SKT Sky Network Television Limited.

**mistaTea** · 10-12-2021, 10:17 AM

Originally Posted by Jay

You could argue that when they lost Cricket, F1, WRC etc etc they did not reduce the price either -
Would prefer the cricket all in one place

Yes that is true...but also consider that the 'savings' they made on cricket, F1 have been spent on the higher cost of NZR etc.

If they just purchased all of the rights from Spark (even at a discount) there would have to be some thinking around whether the entire additional cost could be absorbed into the current pricing model or not.

If Spark do end up getting out of Pay TV I don't think it will be any time soon. One would think that Jolie has paused for thought after the Vodafone update - she has certainly seemed a lot less bullish on Pay TV than her predecessor Simon.

But shutting down Spark Sport would be very embarassing for them, and it is not nearly as easy for them to extract themselves like Vodafone have. Vodafone never had to deal with complex and expensive content rights. All they have to do is cancel their agreement with Sky (which will be super easy because Sky would rather have the VTV Sky subs direct, so no challenge there).

On the other hand, I would say that things are even worse for Spark than Vodafone in terms of ROI. VTV offered a streaming only platform where you could have 'amost' everything in one place...and if you had Vodafone broadband you would get discounts on your Sky sub etc...and it was a disaster.

Spark Sport has cost way more money than VTV, and does not appear to have anywhere near the subs needed to get anywhere near break even. Broadband/Mobile market share does not seem to have changed much either, so I don't think Spark Sport has been a compelling loss leader. At the end of the day, you only save $5/month on Spark Sport if you shift your internet to them - big whoop.

If Spark do stick it out, hoping they get an opportunity to take over the rugby rights from 2026...well, that is a long wait - and I also wonder if there are some potential issues here.

Think back to RWC...Spark had promised the other telcos that they would offer them wholesale rates. They stalled and delayed, and then just before the tournament they launched their pricing offer for the other telcos. It was far from what you would consider 'wholesale' and the other telcos were rightly aggrieved. They had spent a chunk of cash upgrading their networks to support the streaming of the RWC and then got a slap in the face by Spark.

Well, let's just say Spark stuck it out and then did win the rugby...I wonder if there are potential competition issues here. The NZR contract could be considered content of national significance. If Spark used that to offer heavy discounts and undercut the other telcos, gain disproportionate market share etc I think there is an argument for the Comcom to get involved. To avoid this, they would have to offer genuine wholesale deals to all of the other telcos (and Sky is now considered a telco, given we have to pay the infrastructure levy now).
But if they are forced to offer Spark Sport at a little over cost to their competitors then I think it raises more questions as to whether it is even worth their while to pay $100M a year to secure the rights and incur the aditional costs around broadcasting.

Let's watch this space.

**LaserEyeKiwi** · 10-12-2021, 11:10 AM

Originally Posted by mistaTea

Yes that is true...but also consider that the 'savings' they made on cricket, F1 have been spent on the higher cost of NZR etc.

If they just purchased all of the rights from Spark (even at a discount) there would have to be some thinking around whether the entire additional cost could be absorbed into the current pricing model or not.

If Spark do end up getting out of Pay TV I don't think it will be any time soon. One would think that Jolie has paused for thought after the Vodafone update - she has certainly seemed a lot less bullish on Pay TV than her predecessor Simon.

But shutting down Spark Sport would be very embarassing for them, and it is not nearly as easy for them to extract themselves like Vodafone have. Vodafone never had to deal with complex and expensive content rights. All they have to do is cancel their agreement with Sky (which will be super easy because Sky would rather have the VTV Sky subs direct, so no challenge there).

On the other hand, I would say that things are even worse for Spark than Vodafone in terms of ROI. VTV offered a streaming only platform where you could have 'amost' everything in one place...and if you had Vodafone broadband you would get discounts on your Sky sub etc...and it was a disaster.

Spark Sport has cost way more money than VTV, and does not appear to have anywhere near the subs needed to get anywhere near break even. Broadband/Mobile market share does not seem to have changed much either, so I don't think Spark Sport has been a compelling loss leader. At the end of the day, you only save $5/month on Spark Sport if you shift your internet to them - big whoop.

If Spark do stick it out, hoping they get an opportunity to take over the rugby rights from 2026...well, that is a long wait - and I also wonder if there are some potential issues here.

Think back to RWC...Spark had promised the other telcos that they would offer them wholesale rates. They stalled and delayed, and then just before the tournament they launched their pricing offer for the other telcos. It was far from what you would consider 'wholesale' and the other telcos were rightly aggrieved. They had spent a chunk of cash upgrading their networks to support the streaming of the RWC and then got a slap in the face by Spark.

Well, let's just say Spark stuck it out and then did win the rugby...I wonder if there are potential competition issues here. The NZR contract could be considered content of national significance. If Spark used that to offer heavy discounts and undercut the other telcos, gain disproportionate market share etc I think there is an argument for the Comcom to get involved. To avoid this, they would have to offer genuine wholesale deals to all of the other telcos (and Sky is now considered a telco, given we have to pay the infrastructure levy now).
But if they are forced to offer Spark Sport at a little over cost to their competitors then I think it raises more questions as to whether it is even worth their while to pay $100M a year to secure the rights and incur the aditional costs around broadcasting.

Let's watch this space.

I think then one has to consider if Sky would actually be allowed to purchase Spark Sport and/or its content rights due to Comcom concerns. It seems doubtful that comcom would allow the sport market to effectively go back to a monopoly.

I think the only way Sky gets NZ cricket rights back is when NZ cricket offers the rights again (either at the end of the current contract with Spark, or by Spark/NZ cricket mutually agreeing to end their contract early).

Alternatively nothing stopping Spark from offering Sky reseller rights by offering Spark Sport content within SkySport Now, or through a SkyBox linear channel. Even Pay Per View options might be good.

**mistaTea** · 10-12-2021, 11:19 AM

Originally Posted by LaserEyeKiwi

I think then one has to consider if Sky would actually be allowed to purchase Spark Sport and/or its content rights due to Comcom concerns. It seems doubtful that comcom would allow the sport market to effectively go back to a monopoly.

I think the only way Sky gets NZ cricket rights back is when NZ cricket offers the rights again (either at the end of the current contract with Spark, or by Spark/NZ cricket mutually agreeing to end their contract early).

Alternatively nothing stopping Spark from offering Sky reseller rights by offering Spark Sport content within SkySport Now, or through a SkyBox linear channel.

No I don't think it is quite the same thing.

Sky TV already offer wholesale rates for both NEON and Sky Sport NOW. Spark could close down their service, negotiate a transition to Sky and still offer their customers SSN at a discount to upsell their broadband/mobile. As could all of the other telcos if they want to do the same deal with Sky.

I think the trickier part for Sky is if they ever decided to have another crack at being a full blown telco themselves (which would most likely happen in some kind of M&A event). If Spark Sport still exists, then this would be easier. If Jolie cancels SS in part as a defensive move, then it would make things less straightforward for Sky.

Sky would need to show that they have genuine wholesale rates for all of their content offerings, and that those wholesale rates are standardised - so the playing field is levelled.

I think this is what ultimately made the Comcom go against Sky last time...they had various wholesale deals available at the time, and were certainly open to it...but each contract they had with the other parties seemed to have bespoke terms etc. Not good enough to convince Comcom at the time.

But if Comcom could be satisfied that genuine and standard wholesale rates are available to all, then it becomes much more straightfoward.

Of course, it also limits Sky's ability to win disproportionate amounts of market share from the other telcos, but it also helps diversify revenue streams and get their product into the maximum number of kiwi homes.

**snigmac** · 10-12-2021, 02:19 PM

Great to see the $2.4 mark holding up without information on the property sale.

**mistaTea** · 10-12-2021, 02:45 PM

Originally Posted by snigmac

Great to see the $2.4 mark holding up without information on the property sale.

Should see more of "dem gainz" when the property sale is confirmed.

It 'should' already be priced in because it has been all but confirmed by the analysts that the sale price will be in the $50M-$60M range.

But it will be another good news story for Sky heading into the Xmas break.

And then its a short wait until Feb 24 where the next catalyst will happen - buybacks and dividend announcement. That is when we should see another significant re-rate, depending entirely on what their plan is for the considerable amount of funds they have to play with.

At these levels I would prefer a larger buyback and smaller dividend.

Once the SP hits, say, $3 or so then that probably flips the other way. Give me the tax free return until it no longer makes sense. Much bigger dividend to look forward to in 2023 that way.

**mikelee** · 10-12-2021, 02:46 PM

Yes, and reasonable volume too.
Let's hope Sophie have a good X-mas in store for all shareholders.

**mistaTea** · 10-12-2021, 02:48 PM

Originally Posted by mikelee

Yes, and reasonable volume too.
Let's hope Sophie have a good X-mas in store for all shareholders.

Oh yes, I think we all want to know what Santa (Bowman) has in his sac for us...

**snigmac** · 10-12-2021, 03:22 PM

I envisage and hope this hits $3 in Feb 2022. Will need more positive news (like a concrete dividend announcement to push this higher past $3).

**mistaTea** · 10-12-2021, 03:48 PM

Originally Posted by snigmac

I envisage and hope this hits $3 in Feb 2022. .

Very realistic.

And that would be a market cap of only $525M. Depending on the capital return policy...if they do elect an on market buyback...and if they managed to reduce s/o to 160M then all things being equal a $525M market cap would be $3.28/share.

With bigger per share dividends still to come.