SYDNEY — A potentially life-saving, infrastructure-sharing agreement between embattled satcaster Australis Media’s Galaxy TV and cabler Optus Vision (OV) was quashed in a surprise ruling by the Supreme Court late Friday.
The ruling may make Galaxy more vulnerable to takeover by a cabler after the market is deregulated in July: It leaves Galaxy without the A$25 million ($20 million) that OV was to have paid in exchange for sharing the costs of satellite transmission, dishes, decoders, subscriber management and some programming. About $116 million in savings over five years could also be lost.
OV was hoping to use the deal to eliminate the need to build a satellite infrastructure after July 1, when Galaxy’s satellite exclusivity expires, and to boost subscription numbers. The deal was brokered after a Kerry Packer-led rescue of Galaxy during one of its liquidity crises last year. Packer didn’t want the stricken Galaxy to fall into the sphere of Rupert Murdoch’s cabler Foxtel.
Foxtel (and its shareholders News Corp. and public telco Telstra) said in court that the deal breached an existing agreement calling for Galaxy to supply key movie programming to Foxtel in exchange for a punishingly expensive $3.5 billion over 25 years. Foxtel said that deal meant Galaxy had to be in control of its own satellite infrastructure.
Galaxy, which called the ruling “ridiculous,” will appeal and is seeking an expedited hearing. In March, Galaxy claimed that if the deal didn’t go ahead, it could have an “adverse effect on the company’s liquidity and, therefore, a significant impact on the company’s ability to continue as a going concern.” Now it is mulling alternatives to achieve the same ends, such as leasing equipment to OV. Galaxy has struggled since a proposed merger with Foxtel was quashed by competition regulators in February 1996.
But Galaxy chief exec Sean O’Halloran told TV reporters Sunday that the satcaster had enough cash to see it through to break-even in 1998-99 and that industry rationalizations didn’t necessarily entail mergers, but a “discontinuation of wasteful infrastructure duplication and reducing program costs.”
The ruling could also affect the float of Optus telco biz, already repeatedly delayed by now-settled lawsuits between Optus and stakeholders US West, Packer and Kerry Stokes. At Easter, Optus bought out the warring feevee shareholders in return for convertible notes in the Optus telco biz.