John Durie: ACCC tipped to clear Telstra’s interest in Fetch TV, as telco looks to enter streaming market

accc

The Australian Competition and Consumer Commission (ACCC) will rule on two mergers involving dominant companies this week, with both deals expected to clear due to the market circumstances.

The likely decisions highlight the difference between competition policy and the law, with the former more a wish list and the latter reality.  

The most problematical deal is Aurizon’s $2.4 billion acquisition of One Rail from Macquarie and others because of the stranglehold it gives it in the east coast coal market.

The ACCC expressed concerns because it would cut the number of competitors from three to two and this was made worse when one suggested buyer, Glencore, pulled out.

The Brisbane based Aurizon undertook to sell the assets and if this is not possible it would create a new vehicle by demerging the business.

The ACCC is not keen on this form of divestment because it is subject to market uncertainty at a time when coal is not the flavour of the month and management structures would be similar.

A decision is due Thursday as new Competition Minister Andrew Leigh maintained his concern at the increasingly concentrated Australian market.

“What economics tells you is that you will get lower prices if you have more competitive markets, so I think in every context, the competition regulator needs to be making sure that it’s doing all it can to get more players into the market and particularly avoiding those situations where you’ve got a single monopolist, or a monopoly or a duopoly that are divvying up the market,” he said in an interview with SmartCompany

The ACCC is also tipped to clear another merger at the big end of town, with Telstra seeking to buy 50% of Fetch TV. The rest of the pay television venture is owned by Malaysian billionaire Ananda Krishnan.

Telstra also owns 35% of Foxtel but its management control is weak.

It claims the market is increasingly controlled by streaming services like Netflix, Apple and Amazon.

This is also evident in Foxtel’s own user base of 4.5 million subscribers, of which 2.8 million are with streaming services like Kayo and Binge.

Foxtel revenues per subscribers are around $80 against $25 at Kayo and $16 at Binge, so it makes more money from its main platform even if the market is moving away from it. Its strategy is to run content on as many platforms as possible.

Tesltra has long toyed with subscription television without ever making a big leap and the Fetch deal may be its point of entry.

The phone giant has 800,000 Telstra TV customers and Fetch would add in another 650,000.     

While any acquisition by Telstra is closely watched by the ACCC, market diversity should see the deal cleared.

Rival Optus, which runs Fetch on its mobile platform, has noted it provides Telstra with dominance, which may inhibit further competition and innovation.

Content is important for retail service providers, it added.

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