It's a no go for merger between TVNZ and MediaWorks, says John Key.

Television New Zealand and TV3-owner MediaWorks would not likely be allowed to merge, Prime Minister John Key has indicated.

Key appeared to confirm there had been interest in a transaction short of a merger, after a report of talks between TVNZ and MediaWorks in the Australian media.

"What I am aware of is a bit of discussion that there might have been some interest on the TVNZ side in relation to some of the assets owned by MediaWorks," Key said. TVNZ spokeswoman Georgie Hills would not identify the "assets" Key was referring to.

KIRK HARGREAVES/FAIRFAX NZ Coalition for Better Broadcasting fears lack of choice if broadcasters came together.

Key said a merger was "very unlikely to happen".

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"I don't think there is a great deal of support around that on the government side, which is a critical part of it as the Government would have to allow that to happen on the TVNZ side," he said.

"We like the concept that there are competing networks."

TVNZ had earlier declined to comment on a claim in The Australian which said merger talks had taken place between TVNZ and MediaWorks, citing unnamed sources.

The newspaper also reported that MediaWorks' acting chief executive David Chalmers was looking to schedule meetings with Australian media companies.

MediaWorks' United States owner Oaktree Capital had appointed investment bank Credit Suisse to assess options for the business, it said.

The New Zealand media industry is in the midst of a consolidation, with APN News & Media and Fairfax looking to merge their New Zealand operations, and Sky Television recommending shareholders accept a partial reverse takeover by Britain's Vodafone.

TVNZ spokeswoman Emma-Kate Greer would not say whether discussions had taken place with MediaWorks about a new partnership between the firms.

She said TVNZ had no comment about the report in The Australian.

MediaWorks spokeswoman Charlotte McLauchlan said MediaWorks had previously confirmed it intended to appoint an adviser to ensure it could capitalise on any opportunities arising from the consolidation of the New Zealand media market.

"The company has not commenced a sale process and has not instructed advisers to 'pitch' the business to Australian or New Zealand media companies, she said.

Coalition for Better Broadcasting chief executive Myles Thomas described the idea of a merger between the broadcasters as "outrageous".

Thomas said a tie-up between TVNZ and MediaWorks would be "the television version" of the proposed Fairfax NZ, NZME merger which the lobby group opposes.

"If NZME and Fairfax are allowed to merge then anything is possible. Certainly, TVNZ and MediaWorks would have a similar argument to NZME and Fairfax," he said.

But Thomas believed any argument in favour of a merger would be tenuous, as it would create a "free-to-air monopoly". Sky Television also operates a nationwide free-to-air channel, Prime.

"We know monopolies make it impossible for the market to function properly … and that is the whole point of the Commerce Commission," Thomas said.

TVNZ and MediaWorks are direct nationwide competitors in the free-to-air television market.

But both have seen a common interest in competing against overseas media-tech giants.

Both broadcasters are shareholders – alongside Fairfax New Zealand and NMZE – in the Kpex digital advertising media exchange, which provides a one-stop-shop for advertisers placing digital advertising with the four firms.