Foxtel's $2 bn Austar bid hits competition hurdle

A USD 2 billion takeover by News Corp's part-owned Australian pay-TV business Foxtel of rival Austar hit a hurdle on Friday after the country's competition watchdog raised concerns the deal could create a pay-TV monopoly.

The Australian Competition and Consumer Commission (ACCC) delayed a final ruling on the deal until September as it seeks more information, wiping more than 15% off the value of Austar shares.

The delay is the latest blow for News Corp, which owns 25% of Foxtel, amid the fallout from a phone hacking scandal in the United Kingdom which forced it to abandon a takeover bid for British pay TV firm BSkyB.

The ACCC said the Foxtel-Austar deal could substantially lessen competition in subscription TV services, acquisition of audio visual content and competition in telecommunications products.

"The proposed merger would ... effectively create a near monopoly subscription television provider across Australia," the commission said in a statement.

The commission warned the merger would make the barriers to entry for competitors higher in the future and highlighted the rollout of a new A$35.9 billion (USD 38.9 billion) National Broadband Network in Australia which will change the competitive landscape for pay-TV and telecoms services in the country.

It argued that the industry changes would increase Foxtel and Austar's ability to compete with each other in the future if the deal did not go ahead.

Austar shares sank 15.8% to A$1.09 by 110 GMT.

The watchdog expects to complete market inquiries by Aug. 11 and make a final decision on the deal on September 8.

Foxtel, whose other large shareholders include telecoms firm Telstra and billionaire James Packer's Consolidated Media Holdings, launched its bid in May to buy Austar which is majority owned by Liberty Global.

Austar shares slipped earlier in the week on concerns that the fallout from the phone hacking scandal in the United Kingdom may affect Foxtel's bid because News Corp was a major shareholder.

The ACCC did not mention the phone hacking scandal which analysts and source close to the deal have said was unlikely to play a part in the regulator's thinking.

In a separate deal, the Australian government has decided to reopen a bitterly fought tender involving Murdoch's part-owned Sky news for the country's taxpayer-funded overseas TV service.