Sky TV confirms merger talks with Vodafone

Sky TV says merger talks are "incomplete".

Sky TV says merger talks are "incomplete".

Sky Television is considering merging with Vodafone New Zealand to create a single pay-television and phone business.

Sky cautioned in a statement to the NZX that the talks were still continuing and might not result in a deal proceeding. 

An update is expected within days. Sky said it would maintain a trading halt that it placed on its shares on Wednesday morning, pending a "further announcement".

Sky is allowed to halt trading in its shares for 48 hours, which suggests it expects more information may be available on the status of the merger talks by Friday.

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Sky Television chief executive John Fellet had previously said the company was weighing up possible acquisitions or a return of capital to shareholders.

Vodafone New Zealand spokeswoman Andrea Brady said Vodafone could not add to the NZX statement that was issued by Sky.

Sky and Vodafone currently partner with one another, reselling each other's services.

Vodafone sells fixed-line and mobile broadband, while Sky sells satellite television subscriptions and some internet TV services. Sky also owns free-to-air television channel Prime. 

Sky TV employs about 1500 staff and contractors while Vodafone New Zealand employed 2800 staff as of 2014.

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Consultancy PWC forecast in a report also released on Wednesday that satellite television subscriptions had peaked in the face of competition from internet television services such as Netflix and Lightbox.

Vodafone New Zealand faces its own issues having posted a $121m loss in the year to April 2015 on the back of tougher regulation, stronger competition and issues integrating its 2012 purchase of TelstraClear. 

Australian telecommunications firm TPG is understood to have considering buying Vodafone New Zealand from its British parent company earlier this year but it is understood a deal was not reached.

First NZ Capital research director Arie Dekker said it was hard to know whether Sky's shares would rise or fall if a merger with Vodafone New Zealand did come to fruition. "To me the thing that would completely dominate that would be transaction terms." 

Sky and Vodafone had a close working relationship, he said. "Vodafone has resold Sky's products for a very long time and it is an important differentiator for them." 

Spark investors appeared to react nervously to the possible merger, sending its shares down 4 per cent to $3.49 in late afternoon trading.

That probably reflected a view that Vodafone and Sky together would be better able to compete with Spark, Dekker said. 

"They would still be smaller than Spark combined, in terms of earnings," he said.

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 - Stuff


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