New Zealand competition watchdog rejects Sky TV purchase of Vodafone NZ

(Adds market reaction)

WELLINGTON, Feb 23 (Reuters) - New Zealand's competition regulator on Thursday rejected Sky Network Television (Frankfurt: A0ETX2 - news) 's proposed acquisition of Vodafone's New Zealand unit, saying that it would create a monopoly on premium sports content.

The decision sent shares in Sky TV plummeting 17 percent to NZ$3.6, its largest daily percentage drop on record.

The Commerce Commission said in a statement that its concerns about the NZ$1.3 billion ($930 million) deal outlined in October had not been assuaged.

"We have concerns that this could impact competitiveness of key third players in these markets," Commerce Commission Chairman Mark Berry said in the statement.

Vodafone said it will consider its options after it has examined the commission's decision.

"We are disappointed the Commerce Commission was unable to see the numerous benefits this merger brings to New Zealanders," Vodafone's New Zealand CEO Russell Stanners said.

The regulator had delayed its decision until February after asking Sky (Frankfurt: 893517 - news) and Vodafone for more details on the deal, which was first proposed in June.

Rival telecoms company Spark New Zealand (Other OTC: NZTCY - news) also opposed the deal and had received a court stay on Wednesday for a temporary halt if the regulator ruled in flavour of the sale.

Shares (Berlin: DI6.BE - news) in Spark rose 2 percent when the market opened after the announcement.

"The Commerce Commission's decision to decline the proposed merger between Sky Network Television Ltd and Vodafone New Zealand is a big positive for Kiwi consumers," Spark’s General Manager for Regulatory Affairs, John Wesley-Smith, said in a statement. (Reporting by Charlotte Greenfield; Editing by Toby Chopra and David Goodman)