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21CF’s future commitments, contingent guarantees see a spike due to IPL deal

MUMBAI: 21st Century Fox’s (21CF) total firm commitments and future debt payments have jumped by $1 billion to $83 billion due to the Indian Premier League (IPL) media rights acquired by the company’s India unit till 2022.

In September, Star had acquired global IPL media rights with a composite bid of Rs 16,347.51 crore beating Sony Pictures Networks India (SPNI) and Facebook, the highest bidders in India TV rights and digital rights category respectively.

As of 30 September, the company’s total firm commitments and future debt payments were approximately $83 billion compared to $82 billion till 30 June.

The company noted that the increase from the previous quarter was primarily due to a new agreement for the IPL global media and digital cricket broadcast rights for the five-year period from 2018 to 2022 partially offset by payments related to sports programming rights.

In addition, the company said it has made an offer to purchase the fully diluted share capital of Sky which it does not already own.

“The company has commitments under certain firm contractual arrangements to make future payments. These firm commitments secure the future rights to various assets and services to be used in the normal course of operations,” the company said in a regulatory filing.

Furthermore, the company’s contingent guarantees have jumped to $1.1 billion as of 30 September due to a bank guarantee covering the IPL programming rights obligations. The contingent guarantees for the quarter ended 30 June was $500 million.

“The Company’s contingent guarantees as of September 30, 2017, and June 30, 2017, were approximately $1.1 billion and $500 million, respectively. The increase from June 30, 2017, was primarily due to a bank guarantee covering the Company’s new IPL programming rights obligations,” the company stated.

As reported earlier, 21st Century Fox is expecting approximately 3% points cost growth addition to the cable segment due to the acquisition of the IPL rights.

The media conglomerate is expecting a similar dollar amount of incremental revenues to be generated from these matches in the fourth quarter. The IPL is generally played in the April-May window.

“So, one addition of note since the call is our successful acquisition of the IPL cricket rights in India starting this coming spring. These worldwide rights will add approximately 3 percentage points of cost growth to the Cable segment, and we expect a similar dollar amount of incremental revenues to be generated from these matches all in the fourth quarter,” 21st Century Fox EVP and CFO John Nallen had told analysts.

21st Century Fox CEO James Murdoch had said that Star India is well on track to deliver the $500 million EBITDA target in FY18 as envisaged by the company. Fox had set a target of $500 million EBITDA by FY18 and $1 billion EBITDA by FY20 from the India business.

“First quarter results keep us on the plan to achieve $500 million of EBITDA target this fiscal year as projected and with velocity heading into the next few years,” Murdoch asserted.

Talking about the IPL media rights acquisition, Murdoch said that the acquisition was a final step in the realignment of its sports portfolio. He also said that the exclusive global rights across broadcasting and digital will be a key growth driver of this business going forward.

“Star just recently took its final step in the realignment of its sports portfolio with the acquisition of those 5-year rights for the Indian Premier League, the most attended and watched cricket league in the world,” Murdoch had stated.

About Hotstar, he had said that the platform continues to set the pace for streaming in India. The service was recently launched internationally for the Indian diaspora, providing opportunities to further monetise our Indian investments, he added.

Both James and 21s Century Fox executive chairman Lachlan Murdoch had refused to comment on media reports that the company was in talks with The Walt Disney Company to sell a major portion of its business including Star India. “We can’t comment on market speculation,” James stated.