The Commerce Commission has blocked Sky Television and Vodafone’s planned merger on the grounds that it would be likely to lessen competition by creating a strong vertically integrated pay-TV and full service telecommunications provider owning all premium sports content.
The proposed merger would have given UK based Vodafone Group a controlling 51 percent of the merged entity.
The Commission’s decision follows it writing to Sky and Vodafone in October outlining its concerns that a merged Sky/Vodafone would be able to use ownership of content – particularly live sports – to make buying Sky on a standalone basis less attractive than buying it in a bundle with Vodafone’s broadband and mobile services.
It suggested that rival broadband and mobile providers could lose or fail to achieve scale and become less competitively effective. “Over time this could reduce competition in these markets and potentially enable the merged entity to raise prices or lower the quality of service beyond what it would be able to without the merger occurring,” the Commission said. It is yet to release full details of its final decision to block the merger.
The Commission’s decision has been welcomed by Spark and by InternetNZ. Spark and 2Degrees had early sought, and been granted an order from the High Court imposing a three day hiatus on Sky and Vodafone implementing a favourable decision from the Commerce Commission, to enable them to consider their options.
Spark New Zealand said the Commission’s decision was “a big positive for kiwi consumers.” General manager regulatory affairs, John Wesley-Smith, said: “In today’s digital age, consumers want to be able to watch their favourite sports wherever and whenever they want. Viewers have been voting with their wallets away from out-dated content bundle models that force them to pay for unwanted content, set-top boxes or service providers.
“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.”
He added: “That wholesale market would not have developed at all had the merger gone ahead, but will and must develop now. …Spark, alongside several other broadband and mobile providers, would welcome the opportunity to bundle modern, on-demand versions of Sky's core sporting content with their broadband and mobile packages, if Sky is willing to create a vibrant wholesale market for its content.”
Vodafone NZ CEO, Russell Stanners, said the company was disappointed the Commerce Commission was unable to see “the numerous benefits this merger brings to New Zealanders.” He said the company would “carefully review the Commission’s statement and consider all courses of action.”
Sky CEO, John Fellet said with the merger blocked that the company would “continue to strive to deliver innovative ways to curate and deliver entertainment to all of New Zealand.”
Internet NZ, which had supported Spark and 2Degreees’ application to the High Court, said consumers could have been the losers from the deal. CEO Jordan Carter said: “Sky and Vodafone, absent this merger, will be competitors in the ever-changing markets for communications services. We look forward to seeing how they respond, and how the market evolves.”