Seven: The new Telstra?

Summary:A good merger always gets the pulse racing -- and Seven's takeover of Unwired could be shaping up to be one of the most interesting for a while.

The world of mergers and acquisitions often has a big yawn factor. So and so bought so and so to get its customers or to catch up with its competitors, customers are wondering when they'll be forced into inevitable upgrades, shareholders go berserk, yadda yadda yadda.

From a news perspective, of course, the most widely covered M&As are those with big tickets attached -- the ones where you know the CEO has put his neck on the line and the analysts and journos are lining up to opine on who'll be setting up the guillotine. A well-chosen purchase can reinvigorate a company and open up great new horizons, but a badly considered merger can be a strategic nightmare.

It's not yet clear which category the purchase of wireless telco Unwired by Seven Network will fall into, but if Seven's bosses have any imagination at all they're going to have a good run at changing the marketplace significantly.

The deal, of course, is Seven's mooted AU$127 million buyout of Unwired, which has the distinction of owning the rights to quite a lot of the broadcast spectrum over which WiMax runs. Unwired has also been offering fixed landline replacement services that use a modem to provide a passable Internet connection anywhere in Sydney or Melbourne that happens to have Unwired connectivity.

Blanketing the country with WiMax, of course, takes a whole lot of money (or the favourable eye of the current government). Getting that money requires giving people a compelling reason to fork theirs over, and this is where Unwired has fallen short.

This was the appeal of VoIP provider Engin's recent investment in Unwired, but even Engin only provides one of many services that it takes to be a full-service telco these days.

Enter Seven, which has money to burn and street cred in the broadcasting world. If it made sense for Engin and Unwired to cosy up to improve delivery of VoIP, Seven's move to buy unfettered access to wireless spectrum -- in its biggest markets, at least -- makes even more sense.

A flock of top-rating shows, including both domestic and overseas brands, means Seven has a huge range of options for delivering its programming and related content. More importantly, with the acquisition of what is basically a private wireless delivery service, Seven is now the only network in the position of being able to bypass Telstra in the delivery of value-added content.

Conveniently enough, Seven's highly publicised investment in TiVo personal video recorders will round out its offering, giving it marketing rights to a product so successful that it has become to PVRs what Windex is to glass cleaner and iPods are to MP3 players -- the gold standard.

Assuming the deal goes through, Seven will find itself with a compelling product (TiVo), a compelling phone service (VoIP), a mass of compelling content to draw upon, and a compelling wireless delivery channel with which to reach its customers at very little incremental cost. The potential to expand content coverage using technologies like IPTV is significant: as WiMax bandwidth ramps up over time, Seven will be able to deliver as many channels as it wants to its customers -- without paying anyone else for access to the infrastructure.If Seven can bundle all of this into appealing packages with equally attractive prices, it could well become the next Telstra.

Yes, Telstra.

Now, I don't think for a second that it's going to happen overnight. But with the kind of capital Seven is able to raise, it should be able to fill in the many coverage gaps in Unwired's network to give the country a proper WiMax service. With this service in place, Seven as an ISP could gradually become one of the country's major providers -- and offer unrivalled content packages to its customers.

It's not the first time the boundaries between telcos and content providers have been crossed. Ventures by traditional media players to buy into online content have traditionally ended in disaster; think Telstra's abortive venture with Hong Kong's Pacific Century CyberWorks, Optus's abortive Optus@Home venture, and Seven's own abortive AOL7 venture, which dwindled into irrelevance and was sold to Primus Telecom in 2004 after accumulating more than AU$120 million in losses.

The more successful ventures, such as the long-running NineMSN and Yahoo7 partnerships, have tended to avoid putting too much stock in any particular telco's infrastructure and focused instead on content. Then, of course, there's Telstra, which has tried just about every form of mobile and fixed content at some point but now offers movies, music, and a host of other types of content -- just not VoIP.

Using its fixed and mobile networks, Telstra can offer both connectivity and service -- and this is the market Seven will be targeting (could a close partnership with a mobile provider be far behind?) Successfully making this happen, however, will take caution and significant investment, since running a telco is a much different exercise than running a TV network.

Many past efforts to grow telcos into nationwide entities have met with disaster and the stakes are high for Seven. But with its recent spate of partnerships and acquisitions, this media giant is uniquely poised to become a significant force in Australian telecommunications.

Is Seven out of its depth? Would you subscribe to a Seven-based content and connectivity bundle? Could this be the boost that WiMax needs? Share your thoughts below.

Topics: Broadband, NBN, Networking, Telcos, Unified Comms, Wi-Fi

About

As large as the US mainland but with a smaller population than Texas, Australia relies on ICT innovation to maintain its position as a first-world democracy and a role model for the developing Asia-Pacific region. Award-winning journalist David Braue has covered Australia’s IT and telecoms sectors since 1995 – and he’s as quick to draw le... Full Bio

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