Australian pay-television provider Foxtel has offered AU$2 billion for rival Austar, which covers regional and rural Australia. It reflects a consolidation in Australian media businesses and following limited subscriber growth will provide increased competition for the terrestrial networks promoted through Freeview.
Foxtel is 50% owned by telecommunications company Telstra, with the remainder equally owned between News Corporation and Consolidated Media Holdings. After years of negotiation, the bid for Austar comes after its majority shareholder, Liberty Global agreed to back the cash offer. The conditional offer is subject to regulatory approval.
Austar said in a statement at its annual general meeting that the board “believes the value ascribed to Austar is appropriate in the context of a change of control transaction.” It said it intended to work with Foxtel to reach a definitive transaction.
Foxtel serves metropolitan areas of Australia on cable and satellite, while Austar covers regional markets with similar services, primarily by digital satellite, with around 764,000 subscribers in a coverage area of 2.4 million homes. The combined operation would have a subscriber base of 2.5 million homes, delivering significant operational savings and boosting competition with free-to-air channels. It would create one of the largest media businesses in Australia, with revenues of around $2.8 billion.
A merged operation would be able to roll out new digital products and services faster to existing and new customers, Foxtel said in a statement. Viewers in regional Australia will also be able to subscribe to Foxtel channels delivered by broadband on the Telstra T-Box and Microsoft Xbox 360.
“This is a logical transaction with significant consumer and industrial upside for all stakeholders. The two companies are a complementary fit,” said Foxtel chief executive Kim Williams. “If the merger were to go ahead, it is a win-win transaction that delivers value to Austar shareholders, synergies and growth opportunities for Foxtel and increased services and choice for all consumers.”
Foxtel, Austar and Telstra recently announced that they will have live coverage of every Australian Football League game in a five year rights deal, between them paying an estimated AU$693 million for the privilege, while Seven paid AU$475 million for the free-to-air rights.