By Glenn Dyer

What’s this … a pay TV business that makes money? And the interim results from Austar leave you wondering why the bigger and better resourced Foxtel can’t make money.

Austar
made a profit of $17.9 million, $10 million of which was racked up in
the three months to the end of June. And it has costs under control.
Compare that with Foxtel which has twice as many subscribers and is
still struggling to break even.

Foxtel would argue that its
situation is different because it is the “platform” for the
subscription TV business in this country and Austar and Optus sell the
basic channels set up or arranged by Foxtel as part of its various
offerings. That’s true, but the fact remains that Austar’s financial
performance is better off a weaker base.

Private equity group
Champ bailed out Austar several years ago as it tottered on the edge of
collapse, injected more capital and organised the financial
restructuring that has helped it to slowly recover and become
profitable. Champ and Liberty Media (John Malone) now jointly control
Austar with around 80% of the issued capital.

Austar’s revenue
grew 19% to $220 million, and the gross margin rose to $117 million, or
53%, which isn’t too bad. In fact, there would seem to be ample room
for more money to be made. Earnings before interest, tax, depreciation
and amortisation grew 43% to $62 million and “available cash” jumped
70% to nearly $80 million. Customer churn was down and revenue per
customer rose – all the sort of indicators Foxtel is aiming for.