Kiwi dollar set to score in Sky deal

Sky TV is set to begin negotiating rugby broadcasting rights with parent News Corp and is likely to seek a deal in New Zealand dollars to lessen its exposure to currency fluctuations.

Media conglomerate News Corp and South Africa's M-Net/Supersport have hammered out a $460 million deal for broadcasting rights to Southern Hemisphere rugby union through 2010.

The deal struck with Sanzar, which represents the Australian, New Zealand and South African rugby unions, has a five-year term attached to it and will bring Sanzar a 16 per cent increase in broadcast revenue each year.

Sky has held the New Zealand broadcast rights to Southern Hemisphere rugby for the past five years, a deal that consumes a hefty chunk of Sky's $137 million a year in annual programming costs.

The Sky-News Corp deal has traditionally been negotiated in US dollars, but Sky chief executive John Fellet has expressed his desire to settle the next deal in New Zealand dollars.

Sky spokesman Tony O'Brien said it was "premature" to say whether Sky would pay for the rights in New Zealand dollars.

"We're pleased agreement has been reached [with Sanzar]. The next step is for Sky to start talking to News."

Sky's US dollar deals for programming put it at risk of currency fluctuations.

While it has a hedging policy to reduce its exposure, Sky to a large extent is still at the mercy of the US/NZ exchange rate.

"Based on 2004 results, each 1USc movement in the US/NZ rate would have affected operating costs by around $2 million. At the same time, capital costs would have changed by around $3 million," Sky said in its annual report.

News Corp is a large investor in Sky through listed company INL, which is to merge with Sky next year.

The five-year Sanzar agreement replaces News Corp's US$555 million, 10-year accord, which expires at the end of 2005.

"This is a superb result for rugby," said NZRFU chief executive Chris Moller. "It allows us to plan the future with certainty and confidence."

News Corp secured broadcast rights for New Zealand, Australia and the UK.

Greg Baxter, a spokesman for News Ltd, News Corp's Australian arm, said: "The whole deal's worth US$323 million ($453 million) between the two of us."