Pay-TV operator Sky has confirmed it is in merger talks with Vodafone.
Shares in Sky TV were placed in a trading halt on Wednesday ahead of the announcement which was prompted by media speculation.
"Sky confirms that it is in discussions with Vodafone Group Plc regarding a potential transaction involving a combination of the businesses of Sky and Vodafone New Zealand," it said in a statement to the NZX.
It said discussions were continuing.
The two companies are already in partnership offering bundled deals to consumers consisting of a Sky TV package, broadband and phone services.
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Sky has retained Citibank for advice on options for what analysts estimate will be $NZ400 million ($A375.46 million) of surplus capital, once the pay-TV company's expenditure program winds down.
Sky TV boss John Fellet told BusinessDesk in May that the options were to buy a business or return funds to shareholders.
Vodafone NZ had $NZ1.96 billion of sales in its 2015 year, but that was eclipsed by expenses and one-time costs, resulting in a net loss of $NZ120.7 million. Total assets were $NZ2.2 billion, while financial liabilities including trade creditors was $NZ1.95 billion.
Sky TV's market capitalisation is $NZ1.7 billion.
Sky's shares last traded at $NZ4.47 and have declined 28 per cent in the past 12 months as it battles falling subscriber numbers amid competition from online streaming services Netflix and Lightbox.
