Sky TV shareholders must be jubilant with the proposed merger with Vodafone, with fingers crossed hard that the Commerce Commission won't take interest in the deal.

It's hard to see what else Sky could've done. Continuing with the expensive satellite service when high-speed internet connections are becoming the norm surely couldn't have been an option for Sky.

If you want to save money, "cancel your Sky subscription" is a common tip. Nobody would suggest you cancel your broadband or mobile phone subscription however. You need broadband and a mobile, but Sky? That's a luxury item that comes with an ugly dish even with the Sky Go and Neon internet services tacked on.

It'll be interesting to see what will happen to the satellite service. Supporting decoders, dishes, the installers and satellite transmission capacity isn't cheap compared to internet-delivered video on demand services. Somehow or the other the merged Vodafone and Sky group will have to think about how to wind down the satellite service without angering existing customers.


Watch: Vodafone NZ, Sky TV chief execs talk about the merger plan:

Interview with CEO's John Fellet & Russell Stanners about the Vodafone & Sky TV merger.

It's less clear what Vodafone is hoping to achieve by merging with Sky. Sure, the two have had a cosy relationship for a long time now, and streaming video over the internet has been the new television for ages and Vodafone wants a slice of that action. Merging with Sky seems a very costly way to become a video on demand player though.

The problem for Vodafone is that like Sky, it too has infrastructure that's expensive to run and support along with retail operations. This makes it uncompetitive and less nimble against over the top providers like Netflix that can focus on content delivered over others' networks, and not having to build and maintain its own.

If the merger is approved, perhaps the next step for the group will be a structural separation of the business, like Telecom did when it became Spark and Chorus?


Take the mobile, national backbone and the cable networks, bundle them together, perhaps even add the Tasman Global Access connection, and create a wholesale-only company.

That would possibly address regulatory worries over excessive market power and net neutrality - don't expect the merger to benefit consumers - and help Vodafone UK exit gracefully from New Zealand, something I'm told it has considered for some time now.

We're too small to be worth it, basically.

A successful media merger followed by a separation into wholesale and retail would serve as a template for Vodafone Australia, a troubled operation that its global mothership is dying to ditch in favour of expanding in populous markets like India instead.

Either way, my bet is that the merger spells the end of the Vodafone brand in New Zealand, perhaps in a year's time when the dust has settled.