Vodafone merges with Sky TV in NZ

Vodafone has struck a NZ$2.4 billion (£1.2 billion) deal to merge its New Zealand business with Sky’s pay-TV network in the country.

Analysts reckon the new media company, which will be one of the biggest firms on New Zealand’s stock market, is aimed at giving the two players a stronger chance at competing with online rivals like Netflix.

Vodafone will own 51% of the new firm, which combines Sky Network TV’s more than 830,000 subscribers with Vodafone’s phone business, which has some 2.35 million mobile customers and 500,000 landline connections.

Vodafone NZ’s chief executive, Russell Stanners, will oversee the merged business.

The new company is expected to bring in revenues of about NZ$2.9 billion.

“This brings together Sky’s leading sports and entertainment content with our extensive mobile and fixed networks, enabling customers to enjoy their favourite shows or follow their team wherever they are,” Stanners said.

But UBS analysts warned the deal could mean Sky’s paid-TV model might struggle without partners.

“The fact that Sky is considering such a merger potentially highlights the challenges to growing earnings… as a standalone business,” UBS said.

“They’re probably waking up and smelling the coffee,” said Greg Smith, head of research at Fat Prophets.

“Sky has certainly been pressured to doing this. Combining with Vodafone is going to be quite a powerful combination.”