Oz regulator punctures Foxtel takeover bid

If it looks like a monopoly and quacks like a monopoly...

Foxtel’s ambition to create a subscription TV monopoly with the $1.9bn takeover of rival Austar has been significantly dampened by the competition regulator.

On Friday the Australian Competition and Consumer Commission (ACCC) released its ‘Statement of Issues’ on the takeover which provides the regulator’s preliminary views.

The ACCC found that the proposed acquisition is likely to result in a "substantial lessening of competition" in the national market for the supply of subscription television services; the national market for the acquisition of audio visual content; and a number of markets for the supply of telecommunications products.

The report stated that as 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.”

It added that the advent of the NBN (National Broadband Network) would most likely create industry changes that “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.”

It also found that Telstra, via its 50 per cent shareholding in Foxtel, “is likely to be able to leverage its relationship with Foxtel and consequently Foxtel’s position in the national market for the supply of subscription television services, to the detriment of competition in telecommunications markets.” Rupert Murdoch's News Corp and Consolidated Media Holdings each own 25 per cent of Foxtel.

Austar said it would “continue to work with the ACCC to resolve issues identified as a result of market inquiries. Austar remains committed to effecting the transaction and will continue to cooperate fully with all relevant government authorities and regulators.”

Foxtel is considering taking legal action, according to The Australian.

Foxtel CEO Kim Williams told the newspaper, "while the ACCC has raised some high-level issues, it provides limited evidence to back up some of its assertions. On this basis we believe Foxtel/Austar would be well positioned to have some success should it ultimately choose to take the ACCC to court, although we would still see a negotiated outcome as preferable for all parties and is therefore still more likely."

The ACCC will publish it its final determination by 8 September after receiving submissions from market participants on each of the issues identified in this Statement of Issues. The ACCC is calling for industry submissions by 11 August. ®