Brakes put on Sky-Vodafone merger

Spark New Zealand and 2Degrees have been granted a stay on the proposed merger between rival Vodafone New Zealand and pay-TV operator Sky Network Television to consider their legal options.

If the Commerce Commission clears the merger tomorrow, it won't come into effect immediately, giving the opposing parties time to read the reasoning behind the decision and decide whether they will pursue a legal challenge.

"I have concluded it is appropriate in the present case to make an order staying the effect of any clearance decision for a short period in order to enable the applicants to consider their options," High Court Justice Graham Lang said.

"The transactions have the potential to directly affect consumers in the markets affected by the commission's decision. There is, therefore, a significant degree of public interest in the outcome of the clearance decision. As a result, there is also public interest in ensuring that the decision-making process has not miscarried in any material way."

The parties have until midnight on the third day after the regulator delivers its decision to file for judicial review, and if they do Sky and Vodafone will be unable to merge until further court orders are made.

Spark, Internet New Zealand, and Trustpower last week asked Sky and Vodafone to voluntarily put off finalising the merger if they got regulatory approval, a request that was rejected.

Sky and Vodafone want to create the country's largest telecommunications and media group, with Sky TV buying Vodafone NZ for $3.44 billion, funded by a payment of $1.25b in cash and the issue of new Sky TV shares at a price of $5.40 per share.

Vodafone becomes a 51 per cent majority shareholder in Sky TV, in what amounts to a reverse takeover. The pay-TV operator will borrow $1.8b from Vodafone to fund the purchase, repay existing debt and use for working capital.