Commerce Commission concerned about SKY TV, Vodafone merger


The Commerce Commission has put the brakes on the proposed Vodafone and SKY merger, saying it would substantially lessen competition in telecommunications and pay TV services.

Under the proposal, SKY will purchase Vodafone NZ from its parent company Vodafone Europe for $3.44 billion. It will be funded by payment of $1.25 billion in cash, as well as the issue of new SKY shares at a price of $5.40 per share.

The deal will give Vodafone Europe a 51 percent stake in the merged company.

The commission has sent "a letter of unresolved issues" to both companies seeking further submissions on specific areas of concern.

Those concerns include the ownership of content particularly live sports to make buying SKY on a standalone basis less attractive than buying it in a bundle with Vodafone's broadband and mobile services.

The commission is also concerned about pricing saying while consumers may benefit from lower prices in the short-term, the market may lose competition as other companies fail to match those prices.

In turn it says the quality of service in the market could also be lowered.

A decision on the merger was expected by November 11, however that has now been extended to allow time for further submissions.

New submissions are due by November 11 with cross-submissions due no later than Friday, November 18.