Australia's unprofitable Ten Network plans stake sale to News Corp's Foxtel

SYDNEY (Reuters) - Unprofitable Australian television broadcaster Ten Network Holdings Ltd (TEN.AX) said it plans to sell a 15 percent stake in itself to the local cable TV arm of Rupert Murdoch's News Corp (NWSA.O), in a lifeline deal that may face regulatory snarls.

Ten, which warned in April that it may not survive a downturn in free-to-air advertising, said on Monday the shares will be offered at A$0.15 each, a 43 percent discount to its closing price on Friday. The A$77 million ($59 million/38 million pounds) from the sale will be used to cut debt, it said, and added that it wants to raise another A$77 million with a rights issue.

But a partnership with Foxtel, the cable TV firm half-owned by News Corp and Telstra Corp Ltd (TLS.AX), may be seen enabling Ten to outbid larger free-to-air rivals Seven West Media Ltd (SWM.AX) and Nine Entertainment Co Holdings Ltd (NEC.AX) for prized sports broadcasting rights and raise concerns about anti-competitive behaviour, an analyst said.

"It's not a done deal yet, we'll need to see what the ACCC says about this and it could all take a few months," said Morningstar analyst Brian Han, referring to the Australian Competition and Consumer Commission.

In 2012, the ACCC blocked Seven from buying a stake in Foxtel, citing concerns that it would lessen competition for sports rights. Local media reported then that the ACCC also warned News Corp that it would stop the firm from buying free-to-air TV assets for the same reason.

The ACCC did not immediately respond to a request for comment.

Ten, which already has News Corp co-chairman Lachlan Murdoch among a host of high profile major shareholders, has consistently rated last behind Seven and Nine, and in 2014 appointed Citibank to help it decide its future amid reports of several takeover approaches.

But the weak advertising market is affecting all three free-to-airs. Seven and Nine have watched their revenues decline in 2015 as more viewers switch to streaming video offerings from the newly-launched local arm of Netflix Inc (NFLX.O), as well as to their own video streaming ventures.

Ten said it expects to take three months to obtain regulatory clearance so the sale would take place in October.

Its shares fell as much as 6 percent after the announcement, but recovered to be trading down 2 percent at A$0.26, while the broader market (.AXJO) was down 0.4 percent. Ten shares last traded at the proposed deal price of A$0.15 in 1993.

(Reporting by Byron Kaye and Charlotte Greenfield; Editing by Muralikumar Anantharaman)