BT: “One of Europe’s worst telcos for TV”

Investment specialists Morningstar did not pull any punches in a note to clients on August 30th, saying that the UK market has overreacted in its somewhat negative view of BSkyB over the launch of the rival BT Sport pay-platform, and that “[BSkyB’s] sports content remains far superior to that of BT. BSkyB also dominates content in other areas, and we think this superiority will allow the firm to continue to grow.”

Morningstar explains itself, saying that BSkyB has faced similar challenges in the past and that despite the service essentially being offered free-of-charge to BT’s 6.8 million broadband connected homes only 500,000 had signed up by late July [and in fairness to BT another 2.5 million by mid-August helped by the deal with Virgin Media] and that its BT Vision television service had attracted only 833,000 customers after 6 years of operation, [which is] “one of the worst performances among European incumbent telecom operators. While BT has some advantages over the previous two competitors, we expect it will also struggle. The first company to offer a rival sports channel was Setanta Sports, which subsequently went bankrupt. The second was ESPN, which, despite having the ability to leverage its vast catalogue of US sports content, could only manage about 1 million customers.”

Morningstar continues saying that the BT Sport offering “pales in comparison with BSkyB’s” and that BSkyB’s pattern of acquiring full geographic rights to its programming is also a key advantage over BT.  “BSkyB is now selling monthly movie passes and 24-hour sports packages through its Now TV programme. This move hasn’t caused much cannibalisation so far, according to management, and we don’t think it will, as these package options primarily appeal to customers that can’t have a satellite dish or don’t want to be tied to a 12-month contract. In our view, this offering does help prevent over-the-top-type services from taking off, because they have limited content to distribute.”

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