Telstra writes down Ooyala to zero, takes AU$273m impairment

Telstra has been forced to announce another impairment in addition to a write-down to zero of IPTV business Ooyala, with the telco blaming changing 'market dynamics' in broadcast media.
Written by Corinne Reichert, Contributor

Telstra has announced that it will make a non-cash impairment of AU$273 million and a write-down of its United States-based IPTV business Ooyala to the value of zero following impairment testing for the first half of FY18.

"Telstra expects to recognise an impairment charge of AU$273 million against goodwill and other non-current assets in its results for that period to write the company value down to zero," Telstra said.

The telco had announced another Ooyala-related impairment 18 months ago as part of its FY16 financial results, with Telstra group exec of Technology, Innovation, and Strategy and Ooyala chair Stephen Elop saying on Friday that the company has since made "substantial efforts" to improve performance.

"This was a business that Telstra purchased when the market dynamics were very different. When we announced the initial impairment 18 months ago, we indicated that we would be working closely with the team to turn around the performance," Elop said.

"While some of these initiatives have been successful, the market has continued to change."

Elop said there are three main business arms of Ooyala -- ad tech, a video player, and the Flex media logistics workflow management system -- with the former segment not performing well.

"We will therefore seek ways to exit that part of the business, [but] importantly, we do see a future in the other core parts of the Ooyala business: Video player and the workflow management system," Elop added.

Despite "positive progress" being made by Ooyala's new management team on reducing customer churn, improving product quality, and increasing booking trends, Elop said it is still "appropriate to impair all of the goodwill associated with the business".

"From here, we will sharpen Ooyala's focus by exiting ad tech and focusing on the underlying video platform and continuing to serve our customers. We will increase emphasis on our differentiated Flex media logistics product, and we will drive operational efficiencies and leverage our go-to-market partnerships with companies such as Microsoft," he explained.

"In addition we will remain alert for broader strategic options for Ooyala in a market fragmented across multiple providers."

Telstra had acquired 9 percent of Ooyala back in mid-2012 for $35 million, then expanding its stake to 98 percent of the company in 2014 for $270 million as part of what Elop on Friday called "a broader strategy to provide end-to-end solutions for broadcasters and over-the-top companies".

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