Commerce Commission says deal had potential to jeopardise future investment in broadband, mobile markets.

New Zealand’s Commerce Commission on Thursday blocked the proposed NZ$3.44 billion (€2.33 billion) merger of Vodafone and Sky Network Television.

The regulator concluded that the tie-up would have harmed competition in the broadband and mobile markets, on the grounds that Sky’s monopoly on premium sports content would have made it harder for rivals to attract customers.

"The evidence before us suggests that the potential popularity of the merged entity’s offers could result in competitors losing or failing to achieve scale to the point that they would reduce investment or innovation in broadband and mobile markets in the future," said Mark Berry, chairman of the Commerce Commission.

"In particular, we have concerns that this could impact the competitiveness of key third players in these markets such as 2degrees and Vocus," he said.

Berry said a full rundown of the decision will be released in due course.

"This is a very disappointing conclusion to a merger we saw as enhancing New Zealand’s communications and media landscape," said Sky CEO John Fellet. "From here we will continue to strive to deliver innovative ways to curate and deliver entertainment to all of New Zealand."

Vodafone merely acknowledged the ruling in a brief statement.

The two companies agreed to merge in June 2016. Both companies applied for merger clearance later that same month, insisting that the residential broadband and pay TV markets would remain unharmed because Vodafone and Sky do not already compete with one another.

The Commerce Commission was initially due to decide on the deal by 11 November. However, lingering doubts about the tie-up’s implications for competition, and the large number of submissions related to the deal from several third parties, led the Commission to delay its ruling until today.

Earlier this week, incumbent Spark, which opposed the transaction, successfully petitioned New Zealand’s High Court to impose a delay on the merger becoming effective in the event that it was approved in order to give it time to assess the Commission’s reasoning and request judicial relief if necessary.

Unsurprisingly, Spark welcomed the Commerce Commission’s decision, agreeing that the combination of Sky and Vodafone would have made it harder for other telcos to compete.

"The lack of a meaningful wholesale market today for Sky’s sports content means we and other mobile and broadband providers have been held back from offering our customers new ways to watch sports content in ways that are already the norm elsewhere in the world," said John Wesley-Smith, general manager of regulatory affairs at Spark.

"That wholesale market would not have developed at all had the merger gone ahead, but will and must develop now," he said.