Vodafone to merge New Zealand unit with Sky Network in $2.4 billion deal

Thu Jun 9, 2016 7:49am EDT
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By Byron Kaye and Rebecca Howard

SYDNEY/WELLINGTON (Reuters) - Vodafone PLC (VOD.L: Quote) said it was merging its New Zealand unit with the country's biggest pay-TV firm, Sky Network Television (SKT.NZ: Quote), in a $2.4 billion deal that will enable it to offer customers packages of entertainment, broadband and mobile.

The biggest deal in New Zealand this year will give Sky Network the chance to expand beyond its traditional satellite broadcast market, which has been shaken up by the arrival of Netflix and Apple Inc's (AAPL.O: Quote) online content service. Sky's shares jumped nearly 20 percent.

Vodafone said the tie-up would enable it to offer Sky's sports and entertainment programming to its mobile and fixed-line subscribers who increasingly wanted to access more content and communications from a single provider.

Under the terms of the deal announced on Thursday, Sky will buy the mobile phone provider for NZ$3.4 billion ($2.4 billion) in total, including NZ$1.3 billion in cash, to be funded through new debt, and the rest in new Sky shares. Vodafone will, however, own 51 percent of the combined entity after the deal, which is subject to regulatory clearance, the firms said.

Mobile operators and cable and satellite pay-TV groups in Europe, the United States and elsewhere are scrambling to tie-up so they can offer "quad play" packages of mobile, fixed-line, broadband and TV service.

"The acquisition, if successful, will secure Sky's future as a company, transforming it from a one-trick (pay television) entity to a three-trick (mobile, broadband, pay television) integrated force in the New Zealand market," analysts at Morning Star said in a note.

"On face value there are both strategic and financial merits in the near term."

Analysts had suggested Vodafone should cut its exposure to the mature markets of Australia and New Zealand and instead focus on higher-growth Asia. Last month, Vodafone said developing markets were responsible for its first year of sales growth since 2008.   Continued...

Vodafone branding is seen outside a retail store in London November 12, 2013.    REUTERS/Toby Melville/File Photo