The Australian media sector can be a small pond. And just how small a pond it is was made clear last week when Seven West Media’s octogenarian chairman, Kerry Stokes, told the Australian Financial Review floundering fund manager Magellan was a “fine company” despite not owning a share or having a dollar in its funds.

Stokes, of course, was helping out his mates. The person currently in charge of Magellan, Chris McKay, used to be a director of Seven West. Stokes’s chief corporate adviser, Matthew Grounds, chairs Barrenjoey, which counts Magellan as a substantial shareholder. So far, so predictable.

But it’s the confluence of media interests that has people talking. Magellan counts Hamish McLennan as its chairman. McLennan wears many hats - he is chairman of real-estate listings portal REA Group and Rugby Australia - but it’s his role chairing radio company Here, There & Everywhere, the home of popular breakfast radio show Kyle & Jackie O, that is of particular interest at the start of a year that is expected to yield plenty of media consolidation.

A tie-up between Seven, which is primarily a free-to-air television business, and HT&E is logical. Both companies have in recent months acquired regional broadcasters in their respective markets, giving them greater scale and letting them sell advertising nationally.

When Seven’s chief executive James Warburton presents the company’s half-year results on Tuesday, it will be in much better shape than it was this time last year - and significantly better than when he began the job in August 2019. Shares in Seven have climbed nearly 67 per cent in a year as it secured a more favourable deal with banking lenders, achieved record-breaking television ratings thanks to the (very expensive) Tokyo 2020 Olympics and finally acquired regional broadcaster Prime Media Group for $132 million.

Debt levels are down ($240 million at the end of financial year 2021) and Stokes told investors at the annual general meeting late last year he expected the dividend to be reinstated for the first time since 2017 by the end of the financial year. In that same meeting Seven said it would beat the analyst consensus forecast of $260 million in earnings [before interest, tax, depreciation and amortisation] for financial year 2022 by between 7 and 10 per cent. Seven is now in a position to consider sizable takeovers - its market value is double that of HT&E - but people close to Warburton say he is not going to rush any mergers and acquisitions.

While there’s plenty of chatter around on what Warburton and his team will do next, ultimately the decision will be guided by how to best increase Seven’s valuation.

Integrating Prime Media and growing regional earnings is one way for Seven to increase its value. A focus on capital management will also let Seven keep costs down as it tries to increase its share of television revenue.