Commission has competition questions on Sky-Vodafone merger

6:06 pm on 31 October 2016

The Commerce Commission fears internet and pay television subscribers could face long-term price hikes if it gives the green light to a proposed merger between Sky TV and Vodafone.

Sky TV and Vodafone have agreed to merge.

Photo: 123RF

The competition watchdog has written to both companies to express its concerns about unresolved issues with the proposal to combine their New Zealand businesses.

The proposed merger - unveiled in June - would see Vodafone's British parent company take a 51 percent stake in Sky TV through a mix of new shares and $1.25 billion in cash.

Sky TV's shareholders backed the plan, which then went to the Commerce Commission.

But the watchdog has reservations about the plan, and made those fears public in a statement.

"The Commission is currently not satisfied that the proposed merger will not have, or would not be likely to have, the effect of substantially lessening competition in the telecommunications and pay TV services markets," it said in the statement.

The letter focuses on a merged Sky Vodafone conglomerate's ability to use to use ownership of content such as sport to make buying Sky on a standalone basis less attractive than buying it in a bundle with Vodafone's broadband and mobile services.

Many objectors argued that people would be either forced or hugely incentivised to subscribe to Vodafone to watch premium sports like All Blacks matches, skewing competition in the broadband and mobile markets.

The Commerce Commission statement echoed these worries and added further concerns about the prices which could be faced by consumers.

"While consumers may initially benefit from lower prices, rival broadband and mobile providers could lose or fail to achieve scale and become less competitively effective," it said.

"Over time, this could reduce competition in these markets and potentially enable the merged entity to raise prices or lower the quality of service."

Neither Vodafone nor Sky were saying much, choosing instead to praise the Commerce Commission's handing of the matter.

However, Vodafone's chief executive Russell Stanners in June denied the new merged entity would withhold content such as sport from other internet companies.

Instead, it would sell that content to other internet companies as well, to make the most of as many outlets as it could.

"Content's always looking for different networks to go out on," he said.

"We are pretty excited on how to deliver that content on different formats. So, I think the rugby fans will have a lot more options going forward."

Meanwhile, both Internet New Zealand and the Telecommunications Users Association have welcomed the Commerce Commission's move.

In July, Sky TV chief executive John Fellet indicated it might take some time to get Commerce Commission approval, not least because the commission was also dealing with the planned merger of NZME and Fairfax media companies.

"I would not expect our review to be completed before the end of the calendar year," he said.

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