CBS at Ten could stem rivals cash flow

THE sale of the Ten Network to US media giant CBS would likely cause havoc for rival broadcasters Seven West Media and Nine Entertainment, an analyst has warned.

Morningstar senior equity analyst Brian Han believes that a CBS-controlled Ten could hit revenue share and margins at the two larger freeto-air networks.

CBS – Ten’s largest creditor – in August launched a surprise bid for the failing broadcaster, which entered admin- istration in June when major shareholders Bruce Gordon and Lachlan Murdoch pulled their support for a new funding deal after an existing facility expired.

Ten’s creditors last month voted overwhelmingly in favour of the CBS takeover, which included the acquisition of Ten’s Eleven channel, channel One and digital platform TenPlay, spurning an advance from media moguls Mr Gordon and Mr Murdoch.

The Supreme Court dis- missed an attempt by Mr Gordon to derail the CBS bid, although the pair indicated they intend to appeal the court decision – and have yet to decide whether to block a final transfer of Ten shares to CBS.

Mr Han said CBS’s annual $US3 billion ($A3.8 billion) earnings and $US2 billion free cash flow would help Ten retain existing rights such as Big Bash cricket, develop more premium local content and apply for marquee sports rights as they went up for renewal.

He added that if CBS took control of Ten and succeeded in lifting the network’s share of the $2.8 billion capital city freeto-air advertising market, Nine and Seven’s valuation could drop between 15 per cent and 27 per cent due to falling share values and lower margins.

“Such a step-up in competitive dynamic is the last thing the free-to-air TV market needs, given the structural pressures already decimating the industry,” Mr Han said in a note to investors.