Merger appeal like root canal: Sky boss

Sky Television has downplayed the prospect of going to court over its scotched merger with Vodafone NZ, with chief executive John Fellet comparing the idea to ‘‘root canal work’’.

Vodafone New Zealand said in a statement that it would ‘‘consider all courses of action’’ after the country’s competition watchdog declined to clear its planned merger with Sky TV.

But Fellet said appealing the regulator’s decision would probably take a year and would not be something he would want to go through unless there was a high expectation of success.

‘‘We have sat on our hands in the last year on some decisions we want to make, and so we have got to focus on the business again,’’ he said.

Had the merger been allowed, Britain’s Vodafone would have taken a 51 per cent share of the merged firm and banked $1.25b in cash.

But the rejection means Sky TV will remain a standalone business for now, and may have to pursue other avenues to fend off competition from internet television providers such as Netflix.

Vodafone may also need to look for other means to differentiate and grow its New Zealand business in the increasingly competitive and low-margin telecommunications market.

Fellet said on the eve of the merger ruling that Sky could not criticise the thoroughness of the commission’s process and he could not argue it had rushed to judgment.

The commission has not yet released its detailed reasoning for declining the merger. But chairman Mark Berry said Sky Sports was central to its thinking.

The commission feared Vodafone would have been able to use control of Sky Sports to drive customers away from rivals and towards its broadband and mobile services.

‘‘Had the merger not included Vodafone acquiring all of the premium sports content we would have likely approved this merger,’’ he said.

The commission’s ruling wiped $300 million off the value of Sky TV when its shares opened down 18 per cent on the New Zealand stock exchange, but they had regained a third of those losses by mid-afternoon trading.

Spark signalled it would have gone to court had the merger been approved.

InternetNZ said the merger would have contravened the principle of ‘‘net neutrality’’ – that internet providers should not favour some content over other content – and would have risked damaging the country’s reputation for phone, internet and TV services.

Vodafone NZ chief executive Russell Stanners said it was ‘‘disappointed the Commerce Commission was unable to see the numerous benefits’’ the merger would have brought.

Fellet said that, despite the commission’s ruling, its existing partnership with Vodafone could be deepened and he also forecast more partnerships between Sky and other telecommunications companies.

Sky had tried to reach deals with other phone companies by offering them the same terms and conditions for access to its service that Vodafone currently enjoyed, he said.

‘‘These guys have walked away from me, not the other way around.’’

Berry said Sky and Vodafone could reapply for permission to merge, though he was not expecting that, and the commission could not provide guidance to them on what steps they would need to take to satisfy its concerns.