Vodafone New Zealand’s merger with SKY TV rejected

New Zealand regulator the Commerce Commission has declined to approve the proposed merger between Vodafone New Zealand and SKY Network Television on competition grounds.

The commission held that a merger between the companies would negatively impact competition in the premium sports content market.

“The proposed merger would have created a strong vertically integrated pay-TV and full service telecommunications provider in New Zealand owning all premium sports content,” Commerce Commission chair Dr Mark Berry said.

“We acknowledge that this could result in more attractive offers for Sky combined with broadband and/or mobile being available to consumers in the immediate future…[but] the evidence before us suggests that the potential popularity of the merged entity’s offers could result in competitors losing or failing to achieve scale to the point that they would reduce investment or innovation in broadband and mobile markets in the future.”

The Commerce Commission said it had particular concerns that the merger could impact the competiveness of key third players in these markets such as 2degrees and Vocus.

“This is also against a backdrop of fibre being rolled out, making it an opportune time for the merged entity to entice consumers to a new offer,” Berry said.

“If significant switching occurred, the merged entity could, in time, have the ability to price less advantageously than without the merger or to reduce the quality of its service. Given we are not satisfied that we can say that competition is unlikely to be substantially lessened by the proposed merger, we must decline clearance.”

In a terse statement, Vodafone New Zealand acknowledged the regulator’s decision but made no further comment.

Under the proposed merger, Vodafone Group would have taken up to a 51% stake in Sky TV, which itself would acquire up to 100% of Vodafone New Zealand. The merged entity would have been controlled by Vodafone Group.