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TVNZ And Telstrasaturn Digital TV Partnership

TVNZ And Telstrasaturn Enter Digital Television Partnership

TVNZ and TelstraSaturn have today signed a memorandum of understanding that will speed the delivery of digital television services to New Zealanders.

TVNZ will use its satellite transponder capacity to provide the first genuine national digital free to air television service and enable TelstraSaturn to provide a national subscription service as part of a bundle of convergence services.

TelstraSaturn will provide an initial quantity of low cost digital satellite set-top boxes. This is intended to encourage early take up of digital satellite free to air services with capacity also available for a Maori channel. This service should be available around April/May 2001. TelstraSaturn will also provide, on request, access to set-top-boxes for government departments and agencies who may wish to utilise digital services to reach parts of the nation.

The two companies will create a Joint Venture company that will manage the satellite platform and allow TVNZ and TelstraSaturn to share the costs of developing digital television for all New Zealanders. The Joint Venture will leverage TVNZ's core strengths through the provision of a range of broadcast infrastructure services to TelstraSaturn.

The Joint Venture will offer other national free to air broadcasters carriage for their services on the satellite transmission system.

The combined cable and satellite network will enable TelstraSaturn to offer a compelling variety of packages, including telephony, multi-channel digital television, interactive and high-speed Internet services, to the whole of New Zealand within the next six months.

In addition, the Joint Venture will contract with TVNZ for the acquisition of programming. This will allow both companies to maximise their purchasing power in international markets.

The Joint Venture will develop new enhanced and interactive content for both the TelstraSaturn subscription business and the free to air television channels.

Also under consideration is TelstraSaturn contracting its advertising sales functions for its existing and future subscription television channels to TVNZ. TVNZ has the largest sales force in the New Zealand media industry.

The strategic relationship between the two companies will also secure open access for TVNZ to TelstraSaturn's set top boxes. Open access to set top boxes, rapidly becoming the digital gateway to New Zealand homes, is the cornerstone of TVNZ's submissions to the recent Ministerial Inquiry into Telecommunications. The Inquiry agreed with TVNZ's submissions and this memorandum of understanding has been signed with both companies operating on the basis of future open access on reasonable commercial terms.

TVNZ CEO, Rick Ellis, says TelstraSaturn and TVNZ both agree that no one platform or set top box supplier should control the digital gateway to the New Zealand home.

"These discussions are an important and significant step in securing the digital future for all New Zealanders and narrowing the digital divide."

TelstraSaturn CEO, Jack Matthews, says "This is an extremely exciting development for TelstraSaturn as it allows us to provide consumer services ahead of our cable rollout. There are some geographic areas of the country which we could never afford to reach with cable. Our partnership with TVNZ means that we can now offer services to those consumers. This does not in any way replace our cable rollout, but it does allow us to develop a relationship with customers and provide them with a choice much earlier than we could otherwise have done so."

Mr Matthews also pointed out that TelstraSaturn was looking forward to working with TVNZ to add strong local content to its platform.

The media conference and staff announcement will be streamed live on

TVNZ and TelstraSaturn Enter Digital Television Partnership - Q+A

What is Digital TV and convergence all about?

- Clearer pictures and sound for viewers.
- In comparison to analogue, massive capability for multiple channels catering to all tastes and demands.
- In the not-to-distant future, enhanced and interactive programming that enriches the individual viewing experience.
- e-mail and Internet access through your television set.
- Bundled services of telecommunications and entertainment products across common technology platforms.

What are the key elements of the deal?

TVNZ and TelstraSaturn intend to form a joint venture services company which will provide a range of services to TelstraSaturn, and potentially other industry players as well. Those services would include the following:

· acquisition and commissioning of content;

· operation and management of a digital head-end for the aggregation and play-out of content for TelstraSaturn's pay-tv service;

· development of enhanced and interactive content;

· technical development of set-top-boxes to meet the requirements of both the free to air industry and the TelstraSaturn subscription business'

· contracting to TVNZ for the sale of television and related advertising and sponsorship for the TelstraSaturn subscription service.

Further, TVNZ will provide its satellite transponder capacity to the joint venture company, allowing TelstraSaturn to access that capacity to provide a national pay-tv service, while TVNZ can provide a national digital free to air service.

To enable the delivery of both pay-tv and free to air services, TelstraSaturn will provide an initial quantity of low cost digital satellite set-top boxes. This is intended to encourage early take up of digital satellite free to air services with capacity also available for the proposed Maori free to air channel.

This service should be available around April/May 2001 and will provide for the first time, all national free-to-air signals to the whole country on a digital platform. TelstraSaturn will also agree to provide, on request, access to set-top-boxes for government departments and agencies.

The definitive commercial terms around the deal are still being negotiated, but both parties expect these discussions to be concluded at the end of the year.

Why a TelstraSaturn * TVNZ partnership?

Upgrading to digital infrastructure is a significant exercise. TelstraSaturn already has plans to expand its entertainment services to digital as part of its national expansion plans. TVNZ has been examining ways of doing this over the last couple of years. It makes perfect sense for TVNZ and TelstraSaturn to work together, and the extremely positive discussions which have been held between the parties shows that the commercial will is there to develop a broad mutually beneficial partnership which shares costs and leverages the talents of both parties and allows them to also share the benefits of the digital interactive future. Importantly for TVNZ, this means that it is able to act in a manner consistent with its obligations as a national broadcaster, preserving its future value, and being able to offer national digital television for much less cost than previous approaches.

What's in it for TelstraSaturn?

TelstraSaturn's investment plans focus on its cable network capabilities, it plans to spend some $1.2bn over the next four years rolling out cable infrastructure in major population areas of the country. While cable is the superior access technology, it is relatively slow to rollout. This new relationship with TVNZ allows the following:

· access to the satellite platform, which means an immediate national presence, with revenue generation ahead of its cable rollout, as well as in areas where there are no cable rollout plans; · · TelstraSaturn will be able to deliver a bundle of subscription television channels, plus free to air channels, e-mail, Internet and mobility services in areas all over New Zealand; once cable reaches these areas, customers will be able to upgrade to even more channels and services over TelstraSaturn's broadband network; · · access to current local content via TVNZ, with the possibility of involvement with other New Zealand broadcasters; ·

What's in it for TVNZ?

· Low cost and effective establishment of the first genuine digital free to air platform for the nation.

· Opportunities to expand and enhance New Zealand content.

· Commercial leverage of TVNZ's skills and resources in the infrastructure of broadcasting to provide new revenue streams to the Group.

· Opportunity to develop a strategic relationship in the area of convergence with a world class partner.

What about the other free to air Broadcasters?

It is hoped that the Joint Venture company will contract with the other national free to air broadcasters to provide carriage to them on the satellite transmission system.

What about SKY?

The deal is non-exclusive. Both TVNZ and TelstraSaturn hope that this agreement may act as a catalyst to promote open access on commercial terms to all set top boxes.

Is there a real deal here? If no binding agreements have been reached why this launch today?

The two organisations have conducted a large amount of in depth negotiations and financial modeling. While the deal is not as yet finalised in all its details, both parties feel a high degree of commitment to each other and confidence that the deal will be concluded successfully.

With the recent press speculation, both TelstraSaturn and TVNZ felt it was appropriate to tell everyone what is happening.

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