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Multiplay trend continues as mobile, fixed broadband operator merges with pay TV provider; incumbent Spark insists it faces no increased competitive challenge.
Sky Network Television and Vodafone will merge their operations in New Zealand via a deal valued at NZ$3.44 billion (€2.16 billion) that will effectively see Sky buy out the mobile operator before handing over a majority stake in the combined entity.
Under the terms of the deal, Sky will buy all of Vodafone New Zealand’s shares for the aforementioned sum by issuing new Sky shares to give Vodafone a 51% stake in the merged company plus NZ$1.25 billion in cash, to be funded through new debt.
The tie-up creates a stronger, converged player in New Zealand as the market increasingly moves towards the provision of quad-play services.
Vodafone is the country’s largest mobile operator by customers – albeit coming in only just ahead of main rival Spark – and its second largest fixed broadband provider. It also partners with Sky to enable the pay TV provider to add broadband to its packages.
Sky claims to be the biggest pay TV company in New Zealand with 830,000 subscribers, based on an end-June projection. Vodafone said it had 2.35 million mobile connections at the end of March and half a million fixed-line connections.
"We already enjoy an excellent partnership with Vodafone. Bringing together our two highly complementary businesses is in the best interests of shareholders and customers," said Sky CEO John Fellet, in a statement.
"The combined group will offer exciting new packages with Sky’s premium entertainment content, Vodafone NZ’s communications, and digital services of the future," he added.
His sentiments were echoed by Vodafone.
"The combination with Sky will bring greater choice, enhanced viewing experiences and will better serve New Zealanders as demand for packaged television, Internet and telecoms services increases," said Vodafone New Zealand CEO Russell Stanners.
Stanners will serve as chief executive of the merged company, with Fellet reporting to him as CEO of media and content. The remainder of the management team will come from the existing teams at both companies, the firms said, without elaborating.
Sky chairman Peter Macourt will chair the merged entity, whose board will comprise five members from Sky and four from Vodafone.
The existing Sky board said it fully supports the transaction and has advised shareholders to vote in favour of it. Sky will hold a shareholder meeting in early July.
The firms expect to receive regulatory clearances and to be able to complete the transaction towards the end of the calendar year.
Presuming the merger goes ahead, Spark will find itself under increased pressure in its home market.
The incumbent has a strong presence in the fixed and mobile telecoms space, but its TV presence is limited; the telco does not disclose how many people use its online TV offering Lightbox.
Nonetheless, Spark insists it is "ready to compete" with the merged entity.
"The reality is that Spark has been competing successfully with a tightly integrated partnership between Vodafone NZ and Sky TV for a couple of years now," said Spark managing director Simon Moutter, in a statement.
"During that time Sky TV’s core subscriber base has declined while Vodafone NZ’s broadband base has had little or no growth since they acquired Telstra Clear nearly four years ago," he said. "As such, we don’t believe a merged Sky TV and Vodafone NZ poses a greater challenge to Spark than the existing partnership has achieved to date."
Furthermore, Moutter insisted that while his company competes fiercely with Vodafone it does not see itself as going head-to-head with Sky in the pay TV space.
"The real competition in the future of media is with global over-the-top players like Netflix, YouTube and Apple or with direct-to-consumer premium sports content owners," he claimed.
We will see how accurate that statement is as the market develops.
