The Commerce Commission has declined to grant clearance for the proposed merger of Sky Network Television and Vodafone New Zealand. The Commission says its assessment focused on the impact of the proposed merger on competition in both the broadband and mobile markets. To grant clearance, the Commission says it would need to be satisfied that the proposed merger would not be likely to substantially lessen competition in any market in New Zealand.
The Commission outlined its concerns with the proposed merger in a Letter of Unresolved Issues in October 2016, and subsequent submissions by the companies did not resolve its concerns. As a result, the Commission says it has not been able to exclude the real chance that the merger would substantially lessen competition.
"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. 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. However, we have to take into account the impact of a merger over time, and uncertainty as to how this dynamic market will evolve is relevant to our assessment," said the Commission’s chair Mark Berry.
"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. 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," Berry added.
Vodafone Group sought clearance to acquire up to 51 percent of the shares in Sky. Sky also sought clearance to acquire up to 100 percent of the assets and/or shares of Vodafone New Zealand. The merged Sky/Vodafone entity would have been controlled by Vodafone Group.
Market competitor Spark New Zealand believes the Commerce Commission’s decision to decline the proposed merger between Sky and Vodafone New Zealand is "a big positive for kiwi consumers". The company earlier obtained a court injunction to suspend implementation of the merger if the Commerce Commission had approved the deal, in order to give rivals the time to consider an appeal.
"We’re generally supportive of market consolidation where it leads to better outcomes for consumers," said Spark’s GM of 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," Smith said.
Spark also says it believes 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 wholesale market for its content, the company said.
