BSkyB: “Sell”, say bankers

On the one hand everything for BSkyB is looking pretty rosy. Its acquisition of its counterparts in German and Italy is shaping up well, and James Murdoch’s highly positive comments at MIPCOM on October 13th should have helped this rosy glow.

However, a report from Berenberg Bank stays negative, and the bank is advising investors to sell their BSkyB shares. BSkyB is due to report its Q1 numbers on October 16th.

The bank’s report cites a few headaches that it has, not least what it describes as a “preamble”  to the upcoming English Premier League rights auction which it expects to start in the next month or so. The bank expects the actual auction to take place in January or February 2015, but issues a robust warning: “In our view, the market is taking too sanguine a view as to the outcome of this auction.”

“For while in public BT suggests it will not be an aggressive bidder, we believe that, in private, management is thinking just the opposite. BT has clearly done well out of its BT Sport strategy, and we think it stands to benefit from an aggressive approach. Meanwhile, BSkyB cannot afford to lose any rights at all now that it has lost the Champions League, and we think it will bid accordingly. We continue to assume a 60 per cent rights cost inflation in our 2017 numbers,” says the bank’s note to clients.

The report adds: “Q1 numbers, of course, will be unaffected by either issue, although we note that BSkyB’s customer and paid-for product growth continues to slow. Management continues to state that its policy is not to chase promotions as aggressively as the competition. However, given that the company now offers uncapped broadband for free to anyone, it is hard to take such comments seriously.”

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