Skyfone deal reaches drop-dead date but companies say they haven't given up hope

Sky Network Television and Vodafone NZ haven't given up hope for a merger despite being rebuffed by the Commerce Commission last week over competition concerns. 

Sky Network Television and Vodafone New Zealand haven't given up hope for a merger despite being rebuffed by the Commerce Commission last week over competition concerns. 

The pay-TV operator and telecommunications group have not triggered a right to terminate the transaction if it wasn't completed by February 28, Sky said in a statement. 

"Sky does not propose to give notice of termination of the SPA (sale and purchase agreement) to Vodafone while the parties consider their options," it said. "Vodafone has indicated to Sky that it also does not propose to give notice of termination of the SPA." 

The competition regulator rejected the companies' application to merge last week, saying it risked creating a strongly vertically integrated pay-TV service and telecommunications provider, with rejection hinging on their owning all premium sports content. Had the deal not captured popular sports it probably would have got over the line. The rejection saw shareholders dump Sky stock, wiping $293 million from the company's market value. The shares last traded at $3.80, valuing Sky at $1.48 billion. 

The Commerce Commission hasn't published its detailed reasoning behind the decision, which the companies could then scour to determine whether it's worth seeking a judicial review. 

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 $1.25 billion in cash and the issue of new Sky TV shares at a price of $5.40 per share. Vodafone would have become a 51% majority shareholder in Sky TV, in what amounted to a reverse takeover. The pay-TV operator planned to borrow $1.8 billion from Vodafone to fund the purchase, repay existing debt and use for working capital.

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