Sky's share price slumps after Vodafone merger declined

6:56 pm on 23 February 2017

Sky Television's share price has slumped to its lowest level in eight years after the Commerce Commission torpedoed its plans for a merger with Vodafone.

Sky TV and Vodafone have agreed to merge.

Sky said it was willing to reach deals with all players, regardless of the commission's decision. Photo: 123RF

Sky had said it needed a merger with a mobile operator to ensure its future and get access for its wide range of programme content to customers in a changing market.

But the Commerce Commission said it was not convinced a merger would not substantially lessen competition and declined the companies' application to team up.

Sky's share price fell 14 percent to $3.74 after the announcement, its lowest level in eight years.

Commission chair Mark Berry said the key issue was Sky TV's ownership of the broadcast rights for most major sporting events at the expense of other third party players in the markets, such as 2degrees and Vocus.

"The problem we have is that there's this major customer segment, for whom Sky Sport 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-Sky's rivals," Dr Berry told a news conference.

Commerce Commision chair Mark Berry.

Commerce Commission chair Mark Berry Photo: RNZ / Gyles Beckford

Under the proposed deal, Vodafone would have effectively taken a 51 percent stake in Sky TV, with the enlarged company having premium sports, drama, movie content to put on Vodafone's internet and mobile services.

Those opposed to the deal, which included Spark, 2degrees, Trustpower, TVNZ and Internet NZ, argued it put too much market power in the hands of one company at the expense of competition and consumers.

Spark said the decision was a "big positive" for consumers, and it was confident new commercial deals would be done.

"Spark, alongside several other broadband and mobile providers, would welcome the opportunity to bundle modern, on-demand versions of Sky's core sporting content with their broadband and mobile packages, if Sky is willing to create a vibrant wholesale market for its content," said its general manager regulatory affairs, John Wesley-Smith.

Sky's chief executive John Fellet said the decision was "terribly disappointing", but said Sky was willing to reach deals with all players.

"The door is always open but it has to make sense for both sides, nothing has changed. We'll continue to work closely with Vodafone but we're wide open for other players as we've always been."

Broking house analyst Blair Galpin, of Forsyth Barr, said before the merger decision that regardless of the outcome Sky TV faced considerable challenges.

"In the event of the ComCom not providing clearance then SKT/VNZ will need to assess their appetite to continue with the proposed merger," he said.

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