WELLINGTON: Sky Network Television, the largest pay TV firm in New Zealand, plans to merge with Vodafone NZ to create an integrated telecoms and media group that could bolster its ability to respond to new challengers, such as Netflix.

If approved by regulators, the deal will see Sky Network TV buying the New Zealand arm of the UK mobile network for NZ$3.4bn (US$2.4bn), although Vodafone will keep 51% of the combined entity.

The new group would become one of the largest companies listed on the New Zealand stock exchange and would bring together Sky's 830,000 local subscribers with Vodafone's customer base of around 2.35m mobile connections and some 500,000 fixed-line connections.

Sky and Vodafone NZ have been working together for some time to offer bundled deals of pay TV, broadband and phone services to their customers, but the new deal would extend the arrangement to cover Sky's entertainment packages.

It means the combined group would be able to offer Sky's premium sports and entertainment content to Vodafone subscribers across multiple devices, Reuters reported.

"The acquisition, if successful, will secure Sky's future as a company, transforming it from a one-trick (pay television) entity to a three-trick (mobile, broadband, pay television) integrated force in the New Zealand market," noted analysts at Morningstar, the investment firm. "On face value there are both strategic and financial merits in the near term," they added.

"This is an exciting time for the rapidly evolving communications and entertainment industries," commented Russell Stanners, CEO of Vodafone NZ.

"The combination with Sky will bring greater choice, enhanced viewing experiences, and will better serve New Zealanders as demand for packaged television, internet, and telecoms services increases."

A recent study by Roy Morgan Research confirmed the extent of this growing demand with the finding that Netflix had 264,000 subscribers in New Zealand at the end of 2015 even though it has been operating in the country for little more than a year.

Meanwhile, the research found that 83% of Kiwis access one or more types of content "on demand", including 52% who stream or download TV, films, music and radio.

Data sourced from Vodafone, Reuters, Roy Morgan Research; additional content by Warc staff