March 12 (Bloomberg) -- Seven West Media Ltd. and Nine Entertainment Co., Australia’s two largest free-to-air broadcasters, may be allowed to take over smaller networks if a government committee approves potential changes to media rules.
The government will set up a parliamentary committee to look at abolishing the so-called reach rule, which forbids any television company from broadcasting to more than 75 percent of the Australian population, Communications Minister Stephen Conroy told reporters in Canberra today.
Removing the rule could fuel deals in Australia’s A$31 billion ($32 billion) media sector between Seven West and its rural affiliate Prime Media Group Ltd.; Nine and closely-held WIN Corp.; and Ten Network Holdings Ltd. and Southern Cross Media Ltd., UBS AG analyst Richard Eary wrote in a Jan. 22 note to clients. Southern Cross is “reviewing a number of strategic options,” the company said March 4 after the Australian newspaper reported it was looking at a deal with Nine.
“The reach rule is outdated,” Conroy said. “It’s not a sustainable position in the 21st century.”
News Ltd., the Australian unit of Rupert Murdoch’s News Corp., criticized the government’s stance. Murdoch’s son Lachlan is Ten’s chairman and has a 8.9 percent stake in the company through his investment vehicle Illyria.
Ten fell the most in three weeks, dropping 2.6 percent to 37 Australian cents at the close in Sydney. Southern Cross, which would benefit if a tie-up with Nine was permitted, rose 2.7 percent to A$1.72, while Seven West slipped 1.3 percent to A$2.35.
“We are alarmed that this inquiry is being rushed and that the government thinks it can be done and dusted in just one day,” Hamish McLennan, Ten’s incoming chief executive officer, said in an e-mailed statement. “This is an issue of national significance. It needs to be properly debated.”
The government will also set television broadcast licenses at a maximum 4.5 percent of revenue and make permanent a current 50 percent rebate on the cost of licenses, Conroy said today.
Content rules will mandate at least 1,490 hours of Australian content on television channels by 2015, Conroy said, and an advocate will be established to ensure takeovers don’t decrease diversity of ownership.
News Ltd. CEO
The government “risks standing as the one that turned the clock back to the last century with its highly interventionist, vague and unnecessary public interest test on media ownership -- - which is nothing more than a political interest test which governments will use to punish outlets they don’t like,” News Ltd. Chief Executive Officer Kim Williams said in an e-mailed statement.
The public interest test to ensure diversity would be “unworkable and unnecessary,” Ten’s McLennan said, and an equivalent system in the U.K. had proven “complicated and impractical”.
McLennan is an executive vice president in the chairman’s office at News Corp. the media company controlled by Rupert Murdoch, as well as chairman of REA Group Ltd., the real estate website controlled by
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