Competition watchdog refuses Sky TV, Vodafone NZ merger plan

Commerce Commission ... Sky, Vodafone merger rejected. Image: RNZ

New Zealand’s Commerce Commission ruled today that Sky Television will not be allowed to merge with Vodafone NZ.

Rival telco Spark New Zealand said the decision to decline the proposed merger was a big positive for consumers.

Stuff reported Vodafone NZ’s chief executive Russell Stanners said: “We are disappointed the Commerce Commission was unable to see the numerous benefits this merger brings to New Zealanders.”

The country’s competition watchdog had declined to grant clearance for the merger, which was first publicly proposed last June.

Had the merger been allowed, Britain’s Vodafone would have taken a 51 percent share of the merged firm and banked $1.25 billion in cash.

“We’re generally supportive of market consolidation where it leads to better outcomes for consumers,” said Spark’s general manager regulatory affairs, John Wesley-Smith.

“However, the lack of modern on-demand options for how New Zealand sports fans can access ‘must-watch’ premium sports content today, which would have been exacerbated by the merger, meant the merger was not in the best interests of consumers and so we believe the decision to decline was the right one.

The commission’s assessment focused on the impact of the proposed merger on competition in both the broadband and mobile telecommunications markets.

To grant clearance, the commission said it would need to be satisfied that the proposed merger would not be likely to substantially lessen competition in any market in New Zealand.

Chair Dr Mark Berry said the commission outlined its concerns with the proposed merger in a Letter of Unresolved Issues in October last year and subsequent submissions had not resolved these concerns.

As a result, the commission had not been able to exclude the real chance that the merger would substantially lessen competition.

‘Voting with wallets’
“In today’s digital age, consumers want to be able to watch their favourite sports wherever and whenever they want. Viewers have been voting with their wallets away from out-dated content bundle models that force them to pay for unwanted content, set-top boxes or service providers.

“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.

“That wholesale market would not have developed at all had the merger gone ahead, but will and must develop now.

“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. 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.”

Wesley-Smith said the need for the market to be able to deliver better choice for sports fans would only grow.

“This decision recognises that the sports content market in New Zealand needs to catch up with consumer reality, as it has in many other markets around the world. Increasingly, consumers are demanding greater choice and flexibility as to how they access premium content. Today’s decision is a welcome step in the right direction.”

The Commerce Commission is due to making a ruling on a proposed merger between NZME and Fairfax New Zealand on March 13. In a preliminary decision last November, the commission said it proposed to decline the merger on the grounds the it would substantially lessen the competition in a number of media markets, including one media outlet controlling nearly 90 percent of the print market.

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