Vodafone's pay TV strategy unclear

Vodafone has not decided its strategy for Telstra Saturn. Photo / Supplied

Secrecy surrounds the degree Vodafone will challenge Sky TV now it has taken over TelstraClear and whether the two tech giants compete in the unregulated market or complement one another.

Vodafone's $840 million purchase was approved by the Commerce Commission last week and Telstra has quickly exited the New Zealand market.

TelstraClear's Christchurch and Wellington cable TV network Telstra Saturn - which is largely a rebroadcast of Sky TV - will be rebranded by Vodafone.

Beyond that Vodafone has not decided its strategy for Telstra Saturn while Sky TV chief executive John Fellet says the terms for content are not being renegotiated with new owners.

Longer term the question is whether Vodafone will directly challenge Sky's dominance of the pay TV market or continue its past strategy where it does not compete directly with Sky by acting as a reseller for Sky.

Sky TV and its relationship with internet service providers like Vodafone and TelstraClear is the subject of a Commerce Commission investigation looking at the unregulated market for content.

In the past TelstraClear chief executive Allan Freeth has complained about contractual terms in the Telstra Saturn deal with Sky that limit unique content and that will reduce uptake for UFB - ultra fast broadband

Sky TV says its terms for ISPs using its content rights are not restrictive.

Across the Tasman there has been a shakedown where their pay TV market is controlled by Foxtel - a company that is owned 50 per cent by Telstra (parent company of TelstraClear) and 50 per cent by News Limited, the Australian arm of the Rupert Murdoch empire.

News Limited has a controlling stake of 43.65 per cent in Sky TV. There is no evidence of any side agreement between Telstra and News over competition in the New Zealand pay TV market.

Vodafone New Zealand has had a chequered history developing content.

Vodafone hired former TVNZ programmer Jane Wilson, leading some to believe it was getting serious about developing its own content. Meanwhile, last week, the second largest shareholder in Sky TV - Todd Corporation - sold its $218 million investment to Credit Suisse and it has been distributed further.

The departure of such a big player - after 22 years in the firm - removes an institutional voice competing with the influence of News Ltd on the board.

Pay TV shakedown

Telstra: Dominant Australian telco owns 50 per cent of dominant Australian pay TV operator Foxtel.

Vodafone: Last week took over New Zealand arm of Telstra - TelstraClear - including TelstraSaturn with cable TV operations in Wellington and Christchurch, including some fibre optic.

News Ltd: Rupert Murdoch's Australian arm recently increased to 50 per cent of Foxtel and has a controlling 46.3 per cent stake in New Zealand's Sky TV.

Sky TV: dominates New Zealand pay TV market and wholesale market for TV content, especially sports.

UFB: New Ultra Fast Broadband network being rolled out will be distributor in new era of video on demand pay TV downloads.

This story has been corrected from an earlier version, which said News had a 46.3 per cent stake in Sky TV. The correct figure is 43.65.