While posting a big increase in first-half net profit, pay TV provider Austar remains confident that the proposed $2.5 billion merger with Foxtel will go ahead.

Outlining the company’s financial report for six months ending June 30, 2011, Austar chief executive John Porter indicated the transaction was expected to be completed either late this year or early 2012.

This is subject to meeting a number of conditions including: Australian Competition and Consumer Commission (ACCC) and Foreign Investment Review Board (FIRB) approval, Austar shareholder and court approvals, and the ruling that the merger is in the “best interests of Austar and minority shareholders”.

The ACCC recently raised concerns about the proposal, saying the merger between the subscription TV providers would give Telstra an unfair advantage in the telecommunications market while increasing the barrier to entry for prospective competitors. The ACCC called for further submissions.

Despite this, Porter remains optimistic the merger will go ahead.

“While the ACCC’s…Statement of Issues raised some market concerns about the transaction, I am confident that once the ACCC reviews our submissions, there will be a reasonable result,” Porter said in a statement.

“There has always been a compelling industry logic to bringing Austar and Foxtel together.

“Austar’s independent directors have said the transaction is in the best interest of shareholders. It also makes sense that a bigger entity is likely to deliver a number of consumer benefits for all Australians.”

The regional pay TV provider had promising results in its half-year ending June 30, 2011, posting a net profit of $88.7 million – up substantially from just $20.7 million a year earlier. This was largely due to the sale of its spectrum licences to NBN Co for almost $120 million. Revenue was flat at $351.8 million.

Total television subscribers grew to 764,250 at June 30 – an increase of 8609 from March 31.

Deutsche Bank analysts noted that Austar’s quarterly subscriber decline in March was its first negative result since 2002, due to not just natural disasters.

“We believe this was also due to continued ‘challenging consumer markets’ and the competitive dynamic caused by the successful launch of the FTA multichannels,” Deutsche Bank said.

MyStar subscribers increased 11 per cent on the first quarter to end the period at 228,927.

“Despite the difficult consumer environment, regional Australians are still choosing Austar, and opting for greater control in their viewing with MyStar,” Porter said.

Earlier this week, IF reported subscription television has seen an increase in advertising revenue.

To read more on the battle between pay TV and free-to-air, pick up a copy of the June-July issue of IF Magazine.

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