Telstra takes all as Austar exits NZ

By PETER GRIFFIN, telecoms writer

Australian pay TV operator Austar has sold its interest in TelstraClear, handing ownership of its 42 per cent stake to Telstra for A$25 million ($27.3 million).

Telstra's move to full ownership of TelstraClear comes as little surprise because the telco has had full managerial, operational and board control of the New Zealand investment since December 2001 and Austar has struggled with debt issues that necessitated a major overhaul of its business.

Austar had the option to sell its shares to TelstraClear at the end of the 2004 financial year, but brought that transaction forward.

The sale ends a chapter of New Zealand pay TV history that ultimately cost Austar tens of millions of dollars.

It comes as TelstraClear's financial health would give most investors a good excuse to hang around. TelstraClear is profitable at an operating level and chief executive Rosemary Howard expects it to break even by the end of next year.

But Austar was in no position to pour more money into TelstraClear. It did not contribute to the $435 million acquisition of Clear Communications, instead reducing its shareholding. It wrote the value of TelstraClear on its books down to zero.

Initially holding a 50 per cent stake in TelstraSaturn with Telstra and splitting investment costs equally, Austar's interest lay in Saturn, the cable TV component of the firm which provided content across its cable network in Wellington and Christchurch.

Austar spokeswoman Deanne Weir said TelstraClear was always going to be a "long term, capital intensive" investment for Austar, but the firm's game plan had changed. "What we're about now is focussing on our business in rural Australia. The New Zealand investment doesn't fit like it used to."

Austar has also hammered out a deal with Telstra allowing Telstra customers to bundle pay-TV with their phone accounts. Similar to a deal Telstra struck with Foxtel last year, regulatory approval is now needed.

Austar will report its full year result for 2003 tomorrow. Chief executive John Porter said last week that Austar would report strong earnings before interest, tax, depreciation and amortisation and a large capital injection was close to being finalised.

In the year to December 2001 Austar posted a loss of $682 million and wrote off $240 million of assets.