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Why ComCom rejected Sky-Vodafone merger

NZN 13/04/2017 Paul McBeth

The government-sponsored roll-out of a national telecommunications fibre network was among the complicating factors against a tie-up between pay-TV operator Sky Network Television and telecommunications group Vodafone New Zealand.

It was because it put too many customers into play, the Commerce Commission says.

The competition regulator rejected the $3.44 billion merger to create a vertically integrated pay-TV service and telecommunications provider in February, and almost two months later the commission on Thursday released its reasoning behind the decision.

At the time, the commission said a principal objection was the ownership of "all premium sports content", which the merged entity could then bundle up into a single mobile, landline, broadband and pay-TV offering.

That in itself posed a real chance of substantially reducing competition, it had said.

The 145-page report says there's no close substitute for premium live sports rights in New Zealand, which made it easier for the merged Sky-Vodafone group to attract customers at the expense of smaller telecommunications service providers (TSPs).

What's more, the roll-out of the government-sponsored UFB programme presented a "significant opportunity" to attract new customers with a larger bundle of services.

"The roll-out of UFB is expected to promote increased rates of switching in New Zealand, with approximately 1.1 million premises in play by 2019," the report said.

"Given this, and changing consumer preferences, we do not consider that historic rates of switching from other jurisdictions provide a reliable predictor of future switching in New Zealand."

Once the UFB programme is completed, the regulator said the evidence suggested churn "significantly reduced for customers on bundles" which would "lift acquisition costs and "likely put a significant number of customers 'out of reach' of rival TSPs".

In a separate statement, Sky TV said it and Vodafone were assessing the report "so that they can determine their future steps in relation to the proposed merger, if any".

The companies filed High Court papers to make sure any appeal would fall within the statutory timeframe.

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