Foxtel is a monopoly. It is controlled by media tycoon Rupert Murdoch and operates with the privilege of a government licence. But this privilege, and its attendant freebies, have not stopped Murdoch’s News Corporation from smuggling Foxtel out of Australia to a mysterious entity in the secrecy jurisdiction of Delaware.
Keeping tabs on this breathtaking chutzpah of the Murdoch clan:
- News Corp wins Pay TV licence for Foxtel.
- Foxtel makes billions in profits.
- Pays almost no tax.
- Is allowed to take over rivals such as Austar to entrench its monopoly.
- Is given government grants without reasonable explanation.
- News Corp then quietly shifts it overseas.
This sheer brazenness of Rupert Murdoch – or perhaps it is his son Lachlan reshaping the group – is but part of the changing News Corp picture, one part in a radical restructure of the Australian assets whose purpose appears to be cleaning up the Murdoch house for sale.
News Corp is a veteran of corporate chicanery, of tricky manoeuvres mostly designed to denude some tax authority somewhere of revenue. Rupert’s latest caper however is of greater historical significance.
Murdoch built his global media empire from a single newspaper in Adelaide. The empire is now unravelling quickly, his old media revenue fortress under fatal attack from new media and News has been scrambling for three years to dump assets and cut costs. So it is that he has restructured his Australian operations and reduced the Australian footprint by putting $6.3 billion of assets up for sale.
He has done it in such a way as to disguise the impact on his finances, indeed the very solvency of News Corp in Australia. Both the revenue of his top company News Australia Holdings, and the value of its asset base, are dropping sharply.
To the corporate plot. News Corp has broken its Australian operations into three groups: Foxtel, the City Mastheads and the Regional Mastheads. Bear in mind that the group has already been in talks – most notably with Antony Catalano’s Australian Community Media – to sell its regional newspapers.
Whither Foxtel?
Foxtel has disappeared from News Australia’s balance sheet, but the accounts don’t say where it went. What happened?
Nothing happens at News Corp without a plan.
Under serious attack from the incursion of streaming giants such as Netflix, things turned more sharply south for Foxtel’s 35% shareholder Telstra in February this year, when it accepted that Foxtel may not be paying its cable transmission fees any time soon. Telstra agreed it would wait till the end of 2027.
In the meantime they’d be receiving interest at just above 7.75%, but the interest could capitalise and may not be paid till 2027 either. In a worst case Telstra could wait to get around $330m in seven years.
Three months later, in May, Telstra wrote down its investment in Foxtel by $300m.
It did not have much choice, News Corp had just announced in New York that it was writing down its 65% of Foxtel, by $931m, backdated to March 31. By the time it published its accounts in October, News Corp was saying up to another $900m was at risk.
The next step was for News Corp to remove Foxtel from the Australian segment of its accounts, the ones published by News Australia Holdings.
Over two days in June, it prepared News Pay TV Financing, an Australian company, to take Foxtel. News Corp tidied up News Pay TV’s capital structure and then transferred it from News Australia to News Corp itself and to another Delaware company: News Australian Holdings LLC.
Delaware filing – no shareholder disclosed
News then waited for the June 30 balance date to pass and, on July 2, it capitalised News Pay TV. News Pay TV then paid $865,781,326.66 for 65% of Foxtel, removing it from the Australian Group.
Michael West Media has traced the structure to Delaware. Alas, it is possible to entirely hide shareholders and directors if you set up a company in Delaware. That is precisely what News has done and the broadcasting regulator, the Australian Communications and Media Authority (ACMA) seems none the wiser.
Has ACMA been told by News? Does it know that Foxtel has disappeared from Terra Australis? We put questions to the chair Nerida O’Loughlin but there has been no response.
The Regionals
Meanwhile, back to June. News Corp moved the regional Australian mastheads from the Australian reporting group by releasing control of their owner News Corp Australia. A plausible explanation is that it is cleaning up the newspapers for sale (despite having accepted millions in government grants in regional newspaper subsidies earlier this year).
The City Mastheads
The Melbourne Herald Sun, Sydney Daily Telegraph, Brisbane Courier Mail – along with a few other bibs and bobs – is all that’s left now under News Australia. News Australia won’t be reporting next year about Foxtel or the Regionals.
A Noisy Stub: Rupert Murdoch’s Australian news assets valued at zip
Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.