Terms of Reference for TVNZ Scoping Study

Terms of Reference for the scoping study of the Crown's ownership interest in Television New Zealand (TVNZ) were released today by Treasurer Winston Peters, Finance Minister Bill Birch and SOE Minister Tony Ryall.

They said the Government had not made any decision to sell TVNZ.

"The Terms of Reference detail the nature of the scoping exercise currently being undertaken by the Government and, in keeping with the Coalition Agreement, make it clear that Television One is not being considered for sale," said Ministers.

"The scoping study, announced on 5 December last year, focuses on TVNZ's business environment, the technological issues facing the company, its value in continued Crown ownership and under alternative ownership and possible sales methods for parts of TVNZ.

"The completion of the report has been delayed to allow time to examine fully the complexity of the issues. The report is now expected to be completed before mid-May. Ministers will then consider its findings."

A consortium of Ord Minnett, Andersen Consulting and the New Zealand Institute of Economic Research were appointed late last year to carry out the study, after a competitive tendering process, Ministers said.

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Terms of Reference
SCOPING THE CROWN'S OWNERSHIP INTEREST IN TVNZ
We would expect the successful applicant to combine a global perspective of broadcasting and telecommunications with significant knowledge of these sectors in New Zealand, including the New Zealand public policy environment. Specifically, Treasury's advisor would be required to submit a report which brings out all relevant factors, including:

(a)

the potential value to the Crown of continued ownership given the strategic plans of the Company.
This analysis should include:

a description of the nature, scope and performance of the Company;

an assessment of TVNZ's medium term strategic plan and of the impact of that strategic plan on the value of TVNZ (The company is currently implementing its Great New Zealand Television Project which will have major implications for its future performance, its structure and focus);

the business' on-going capital expenditure requirements;

evaluation of the assets and liabilities of TVNZ including investigation of current and potential contingent liabilities facing the company;

investigation of existing contractual arrangements and contractual arrangements under discussion;

analysis of the risks and opportunities inherent in continued Crown ownership including the risks posed by technological change and competition; and

a review of public policy issues such those related to the Treaty of Waitangi, competition policy and social issues;

analysis of impediments to sale.
(b)

the expected value of TVNZ under alternative ownership strategies.
While Television One will not be sold, the value of the TVNZ Group under alternative ownership strategies should be estimated, in order to reveal the costs and benefits of the options available to the Government.

(c)

the best sale method;
This analysis should include:

methods of sale, including trade sale, float and some combination of the two or any other value maximising sale method. Scenarios involving limits on who can invest, the nationality of the investors and, in the case of a float, the number of shares which can be bought, should be investigated. Under a trade sale, scenarios involving partial float by any new owner should also be examined.

identification of any legal, commercial or other risks involved in sale for both the Crown and the Company under these methods;

analysis of the value maximising method including the costs of sale under each method;

analysis of the best structure of sale and sequencing of the sale of any key components of TVNZ;

estimates of the time it would take to complete any sale; and

advice on the next steps and the key issues involved in implementing the various sale methods.
Treasury's advisor will be expected to make the issues and the options clear.

Timetable and Phasing of Work
TVNZ currently has a number of projects underway, such as the Great New Zealand Television Project, which are designed to strengthen the company's competitive position. The company is also investigating options with respect to its distribution assets such as Broadcast Communications Limited (BCL). The Company plans to clarify or finalise these projects in the first quarter of 1998. Many of them will have a significant effect on the direction of the Company's strategic plan. TVNZ's management and staff therefore face some significant demands particularly when this work is combined with external scoping.

The scoping advisor will therefore need to establish a phased timetable which will allow the Company to complete its work programme as planned and the advisor to complete its business evaluation report and deliver it to Treasury before the end of March 1998. This will require close consultation with the company and discussion with Treasury. The advisor would be expected to begin to engage with company personnel, on a basis that is mutually convenient for both the Company and the advisor, beginning in February. Phasing of work to begin with assessment of TVNZ's distribution business followed by work on the television networks towards the end of the timetable, would offer a number of advantages.

A company representative will participate in the selection panel.