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* Agrees shares, cash deal with pay-TV firm Sky
* Deal is biggest M&A transaction in New Zealand this year
* Analysts see Vodafone pivoting toward higher-growth Asia
* Move beefs up Sky, under pressure from likes of Netflix
* Deal subject to regulatory clearance; Sky shares jump (Recasts, add Vodafone shares, ownership and competitiondetails)
By Byron Kaye and Rebecca Howard
SYDNEY/WELLINGTON, June 9 (Reuters) - Vodafone PLC said it was merging its New Zealand unit with the country'sbiggest pay-TV firm, Sky Network Television, in a $2.4billion deal that will enable it to offer customers packages ofentertainment, broadband and mobile.
The biggest deal in New Zealand this year will give SkyNetwork the chance to expand beyond its traditional satellitebroadcast market, which has been shaken up by the arrival ofNetflix and Apple Inc's online content service. Sky'sshares jumped nearly 20 percent.
Vodafone said the tie-up would enable it to offer Sky'ssports and entertainment programming to its mobile andfixed-line subscribers who increasingly wanted to access morecontent and communications from a single provider.
Under the terms of the deal announced on Thursday, Sky willbuy the mobile phone provider for NZ$3.4 billion ($2.4 billion)in total, including NZ$1.3 billion in cash, to be funded throughnew debt, and the rest in new Sky shares. Vodafone will,however, own 51 percent of the combined entity after the deal,which is subject to regulatory clearance, the firms said.
Mobile operators and cable and satellite pay-TV groups inEurope, the United States and elsewhere are scrambling to tie-upso they can offer "quad play" packages of mobile, fixed-line,broadband and TV service.
"The acquisition, if successful, will secure Sky's future asa 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," analysts at MorningStar said in a note.
"On face value there are both strategic and financial meritsin the near term."
Analysts had suggested Vodafone should cut its exposure tothe mature markets of Australia and New Zealand and insteadfocus on higher-growth Asia. Last month, Vodafone saiddeveloping markets were responsible for its first year of salesgrowth since 2008.
Vodafone NZ has more than 2.35 million mobile connectionsand more than 500,000 fixed-line connections in New Zealand. Itsaid its revenue for the 12 months to end-June was forecast tobe NZ$2.0 billion.
Sky, which has no connection with the European pay-TVcompany of the same name, has over 830,000 subscribers. Itsrevenue for the same period is forecast to be NZ$927 million.
A spokesman for the NZ Commerce Commission said thecountry's competition clearance regime requires parties tosubmit an application for approval if they believe there arecompetition issues. "Until all the detail is established, no-onecan assess what the competition issues will be," he said.
The approval process normally takes about 40 days, accordingto the authority's website.
Reflecting the pressure on its business, Sky's shares havefallen 28 percent in the last 12 months.
In New Zealand on Thursday, Sky shares closed up 17 percentat NZ$5.25, below the NZ$5.40 per share issue price of new stockfor Vodafone.
If the deal succeeds, the new company will be one of NewZealand's biggest listed companies with annual revenue of aboutNZ$2.9 billion, the companies said.
The combined group would be able to generate synergies ofabout NZ$415 million after integration costs by rationalisingsome overlapping functions and marketing services moreeffectively to a bigger customer base, the companies said.
Vodafone's shares were trading ex-dividend in London, down4.3 percent at 1018 GMT.
Its New Zealand operation will still not be much more thanabout 2 percent of its valuation of the global group after thedeal, analysts said.
Shareholders are scheduled to vote on the deal at a meetingin July.
($1 = 1.4031 New Zealand dollars) (Reporting by Byron Kaye in SYDNEY, Rebecca Howard inWELLINGTON; and Paul Sandle in LONDON Editing by Kenneth Maxwelland Elaine Hardcastle)
