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New Zealand commission blocks Vodafone NZ-Sky merger

New Zealand’s Commerce Commission has blocked a proposed merger of pay-television broadcaster Sky New Zealand and telecommunications company Vodafone New Zealand.

Commission chair Mark Berry outlined the regulator’s concerns about the impact of the proposed merger on competition in the broadband and broadcast markets in a letter in October. The commission said that subsequent submissions had not resolved the concerns.

“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,” Berry said. “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.”

Berry added that around half of all households in New Zealand have Sky, with a large number being Sky Sport customers.

“Internationally, the trend for bundles that package up broadband, mobile and sport content is growing,” Berry added. “Given the merged entity’s ability to leverage its premium live sports content, we cannot rule out the real chance that demand for its offers would attract a large number of non-Vodafone customers.”

The integrated telecommunications and media group would have been 51-per-cent owned by Vodafone, but the proposed deal had attracted criticism from various quarters since it was announced last June.

Telco Spark claimed in a submission to the Commerce Commission that the deal would not be in the interests of sports viewers, while public-service broadcaster TVNZ suggested that Sky should be forced to sell free-to-air channel Prime if the merger was allowed to go ahead. TVNZ said that Sky had used its income from its pay-television service to subsidise its purchase of free-to-air sports-rights, leading to a “dramatic reduction in the availability of live sport on free-to-air television.”

The Telecommunications Users Association also raised “serious concerns” with the commission about the possible impact of the merger on the broadband market.

Last May, Sky agreed a five-season extension, from 2018 to 2022, to its rights deal with Australian rugby league competition the NRL, with the contract also including national team Test matches.