Why the media sector is now ripe for mergers and acquisitions

New less-restrictive media laws pass through lower house of parliament

Mike King

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Published December 2, 2016 12:54 pm AEDT

Media ownership rule changes have passed through the lower house of parliament, suggesting the sector could be about to see plenty of mergers and acquisitions.

Previous rules meant media companies were restricted from owning more than two out of three types of media – television, newspapers and radio – in one geographical area – like metropolitan Sydney.

That rule has now been abolished, meaning media companies can own several types of media in the same region.

The government has also removed the reach rule, which prevents a company controlling commercial TV licences that reach more than 75% of the population. That has led to metropolitan broadcasters like Nine Entertainment Co Holdings Ltd (ASX: NEC), Ten Network Holdings Limited (ASX: TEN) and Seven West Media Ltd (ASX: SWM) signing affiliate deals with regional broadcasters Prime Media Group Limited (ASX: PRT) and Southern Cross Media Group Ltd (ASX: SXL).

In fact, Prime and Southern Cross are likely to be two companies in the front line, targeted by Nine, Ten and Seven.

Once the new media laws are passed, we could also see the likes of newspaper owners News Corp (ASX: NWS) and Fairfax Media Limited (ASX: FXJ) merging or acquiring commercial TV broadcasters, as well as radio station companies like Macquarie Media Ltd (ASX: MRN) – of which Fairfax owns 54.5%.

Telstra Corporation Ltd (ASX: TLS) could also see the relaxed media laws as a way of either divesting its 50% share of Foxtel, or move further into the media sector to acquire growth. The new rules may allow partner News Corp to acquire Telstra' share, or for Foxtel to be demerged into a separate company.

The giant telco has struggled to generate top-line revenue growth but also appears to like the idea of becoming a media/content provider.

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