Aussie Regulator Examining PBL-Foxtel Deal11/08/1998 7:00 PM Eastern
Sydney, Australia -- The long-awaited consummation of the
relationship between Australian media barons Kerry Packer and Rupert Murdoch -- now
partners in the Foxtel cable systems company -- is drawing the eye of the Australian
Competition and Consumer Commission, the country's antitrust watchdog.
The ACCC, which in the past had quashed deals for Foxtel to
merge with now-defunct satellite player Australis Media, is looking at the market power of
Packer's Publishing and Broadcasting Ltd. as the country prepares to launch
digital-terrestrial television in January 2001. PBL owns leading broadcaster Nine Network
and now has 25 percent of Foxtel.
ACCC commissioner Allan Asher was quoted by local media as
saying that the commission is particularly interested in examining whether there are any
"identifiable market overlaps that may raise issues under the Trade Practices
Act." Further, "We have been getting some more information from them. We are
waiting to understand the way that the commercial transactions operate in this
sector," he was quoted as saying.
In previous rulings, the ACCC had taken the view that the
pay TV market was separate from broadcasting, but with the arrival of digital television
it could change its view.
Valuing Foxtel at $A640 million ($US400 million), PBL in
late October agreed to half of Murdoch's News Ltd.'s 50 percent stake in Foxtel
for $A160 million ($US100 million). Telco Telstra Corp. is now Foxtel's majority
shareholder, with 50 percent, and Telstra sources confirmed it would not trim its stake to
make Foxtel an equal, three-way partnership.
PBL CEO Nick Falloon said the deal is expected to be
finalized in the next 10 days, and that it is uncertain how many seats PBL will have on
Foxtel's six-member board.
"The ACCC, as it does in these matters, will look very
clearly at the issue, and we expect them to do that. But we are very confident that there
are no issues to concern them. We've been communicating with them over the 12 months
of our option," he told reporters
He added that News Ltd. will retain management control of
Foxtel and that PBL is also negotiating with News to take 50 percent of the News-owned Fox
Sports service in Australia.
Falloon added that he stood by previous forecasts that the
pay TV industry is set to break even around the year 2000, but would not comment on
specific forecasts for Foxtel. He also declined to comment on how much PBL will contribute
to the currently unprofitable Foxtel over the next few years.
"We've obviously decided to go ahead, and look
forward to attempting to make Foxtel an even more successful pay TV operator," he
Foxtel has 350,000 cable subscribers and is believed to
have 50,000 satellite subscribers acquired from the Australis auction.
PBL's entry into Foxtel is potentially a major blow to
telco Optus Communications Ltd., which owns Foxtel competitor Optus Vision, a cable
"It's PBL's view, now that we've taken
a stake in Foxtel, that we'd look at rationalization that makes the company more
profitable. It's something we hope happens -- that the industry becomes more
rational. And it's something we'd participate in going forward," Falloon
The first step in any consolidation for PBL may be the sale
of its 8.3 percent stake in Optus' movie provider, Movie Vision. Falloon said an
announcement regarding Movie Vision would come in the next few weeks.
An Optus Vision spokesman said PBL's 25 percent stake
in Foxtel would have "little impact on it. We're in pay TV for the long haul,
and it plays an integral role in our full-service strategy. While we are willing to enter
discussions on the industry with any of the major players, we're not sitting on our
hands waiting for an industry restructure."