Murdoch to consolidate Sky Deutschland?
November 6, 2013
By Chris Forrester
Investment bank Morgan Stanley says the prospects for pay-TV operator Sky Deutschland are so good that; “Fox, which owns 54.5 per cent of Sky Deutschland, may wish to cement its grip”. The bank says “Fox/News has invested c€1.85 billion in Sky Deutschland since 2008. The relationship between Fox and Sky Deutschland is clearly close, with successive CEOs and CFOs of Sky Deutschland having been drawn from News/ Fox. The obstacles to Fox cementing its control over Sky Deutschland, which are (i) a desire not to consolidate the losses of Sky Deutschland, and (ii) the threat of losing €2 billion of tax losses, have been resolved. It is difficult to see what further obstacles there could be from here. Fox was floated out of News in June with $8 billion in cash and $4 billion of annual Free Cash Flow.”
The bank’s 14-page report states: “Our view is that we are at the beginning of a period of pay TV transformation in Germany, that Sky Deutschland is the unrivalled premium player, that it will be the major beneficiary of the growth and, post-financing, that it has the ability to fund itself. Assuming Sky penetration of TV homes of 14.7 per cent by the end of 2020 and ARPU of €41.9, the shares are worth €7.50 per share. There remains, of course, the possibility that Fox, which owns 54.5 per cent, cements its hold on the company in the meantime, now that to do so would not compromise the tax loss position of Sky Deutschland.”
“In our view,” says the bank, “there is only one winner in German premium pay TV, Sky Deutschland. It is the biggest player with 3.4m subs and has the highest pay TV ARPUs (€34pm). It dominates premium content in film and sport and has the Bundesliga rights for cable, satellite, mobile/Internet and IPTV until the end of 2017. It has 70 HD channels, the most comprehensive offer in Germany, and for the last two years was judged the pay TV ‘Service Champion’ by ServiceValue GmbH (Germany’s largest service ranking organisation).”