PAY-TELEVISION operator Foxtel will use its exclusive internet rights to broadcast the 2010 winter Olympics and Commonwealth Games and the 2012 summer Olympics as the linchpin for a substantial expansion of its online presence.

News of the pay-TV operator's internet expansion has come as Foxtel has announced record bottom line and operating profit for the December half year. The results were driven by rapid subscriber expansion, particularly in the Sydney market.

In an interview with Media yesterday, Foxtel's chief executive Kim Williams revealed the group was working extensively on its internet strategy as part of plans to offer consumers access to Foxtel at any place and time.

"The internet is an absolute mainstream, front-of-mind issue with all consumers," he said.

"Foxtel needs to respond to that in a way that is relevant to customers and ensures they get a good service offering."

Mr Williams said Foxtel was developing products "that have broadband as a delivery agent and we'll be unveiling those over the next couple of years".

It is understood Foxtel conducted an extensive broadband trial last year, with the company testing the downloading of programs to PCs and portable devices. Also, Fox Sports has experimented with downloads of English Premier League games on its website for subscribers.

Foxtel has indicated its recently launched high-definition set-top box could be used to access web content and other downloads using a broadband connection.

Mr Williams said the three main sports events to which it has won the online, mobile and overall pay-TV rights would provide a showcase and an impetus to develop the company's broadband strategy. "Clearly with having the mobile and broadband rights to the winter and summer Olympics and the Commonwealth Games, it gives us an incentive because we're committed to delivering for our customers in a technologically neutral way," he said.

Asked about one scenario - that www.foxtel.com.au could become a password-protected online hub for Foxtel channels - Mr Williams said: "There is a range of possibilities and we will be progressively unveiling them."

The pay-TV operator will have plenty of cash to fund its online expansion. The company's 25 per cent owner, Consolidated Media Holdings, implied in its accounts Foxtel had more than doubled its bottom line net profit to $60.8million for the six months to December 31, up from $27.2million for the corresponding period the previous year.

(Foxtel is 25 per cent-owned by News Limited, publisher of The Australian.)

Revenue increased by 17 per cent to $805 million after average revenue per user rose to $84.

Foxtel's earnings before interest, tax, depreciation and amortisation rose 62 per cent to a record $165 million after it increased direct subscriber numbers by 13per cent to more than 1.3million for the 2007 calendar year.

Media understands 40c in every incremental dollar of revenue being earned by Foxtel is dropping to the bottom line.

The company's total subscriber base passed 1.5 million last month, representing a 29 per cent average penetration across its operational areas and a substantial 38 per cent penetration in Sydney.

One negative point for Foxtel during the period was an increase in the rate of annualised "churn" - or customer disconnections - to 13.5 per cent.

Mr Williams said this was attributable to the expiry of two-year contracts during the December half, with some customers not renewing subscriptions.

"With the economic outlook uncertain, some people are naturally being cautious," he said.

The company is implementing strategies to ensure this churn rate stabilises. "We are confident we have the right tools to make sure consumers won't leave us," Mr Williams said.

He indicated the company would be promoting lower-cost pay-TV package options.

"Sometimes people have a kneejerk reaction and forget you can pay as little as $37.95 a month," he said.

(Source: Theaustralian.news.com.au)