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Vodafone/Sky merger turned down

23 February 2017

The Commerce Commission has declined to grant clearance for the proposed merger of Sky Network Television and Vodafone New Zealand.

The Commission’s assessment focused on the impact of the proposed merger on competition in both the broadband and mobile telecommunications markets. To grant clearance, the Commission would need to be satisfied that the proposed merger would not be likely to substantially lessen competition in any market in New Zealand.

Chair Mark Berry says the Commission outlined its concerns with the proposed merger in a Letter of Unresolved Issues in October 2016 and subsequent submissions had not resolved these concerns. As a result, the Commission had not been able to exclude the real chance that the merger would substantially lessen competition.

“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,” says Dr Berry.

“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.

“Around half of all households in New Zealand have Sky TV and a large number of those are Sky Sport customers. Internationally, the trend for bundles that package up broadband, mobile and sport content is growing. 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.

“To clear the merger we would need to have been satisfied that it was unlikely to substantially lessen competition in any relevant market. The evidence before us suggests that the potential popularity of the merged entity’s offers could result in competitors losing or failing to achieve scale to the point that they would reduce investment or innovation in broadband and mobile markets in the future. In particular, we have concerns that this could impact the competiveness of key third players in these markets such as 2degrees and Vocus.

“This is also against a backdrop of fibre being rolled out, making it an opportune time for the merged entity to entice consumers to a new offer. If significant switching occurred, the merged entity could, in time, have the ability to price less advantageously than without the merger or to reduce the quality of its service. Given we are not satisfied that we can say that competition is unlikely to be substantially lessened by the proposed merger, we must decline clearance.” 

A copy of the Commission’s full reasons for decline will be released in due course.

Last updated on the 16th September 2019