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A rewrite of media laws could see Kerry Packer and Rupert Murdoch go head to head

One of the underlying assumptions in the Australian media industry is that Kerry Packer does not like competing with Rupert Murdoch, and vice versa.

In recent years, the Australian government's media ownership laws - which restrict cross-media ownership - have kept the two media barons apart, with Mr Packer concentrating on television and Mr Murdoch on his Australian newspapers.

Their only recent spat, the battle over the Rugby League in the 1990s, ended up with the spilling of much red ink on either side, and they have been careful to avoid clashing ever since.

With Canberra now planning long-overdue changes to the media laws, however, it is possible that the two titans could go head to head in competition with each other. At the same time, the legal changes could give them the chance for an unprecedented deal.

Strong rumours are circulating of another scenario, which could see Mr Packer, Australia's richest man, sell his dominant Nine Network to Mr Murdoch's News Corp, which would be free to own both newspaper and television assets.

'There are a lot of signs that Kerry is preparing Nine for sale, and we wouldn't be surprised if Rupert is the buyer,' says one  adviser to a rival  media company.

'If you have a look at the Packer family interests, they are moving away from television and into gaming, which is becoming much more important for them.

'And if News suddenly had the freedom to buy an Australian television network, and Nine was for sale, why wouldn't they look at it?'

Australian media-ownership laws have long been restricted in two areas: foreign ownership and cross-holdings. Foreign investors are unable to own more than 25 per cent of a major metropolitan newspaper, or more than 15 per cent of a television station.

At the same time, media companies are unable to own a television station and a newspaper or radio station in the same city market.

The laws have long been considered anachronistic, and their absurdity was put into sharp relief when News Corp moved its domicile from Australia to the United States recently.

In one move, a foreign company controlled more than 70 per cent of the Australian metropolitan newspaper market - a situation that was technically contrary to the media ownership laws.

With the government of Prime Minister John Howard now controlling both houses of the federal parliament, media-law reform is firmly on the agenda.

Communications Minister Helen Coonan has spent the past few weeks talking with media executives, such as Mr Packer, John Fairfax Holdings newspaper group chief executive Fred Hilmer, and Mr  Murdoch's son, Lachlan, who yesterday  announced he was resigning as  deputy chief operating officer of News Corp but will stay on the board.

Lachlan Murdoch is also the chairman of News Ltd, the conglomerate's Australian arm. News Corp owns The Australian, plus papers in capital cities such as The Courier-Mail in Brisbane, the Daily Telegraph in Sydney, Herald Sun in Melbourne, Advertiser in Adelaide and the Hobart Mercury.

The message coming out of Ms Coonan's office is that there will be 'something for everybody' in the changes, which are likely to be introduced next year.

The government is likely to scrap foreign-ownership restrictions and radically amend cross-ownership laws so that companies can own two different media, such as television and newspapers, in the same market - although there could be a restriction on simultaneously owning a third different media, such as a radio station.

At the same time, the government is likely to bow to pressure from the incumbent television players, and ditch plans for a new fourth commercial television licence.

Instead, it is likely to allow the existing players to own multiple stations - even though this is likely to pose a threat to the pay-television monopoly of Foxtel, a joint venture owned by Telstra, News Corp and Mr Packer's Publishing and Broadcasting Ltd (PBL).

So while foreign media companies such as Ireland's Independent Newspapers of Tony O'Reilly, USA Today publisher Gannett Company, British group Pearson, and the new media fund established by Macquarie Bank are expected to ponder potential moves in the Australian media market, one of the first major plays could involve Mr Packer and the Nine Network, recently valued by Credit Suisse First Boston at A$4.1 billion ($23.6 billion).

Mr Packer recently installed industry veteran Sam Chisholm as chief at Nine, and he immediately began a round of cost-cutting, which spurred rumours that it was being readied for sale.

According to this line of thinking, PBL is now not so much a media company as a diversified conglomerate which, since 1999, has moved strongly into the global gaming industry, with  ventures in Macau and Britain.

Mr Packer's son and heir, James, seems more interested in this side of the business than he is in television.

Although some are looking to a deal with Mr Murdoch, other reports claim that Nine could be split off from PBL and merged with the A$3.7 billion Fairfax newspaper group, publishers of the Sydney Morning Herald, Melbourne's Age and the Australian Financial Review and owner of newspaper and television assets in New Zealand.

This would not be the first time that Mr Packer has entered the Fairfax fold.

In 1996, when Mr Howard won his first term, Mr Packer bought 15 per cent of Fairfax, betting that media ownership would be liberalised.

Mr Packer eventually sold this stake in 2001 - some say prematurely, given the prospects of liberalisation next year.

In April, Mr Hilmer said that if his company merged with a television network, it 'would be in a better position to consider expanding publishing operations'.

Mr  Packer has done famously well out of his Nine Network. After he sold it to one-time tycoon Alan Bond in the late 1980s for A$1.06 billion, he bought it back from him a short time later for A$200 million as Bond Corp started collapsing.

At the time, Mr Packer said the Bond deal had been the deal of a lifetime.

With Australian media laws about to change, it is possible that he could soon have another deal to rival the Bond coup, once again involving the Nine Network - and possibly his perceived archrival, Mr Murdoch.



Australia's media titans destined to deal or duel