New Zealand shares dropped, led by Spark New Zealand as company earnings show the telecommunications sector is experiencing stiff competition, while Sky Network Television fell as its merger continues to attract opposition. A2 Milk Co and Fletcher also declined.

The S&P/NZX50 Index fell 80.05 points, or 1.1 per cent, to 7,099.98. Within the index, 22 stocks dropped, 17 rose and 11 were unchanged. Turnover was $134.4 million.

Spark was the worst performer, down 4 per cent to $3.56. The country's biggest telecommunications company lifted first-half earnings 3.5 per cent to $178m as the acquisition of Computer Concepts bolstered revenue from its IT services unit and got an early dividend from its stake in the Southern Cross trans-Pacific cable, and affirmed its annual earnings outlook.

"It probably, as a headline number, looked to be in line with expectations," said James Lindsay, senior portfolio manager at Nikko Asset Management. "The Southern Cross dividend was a bit higher than people's expectations, the manager suggested that shifted about $9m from the second half into the first half, and they've lost a bit of share of the mobile market and broadband as well, which probably surprised the market a bit, and they upped their capex. A combination of that has led to a mild disappointment in the result.

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"Overlaying that, Telstra announced their result which was a poor result which has driven both stocks down. It shows the competitive dynamic in the industry still remains pretty high - Spark have talked about further competition in the market hurting them and broadband remaining competitive," Lindsay said. Dual-listed Australian telco Telstra fell 4.7 per cent to $5.25 on the NZX.

Sky TV dropped 2 per cent to $4.50. Sky says it won't delay a merger with Vodafone New Zealand to give other telecommunications companies, including Spark, time to appeal it in court if the transaction is approved by the Commerce Commission. Simon Moutter, Spark chief executive, told an analyst briefing he is considering options after that rejection and will likely make a decision today.

"It was up extremely strongly and unusually yesterday, so it's given up its performance," Lindsay said. "It was an odd request that Spark has made to Sky, and it may suggest it's going towards a decision that may reflect the merger going ahead."

A2 Milk dropped 3.9 per cent to $2.46, Fletcher Building fell 2.7 per cent to $10.11, and Meridian Energy declined 2.2 per cent to $2.64.

Precinct Properties New Zealand dipped 0.4 per cent to $1.23. The listed commercial property investor lifted first-half profit 12 per cent to $39.1m as its overall occupancy rate rose to 99 per cent and demand for its Commercial Bay development remained strong.

Ebos Group was the best performer, up 2.2 per cent to $18.44. Air New Zealand rose 1.9 per cent to $2.135 and Mainfreight advanced 1 per cent to $21.50.

Units in the Fonterra Shareholders' Fund gained 0.3 per cent to $6.22. The Auckland-based cooperative said in its latest Global Dairy update to the NZX that it sees a smaller decline in local milk production after better-than-expected collections followed unfavourable weather during peak milking months. Fonterra had been picking the 2017 season collection to fall 7 per cent after a very wet spring hurt North Island milking operations, but is now forecasting a 5 percent decline as "collections have shown signs of improvement" since then.

Outside the benchmark index, Skellerup Holdings sank 6.2 per cent to $1.51. First-half profit fell 7.5 per cent to $8.9m due to weaker sales to the mining sector in Australia and higher finance costs for a new factory in Christchurch. Revenue declined 9.5 per cent to $97.3m. The result is weaker than the $100.5m revenue and $10m profit forecast by brokerage Forsyth Barr.

Abano Healthcare was unchanged at $8.70. Healthcare Partners Holdings will consider mounting a full takeover bid for Abano provided it can get access to the medical investor's books, and has raised its bid for a controlling stake to $10.16 per share from $10 in the meantime. Healthcare Partners has attracted 1 per cent of Abano's shares since mounting its offer to build a 50.01 per cent stake in the business. The Hutsons and Reeves already own about 19 per cent, meaning acceptances would probably be scaled if they achieve control. The offer closes on March 3.