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Technology, media and telecommunications – trends to watch for in 2021: part two – Media, Telecoms, IT, Entertainment


Already a fast-moving area, the pace of change in the
technology, media and telecommunications (TMT) sector increased
further during the COVID-19 pandemic, with this trend likely to
continue in 2021.

In this three-part series, the Corrs TMT team unpack
some of the key issues general counsel should be following closely
this year.

In part two, we consider:

  • digital infrastructure and 5G;

  • technology-based M&A / venture capital deals;

  • virtual trials and litigation post COVID-19; and

  • media ownership reform.

Access part one here.

Mobile phone towers, sale of digital infrastructure and 5G -
James North

As traditional core infrastructure assets face COVID-19 related
headwinds, digital infrastructure assets have piqued the interest
of pension funds and other investors. The assets that support the
digital economy, examples of digital infrastructure include fibre
networks and satellites that support internet connections,
telecommunication towers that support mobile phone connectivity and
data centres that support cloud computing services and data
storage.

Digital infrastructure assets possess similar characteristics to
traditional core infrastructure which have been favoured by
financial investors. Cash flows for these assets are underpinned by
long-term revenue contracts and the assets tend to be protected by
strong barriers to entry (whether regulatory, market driven or
commercial).

Throughout the COVID-19 pandemic, digital infrastructure has
proved to be recession-proof, while other markets continue to be
volatile. Trends such as the growth in cloud computing and Internet
of Things (IoT) applications and geopolitical
tensions increasing national security concerns are likely to drive
significant growth in digital infrastructure investment in
Australia.

Following a host of mobile phone tower transactions in Europe
over the last few years, it also seems likely there will be a
reasonable number of digital infrastructure assets coming to
market. One factor driving these transactions is the need for
mobile phone carriers to release capital from their towers and data
centres to re-invest in spectrum and network equipment for 5G
mobile networks. At the same time, data centre operators are also
in need of significant capital funding to invest in the roll out of
data centre networks, meaning there should be no shortage of
greenfield and brownfield investment opportunities.

Investments in digital infrastructure raise a host of legal
issues. Digital infrastructure tends to be highly regulated and
subject to strict security obligations. The recent changes to
Australia’s foreign investment review framework (highlighted in Part 1) ensure there is
oversight by FIRB into all foreign investments in certain classes
of digital infrastructure, regardless of value of the investment.
There is also unique regulator security. For example, owners and
operators of communications infrastructure are subject to onerous
cyber security obligations, including the telecommunication sector
security reforms (TSSR), which provide the
Critical Infrastructure Centre powers to oversee and direct the
security of communication systems and services.

Surge in technology-based M&A / venture capital deals -
Gaynor Tracey

Following a slow start to deal-making in the first half of 2020,
we anticipate deals in the technology and software space will surge
throughout 2021 on the tail of a strong end to 2020. As businesses
continue to settle into the new normal of a COVID-19 environment
and are able to shift their focus from managing pandemic-related
impacts to potential merger discussions and opportunities, tech
targets have a strong potential to drive deal activity in the
coming year. The pandemic and likely endemic to follow have
reinforced the value of technology-based assets to facilitate
remote working and the more general demand for innovative digital
infrastructures relating to e-commerce, cybersecurity, cloud
infrastructure and 5G.

A number of these companies are opportunistically coming to
market with strong competitive tension and bullish valuations for
relatively young business in areas such as online retail platforms,
telecommunications solutions and cyber security. Notable tech deals
demonstrating this demand in 2020 include Mastercard’s
acquisition of Wameja, a cross-border payment technology company,
and Bravura Solutions’ acquisition of FinoComp, a data
analytics and reporting software company.

The significant dry power that private equity are sitting on,
combined with enticing low cost of funding, will no doubt further
increase demand for new digital assets, encouraging competition in
the market and driving higher valuations in 2021. With so much
appetite for established tech companies, private equity is likely
to continue the trend of investing earlier in the life-cycle of
start-ups as we have seen over the last 12 months.

The resilience of the tech sector throughout 2020 was also
reflected in record levels of venture capital investment in
Australian start-ups, notwithstanding the impact of COVID-19, which
included increased scrutiny from regulators such as FIRB. The
sustained investment in start-ups shows growing investment
opportunities in the digitisation of business solutions, which we
expect to see continue into 2021.

While COVID-19 has no doubt brought about widespread
uncertainty, it has affirmed and accelerated the necessity of
digital solutions in staying productive and connected, allowing the
technology sector to flourish in the deal space.

Virtual trials, litigation and ‘lawyer cats’ in a
post-COVID world – Simon Johnson

While undoubtedly hilarious, the recent ‘I’m not a
cat’ Zoom faux pas in the United States is indicative of some
of the difficulties faced by Australian lawyers, barristers and the
courts in quickly adapting solemn and formal legal processes to a
remote format.

There is no doubt that the Australian litigation system moved
exceptionally quickly and effectively to adopt a virtual hearing
model from March and April 2020. It has been said that Australian
Courts and Tribunals made ten years of technological advances in
the space of just a few months. Contested hearings, appeals,
interlocutory applications and directions hearings have all been
conducted effectively and efficiently on a remote basis in a range
of federal, state and local courts.

However, steps are being taken in many Australian jurisdictions
to resume in-person appearances and hearings for 2021. Our
prediction is that the COVID experience will see many proceedings
in 2021 adopting a ‘hybrid’ model (e.g. case management
being conducted virtually and witnesses outside the jurisdiction
appearing remotely) in light of the time and cost-savings of
virtual proceedings, and likely ongoing interstate and
international travel restrictions.

Similarly, 2020 saw changes in a number of jurisdictions to
enable document witnessing by audio visual link, and the electronic
execution of certain documents. As many of these changes were
temporary only, practitioners should be alive to the status of the
measures in their jurisdiction at the time of applying electronic
signatures or witnessing documents. It remains to be seen whether
such changes will be adopted permanently.

Media ownership reform – Adam Foreman

In order for businesses to survive an increasingly challenging
environment in which advertising revenues continue to decline, we
believe further consolidation in traditional media, or joint
venture or similar transactions which allow market participants to
share resources, will be required in 2021.

It has now been more than three years since the media ownership
rules were last relaxed to permit for the first time metropolitan
and regional television mergers and cross media mergers between
news, radio and television. The changes were intended to allow
media companies to consolidate and generate greater scale and
efficiencies, as a way of responding to the intense competition
they faced from online, on-demand operators and offshore technology
companies.

Those competitive headwinds have only grown stronger. At the
same time, we have seen only one significant transaction take
advantage of the new rules, which was the news, radio and
television combination of Fairfax/Nine. Other transactions have
been proposed, including the metropolitan and regional television
merger of Seven West and Prime Media, but ultimately did not
proceed. The logic behind these mergers continues to make sense,
particularly for those businesses operating in regional areas,
which have been particularly affected.

Mergers of metropolitan and regional television broadcasters as
well as cross media mergers in both metropolitan and regional areas
are likely to come back on the table this year as parties find a
way to resolve valuation and other strategic issues that have
prevented such transactions from proceeding to date. However, it
may be that further changes in the media ownership laws are
required to address the difficulties facing these businesses. The
current rules continue to require that three independent television
broadcasters operate in metropolitan and regional areas and it will
be increasing difficult for advertising markets to support three
independent broadcasters, particularly in regional areas, without
significant sharing of infrastructure, resources and other costs
between those broadcasters.

A media reform green paper released by the
Australian Government in November 2020 proposed a number of reforms
to help free-to-air television, particularly in regional areas, to
support that sector move to a more sustainable business model,
including by providing an option to eliminate broadcasting licence
fees. While media ownership reforms were not specifically
mentioned, the paper invited broadcasters to put forward other
proposals which in their view would make their businesses more
sustainable. Further consolidation or greater sharing of resources
between broadcasters is another option some participants may argue
would help create a more sustainable Australian broadcasting
sector.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.





Chambers Asia Pacific Awards 2016 Winner
– Australia

Client Service Award
Employer of Choice for Gender Equality
(WGEA)



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