THE DISTILLERY: Pay TV prize

Jotters pick three outside winners from the Foxtel-Austar deal, while one sees a 'fiscal cliff' for the US.

This morning, the commentariat is firmly glued to Foxtel. After a protracted negotiation process, the Australian Competition and Consumer Commission finally gave the pay TV provider the green light to take over its regional rival, Austar, after forcing the suitor to make some content concessions. As the dust settles, commentators are trying to figure out who won – one jotter reckons it was the ACCC; another says it's Foxtel's parent, Telstra; and another again thinks it could be the corporate community as a whole. Meanwhile, there's also a warning about an upcoming "fiscal cliff" in the US, with dire consequences for the world's biggest economy, and Tony Abbott's plan to scrap the carbon tax is called into doubt.

But first, in the Fairfax press, Malcolm Maiden casts an eye over the ACCC's approval of the Foxtel-Austar deal, which he views as a strategic victory for the regulator. He reckons Foxtel caved to accept the ACCC's narrow focus only on pay TV markets, audio-visual content, and the supply of telecommunications products, even though the pay TV operator originally said it competed on a much broader playing field.

"Foxtel had market reality on its side. There is no doubt that Pay TV and free to air TV compete, no doubt either that digital free-to-air TV is an important new competitor to pay TV, and a factor slowing growth in pay TV subscriber numbers. In agreeing to carve out slabs of content from exclusive agreements Foxtel is, however, tacitly reinforcing the regulator's narrower view that the emerging market for the provision of TV on the internet, be it landline or mobile, should be nurtured. The deal is in that sense a win for the ACCC, and one that will shape future decisions it makes as pay TV platforms multiply."

But in The Australian, Stephen Brook says Foxtel and its parent, Telstra, have done pretty well for themselves, too.

"In a converged world, the ability to offer customers not just TV shows, but also phone and broadband, becomes crucial and such bundling is Foxtel's great defence against its IPTV rivals. ... But Telstra (a 50 per cent shareholder in Foxtel) is the biggest winner because the takeover means it has future-proofed itself, removing a potential competitor in the regional telephony and broadband market, which Austar would have become."

The Australian Financial Review's Chanticleer columnist, Michael Smith, takes a broader view. He thinks the decision could signal a fresh take on takeover deliberations at the ACCC, after its new chairman, Rod Sims, agreed to sort out his differences with Foxtel before the Easter break – and ahead of Friday's court ruling on the deal.

"It was a defining moment in Foxtel’s frustrating year-long effort to buy regional operator Austar and highlights the different approach the Australian Competition and Consumer Commission is taking towards takeovers under Sims’s leadership. ... Foxtel and its powerful shareholders are relieved by what they see as a pragmatic and sensible approach to the impasse by Sims. The corporate world hopes it signals a more friendly manner in the way the ACCC deals with takeovers and confirms the regulator’s 'evidence-based' approach to takeovers."

Meanwhile, off-topic and offshore, The Australian's John Durie expects the US economy to take a big hit over the next 12 months, as the nation approaches a "fiscal cliff".

"The fiscal cliff Washington is worried about is a combination, in the end, of the payroll tax deduction, temporary unemployment benefits, Bush tax cuts, the debt ceiling, which will be hit in the first quarter next year, and a range of middle-class tax hikes that are on track to come into effect next year. In all, they will amount to a fiscal tightening of anywhere between 3 per cent and 5 per cent of GDP, depending on which house economist you follow. None of which is a positive for a teetering economy and none of which suggests anything but tepid growth for the foreseeable future."

In company news, The Australian's Tim Boreham examines a downgrade by toilet making company GWA – a proxy play for Australia's housing market – and reckons things aren't as bad as they look. And in the same paper, Barry Fitzgerald likes WPG Resources' strategy of derisking mining projects by getting them fully permitted, funded and fully contracted on sales, then passing them on to the more risk-averse major companies for top dollar. It certainly seems to be paying off.

Over at The Australian Financial Review, Matthew Stevens explains how Kangaroo Resources was reluctantly invited into an the international legal dispute between White Energy and its Indonesian partner PT Bayan Resources, while Jennifer Hewett warns that if Tony Abbott becomes prime minister, he will still have a tough time repealing the carbon tax quickly given likely opposition in the senate. And, she says, calling a double dissolution won't help.

Finally, The Australian's Bryan Frith throws his weight behind a warning from the Takeovers Panel, that companies need to take more steps to ensure a rights issue doesn't affect control.

Related Articles