Sky TV chief executive John Fellet is not commenting on speculation that Sky TV might merge with Australian pay-TV operator FoxTel.

Mr Fellet set off the rumour-mill last Friday when he said that Sky TV had deferred a decision on whether to proceed with a share buyback that had been endorsed by shareholders in October, because of an “opportunity”.

He did not comment further on the nature of the proposal, which he said had about a 20 per cent chance of proceeding.

Mr Fellet said that if Sky was to merge with FoxTel it would probably have to inform the market first, but he did not want to issue a denial each time he was presented with speculation.

Rupert Murdoch’s News Corp owns 43.7 per cent of Sky TV and a 25 per cent stake in FoxTel, which is half-owned by Telstra. Sources have speculated that the two companies could cut their programming purchasing costs and would be able to increase their satellite transmission capacity by a third if they merged and broadcast a single service to subscribers in Australia and New Zealand.

FoxTel would want to retain the cash that had been earmarked for a share buy-back on Sky’s balance sheet were it to contemplate a takeover, sources suggested.

One analyst said he was stumped after Mr Fellet appeared to discount the alternative that Sky TV might be contemplating taking over an Internet provider. He said he would be surprised if Sky TV was acquired by FoxTel, but there might be some advantages.

Sky TV is the seventh largest stock on the NZX with a market capitalisation of $1.95 billion.