(Adds comment from Tatts, Tabcorp, additional regulator concerns)
SYDNEY, March 9 (Reuters) - Tabcorp Holdings (TAH) plans to sell its Queensland electronic gaming machine monitoring business to address competition concerns over its proposed A$6.4 billion ($4.9 billion) takeover of rival Tatts Group (TTS), Australia's competition regulator said on Thursday.
The Australian Competition and Consumer Commission (ACCC) said its preliminary view on the deal between two of the country's biggest gambling companies was that it was "likely to substantially lessen competition" in Queensland, Australia's third most populous state.
Tabcorp in October agreed to buy rival Tatts Group to form a gambling powerhouse to fend off overseas online rivals. It was the third time Melbourne-based Tabcorp and Brisbane-based Tatts have tried to join since 2006. Anti-trust regulators blocked the deal 11 years ago, and the two firms failed to agree on another proposed deal in 2015.
A spokesman for Tabcorp and a spokesman for Tatts were not immediately available for comment on Thursday.
The ACCC did not specify in its statement whether it would accept Tabcorp's offer to sell its Queensland electronic gambling unit, saying only that the regulator would seek industry comment.
The regulator added that the deal would involve the companies joining their racing broadcast licencing businesses in four states, and that it may "materially increase the market power currently held by Tabcorp in its dealings with licensed venues and racing media rights holders".
The ACCC is also still investigating whether the combination of both companies' racing media licencing units will affect the ability of rival betting companies to buy licences for the footage.
The ACCC said it will invite further submissions on the proposed buyout by March 24, before it makes a final decision on May 4.
The regulator published its statement of issues before the start of share trading on Thursday.
