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Sky TV in talks with Vodafone

NZN 7/06/2016

Pay-TV operator Sky has confirmed it is in merger talks with Vodafone.

Shares in Sky TV were placed in a trading halt on Wednesday ahead of the announcement which was prompted by media speculation.

"Sky confirms that it is in discussions with Vodafone Group Plc regarding a potential transaction involving a combination of the businesses of Sky and Vodafone New Zealand," it said in a statement to the NZX.

It said discussions were continuing.

The two companies are already in partnership offering bundled deals to consumers consisting of a Sky TV package, broadband and phone services.

Sky has retained Citibank for advice on options for what analysts estimate will be $400 million of surplus capital, once the pay-TV company's expenditure programme winds down.

Sky TV boss John Fellet told BusinessDesk last month that the options were to buy a business or return funds to shareholders.

Vodafone NZ had $1.96 billion of sales in its 2015 year, but that was eclipsed by expenses and one-time costs, resulting in a net loss of $120.7m. Total assets were $2.2b, while financial liabilities including trade creditors was $1.95b.

Sky TV's market capitalisation is $1.7b.

Sky's shares last traded at $4.47 and have declined 28 per cent in the past 12 months as it battles falling subscriber numbers amid competition from online streaming services Netflix and Lightbox.

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