New Zealand’s Commerce Commission rejected a proposed NZD$1.3 billion ($936 million) merger of Sky Network Television and Vodafone New Zealand, amid concerns the deal would “substantially lessen competition”.

The regulator’s assessment focused on the impact of the merger on competition in both the broadband and mobile telecommunications markets.

Commerce Commission chair Dr Mark Berry said: “given the merged entity’s ability to leverage its premium live sports content, we cannot rule out the real chance that demand for its offers would attract a large number of non-Vodafone customers.”

In a media briefing he said if the merger had “not included all premium sports content” the regulator would likely have cleared it.

He also expressed concerns the deal would reduce investment and innovation in broadband and mobile markets and, against a backdrop of fibre being rolled out, it would have been an opportune time to entice consumers to a new offer.

“If significant switching occurred, the merged entity could, in time, have the ability to price less advantageously than without the merger or to reduce the quality of its service”, he said.

Sky CEO John Fellet said the firm could walk away from the bid, but was also considering an appeal in the high court, which could take at least a year, Reuters reported.

Fellet said Sky would wait until receiving the regulator’s full written verdict, due in about two weeks, before making a decision on an appeal.

“We’ve got to keep all the options on the table,” he said in an interview.

Earlier in the week, New Zealand’s High Court granted a short-term stay which would have prevented the merger from going ahead even if the regulator approved it.

Following applications by Spark, 2 Degrees and Internet NZ, the court ruled Sky and Vodafone were prohibited from completing the merger until midnight on the third day after the Commerce Commission published its decision. The ruling gave the trio time to challenge the merger if it was given the green light.

“I wish the other players would not complain that they can’t get ahead and come in here and cut a deal with me,” Fellet said of the opposition, adding access to Sky’s sport content did not have to be exclusive to Vodafone.

There is room for a revised application if Sky gives up control of some of its premium sports content, the Reuters report said.