Australian pay-TV provider Foxtel has presented the Australian Competition and Consumer Commission (ACCC) with a series of measures it hopes will persuade the regulator to approve its A$2.5bn takeover of regional satellite TV operator Austar.
Under the…
Australian pay-TV provider Foxtel has presented the Australian Competition and Consumer Commission (ACCC) with a series of measures it hopes will persuade the regulator to approve its A$2.5bn takeover of regional satellite TV operator Austar.
Under the terms of the proposed undertaking, Foxtel would be prevented from entering into exclusive content agreements to acquire the IPTV rights to ‘a range of attractive content’, in particular transactional movies-on-demand. Foxtel also agreed not to acquire or renew exclusive new distribution rights to a number of channels including the Disney Channel, ESPN and MTV.
In addition, Foxtel would be required to provide signal access to linear channels distributed by independent content suppliers to third parties. The DTH provider would also have to extend its special access undertaking for content suppliers to Austar’s subscribers as well as Foxtel’s.
The ACCC has subsequently launched a market consultation that will last until 20 March. The regulator then plans to make its final decision on 29 March, although cautioned that this may be extended depending on the concerns raised during the process.
Commenting on Foxtel’s offer, ACCC chairman Rod Sims said: “The proposed undertaking has been offered by Foxtel to address the harm to competition which is likely to arise as a result of the proposed acquisition. However, it is not intended to resolve competition or structural issues that may already exist in the relevant markets and are unrelated to the proposed acquisition.
“The (merger) 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 fixed broadband and telephony markets,”
Australian telecoms incumbent Telstra owns 50% of Foxtel with US-based media giant News Corp and Australian investment firm Consolidated Media each owning a 25% stake.
It is the presence of Telstra that is at the heart of the ACCC’s main area of concern. It points to the potential effect the merger would have on not only the national market for the subscription-based television services, particularly at entry level, but also the regional markets for broadband and fixed-line telephony services.
Foxtel hopes that by reducing its content exclusivity, it can persuade the antitrust regulator that it is lowering the barriers to entry for new entrants into the telecoms and subscription television markets.
Foxtel, which holds a pay-TV monopoly in most Australian cities, originally announced its A$1.52 per share takeover bid for Austar back in May 2011. The offer, which includes the assumption of net debt of A$525m, represents an acquisition multiple of about ten times Austar’s consolidated operating cash flow.
Austar is 54% owned by US media group Liberty Global, with the remaining 46% being owned by public shareholders.
Credit Suisse and Allen & Overy are advising Liberty, while Austar has hired Goldman Sachs and Freehills. UBS is advising Foxtel.
