Sky TV, Vodafone in talks about a potential merger of their New Zealand assets

Wednesday 8th June 2016

Sky Network Television said it's talking with Vodafone Group about potentially combining their New Zealand assets.

The nation's biggest pay-TV company said it made the brief statement following recent media speculation. The NZ Herald reported Sky TV chief John Fellett this week had downplayed talk of a tie-up between the two companies because Vodafone, New Zealand's biggest mobile phone company, was "too big" for Sky to swallow.

The two companies are already in partnership offering bundled deals to consumers consisting of a Sky TV package, broadband and phone services.

They were in discussions "regarding a potential transaction involving a combination of the businesses of Sky and Vodafone New Zealand," Sky said. "The discussions are ongoing and incomplete and may not result in a transaction occurring."

Sky has retained Citibank for advice on options for what analysts estimate will be $400 million of surplus capital, once the pay-TV company's expenditure programme winds down. Fellet told BusinessDesk last month that the options were to buy a business or return funds to shareholders.

Vodafone NZ had $1.96 billion of sales in its 2015 year, but that was eclipsed by expenses and one-time costs, resulting in a net loss of $120.7 million. Total assets were $2.2 billion, while financial liabilities including trade creditors was $1.95 billion. Sky TV's market capitalisation is $1.7 billion.

Sky's shares were halted pending the announcement, having last traded at $4.47 and having declined 28 percent in the past 12 months, The stock is rated a 'hold' based on the consensus of seven analysts polled by Reuters, with a price target of $4.61.

(BusinessDesk)

“We are in the season for rationalisation. The media industry is in for massive change and we may see significant reduction in costs and staff. The question will be who dances with who and will the mergers achieve the benefits anticipated at the time of entering the relationships. At IRG we have been picking this, and we are sure there is more to come. It is still too early to work out which new team will have the benefits to outplay their competitors. At IRG we are saying watch closely and invest carefully, there is more to come yet”. Said Mr. Brent King CEO of Investment Research Group Ltd.

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