News Corp has indicated it expects to write down its investment in Foxtel by up to a billion US dollars, as the company concludes a deal with Telstra that will see the pay TV operator merge with Fox Sports Australia.

In a filing with the US Securities and Exchange Commission this morning, News Corporation said it expects to record between US$700 million and US$1 billion in write downs related to the combined business ahead of the deal, which is expected to be finalised by the middle of the year.

News attributed the planned write downs to lower than expected sales of certain new products and broadcast sales at Foxtel, resulting in a reduction in expected future cash flows. In last year’s annual report News valued its 50% share of Foxtel at $1.2bn implying the business, excluding Fox Sports, to be worth $US 2.4bn.

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Telstra, on the other hand, has told the ASX this morning that it expects to record a gain of AU$263 million following completion of the deal.

The deal, which hit problems late last year when the two parties clashed over the value of Sky News’ feed, will see News Corp take 65% of the combined entity with Telstra acquiring the balance.

As a consequence of the new structure, News will record the combined Foxtel results in its accounts and appoint four company directors, with Pat Delaney as the CEO. Minority stakeholder Telstra will nominate two board members.

In the joint ASX announcement by Telstra and News this morning, the shareholders laid out the direction of the merged company in putting greater emphasis on live streaming products and an expanded content library, including Australian written, produced and directed programming.

Telstra and News also flagged they expect to work on developing greater operating efficiencies across the combined businesses while expanding its distribution channels along with leveraging News Corp’s local and global assets to grow the brand.

News Corp chief executive Robert Thomson said in the ASX statement: “The launch of the combined company will mark the dawn of a new era for our Australian business, and Foxtel and FOX SPORTS Australia will together be a formidable force.

“We will be able to use our powerful media platforms to promote the unique sports and entertainment assets in the two companies, and improve services for consumers and advertisers. Patrick Delany and his talented team will be absolutely focused on serving viewers compelling, contemporary Australian content and superlative sports coverage on personalized platforms.”

Telstra CEO Andy Penn said the the combined Foxtel would continue to be an important part of Telstra’s media strategy: “Our customers are streaming more and more sport and entertainment on their TV at home and on their mobile devices while on the move. Telstra will be the exclusive telco sales agent for the combined entity on mobile and IP products and we will continue with our broadcast reseller arrangements.”

The transaction is expected to close during the fourth quarter of fiscal year 2018.