Fox SPORTS Australia into a new company.
The two parties believe that doing so will create a company that is well positioned to deliver premium sports as well as home-grown, original and international entertainment in a rapidly evolving and competitive marketplace.
Subject to the conclusion of definitive agreements and regulatory reviews, News Corp will have a 65% shareholding in the new company and Telstra will hold the remaining 35%.
Furthermore, the two parties believe that combining the two will better position the new company for an initial public offering in the future.
Should you invest in a Foxtel IPO?
In the past there had been a lot of speculation that one day we would see a Foxtel IPO. I believe yesterday's announcement means it is now a near certainty, pending regulatory approval.
Whilst ultimately a decision to invest in a Foxtel IPO will depend a lot on what price its shares are offered at, investors will also have to consider whether the company can compete successfully with on demand services such as Netflix and Stan.
Whilst I believe that Foxtel is a strong product, I am concerned by the cord-cutting being witnessed by many of its international peers including Sky in the UK and ESPN in the United States.
Foxtel has taken steps to tackle this through the launch of Foxtel Now, but at this stage it is too early to know if the launch is having a positive impact on the business.
