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Foxtel's Undertakings Allay ACCC's Competition Concerns Over Bid For Austar

4/9/2012 11:23 PM ET

The Australian Competition and Consumer Commission or ACCC, said Monday that it will not oppose the proposed A$2.5 billion acquisition of Austar United Communications Ltd. (AUN.AX) by News Corp. (NWS: Quote, NWSA) affiliate Foxtel Management Pty Ltd. after accepting court-enforceable undertakings from Foxtel.

The ACCC said earlier that its preliminary view is that the proposed deal is likely to significantly reduce competition in the national market for the supply of subscription television services as well as the acquisition of audio visual content. The body was also of the view that the deal may lead to reduced competition in several markets for the supply of telecommunications products.

ACCC noted that Foxtel and Austar are the only significant providers of subscription television services in Australia. The proposed merger would therefore effectively create a near monopoly subscription television provider across Australia.

"The proposed acquisition would bring together the two main subscription TV industry players in Australia each with a substantial customer base and significant access to key content. This would in turn give Telstra, FOXTEL's largest shareholder, greater market power in regional fixed broadband and telephony markets," ACCC chairman Rod Sims said.

According to undertakings, Foxtel's will not be able to acquire exclusive Internet protocol television (IPTV) rights for a range of attractive television program and movie content. It also prohibits Foxtel from exclusively acquiring any movie delivered on a Transactional Video on Demand (TVOD) basis.

The undertaking most importantly prevents Foxtel from acquiring exclusive mobile rights to content where those rights are sought by competitors to combine with IPTV rights.

The ACCC's main areas of concern with the proposed acquisition were in the national market for the retail supply of subscription television services, particularly in relation to the developing IPTV field, and a number of regional markets for the supply of fixed broadband and fixed voice telephony products.

The concerns in regional markets for fixed broadband and telephony markets arise because of Telstra's 50 percent ownership of Foxtel and Telstra's ability post merger to acquire preferential access to Austar's existing subscriber base in combination with its existing content delivery infrastructure in regional areas. This will allow Telstra to offer a superior "triple play" of fixed voice, broadband and IPTV services.

Foxtel is Australia's largest subscription television provider and has over 1.63 million subscribing households. Telstra Corp. (TLSYY.PK,TLS.AX) has a 50 percent stake in the company and News Corp and Consolidated Media Holdings have a 25 percent holding each.

NWS closed Monday's regular trading session at $19.31, down $0.45 or 2.18% on a volume of 1.90 million shares.

In Tuesday's regular trading session, AUN.AX is currently trading at A$1.52, up A$0.04 or 2.53% on a volume of 10.95 million shares.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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