Leading subscription television provider Foxtel has proposed a $1.9 billion acquisition of regional and rural counterpart Austar United Communications.

The $1.52-a-share bid, if approved, will result in the creation of one of Australia’s biggest media businesses, with anticipated annual revenues of more than $2.8 billion.

If the “non-binding, indicative and conditional” proposal is successful, the merger would result in regional consumers being able to access new digital subscription channels and viewing through products such as the Xbox360 and T-Box.

Foxtel CEO Kim Williams said it was a “win-win transaction” that delivered value to Austar shareholders, synergies and growth opportunities for his provider, which is owned by Telstra Corp, Consolidated Media Holdings and News Corp.

“This is a logical transaction with significant consumer and industrial upside for all stakeholders,” he said in a statement, indicating the two providers are “a complementary fit”.

The transaction is subject to final board and regulatory approvals, due diligence and financing. US cable company Liberty Global, which owns more than half of Austar, has approved the proposal.

Austar deputy chairman Tim Downing said at today’s annual general meeting that his company looked forward “to working with Foxtel over the coming weeks with the intention of entering into a definitive transaction as soon as possible”.

However Downing pointed out that “no assurance” can be given that the proposal would lead to a definitive transaction.

Foxtel announced it would maintain Austar’s facility in Robina, near Queensland’s Gold Coast.

The proposal follows Foxtel’s massive $600 million investment in AFL broadcasting rights for the next five years, starting in 2012.

Subscription TV has been under threat in recent times due to the introduction of new free-to-air digital multichannels. This has resulted in a 12.7 per cent churn rate (down from 13.3 per cent in the previous year) for Foxtel. The provider currently has 1.55 million direct subscribers, while Austar customer figures were down 1.1 per cent at the end of March, compared to last year, with 755,641 in total now on their books.

Read our in-depth article on the battle between Pay TV and free-to-air in the June/July issue of IF Magazine.

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