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New Zealand's Commerce Commission has refused to allow the merger of Sky Network Television and Vodafone New Zealand.
In a statement this morning, the Commission said its assessment was based on the effect the merger would have on competition, both in the broadband and mobile telecommunications markets.
On Tuesday, as iTWire reported, the High Court granted a temporary stay on the merger proceeding, if the Commission gave its assent, until midnight on the third day after the Commission had delivered the reasons for its decision to the applicants.
The court action was initiated by New Zealand's biggest telco Spark.
{loadposition sam08}Commission chair Dr Mark Berry said it had outlined its issues with the merger in a Letter of Unresolved Issues in October 2016. These issues had not been addressed in later submissions and hence the Commission had stuck to its earlier conclusion.
Dr Berry said: "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. 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."
He pointed out that about 50% of households had Sky TV and many of them were 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," Dr Berry said.
Vodafone Europe had sought clearance to acquire up to 51% of the shares in Sky TV New Zealand. Sky also sought clearance to acquire up to 100% of the assets and/or shares of Vodafone NZ which, together, constituted the proposed merger. The merged Sky/Vodafone entity would have been controlled by Vodafone Group.
"To clear the merger we would need to have been satisfied that it was unlikely to substantially lessen competition in any relevant market," Dr Berry said. "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 competitiveness 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."
Unsurprisingly, Spark hailed the Commerce Commission's decision as one being "a big positive for kiwi consumers".
Spark general manager Regulatory Affairs, John Wesley-Smith, said: "We're generally supportive of market consolidation where it leads to better outcomes for consumers.
"However, 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."