The Commerce Commission today cleared a proposal which would result in Telecom acquiring a 25 percent interest in Sky Network Television.
Commission Chairman Dr Alan Bollard said the proposal involves Telecom's major shareholders, Bell Atlantic and Ameritech, transferring shares they own to Telecom.
Together, Bell Atlantic and Ameritech own 49 percent of the HKP Partnership of New Zealand. In turn, HKP owns 51 percent of the shares of Sky.
"The acquisition essentially involves a telecommunications company with a small amount of broadcasting involvement buying its shareholders' shares in a television broadcaster," Dr Bollard said.
Telecom had applied for clearance of the proposal. To give a clearance, the Commission must be satisfied that a proposal would not lead to anyone acquiring or strengthening a dominant position in any market.
Important conclusions reached by the Commission in making its decision included:
Pay TV (like Sky) and free to air TV (like TVNZ and TV3) operate within the same retail television broadcasting market.
While TVNZ has a 16.3 percent shareholding in Sky and has one director on Sky's nine-person board, it is not able to exert substantial influence over Sky. Consequently, TVNZ and Sky are competitors in the retail television broadcasting market. Whether measured by percentage of viewers or by revenue, TVNZ has a far larger market share in this market than Sky and Telecom combined.
Both Telecom and Sky own rights to use some frequencies capable of transmitting television signals. However, a large number of frequencies and other means of transmitting television signals will remain outside their influence. Additional means of transmitting television signals will be likely to become available as a result of new technology allowing compression of signals, the establishment of cable networks and satellite accessibility.
It is likely that in the future there will be a convergence of telephone, broadcasting, entertainment and information services as new technologies are developed. These developments may change how the Commission would view relevant markets in the future. In the present, these developments are not considered sufficiently imminent to affect how the markets relevant to the proposal should be defined.
The proposal may allow Telecom to achieve some cost savings through economies of scale and scope. However, other companies appear to have the potential to achieve similar economies by expanding their own operations or by working with other parties.
In considering Telecom's application the Commission released a draft determination indicating its preliminary view was to grant a clearance. Telecom and interested parties made submissions on the draft.
A two-day conference was held to give them opportunity to make further comment and to allow the Commission to ask questions.