Seven: The new Telstra?

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.

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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, Networking, Telcos, Unified Comms, NBN, Wi-Fi

About

Australia’s first-world economy relies on first-rate IT and telecommunications innovation. David Braue, an award-winning IT journalist and former Macworld editor, covers its challenges, successes and lessons learned as it uses ICT to assert its leadership in the developing Asia-Pacific region – and strengthen its reputation on the world stage.

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15 comments
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  • Content dissassociated

    hi David,

    what you're missing is that this is a pointless investment ... Seven doesn't understand that content is becoming disassociated from the delivery platform, and that people won't pay for an Unwired service to get Seven's content which is bound to that delivery mechanism. They'll simply get an open-ended internet pipe somewhere else.

    As for VoIP -- the same thing. People in future won't want their telephone service bound to one delivery platform. They will want to be able to access it everywhere -- such as you can with Skype right now. And Seven sure doesn't own a mobile phone network :)

    In short, you can't tie people down.
    anonymous
  • Seven Network must learn from OneTel Failure

    In most cases,if a company was too much greedy,it resulted in failure.
    1.Do not invest too much money!
    2.Do not try to kill competitors!
    3.Try to make a joint venture with a major competitor!
    4.Invest a huge amount of money into a safe and high yield sectors!
    5.Return the money to shareholders!
    6.Get an IPO for SMG and list on ASX!
    anonymous
  • Seven Network Should Learn From Caltex and Woolworth

    Few years ago,Caltex made a joint venture with Coles and Shell made a joint venture with Woolworth,and they succeeded.
    If Caltex tried to kill Shell by price war,Caltex and Shell both might be in difficuld situations.
    I recommand Seven Network to make joint ventures with major competitors and invest into leading companies in the industry.
    anonymous
  • Telco Vs Tv

    "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."

    I would argue this is a disingenuous comment, as IPTV is one of THE major goals being pushed toward in the (media) convergence stakes. Once you can break down TV into a packet base system (i.e. internet) there are all sorts of pssibilities available not there with traditional broadcast systems.

    No; Unwired do not have TV experience. but then again Seven dont have ISP experience either - hence the point of this deal.

    Yes! there is a bet on who can make it 'successfully". I would argue though, Seven is showing remarkable prescience with this play, i was aware and watching for a while now but this really makes me sit up and take notice.

    Yes Seven can consider taking Telstra on in the content stakes. Now? no. but give it some time..! i call this a promising development.

    I have never been a fan of the Pay-TV model. but 'What If' TV was rolled into my data needs? i would be much more inclined to watch, particularly if seven dont lose their motorsport and AFL properties.

    i wouldnt get into phone service - that is one thing i would not do (myself) with this play. Seven can leverage Engin for that anyway....but Seven itself should concentrate on content - and they can make a play to chase the Pay tv market in Oz which i would argue is a failed market.

    With this move IPTV can break open that failure, given seven no longer have to rely on a supplier of data.

    Given the backhaul bunfight been on for the what - last decade? this circumvents that problem and delivers customers to sevens' door.

    Now this, is truly worth watching (too bad about Seven's regular programming eh?)
    anonymous
  • Glad to see Seven making a move... but it might be the wrong one..

    I'm really pleased to see someone standing up to the Foxtel-telstra machine. IPTV is certainly the future, and perhaps finding an option that doesn't use Telstra wires is sensible.

    However... I think Seven is making some bad moves. The great promise of IPTV is absolute viewer choice - watch ANYTHING you want, anytime. To do that you need a dedicated channel at about 2Mbps per TV... and this is something that Unwired can't handle.

    Instead, a wireless model is closer to the traditional payTV model (plus a TiVo/IQ). It's a fixed package of content broadcast to subscribers, for them to record and watch at their leisure. It'd be pretty easy to watch an episode of Seinfeld, but you wouldn't be able to pick which episode.

    I expect 7 will release something cheaper than Foxtel and with less content (to start with) - but every subscriber will have the equivalent of the Foxtel IQ.

    I'd prefer to see Seven's plan of 6-months ago... which was to offer NakedDSL via Optus, with their TiVo player (and Engin VoIP). Optus (or iiNet) have almost free bandwidth on their own network so the whole "watch anything" model comes into play (as long as Seven has rights to it).

    So all up, yes I'll subscribe to what 7 offers IF it's good value, and I've got far more goodwill to them than Foxtel. If they go the unwired route, I hope they do that in addition to other wired plans.

    There are a few other creative options they may offer, which will be interesting to watch, but I expect something more traditional now.
    anonymous
  • more of a bad thing

    Great -- more ways to distribute rubbish. Just when we get really, really big screen TV's, there's the worst programs on in thirty years.

    Now we'll be able to pay to get it on our PC's!

    I waiting for the program: "We take an ordinary Joe off the street and let him do an autopsy on a real life murder victim."

    Watch -- "Cause of Death" Tonight at 8:30

    You can bet you can't get any faster or cheaper broadband off them, in fact you'll pay more because they will push their program crap on you. Otherwise, why are they doing this? Just to become a competing wireless ISP?
    anonymous
  • Seven's future

    My personal opinion on this is that we need competition in all areas to improve existing services consumers can get, and I think 7's aquirement of Unwired is a small leap and with a little investment it could become a great ISP VoIP and content service provider, I for one would immediately sign up if they were to offer me a wireless home phone service and a WiMax + broadband based service with plenty of quota for downloads and a TVoIP service with their own software player to view 7's various new to TVoIP/HD/Digital channels, for a fair price. Well theres many things 7 could accomplish with this, let's just hope they do.
    anonymous
  • It's mobile wimax - not just another competing ISP

    You can't compare what mobile wimax offers with anything currently on the market. Mobile data plans from the telecoms are ridiculously expensive and severely technologically limited (high prices, high latency, low quota, slow uploads). On the other hand broadband ISPs as we know them offer fixed entities by nature.

    Mobile wimax - over the quantities of specturm that Unwired owns - promises to take the broadband ISP model mobile for the first time.

    Add to that the enormous support from device manufacturers like Nokia and Intel and I think it's difficult to compare what mobile wimax is going to be (very soon now) with anything we've seen before.

    By getting control of the mobile wimax spectrum at this time, Seven is setting itself up to be something Telstra, or any telecom, has never been.
    anonymous
  • Unwired owns?

    I thought Unwired owns a limited amount of spectrum in limited geographic regions.

    When you start cramming many users over wimax you get the issue of users having to fight over the spectrum, this is the same issue that all wireless technologies will have. Having multiple repeaters can help alleviate this problem; based on the range that the repeaters can cover and the range the devices can transmit I doubt wimax will ever become truly widespread or even the first choice among the masses.

    Nice niche solution and that is where it will always be.
    anonymous
  • Content dissassociated

    I agree with the other person than replied to this comment, it's all about "greedy" companies.

    People hate Telstra, cause while Telstra has a choke hold on anything at the time, they milk it for all they're worth. People remember that.

    Seven has a _tremendous_ opportunity here, they just need to remember "The greedy bird feeds well short term". If they get greedy, they'll do well short term, and then wonder why no one sticks with them.

    It's pretty well that simple...
    anonymous
  • Telstra, Intel CPU's & Hybrid Cars

    "People hate Telstra, cause while Telstra has a choke hold on anything at the time, they milk it for all they're worth"

    Any company who is willing to invest to be the first on the market will have a short term monopoly and can charge what they want until other company comes around and provides an alternative.

    Everyone wants to bag Telstra because they manage and maintain the copper network but we all know this is an old outdated network. Is anyone building an alternative? No. Why? Because although you may think it is being milked for all it's worth while the reality is that it would cost a hell of a lot more to build it today and none of your beloved other Telco’s are willing to open their wallets, shut their mouths and build a real alternative.
    anonymous
  • Seven Network partnering with a Mobile Provider

    I wouldn't be surprised if Seven & Vodafone (the desired/required partner or missing link) form a partnership or strategic alliance. It has obvious benfits for both, with Seven getting the mobile partner it requires & Vodafone being able to access content for its Mobile services - Vodafone live ... Don't need to be a rocket scientist to see this is a partnership that'd work !!!
    anonymous
  • Unwired spectrum

    @ Harry , unwired owns over 160 MHz sprectrum on average across all metropolitan regions. I am no engineer but from what I read Wi-Max will have no problem supporting large numbers of users. It was designed from the ground up to be that way. I think it can do more then just pay TV, why not VOD? It will have the bandwidth. It is a great chance for seven to offer a truly innovative product and leave their competitors behind.
    anonymous
  • Seven Cant Muliti-Channel The Olympics

    Thing is until Free To Air Networks are allowed to Multi Channel which is as of 01/01/2009 Seven cant show the olympics on their SD channels. Also they are not allowed to show a sporting event on their HD channel before it is shown on their SD channel until the ACMA changes this.

    So Seven really are stuck. Yes I agree they could improve the online content, but untill the ACMA allow free to air to multi channel SD then Seven can't show mulit events at the olympics on Seven Digital 1,2,3...

    At the moment SBS has suppliment coverage to flick between.
    anonymous
  • Seven saved unwired you mean

    Well if Kerry stokes or any of the ch7 execs actually looked at the current unwired network with its legacy rabbit modems(still no dongle) and tried to connect to one during peak times at night they would have realized that :
    1- Coverage is weather dependent and at times and temperamental
    2- The network has no mobility
    3- Traffic shaping of some sort is taking place to prevent congestion
    4- The network must have been put together with no plans for expansion as they only have coverage in sydney and some parts of melbourne
    5- 3G provides much quicker speeds with better coverage and mobility features and also is provided by mulitple carriers increasing competition and therfore the price will eventually stabilize ...

    I would never invest in whatever Unwired decides to build , they might have some inspirational ideas and seem innovative but it is clear there engineering and ability to manage a network leaves a real bad taste in the mouth for anyone who uses this service .......

    There are a lot better ways to spend $127 million:-)
    anonymous