Australia’s competition regulator has raised concerns that the planned A$2 billion takeover of pay-TV operator Austar by rival Foxtel, part owned by Rupert Murdoch’s News Corp, could hurt competition on three fronts.
The Australian Competition and Consumer Commission (ACCC) has delayed its decision on Foxtel’s bid until September, a strong indication that it sees problems in it proceeding at all.
The ACCC said in a Statement of Issues that it has a preliminary view that it would substantially lessen competition in pay-TV, the market for buying programmes and for the supply of telecommunications products because it is half owned by Telstra.
Austar said it remained committed to the Foxtel deal, and would work with regulators to resolve the issues.
Should Foxtel’s bid for Austar be blocked, it would represent another blow to the pay-TV ambitions of News Corp and Rupert Murdoch, following the withdrawal of News’ bid for the remaining stake in BSkyB in the wake of the phone hacking scandal involving its News of the World newpaper.
Foxtel is half owned by Telstra, with the remaining half split between News Corp and billionaire James Packer’s Consolidated Media Holdings.
The ACCC said: “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.”
“In the absence of the proposed acquisition, and in particular following the rollout of the NBN, the ACCC considers it likely that industry changes will substantially increase the ability and incentive for Foxtel and Austar to compete with one another outside of their existing distribution regions. The proposed acquisition would prevent any such competition from occurring.”
Foxtel has long sought to take over Austar but the parties have only recently agreed on price. They argue there will be no reduction in competition because they only compete on the Gold Coast; the rest of the country is divided up between the two pay-TV providers, Foxtel in the cities and Western Austrakia and Austar in the regions.
The ACCC takes a contrary view: “The extent to which Foxtel and Austar compete currently, or have competed in the past, is not necessarily indicative of the likely future level of competition between the parties. This may particularly be so in light of significant industry changes which are likely to occur in the foreseeable future, most notably the rollout of the NBN, which has the potential to facilitate entry by Foxtel and Austar and other parties into areas of new activity (either in the sense of providing different products and/or expanding their geographic presence).”
It is seeking responses to its issues of concern by 11 August before making a final determination on September 8.