Sky TV, Vodafone appeal blocked merger

Wednesday 22nd March 2017

Sky Network Television and Vodafone New Zealand will today lodge appeals against the Commerce Commission's decision blocking their merger.

The pay-TV operator and telecommunications group are filing the papers in the High Court today to fall within the statutory timeframe while they wait on the regulator's reasoning against the decision, Auckland-based Sky TV said in a statement. Those reasons are expected to be released in the coming weeks, it said, without being specific.

The companies elected not to terminate the deal after the Feb. 28 deadline for the merger passed, indicating they hadn't given up hope of flipping the decision.

The Commerce Commission hasn't published its detailed reasoning behind the decision, which the companies could then scour to determine whether it's worth seeking a judicial review. The High Court granted a temporary stay on the proposed merger had it been allowed at the behest of rivals Spark New Zealand and Two Degrees Mobile, who wanted time to go through the reasoning before deciding on whether to pursue their own judicial review.

The competition regulator rejected the companies' application to merge saying it risked creating a strongly vertically integrated pay-TV service and telecommunications provider, with rejection hinging on their owning all premium sports content. Had the deal not captured popular sports it probably would have got over the line. The rejection saw shareholders dump Sky TV stock, wiping $293 million off the company's market value.

Sky TV shares increased 0.6 percent to $3.50, having slumped 24 percent so far this year. US fund manager BlackRock, the world's largest asset manager, has been increasing its stake in Sky TV, yesterday reporting it now owns 12.3 percent of the pay-TV firm, up from 10.3 percent as at Jan. 31.

The companies want to create the country's largest telecommunications and media group, with Sky TV buying Vodafone NZ for $3.44 billion, funded by a payment of $1.25 billion in cash and the issue of new Sky TV shares at a price of $5.40 per share. Vodafone would have become a 51 percent majority shareholder in Sky TV, in what amounted to a reverse takeover. The pay-TV operator planned to borrow $1.8 billion from Vodafone to fund the purchase, repay existing debt and use for working capital.

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