Telecom snuggles up to media group

By RICHARD BRADDELL and KARYN SCHERER

Telecom has taken a strategic foothold in the rapidly converging telecommunications and media industries, confirming yesterday that it had bought a 5.7 per cent stake in media group Independent Newspapers.

Chief executive Theresa Gattung was travelling back from Europe last night, but in a statement she described the $94.6 million deal as further evidence of Telecom's transition from a traditional telecommunications company to "a serious online and solutions player."

While Telecom is not seeking more shares at this time, she described the investment as "a small strategic position which will allow us to build a closer relationship over time."

The INL stake gives Telecom some influence over one of the country's major media organisations. INL owns just under half of pay-TV operator Sky as well as several major newspapers, including the Evening Post, the Dominion and the Press.

The publications could supply news and information to Telecom's internet portal Xtra, which in turn could provide them in trimmed-down form using emerging wireless internet protocols that will service mobile phones.

As yet, Telecom's cellular network has limited wireless data capability, but that will change as a new CDMA network under construction comes on- stream.

It is also believed to be keen to influence a deal with Sky, which could see customers offered a triple package of pay-TV, internet access and telephony.

Thwarted by fierce litigation brought by Clear when it wanted to buy into Sky five years ago, Telecom ultimately abandoned construction of its First Media broadband cable network, which would have been able to carry Sky content.

Under a 1997 court ruling, Telecom has to give Clear 14 days' notice of any programming arrangement or investment in Sky.

The Commerce Commission said Telecom had notified it of the acquisition.

The chief executive of cable operator Saturn Communications, Jack Matthews, said his company would have no problem with Telecom taking content from INL newspapers. But it would object to an exclusive programming arrangement with Sky.

Some analysts have speculated that Telecom might want to boost its holding, and that Rupert Murdoch's News Corporation could be keen to reduce its stake.

INL managing director Mike Robson said he was unaware of any such intentions.

Mr Robson said Telecom had not yet talked to INL about its plans, other than to let it know about its stand in the market.

He described the deal as very early days and said it would have no effect on the company's plans to launch a web site in May.

"Obviously the components of the new knowledge economy or whatever you want to call it are content and communications links, but that might not necessarily be the links that are used in our case and our content might not necessarily be the content that Telecom uses for any ambitions they have."

INL's main rival, Wilson & Horton, said the move was likely to hasten its own foray into new media.

The group, which publishes the Herald, has already indicated it intends to invest in internet companies, as well as other joint ventures.

Chief executive John Sanders said the company had not yet talked with either Telstra or Clear, but it was an option it might investigate. It might also want to talk to Telecom about a content deal.

Meanwhile, Ihug director Nick Wood claimed paranoia was behind the deal as Telecom realised it was better to find a partner than stand alone.

However, one analyst, who did not want to be named, predicted the move would not bode well for the proposed merger between Ihug and Force Corporation.

"It's another nail in the coffin of Ihug and probably another one in the coffin of Clear as well," he said. "At the end of the day, these guys are going to continue to get marginalised as the big players get bigger and the small players get smaller."

Related sites:

INL

Telecom

Xtra

Sky TV