UPDATED 2.39pm Sky Television's confirmed it's in talks with Vodafone about a merger but hasn't indicated whether it's merger talks or a buyout.

Sky shares were put in a trading halt this morning pending the announcement from the broadcaster.

Their only comment is that it regards a potential transaction involving a combination of the businesses of SKY and Vodafone New Zealand.

Sky TV said the discussions are ongoing and incomplete and may not result in a transaction occurring.

Earlier this week it played down speculation of a merger with Vodafone.

There's been speculation for several months that Vodafone's looking to sell its New Zealand operations, with Sky tipped as a possible option.

Media commentator Bill Ralston said a merger between Sky Television and Vodafone is a logical move to make as digital spaces become more profitable.

"The whole playing field has shifted. 10 years ago Sky were riding high because they had the only subscriber system, but now of course you have other subscriber systems available via the Internet."

Bill Ralston said if they can finalise the deal they'll be putting out a much stronger product for the current environment.

A potential merger between Vodafone and Sky Television could help Vodafone compete against its main rival Spark.

Business Herald reporter Hamish Fletcher told Kerre McIvor and Mark Dye Sky had been playing down the merger earlier this week, but it makes some commercial sense.

"Vodafone globally is going down a television route, and of course locally in New Zealand we've got Spark with its Lightbox offering, Vodafone doesn't have a similar sort of product."

Media commentator Bill Ralston said the talks over a future merge will be tough.

"Sky's John Fellett is a very hard man to do a deal with, he's very tough on the money and he'll be negotiating hard, as will Vodafone. There is obviously many millions of dollars at stake here."

Sky shares were trading at $4.47 recently, down 28 percent on this time last year.