Announcement of the Vodafone & Sky TV merger this afternoon featuring John Fellet (Sky TV) & Russell Stanners (Vodafone).
The planned merger of Vodafone NZ and Sky TV would create a media and telecommunications group ready to make more content available on more devices, Sky has claimed
Sky Network TV announced its plan to buy Vodafone New Zealand for $3.44 billion in cash and shares in a reverse takeover which would see Vodafone's British parent group own 51 per cent of shares.
Vodafone NZ boss Russell Stanners would be chief executive of the company with Sky chief executive John Fellet head of the media and content arm of the merged company. The company will have nine directors, five from Sky and four from Vodafone. The company doesn't have a name yet, but both names Sky and Vodafone will remain in the marketplace.
Fellet told media today the merger would bring together two of the best known companies in their fields, making more content available on more devices.
"Having the expertise of one of the biggest telecommunication companies on the planet will certainly help get us onto more devices."
Stanners said there were plans to harness the fibre network to bring Sky into their homes through fibre. The connected homes trends was another area that was attractive for innovation, Stanners said.
"We're really excited about bringing our digital and technological expertise together for what is undoubtedly the premium entertainment content in the marketplace to create new and exciting offerings and very competitive offerings in the marketplace."
There would not be content exclusively offered to Vodafone customers, Fellet said, but "exclusive packaging deals" could be offered.
The two companies have worked in partnership together for the past 10 years offering bundled deals to consumers consisting of a Sky TV package, broadband and phone services.
Fellet said the opportunities in the past have fallen into three piles - one where Vodafone benefitted but it wasn't such as value driver for Sky, one where Sky TV benefitted and Vodafone didn't get so much, and one which hit the middle ground.
"We can now attack all three piles."
Fellet said "triple play" tactics, where customers buy landline, broadband pay-TV services from one provider, were common in overseas markets and the combined company could offer that in New Zealand.
The merged business would offer mobile streaming as well, upping their offer to "quad play".
The new Sky shares would be issued at $5.40 per share, representing a 21 premium to its last close of $4.47 a share.
Sky TV chairman Peter Macourt said the two businesses were largely complementary and he didn't see any problems getting the required Commerce Commission approval. The deal will be put before Sky shareholders in early July and is expected to be completed by year's end.
Investors reacted positively to the announcement, pushing Sky shares up 20.6 per cent in trading this morning, after shares were put on a trading halt all day yesterday.
A market insider said the merger was "a good option for two challenged businesses." "There's an awful lot of water to pass under the bridge in terms of the earnings projections, the synergies and the extra debt funding in the combined vehicles." The transaction was expected to be complete at the end of 2016.
Vodafone's biggest competitor in New Zealand - Spark - saw its share price drop 16c, to $3.48 yesterday as a direct response to the potential tie up between Sky TV and Vodafone.
Spark managing director Simon Moutter responded to the news by issuing a statement saying the merged company wouldn't pose a greater challenge for its business.
"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," Moutter said. "Vodafone NZ has been bundling and deeply discounting Sky TV products while Sky TV actively resells Vodafone NZ broadband.
"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."
Moutter said 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.
Sky Television is to buy Vodafone New Zealand for $3.44 billion in cash and shares.
New figures show paid streaming services such as Netflix, Lightbox and Neon are doing very well with New Zealand viewers.
More than a year after Netflix launched here new research confirms the subscriber streaming service is the most popular with Kiwis, with more than 264,000 paid subscribers by the end of 2015.
According to the report, one in four Kiwis had access to a paid video-on-demand service by the end of last year, including 128,000 signed up to Lightbox and 22,000 subscribing to Sky's Neon service.
