There’s word from across the Tasman that would be dance partners, Sky TV and Vodafone NZ are thinking of pushing ahead with their planned merger and ignoring February’s thumbs down ruling from the country’s competition regulator, the Commerce Commission.
Sky TV shares have been rising steadily for the past two and a bit weeks on growing rumours that it and Vodafone are weighing up defying the regulator and merging.
Vodafone’s UK parent is said to be behind the push as it wants to get its hands on $NZ1.5 billion in cash from the merger (which would see Sky TV buying Vodafone NZ), plus ongoing management and other fees for the use of the mobile phone network.
Sky TV shares have risen $NZ3.48 on March 21 to $NZ3.89 yesterday, a rise of 12%. It would be a big risk because the companies would be exposing themselves to any possible legal action about services and charges that breach competition rules, but investors seem to like the idea.
Talk of the merger moving ahead seems to be why Sky is talking to two of the deals strongest critics – Spark and 2degrees about a wholesale TV supply deal which could have helped neutralise those competition concerns, but no deals have been concluded.
A Commerce Commission spokesman confirmed to NZ media yesterday that a clearance from the watchdog was not legally required for a merger, but instead provided a level of assurance that companies couldn’t subsequently be sued for anti-competitive behaviour.
NZ analysts say if the two companies decide to merge and defy the Commission and the Government (it has been done before in NZ) then that could open the way for Fairfax Media and NZME (controlled by APN News and Media in Australia), to merge their NZ newspaper and radio interests, even though the Commerce Commission is opposed to it.
That path though will only become an option in early May when the Commerce Commission is now expected to reveal its decision on the Fairfax-NZME deal.
Some NZ analysts believe the chances of a conditional greenlight have improved because the Commerce Commission has now delayed a final decision several times in five months to allow the parties to put more arguments in support of the deal.
Fairfax will get around 41% of the merged company, two board seats and $A53 million in cash, which will be gratefully accepted. Fairfax is then expected to start a sale process for its holding in the merged company.
The commission declined to grant clearance for the Sky-Vodafone merger on the grounds that the combined company could use Sky Television’s stranglehold over premium sports broadcasting rights (AKA All Black Rugby Union Tests) to gain an unfair advantage in the broadband and mobile markets.
Sky and Vodafone have lodged a High Court appeal over the commission’s decision.
But Sky could announce deals offering sports broadcasts to other telecommunications companies to address the commission’s concerns, and push ahead with the merger without seeking clearance.
The sports rights deals would have to include access (at the same time as Sky subscribers) to All Black games and tests for it to be a convincing offer, such is the dominance of the national rugby team in NZ.
Media reports say the NZ Mobile phone top-up companies ePay and Ezi-Pay combined their businesses after the commission refused to clear their merger in 2012 and this is the route now being talked about for Sky and Vodafone NZ. The two companies have lodged appeals in the NZ high court to cover that approach.
The aggressive move of merging without prior consultation or approval would force the Commerce Commission to go to court to prove the merger was anti-competitive if it still had concerns.
