NZ regulator lays out issues in Vodafone-Sky merger

15 Jul 2016

New Zealand’s Commerce Commission has laid out its preliminary issues concerning the proposed merger of domestic telco Vodafone NZ and pay-TV operator Sky Network Television. The regulator says its investigation into the likely effects of the merger will concentrate on two main areas. The first of these is the unilateral effects of the deal, i.e. would the merged entity be able to raise prices or reduce quality by itself? The Commission says that while the two players currently operate in separate sectors and there is very little overlap between their businesses, it will consider whether the parties are likely to have become ‘more meaningful competitors’ without the merger.

The second and main focus of its study will be the ‘vertical and conglomerate effects’ i.e. would the merged entity be able to ‘engage in behaviour that either forecloses rivals or otherwise renders them less able to compete?’ This side of the investigation will examine the vertical retail and wholesale relationship between Sky and Vodafone and whether their combination would give the merged entity ‘a greater ability or incentive to engage in conduct that prevents or hinders rivals from competing effectively’. The regulator is due to make a decision on the deal by 11 November 2016.

As reported in CommsUpdate when the deal was first announced in June, Sky plans to acquire all of the shares in Vodafone NZ for a total purchase price of NZD3.437 billion (USD2.33 billion) through the issue of new Sky shares – giving UK-based Vodafone Group a 51% interest in the enlarged Sky – plus a cash consideration of NZD1.250 billion, to be funded through new debt. Sky Network Television is New Zealand-owned and is not connected to the UK-based pay-TV operator of the same name.

New Zealand, Vodafone New Zealand