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The ACCC has just put a major spanner in the works for Austar’s proposed merger with Foxtel, although Austar says its ‘confident’ the Foxtel merger will go ahead, despite inquiry.
The Australian Competition and Consumer Commission (ACCC) said today it would undergo a “brief market inquiry” into draft undertakings provided by Pay TV giant Foxtel, who are looking to buy regional player Austar, in a $2.2bn deal which will give it 97% of the subscription TV market.

These ‘undertakings’ are aimed at resolving the ACCC’s competition concerns relating to Foxtel’s proposed acquisition of Austar, which includes rival players’ access to channels including Sky News, Disney and channel signals, the watchdog said today.

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The competition watchdog is calling on the IPTV industry to comment on the proposed merger before giving its final approval.

Austar said it “remains optimistic” that the ACCC will be able to complete its inquiry and reach a decision in time for its shareholder meeting set for 30 March.

Foxtel said today it will provide the competition watchdog with undertakings relating to access to exclusive content and channel signals, in a bid to address the ACCC’s concerns in relation to the $2.2bn acquisition.

It welcomed the ACCC’s announcement today of a market inquiry into the proposed acquisition and CEO Richard Freudenstein said while his company “strongly believes” the acquisition would not lessen competition, it would continue to “work constructively” with the ACCC.

Foxtel’s new boss also insisted the Pay TV merger will create one of Australia’s largest media companies, ensure parity of digital entertainment services for metropolitan and regional areas, and be part of an industry which spends close to $600m a year on local content.

“We believe this will create a great Australian media company. It’s good for consumers, it’s good for the nation and it’s good for business,” Mr Freudenstein said.

“Foxtel’s undertakings will ensure that a broad range of content continues to be available for IPTV players. IPTV players will also be able to get access to channel signals from FOXTEL so that they are more easily able to deliver channels to their customers” he added.

Foxtel’s undertakings cover four areas and include non-exclusivity over channels – where the Pay TV giant, which is 50% owned by Telstra, is undertaking not to acquire or renew new exclusive distribution rights to the Disney Channel, SKY NEWS, ESPN, 13th Street, and KidsCo, unless another bidder is seeking exclusive rights.

Rupert Murdoch’s News Limited and James Packer’s Consolidated Media Group each own a 25% stake in Foxtel.

Similar non-exclusivity undertakings over transactional video-on-demand movie rights – where Foxtel is undertaking not to ‘exclusively’ acquire on-demand movie rights to new release titles, unless another bidder is also seeking exclusive rights.

 

Foxtel has also agreed to extend its current Special Access Undertaking to Austar set top units (which the ACCC accepted in 2007).

This will enable independent channel providers to access Foxtel’s and Austar’s over 2.2 million subscribers and enable them to sell their channels directly, it confirmed.

The term of the undertaking is 8 years. Until the transaction is complete Foxtel will continue to provide its services to its subscribers, as will Austar.

The proposed merger remains subject to the approval of the ACCC and the Austar’s minority shareholders and the Court.

Read: Austar Drops Foxtel Ready To Pounce

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