The Commerce Commission was unlikely to oppose the joint venture proposal between Sky Network Television and TVNZ to establish the Sky Lite pay television station Igloo, Forsyth Barr broker Suzanne Kinnaird said yesterday.
The commission announced this week that it was reviewing the joint-venture partners to see if they had met obligations under Section 47 of the Commerce Act.
Under Section 47, a person must not acquire assets of a business or shares if the acquisition would have, or was likely to have, the effect of substantially lessening competition in a market.
Sky is to have 51% of Igloo and TVNZ will have the remaining 49%.
Ms Kinnaird said she believed the commission would support Igloo in its present form.
Igloo was expanding the broadcasting market and competition for viewership.
"Igloo can be done with or without TVNZ. If TVNZ is excluded from owning 49% of Igloo, what benefit would this serve? The answer is none."
Igloo did not buy content, it was a platform business, she said. TVNZ and Sky would continue to buy content in the same way - fiercely competitively.
Igloo would expand the customer base for Kordia and grow its revenue.
Igloo used the DTT (digital terrestrial television) network and that helped with the digital switch off, Ms Kinnaird said.
Customers wanted choice and Igloo provided a new choice for consumers through its low cost pay DTT television service, along with Freeview.
"The barriers to entry for this segment are low and there is nothing stopping anyone else producing a competing service that blends a low-cost pay model with Freeview. In the future, Apple TV, Google TV and Netflix are all capable of competing in this space."
TVNZ had the right to own a business in that segment of the broadcasting market, which extended its investment beyond free-to-air and "on demand" television, Ms Kinnaird said. TVNZ had already invested and lost money in other ventures - Tivo and Freeview. Just as Tivo failed in New Zealand to make a profit, Igloo could also turn out to be unprofitable.
If the commission was to reject TVNZ's 49% ownership in Igloo, Sky would still proceed.
Ms Kinnaird did not believe that Igloo would lead to a lessening of competition because it "actually increases competition".
"We believe the commission review will conclude that Igloo is positive for consumers and therefore should approve the ownership structure of Igloo."
Forsyth Barr maintained its buy recommendation on Sky with a valuation of $6.37 a share. Sky last traded at $5.28.
