SKY and Vodafone 'disappointed' merger is off

SKY TV and Vodafone both say they are disappointed the Commerce Commission has declined their bid to merge.

Shares in SKY have plummeted, dropping 17 percent once a halt on trading was lifted. They fell from $4.35 to $3.60 in less than two hours.

Commission chairman Mark Berry says SKY'S ownership of premium sports content was the major sticking point. Allowing Vodafone to have that could enable it to attack its competitors.

In a short statement released to the stock exchange, SKY chief executive John Fellett said: "This is a very disappointing conclusion to a merger we saw as enhancing New Zealand's communications and media landscape."

Vodafone NZ chief executive Russell Stanners said the company will carefully review the decision and consider all courses of action.

"We are disappointed the Commerce Commission was unable to see the numerous benefits this merger brings to New Zealanders."

Key concerns

Dr Berry told a media briefing that to grant clearance, the commission needs to be satisfied the merger would not substantially lessen competition in any market.

He said the key concerns were:

  • there would be one telecommunications provider that would own premium sports content
  • around half of all households have SKY TV and a large number have SKY Sports. Exact numbers are confidential
  • the merged company would be able to entice non-Vodafone customers by offering attractive bundles
  • the new company with the rollout of fibre broadband would be able to attack Spark, Vocus and 2Degrees
  • rival companies might not be able to match those bundled offers.

Sports a major sticking point

Dr Berry said had the merger not included Vodafone acquiring all of the premium sports content, it would have likely have been approved.

"The problem we have is that there is this major customer segment for who SKY Sports is a must-have, and the merged entity would have the ability to leverage that market power to potentially have an adverse impact on Vodafone and SKY's rivals."

InternetNZ welcomes decision

Non-profit group InternetNZ, which represents internet users and manages the .nz domain, said consumers would have "been the losers" had the deal gone ahead.

"It was up to Vodafone and Sky to persuade the commission that clearance should be granted, and they have not done so," said chief executive Jordan Carter.

"SKY and Vodafone, absent this merger, will be competitors in the ever-changing markets for communications services. We look forward to seeing how they respond, and how the market evolves."

InternetNZ backed proposed legal action against the merger, had the Commerce Commission approved it.