Satellite television services provider Austar (ASX:AUN) has acknowledged speculation that its larger rival, Foxtel, is mulling a takeover.
In a market announcement, Austar said it had understood that there had been verbal discussions between Foxtel and controlling Austar shareholder Liberty Media in relation to a possible acquisition.
But it added that it had not received a proposal, and that there was no guarantee that the discussions will lead to one.
The company was responding to reports claiming that Foxtel's largest shareholder, Telstra, (ASX:TLS) had leant its considerable weight to the potential deal.
Telstra has blocked Foxtel's attempts at an Austar takeover twice previously – in 2005 and 2007.
Austar has around 760,000 subscribers, a bit less than half of Foxtel's estimated total.
Any deal could face scrutiny from regulators, as a combined entry would be left with little meaningful competition in the pay TV market.
AUS shares shot up 10.6 per cent to $1.250 following the reports and the subsequent announcement. At the time the speculation started in February, AUS shares soared from below $0.950 to above $1.150.