18 December 2002 Media Statement

TVNZ's television and transmission operations to be separated

The government will seek amendments to the Television New Zealand Bill to split the broadcasting and transmission arms of the company into separate companies, Finance Minister Michael Cullen and Broadcasting Minister Steve Maharey said today.

The Television New Zealand Bill is currently before the House awaiting detailed consideration in committee. After consideration of whether the company structure proposed in the Bill would continue to be appropriate, and in the light of the progress TVNZ is making in planning for the implementation of its Charter, the government has decided to revise the proposed company structure. United Future has agreed to support the amendments.

The amendments will enable the broadcasting arm, TVNZ (TV One, TV2 and Satellite Services), to be established as a Crown company under its own legislation. The transmission business, Transmission Holdings Limited (THL), including Broadcast Communications Limited (BCL) and TVNZ Australia Limited, will be established as an SOE under the State-Owned Enterprises Act.

Under the former proposal two separate boards were to look after the twin arms and to report to an over-arching parent board. Together they were to have formed a Crown-owned company.

Michael Cullen said given the different natures and objectives of the two parts of TVNZ's business it is more appropriate that they operate completely separately, not within the same company structure.

"The split will result in increased transparency and accountability and allow the two parts to each focus on their core business. The primary objective of TVNZ will be to give effect to its charter while maintaining commercial performance. THL's purpose will be to operate as a successful business.

"A different mix of skills is needed for the governance of each business and this can best be achieved by having separate companies," Michael Cullen said.

Steve Maharey said the new structure would not delay plans by TVNZ to launch programming that gives effect to the Charter at the beginning of the new television season on 1 March next year.

“The loss of BCL's earnings will not result in a loss of revenue for TVNZ. Funding decisions about how and to what extent TVNZ should be compensated to fulfil its charter are more appropriately made by the government, not by TVNZ directors.

“The government allocated $12 million a year to TVNZ to meet costs associated with implementing its charter in the 2002 Budget.

"Funding for TVNZ operations and programmes will come from advertisers, New Zealand On Air and the Crown. The government will have to make an explicit funding decision. It will be politically transparent exactly how much is invested in public television.

“Cabinet has agreed that the remaining stages of the Television New Zealand Bill are to be given priority when the House resumes in 2003 so that it can be passed in time for the Charter to take effect on 1 March. The government is grateful for the support of the United Future party,” Steve Maharey said.

Questions and Answers: Revised Television New Zealand structure

Why has the government decided to separate the broadcasting and transmission operations of TVNZ?

When Cabinet made its decision on TVNZ’s structure in June 2001 it was recognised that the question of whether the transmission business should be separated from TVNZ was finely balanced. The main argument against separation is the transition costs associated with making the split. The main argument for the split is increased transparency, accountability and focus on core business.

Cabinet decided in June 2001 to review its decision to retain the transmission business within the TVNZ Group after two years. It is now some 18 months since this decision was taken and with Parliament planning to complete its consideration of the TVNZ Bill when it resumes in February, it is an opportune time to reconsider the issue at this point.

What specific factors have led the government to revisit its earlier decision?

Given the different nature and objectives of the two parts of TVNZ’s business the government believes it is more appropriate that they operate as completely separate businesses.

Having an owner pursuing the same objectives as the company will enhance the commercial focus of BCL and its future growth potential.

Given the desired change in TVNZ’s focus as a public broadcaster, through the introduction of its charter, it is does not seem sensible to distract the Board and management of TVNZ onto matters associated with BCL’s operations and development.

How will the separation of TVNZ and THL be achieved?

The Television New Zealand Bill is currently before Parliament awaiting detailed consideration in committee. The government intends tabling a Supplementary Order Paper containing the necessary amendments to the existing bill to effect the separation when debate resumes on the Bill in the New Year. Cabinet has agreed that the remaining stages of the Television New Zealand Bill be given priority when Parliament resumes in the New Year so that it can be passed in time for the Charter to take effect on 1 March 2003 (the start of the new television season).

How will TVNZ receive its funding in the future?

TVNZ will receive funding from advertisers, New Zealand On Air and the Crown. In future the government will have to make a explicit decision about the level of funding it will make available to TVNZ through the annual budget process.

This is more transparent and accountable than having TVNZ receive some of its revenue from the revenue generated by the transmission side of the company at the discretion of the formerly proposed TVNZ Group Board.

The government allocated $12 million a year to TVNZ to meet costs associated with implementing its charter in the 2002 Budget.

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