Investors wipe nearly $300M off Sky TV valuation after Vodafone merger rejected

Thursday 23rd February 2017

Sky TV Network Television shares were hammered when trading opened on the New Zealand stock exchange this morning, with investors wiping $293 million off the value of the pay-TV provider after this morning's rejection of its proposed merger with the New Zealand operations of the global telecommunications giant, Vodafone.

Sky TV shares traded at $3.60 at 10am this morning, down 75 cents per share or 17 percent, on last night's closing price, to hit their lowest level since mid-2009.

“This is a very disappointing conclusion to a merger we saw as enhancing New Zealand’s communications and media landscape," said Sky's chief executive, John Fellet, who hinted this may be the end of the road for the current merger plan, despite options existing for judicial review. "From here we will continue to strive to deliver innovative ways to curate and deliver entertainment to all of New Zealand."

Vodafone New Zealand's chief executive, Russell Stanners, issued a single sentence quote on the decision: “We are disappointed the Commerce Commission was unable to see the numerous benefits this merger brings to New Zealanders."

A key opponent of the proposal, Vodafone's chief rival Spark New Zealand, welcomed the decision and challenged Sky to develop a "vibrant wholesale market" for its premium sports content, which the competition watchdog decided was too dominated by Sky TV to allow a merger with Vodafone to proceed because it threatened to stifle competition in the telecommunications market for services such as broadband and mobile telephony.

Spark's share price rose at the open by 2 percent to $3.56.

“This decision recognises that the sports content market in New Zealand needs to catch up with consumer reality, as it has in many other markets around the world. Increasingly, consumers are demanding greater choice and flexibility as to how they access premium content. Today’s decision is a welcome step in the right direction,” said Spark’s general manager of regulatory affairs, John Wesley-Smith.

"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.

"The lack of a meaningful wholesale market today for Sky’s sports content means we and other mobile and broadband providers have been held back from offering our customers new ways to watch sports content in ways that are already the norm elsewhere in the world. That wholesale market would not have developed at all had the merger gone ahead, but will and must develop now."

Internet NZ, representing internet service providers and users, said it had been concerned the proposed merger could raise "network neutrality" issues that could damage competition for telephony, internet and television services.

"Kiwi consumers could have been the losers from the deal," said chief executive Jordan Carter. "Sky and Vodafone, absent this merger, will be competitors in the ever-changing markets for communications markets."

Among telcos most likely to suffer anti-competitive effects was 2degrees, the country's third largest mobile network operator. Its chief executive, Stewart Sherriff, welcomed the commission's decision.

“The Commission has recognised that competition is still developing, and that the impact of competition from companies such as 2degrees can be reduced over time if monopolies are created,” he said.

BusinessDesk.co.nz

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