New Zealand rejects Sky-Vodafone merger plan

New Zealand's competition watchdog rejected a multi-billion dollar merger between Vodafone NZ and pay-TV operator Sky on Thursday, saying the combined entity would have too much market power.

Sky Network Television and Vodafone unveiled the planned tie-up between New Zealand's largest subscription television service and its second biggest telecoms provider last June, estimating it was worth NZ$3.44 billion ($2.47 billion).

It was widely seen as a means for Sky -- which has no connection with the European broadcaster of the same name -- to fight the rise of streaming services such as Netflix.

But the New Zealand Commerce Commission said it was concerned Vodafone would have an unfair advantage if it had access to Sky's exclusive sporting content, which includes All Blacks' Tests and the Olympics.

"Given the merged entity?s ability to leverage its premium live sports content, we cannot rule out the real chance that demand for its offers would attract a large number of non-Vodafone customers," it said.

The regulator said that could inhibit competitors, reduce investment in the telecoms sector and, over time, allow the market's dominant player to drive up prices.

Sky shares dropped 17 percent to NZ$3.60 after the announcement while Vodafone's major rival Spark was up 1.72 percent at NZ$3.55.

"This is a very disappointing conclusion to a merger we saw as enhancing New Zealand?s communications and media landscape," Sky chief executive John Fellet said.

Vodafone New Zealand, a subsidiary of Britain's Vodafone Group, also expressed disappointment and said it would "consider all courses of action".