Telstra and News Corp “triple-play” could be a home run for business

Telstra and News Corp "triple-play" could be a home run for business

Bundling media and telecom service increases customer "stickiness".

Darryl Daté-Shappard

I started investing after finding a copy of Peter Lynch's "Beating the Street" in the English book section of a library in Japan, where I was living at the time in 1997. Seeing that regular people can find investment ideas just as easily as professionals, I used the philosophy of that book to invest in stocks in Japan, and later in Australia after moving in 2001. I also have experience in property investing, and went on to complete my masters degree in Applied Finance at QUT in Brisbane. I follow the investment style of Peter Lynch, Phillip Fisher and Warren Buffett-- knowing what you invest in, doing your homework to keep up with a stock's story and holding a healthy skepticism of what the stock market calls "value".

Published September 30, 2013 7:35 am AEST

The idea of Telstra (ASX: TLS) and News Corp (ASX: NWS) bundling phone, Foxtel and internet service was talked about in October 2012 when Telstra CEO David Thodey said, "There is plenty of upside in this business, and if Telstra and News can work out how to do the triple-play fairly between them, there is massive upside."

This came in the same month that News Corp bought out Consolidated Media's part ownership in Foxtel, making it a 50-50 partner with Telstra in the cable TV business. Several months before in May 2012, Foxtel had taken over rival cable TV provider Austar in a $1.9 billion offer.

As the two business giants now have control of Foxtel, and News Corp owns 100% of Fox Sports separately, the next stage was to expand the service offering to subscribers, which is the "triple-play" that the CEO Thodey spoke of.

Bundled together, cable TV, home/mobile phone and internet service would be a package that marries up the three services that the majority of Australians use, but could be gotten from different providers. The more services are bundled, the more likely customers will stay with their provider. Telstra's Bigpond service could be expanded with this proposed link up, and News Corp would be able to extend its media empire further into telecommunications.

Previously, Telstra was being protective of its dominant telecom business, but if it can work out a good deal with News Corp, then it can keep growing as the convergence of media and entertainment expands as well.

Talking about the benefits of the "triple-play", the new CEO of News Corp, Robert Thomson, said in New York, "There is a great appeal to it. Anything that increases stickiness and increases adoption is quite transparently a good idea."

Foolish takeaway

After the split-up of News Corporation into print/digital media News Corp and entertainment business Twenty-First Century Fox (ASX: FOX), many thought that Fox would be the "good" company with lots of opportunity to expand, and News Corp was the old newspaper business that was being passed by the internet age.

In addition to $2.6 billion in the bank that can be used towards acquisitions, News Corp has the market savvy to link up with other businesses in telecom or media, be they in Australia, Asia or Europe, that haven't fully made the leap into the future of digital media and big data.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned.

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