Unfortunately for its long-suffering shareholders, the Sky Network Television Ltd (ASX: SKT) share price has plunged 12% lower today after emerging from a trading halt. Today's drop brings its six-month decline to approximately 22%.
The reason for the sell-off was an announcement out of the New Zealand-based entertainment company which revealed that the New Zealand Commerce Commission (NZCC) has blocked Sky's proposed merger with Vodafone's New Zealand business.
According to the release the NZCC believes that the merger would create a monopoly on premium sports content in New Zealand.
One company that will be celebrating today is Spark New Zealand Ltd (ASX: SPK). The telco and digital services company had objected to the deal, stating that it felt the merger of the two entities would "result in poor choice and higher prices for consumers."
Sky's chief executive John Fellet had this to say on the news:
"This is a very disappointing conclusion to a merger we saw as enhancing New Zealand's communications and media landscape. From here we will continue to strive to deliver innovative ways to curate and deliver entertainment to all of New Zealand."
Should you buy the dip?
Even after the sharp decline in its share price over the last six months, I can't say I find an investment in Sky Network attractive.
For the period ending December 31 2016 the company reported a 5.1% drop in subscribers to 816,135. Worryingly this is the lowest number of subscribers in the last five years and appears to relate to the emergence of streaming services like Netflix.
Furthermore, during the period the average revenue per residential subscriber fell from NZ$79.56 to NZ$79.09.
I think the merger with Vodafone's New Zealand unit could have helped steady the ship and potentially return the company to subscriber growth. But without it I think it's likely that the company will experience further declines in subscriber numbers.
So for this reason I would suggest investors avoid the company following today's announcement.
