TVNZ looked at floating digital arm

KARYN SCHERER reports on the new-tech battle between the state-owned broadcaster and Sky.

TVNZ was considering floating the digital TV company it was planning in conjunction with British cable giant NTL, official papers show.

The papers, finally made public by the Government yesterday, show TVNZ initially hoped to float the joint venture three to eight years after its launch.

It revised its plans, only mentioning the "possibility" of a float.

TVNZ initially considered taking up to 75 per cent of the joint venture, but revised this to 51 per cent. It settled on 66 per cent after another investor decided it would rather contribute debt than equity.

Though TVNZ has painted a bleak picture of its future without the venture, the papers show there was considerable doubt over its plans.

An independent report by Ord Minnett suggests Sky TV was likely to fight an aggressive campaign against TVNZ, possibly including free set-top boxes.

Sky is still hoping the Government will force TVNZ to use its satellite once it converts to digital broadcasting and the papers reveal it tried to convince the Government to set up a meeting between itself and TVNZ after getting the cold shoulder from the state-owned broadcaster.

In January, Sky chief executive Nate Smith wrote to the Government, urging it to consider forcing TVNZ to use Sky's satellite to transmit its digital service, rather than allowing TVNZ to use its own transmission arm, BCL. It stressed its own difficulty making money in New Zealand. "In the 10 years that Sky has been operating it has invested almost $600 million, accumulated over $100 million in losses, while getting 25 per cent of the New Zealand homes to subscribe," the letter says.

In February, Mr Smith said Sky would not charge a non-subscriber for TV One and TV2 if they agreed to pay the full cost of installing a Sky decoder.It also offered to allow space on its satellite for additional channels, provided the Government paid the cost.Sky has long argued the move would benefit both taxpayers and itself, but TVNZ has refused to play ball. TVNZ stresses not owning the set-top box would mean it could not control potential revenue from digital TV. It would also cast doubt over the future of its transmission arm, BCL.