But the alliance, which is the result of a deal between Rupert Murdoch and Kerry Packer who control key programming rights in the two companies, is being closely scrutinized by the Federal government's industry watchdog, the Australian Competition and Consumer Commission.
Rival Optus Communications, the fledging third network, is expected to launch its own legal assault against the merger, claiming it is anti-competitive.
The merger, which is effectively a takeover by Foxtel, jointly owned by Rupert Murdoch's NewsCorp and Telstra, Australia's major telecommunications player, will result in a company reaching into six million homes and transmitting 30-plus channels by cable, satellite and microwave technology.
It follows three years of heavy losses by all three pay-TV players, much of which came from billion dollar rollouts of cable and cut-throat subscription offers. It also clears a major hurdle for Telstra ahead of its scheduled public float in about six months time, removing a $1.5bn contingent liability from its books.
In the complex deal, the Foxtel partners will take a two-thirds stake in the new company and provide about $250m in additional capital.
Kerry Packer's family company Publishing & Broadcasting, which holds a major stake in Australis, has the option to lift its holding to the same level as NewsCorp. The new company will be called Foxtel. Galaxy, Australis media's brand name, will be gradually phased out.
Copyright July 1997, Crain Communications Inc.