Published: Thu, February 23, 2017
Economy | By Melissa Porter

New Zealand court grants Spark's request for pause on Sky-Vodafone deal

The key issue was the merged entity's ownership of premium sports, such as New Zealand's rugby broadcast rights.

The Commerce Commission has declined to grant clearance for the proposed merger of Sky Network Television and Vodafone New Zealand.

"To clear the merger, we would need to have been satisfied it was unlikely to substantially lessen competition in any relevant market". The lack of a meaningful wholesale market today for Sky's sports content means we and other mobile and broadband providers have been held back from offering our customers new ways to watch sports content in ways that are already the norm elsewhere in the world.

Mr Berry says "unresolved issues" outlined to the applicants last October had remained unresolved and its concerns particularly related to the impact of the merger on challenger competitors in the telecommunications market, TwoDegrees and Vocus. Given the merged entity's ability to leverage its premium live sports content, we can not rule out the real chance that demand for its offers would attract a large number of non-Vodafone customers.

He says the evidence before the Commission suggest that the potential popularity of the merged entities offers could result in competitors losing customers or failing to achieve scale to the point that they would reduce investment or innovation in broadband and mobile markets in the future.

"While Sky will no doubt be disappointed with the outcome, we believe there is still a line of sight to a promising and sustainable commercial future for Sky".

"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.

"That was at the heart of our decision to take this Court action".

Vodafone Group and Sky Network Television reached an agreement to form an integrated telco and media group in June 2016, forecasting that it would make NZ$2.91 billion in revenue for FY17, and earnings before interest, tax, depreciation, and amortisation (EBITDA) of NZ$786 million.

The proposed merger was announced in June past year through a $3.4 billion reverse takeover of Vodafone NZ by satellite pay TV operator Sky TV. Under the Commerce Act we can accept structural divestments (shares or assets) to resolve competition concerns. A copy of this letter can be found here.

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