SKY TV, Vodafone confirm merger plans


Telecommunications company Spark says it is ready to compete when SKY TV merges with Vodafone New Zealand.

SKY TV and Vodafone NZ have confirmed plans to merge by July.

The deal would give Vodafone's British parent company, Vodafone Group, a 51 percent controlling stake in the new business.

Under the terms of the proposal SKY TV will buy Vodafone New Zealand for $3.44 billion through a mix of shares and $1.25 billion in cash.

The new shares in SKY TV will be issued at $5.40 each. That is a premium of 21 percent on the $4.47 price shares in SKY TV traded for on Tuesday.

SKY TV shares rose leapt 17 percent to $5.26 in morning trading.

Shares in Spark fell three percent to $3.38. That followed a fall of four percent yesterday.

But Spark New Zealand has dismissed the prospect of increased competition.

Spark managing director Simon Moutter said in a statement: "The reality is that Spark has been competing successfully with a tightly integrated partnership between Vodafone NZ and SKY TV for a couple of years now. Vodafone NZ has been bundling and deeply discounting SKY TV products while SKY TV actively resells Vodafone NZ broadband."

During that time, Mr Moutter said, SKY's core subscriber base had delined and Vodafone had seen little or no growth in its broadband base since it acquired Telstra Clear nearly four years ago.

"As such, we don't believe a merged SKY TV and Vodafone NZ poses a greater challenge to Spark than the existing partnership has achieved to date."

SKY and Vodafone say the deal gives them "significant potential" for packaging and for cross marketing of their products.

The deal, which needs shareholder and regulatory approval, would see Vodafone NZ boss Russell Stanners become the chief executive of the merged company.

Mr Stanners has kept tight-lipped on whether prices will drop for Vodafone or SKY customers with the merge, but assures customers will be able to independently choose either Vodafone or SKY like they currently can, and that looks unlikely to change.

"We'd like all the customers to buy from both of us, but clearly there's a lot of competitors in the market."

Mr Stanners is confident the deal is good for SKY shareholders, who will help decide the fate of the merge in the coming weeks.

SKY TV boss John Fellett will stay on as the head of the pay television business. He says job losses will remain minimal.

"If you look across the rest of business, the rest of the employees, there’s very little overlap on what they do, we completely two separate businesses that don’t have an overlap."

Mr Fellett says talks on the merger began eight or nine months ago.

The companies say the combined group "will offer New Zealand's best entertainment content across all platforms and devices in a rapidly evolving media and telecommunications market," and will "provide an enhanced customer experience and greater choice, as well as attractive offers of entertainment and content, broadband and mobile to meet the growing consumer demand for packaged services".