By Jarni Blakkarly
SYDNEY, March 1 (Reuters) - Legislation to change media ownership laws in Australia will be put before parliament, the government said on Tuesday, opening the door for a potential raft of mergers and acquisitions from major media companies such as News Corp NWSA.O .
The bill will be introduced in parliament on Wednesday and is expected to be passed in the next several months with support of independent senators.
The so-called 'two out of three' rule which prevents any company from owning a free-to-air TV network, newspaper and radio station at the same time will be scrapped.
Restrictions on urban TV networks purchasing rural stations will also be removed.
"The media ownership regulations were written before paid television, before the Internet and have been out of date for years ... we are bringing media ownership regulation laws into the 21st century" Turnbull told parliament.
The reforms could provide a lifeline to Australia's struggling newspaper industry, which is dominated by News Corp's Australian unit NWS.AX and rival Fairfax Media Ltd FXJ.AX , both of whom are expected to consider merging their newspaper and radio stations with a major TV network.
News Corp and Fairfax have both seen sharp drops in newspaper circulation numbers in recent years and widespread job losses, as readers increasingly move online for news, disrupting advertising revenue and traditional business models.
TV companies Nine Entertainment Corp NEC.AX , Ten Network Holdings TEN.AX and Seven West Media SWM.AX are all tipped to merge with their rural counterparts.
Shares in Nine and Ten have risen, 6.3 percent and 4.7 percent respectively since newspapers reported details of the proposed changes at the start of last week, while shares in Seven have jumped by 34.4 percent.
Shares in News Corp Australia have remained flat.
Shares in Fairfax have dropped 6.9 percent, however analysts ascribed the fall to the company's weaker than expected results.
However, the changes did not go as far as Australian-born media mogul Rupert Murdoch had wanted. News Corp's local pay-TV provider, Foxtel, had been pushing for changes to laws that require major sporting events to be shown on free-to-air TV.
News Corp said on Tuesday, in an emailed statement to Reuters, that the proposed legislation was a step in the right direction, though last week, News Corp Australia Chief Executive Michael Miller said the company was "disappointed".
"It difficult to accept this as genuine media reform," Miller told the Australian Broadcasting Corp.
Communications Minister Mitch Fifield said the government's proposals were drawn from the media industry's broadest consensus.