News Corp Affiliate Foxtel Faces Regulator Block On A$2.5 Billion TV Deal

News Corp. (NWS) affiliate Foxtel's proposed 2.5 billion Australian dollar (US$2.7 billion) takeover of regional pay television company Austar United Communications Ltd. Ltd. (AUN.AU) was knocked back Friday when the country's competition regulator said it's concerned the deal would create a near-monopoly.

In its statement of issues, the Australian Competition and Consumer Commission, said the deal "is likely to result in a substantial lessening of competition" in the pay-TV services market, the market for TV content, and several markets for telecommunications products in Australia.

Foxtel is 50% owned by Telstra Corp. (TLS.AU) and 25% each by News Corp. (NWS) and Consolidated Media Holdings Ltd. (CMJ.AU). News Corp., owner of Dow Jones & Co., the publisher of this newswire, is fighting to contain a phone hacking scandal that has engulfed its tabloid newspaper assets in the U.K. The regulator's near rejection of the deal comes amid calls from Australian lawmakers to review media ownership after the scandal in the U.K.

News Corp. dropped its bid to take over the 60% of U.K. subscription TV company British Sky Broadcasting (BSY.LN) amidst heavy criticism of the phone hacking controversy that forced it to close its best selling tabloid paper, The News of The World. A spokesman for News Corp's Australian unit News Ltd. referred all questions to Foxtel. Spokespersons for Foxtel and Austar were unreachable for comment.

The regulator has called for further information on the deal before it makes its final ruling on Sept. 8. However, the regulator has rarely changed its preliminary view on a deal, although it did recently overturn a call to block an alliance between Virgin Australia and Air New Zealand but with conditions.

-By David Fickling and Gavin Lower, Dow Jones Newswires; [phone]; [e-mail]

Ross Kelly in Sydney contributed to this article.