Southern Cross Austereo (ASX: SXL) (SCA) has made a significant move in the strategic review of its non-core regional television assets. The company has signed a heads of agreement to sell its television licences in the three aggregated markets (3-Agg Markets) of Queensland, southern New South Wales, and Victoria to Network 10. This marks the first major step in SCA’s efforts to reshape its regional television portfolio.
The sale will see Network 10 acquire the licences currently used by SCA to broadcast Network 10 programming under regional affiliation agreements. The transaction is expected to be finalised by February 2025, pending execution of final documentation, approval from foreign investment regulators, and resolution of broadcast transmission agreements with service providers.
As part of the agreement, SCA will retain a financial stake in the licences for five years after the sale, receiving a share of the profits during this Participation Period. The company estimates total gross consideration from the deal to be between $15 million and $20 million, with a net present value of $10 million to $15 million.
Additionally, SCA could benefit from a potential “digital dividend” if Network 10 surrenders its spectrum in the 3-Agg Markets to the Government, although no firm plans for such a dividend have been announced.
Long-term impact
Network 10 will take operational control of the 3-Agg Market licences upon completion, integrating them into its broader network operations. This transition is expected to create a more sustainable earnings model compared to SCA’s current regional affiliation arrangements.
To support the ongoing relationship, SCA will maintain its local salesforce in these markets and provide third-party local advertising sales representation services for Network 10 throughout the Participation Period.
Broadcast transmission agreements
A key condition of the sale involves renegotiating broadcast transmission agreements. Network 10 and BAI Communications are required to enter a new contract for transmission services in the 3-Agg Markets, replacing SCA’s existing contract with BAI. This agreement will remain in effect until 1 September 2034, with SCA assuming certain financial liabilities if the contract is terminated by Network 10 after the Participation Period.
Broader strategy
SCA has also confirmed it is in discussions with multiple parties regarding the sale of other regional television assets, including those in Tasmania, Spencer Gulf/Broken Hill, Darwin, and Remote Central and Eastern Australia. Updates on these negotiations will follow in due course.
The proceeds from the 3-Agg Markets sale will be directed towards reducing SCA’s net debt, aligning with the company’s strategic focus on strengthening its financial position.
Following today’s news, Beverley McGarvey, president Network 10, head of streaming & regional lead, Paramount ANZ shared the following message with Paramount staff in Australia:
“Dear all
Southern Cross Austereo (SCA) has announced that it has signed a Binding Terms Sheet for the sale of its television licences in Queensland, southern New South Wales and Victoria to Network 10.
This announcement reinforces Paramount’s commitment to the Australian market and in particular Network 10.
Please note that the completion of the sale is subject to certain conditions, including appropriate regulatory approval.
The SCA ASX release which contains further information is attached.
Please don’t hesitate to reach out to your manager or HR business partner if you have any questions.
Kind regards,
Beverley”