Australian pay-TV company Foxtel has moved closer to buying regional competitor Austar United Communications Ltd. (AUN.AU) for 1.9 billion Australian dollars (US$2 billion) by proposing changes to the deal that would address competition concerns.

Foxtel has offered an undertaking to the Australian Competition and Consumer Commission, or ACCC, that would prevent it from locking in exclusive content agreements for television content broadcast online, the regulator said Wednesday. Although the agreement does not include some big-ticket domestic sporting events, the regulator said concerns about exclusive sports rights exist independently of the deal anyway.

"While premium domestic sport is therefore not offered as part of the undertaking the ACCC considers that the package of content that will be made available will be sufficient to address the competitive harm that is likely to arise as a result of the proposed acquisition," the ACCC said in a statement.

Australia is undergoing massive structural change in its telecommunications sector with the roll out of a A$36 billion national high-speed broadband network. Telstra Corp. (TLS.AU) will be a major retailer of broadband services on the new network and also owns 50% of Foxtel, raising concerns it could wield too much power if two of Australia's largest pay-TV companies combine.

The other half of Foxtel is owned by News Corp. (NWS), the owner of this newswire, and Consolidated Media Holdings Ltd. (CMJ.AU), which each have a 25% stake.

In a major hindrance to the deal's progress, the ACCC said last July it was "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. Austar shares took a tumble but have since tracked higher amid speculation the parties would tweak the deal to win the regulator's blessing.

By 2355 GMT, they had jumped another 4.8% to A$1.425, closing in on the A$1.52 value of Foxtel's bid. The ACCC said it will either accept or reject the proposed undertaking following market consultation and has set a tentative decision date of March 29.

Austar welcomed the ACCC's market inquiry into the undertaking, which it said is aimed at fully resolving competition concerns about the deal.

-By Ross Kelly, Dow Jones Newswires; +61-2-8272-4692; Ross.Kelly@dowjones.com

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