Source : Globe & Mail

CanWest CEO insists decision not to sell TV network will be vindicated by income, growth

TORONTO — Leonard Asper has acknowledged his frustration with CanWest Global Communications Corp.'s slumping stock price - saying recently he thinks investors aren't giving the company's Australian television operations enough credit.

The Australian business, which churns out $80-million to $100-million in dividends each year, is a plum asset, the company's chief executive officer argued at CanWest's annual meeting two weeks ago.

Analysts, however, have so far seen it much differently.

Most of Bay Street wanted CanWest to sell the network last summer to take advantage of a red-hot takeover market in Australia, and use the $1.4-billion it could have fetched to pay down debt.

However, when the company decided in June that it would not sell, it marked the beginning of a long slide for the stock, which has lost more than 40 per cent of its value since then, in part because of concerns over CanWest's debt.

CanWest now faces a tough task convincing investors in the coming months that holding on to its 57-per-cent stake of Australia's TEN network for the long haul was the right decision.

That push began yesterday when executives with the Australian operations came to Toronto to get Bay Street's attention - and to drum up potential new shareholders for the other 43 per cent of the network that is traded publicly in Australia.

"We're going to meet a number of investors this week in the U.S. and start putting ourselves back on the radar screen," said Nick Falloon, executive chairman of TEN.

CanWest is reluctant to give up the dividend, and potentially surrender any growth it could get from the company's billboard operations, Eye Corp.

Meanwhile, Australia's media sector has been shaken up over the past year in a series of transactions involving TEN's rivals.

Mr. Falloon said he figures the historically frugal network could expand while its two main competitors, SEVEN and NINE, are clamping down on costs.

Australian broadcasters enjoy more freedom to expand their operations than networks in Canada have, and TEN expects to add several channels to its stable in the coming year, including a high-definition operation that will become the centrepiece of the business.

The network, which has moved into second place in the country's ratings with an audience that skews younger than those of its two competitors, is now looking at a special dividend this year, Mr. Falloon said, which should give CanWest a bit of extra cash.

Whether that's enough to get investors to warm up to the Australian asset again is not certain. Analysts said yesterday they still think the Australian network should have been sold.

But even though a sale was explored last year, then halted, Mr. Asper sent a clear message yesterday he's not a seller, erasing any doubt in the room that a deal could still be contemplated.

"It's got a lot of growth opportunities," Mr. Asper told analysts. "That's how we looked at it and that's how we balanced all the options."

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