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The Sydney Morning Herald

OPTUS GRABS LEAD IN PAY TV

Author: By SUE LECKY
Date: 20/09/1994
Words: 891
          Publication: Sydney Morning Herald
Section: Business
Page: 41
The powerful $3 billion telecommunications alliance between Optus and the Seven and Nine Networks has increased the pressure on Australis Media to secure programming for its rival pay TV operations.

Optus and its new partners are expected to announce a formidable programming line-up, including movies and sport, in the next fortnight, turning up the heat on Australis to tie down its mooted Hollywood deals.

The Optus Vision joint venture announced yesterday will be 35 per cent owned by Optus, 30 per cent by the third biggest cable operator in the US, Continental Cablevision, 20 per cent by Nine and 15 per cent by Seven.

The partners expect to spend $2.5 billion between them in the next four years to roll out a hybrid fibre optic/coaxial cable network to more than three million homes.

The roll-out schedule dwarfs plans by Telecom, which is building its own cable pay TV network with the aim of reaching 1.7 million homes by the end of 1996.

It also challenges Australis, which has so far failed to capitalise on the head start afforded by its acquisition last year of a satellite pay TV licence and ownership of microwave licences in every capital city.

Optus's network, which is to be strung from power poles in major urban centres, will provide not only pay TV and interactive services but provide an entree for the second carrier into the market for local phone calls.

Initial capital requirements will be funded partly by equity, with the rest from debt, although Optus chief executive Mr Bob Mansfield said the exact proportions had yet to be determined.

"We haven't decided on equity commitments but it would be in the range of$1 billion to $1.5 billion for the first couple of years," Mr Mansfield said.

The chief executive of the Seven Network, Mr Bob Campbell, said the venture would be conservatively geared and not be burdened with high debts.

"We will sit down as a joint venture and work out the balance between debt and equity," he said. "This is not going to be a joint venture crippled with debt."

The move comes less than two weeks after the much vaunted PMT pay TV consortium between Nine, Seven, Mr Rupert Murdoch's News Ltd and Telecom was dissolved.

Mr Campbell confirmed, however, that Seven had been in discussions with Optus and Continental for about six weeks. He said the network had considered a range of options to become a major player in the multi-media era and believed Optus provided the best opportunity.

Mr Campbell declined to comment on the attitude of Seven's two major shareholders, Telecom and News Corporation, to the deal. "This to us provided the best opportunity we had seen to participate not just in the provision of subscription services, but also in telephony, and we've taken a decision for the overall good of the share register," he said.

News and Telecom have been holding discussions about strategy for pay TV, although sources within News have indicated the group is still some way from a decision.

Both News and Telecom will gain an indirect interest in the Optus Vision venture through their 15 per cent and 10 per cent respective shareholdings in Seven.

Most observers expect Telecom to offload its Seven Network shareholding now that the television group has switched camps.

Mr Mansfield said he did not expect the joint venture would have any impact on Optus's plans to float next year. It could mean the carrier seeks more from the sharemarket than originally envisaged, however.

Optus will fund its share from existing credit and $318 million in new capital to be paid in by Nine when it completes its purchase of 15 per cent of Optus, which is expected soon, Nine's chairman Mr Bruce Gyngell said.

Optus will be responsible for installation of the network and will provide local call services, while entertainment and interactive services will be provided by the joint venture.

RIVALS PONDER OPTIONS

AUSTRALIS

Teamed up with TCI (world's largest cable operator). Satellite and MDS services due start in 1995

NEWS CORP

Possible joint venture with Telecom.

TELECOM

Cable network passing 1.7m homes in 1997.

CABLE TV SERVICES

Attempts to raise $42m for 15 channels on Telecom network is so far unsuccessful.

 
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