ComCom to Skodafone: GFY

The Commerce Commission has released their decision regarding the proposed merger of Sky Television and Vodafone and it’s not the news Mt Wellington was hoping for.

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 Dr Mark Berry said the Commission outlined its concerns with the proposed merger in a Letter of Unresolved Issues in October last year 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.

By all accounts, the Commerce Commissions’ real fear appears to be that the Skodafone merger would have handed the new entity an unfair advantage over the likes of Spark and 2 Degrees.

?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,? Dr Berry said.

The irony in this decision is that while the Commerce Commission wants to prevent a situation where Sky and Vodafone have an advantageous monopoly on content and distribution, the long-term scenario is practically identical. Sky will continue to shed customers and despite currently having control over sports rights, the diminishing customer base and increasing costs will ultimately squeeze them out while Spark, who already have dominance in the mobile and broadband market and have indicated their intention to move strongly into the content distribution market, will be ready and waiting for the opportunity to swoop in and plunder.

The options for Sky are now looking about as grim as they are for Fairfax.

Sky shares closed at $3.78 yesterday, down 13.1%.


– ComCom