Fellet leaving Sky TV

UPDATED: Analyst on hopes for incoming chief executive — and what Sky will miss about its departing boss. Shares fall sharply. 
John Fellet will step down as CEO within a year (photo: Tinaz Karbhari)

Sky TV chief executive John Fellet says he will retire as chief executive within the next 12 months.

A search is under way for a replacement.

Mr Fellet — currently a director as well as chief executive — will stay on until the CEO search is complete, and he will continue to sit on the board after his replacement is found in management (a development that raised the eyebrows of one analyst NBR spoke to, who said it would have been more usual form for Mr Fellet to take a 12-month break — or, better, not stay on the board at all).

The veteran had been due to step aside with the Vodafone merger. The deal would have seen him become head of content of a combined company led by Vodafone NZ chief executive Russell Stanners.

NBR recently criticised Sky TV for being too slow off the mark in five areas, and noted that Mr Fellet has failed to articulate a clear Plan B after the ComCom nixed the merger. The big idea pushed at the interim result – price cuts – did not impress analysts.

Behind the play with technology
FNZC head of institutional research Arie Dekker says that under Mr Fellet, Sky was too slow to embrace internet-delivered content and new platforms.

The chief executive and the board were also too confident in the Vodafone merger going through. Mr Fellet had told NBR that product development was frozen for the best part of 18 months, Mr Dekker says. 

"Both would also likely concede that they should have progressed the platform options in parallel to the Vodafone merger," Mr Dekker says.

Negotiating skills will be sorely missed
But the FNZC analyst also stresses "Mr Fellet has been a key part of Sky’s success over a long period of time." 

"One of Fellet’s key strengths has been in the aggregation and negotiation of content rights – an area that has been critical to Sky's business over the last 25 years."

The Sky chief executive has locked up exclusive rights to every A-list sport. Mr Dekker hopes he can still contribute to negotiations

Game plan for the new CEO
However, with post-2020 rugby rights soon on the table (Amazon reportedly wants to kick off talks this month), Sky will also need to up its technology game — especially if NZ Rugby follows other major codes around the world and splits broadcast and streaming (or even mobile) rights.

"A new CEO may take the opportunity to take a more aggressive approach on both platform investment and pursue a broader customer base – albeit one that will likely require more flexible content/pricing arrangements to the ones being trialled to date," Mr Dekker says.

Despite Sky's structural challenges, the company is still well-positioned for local content, Mr Dekker says (read: local sports content). He expects the chief executive position to draw a lot of candidate interest.

Part of a pattern
Harbour Asset Management portfolio manager Shane Solly sees Mr Fellet's resignation as part of a wider trend among NZX-listed companies.

He sees a pattern of "accelerated change" and a "refocussing on management" that has also seen a changing of the guard at Sky City, Fonterra and Fletcher Building.

The resignation question
After Sky's disappointing half-year result was reported on February 28, NBR asked Mr Fellet if he was thinking about stepping down.

He replied, "I’ll basically stay or go at the request of the board and the shareholders."

He added, “I’ve put 27 years in here. So, even if I leave, I suspect I would still stay on the board and still be active in governance.”

NBR understands Sky TV is hosting investors today. If they're asking for change, they got some before morning tea.

Sky shares [NZX:SKT] fell 3.88% to $2.23 in early trading after news of Mr Fellet's resignation. The stock is down 40.52% over the past year.

FNZC rates Sky underperform, with a target price of $2.29. There was no change to that rating today.

Before today's announcement, Forsyth Barr rated Sky underperform with a 12-month target of $2.05.

ABOVE: Tech commentator Paul Brislen discusses Sky's half-year result, and what should come next (Feb 28).

Login in or Register to view & post comments