UPDATE: Australian Regulator Allows Foxtel's A$1.9 Billion Takeover Of Austar

Australian pay television operator Foxtel's 1.9 billion Australian dollar (US$1.96 billion) bid for fellow pay television company Austar United Communications Ltd. (AUN.AU) cleared a major hurdle Tuesday when the competition watchdog said it won't oppose the deal.

The Australian Competition and Consumer Commission gave the takeover the green light after Foxtel made court-enforceable undertakings that will prevent Foxtel from buying exclusive internet protocol television rights for a range of television programs and content.

Foxtel is 50% owned by the country's largest telco Telstra Corp. (TLS) and 25% each by Consolidated Media Holdings Ltd. (CMJ.AU) and News Corp. (NWS), the owner of Dow Jones Newswires and The Wall Street Journal.

"Taking into account the undertaking which has been offered by Foxtel, the ACCC is satisfied that the proposed acquisition is unlikely to substantially lessen competition," ACCC Chairman Rod Sims said in a statement.

The regulator's main areas of concern about the deal revolved around Telstra's stake in Foxtel and its ability, after the merger, to acquire preferential access to Austar's existing subscriber base and greater market power.

"By reducing content exclusivity, the undertakings will lower barriers to entry and promote new and effective competition in metropolitan and regional telecommunications and subscription television markets," Sims said.

Telstra, which provides IPTV services through its T-box device, welcomed the decision and said it was a "win for consumers."

"It will also enable Telstra to expand its Foxtel on T-box offering into some Austar areas over time, enabling regional Australians in those areas to enjoy the same high quality IPTV services as those who live in metropolitan areas," said Rick Ellis, group managing director of Telstra Digital Media.

Last month Austar's minority shareholders, whose approval was needed for the deal to proceed, voted in favor of the takeover.

Telstra and Consolidated Media said their funding contribution to the deal would be through a subordinated shareholder note.

The Foxtel-Austar tie-up is due to go to Australia's Federal Court on April 13 for approval.

-By Gavin Lower, Dow Jones Newswires; 61-3-9292-2095; [e-mail]