TVNZ boss’s $4b Telstra challenge

Aussie telco giant Telstra has detailed Rick Ellis’s new role at the head of a new $A4 billion division that includes Sky TV partner Foxtel.

Mr Ellis resigned as TVNZ chief executive on Friday. He will join Telstra in January.

 In an update for institutional investors, Telstra chief executive David Thodey detailed the company’s newly created digital media division – and its incoming head, TVNZ chief executive Rick Ellis.

Mr Thodey said business units consolidated into the digital media division have 4000 employees and annual revenue of $A4 billion (or around 16% of Telstra’s total).

The units that will be rolled into the digital media division are:
• Foxtel (a joint venture with News Corp. News is also the largest shareholder in NZ’s Sky TV, with a 43.65% holding)
• Sensis (Telstra’s directories division, including its White and Yellow pages)
• BigPond (Telstra’s ISP)
• IPTV (TV delivered via the internet, including the T Box set-top box)
• Trading Post (online classified ads)

The heads of each unit will report to Mr Ellis, who will in turn report directly to Mr Thodey. All face challenges.

Foxtel is trying to push through the final stages of its takeover of Austar, Australia’s only other pay TV provider.

Like all broadcasters, Foxtel is pushing into new media, and new content deliver strategies. Here, Mr Ellis’s fortunes are mixed. TVNZ’s web-based on-demand video has enjoyed high uptake, but the state-owned broadcaster had to write-off $17 million on its investment in Hybrid TV, the Australasian TiVo licensee.

Like directories worldwide in the Google age, Sensis is struggling. At Friday’s investor briefing, Mr Thodey said Sensis had “lower than expected take-up of digital products by SME [small to medium enterprise] customers. Revenues are also lower than expectations because sales completions are taking longer than expected and sales to new customers have been limited as a result. Additionally, the rate of decline in Yellow print directories has also risen significantly as market dynamics change more rapidly than expected.”

These trends would result in “revenue percentage declines in the high teens for the full year.”

Telstra is trying to sell Sensis. So far, there have been no takers.

Mr Thodey also said that Telstra will invest $A100 million over four years to upgrade its media infrastructure.

Big Pond will have to negotiate fast changing wholesale and retail internet markets as Australia’s National Broadband Network (NBN) is rolled out.

And the T Box (a sibling of TelstraClear’s set-top box of the same name on this side of the Tasman) has faced relatively low customer update so far.

“The investment will help bring to life Telstra’s digital home, and enable Telstra’s enterprise and business customers to more efficiently deliver broadcast-quality video streaming services to end-users over any device connected to the internet,” the company said in a statement.

Mr Thodey said Telstra was on track to achieve low single digit revenue growth for its current financial year. For its 2011 financial year, Telstra reported revenue of $A25.09 billion.