Analysts at Berenberg Bank remain cautious over future prospects for BSkyB, retaining their ‘SELL’ advice to investors.

The latest note from the bank comments on the new Sky Sports 5 channel, as well as BskyB’s ‘free’ broadband offer for two years. The bank’s note is blunt: “We do not see the channel as a driver of customer growth or upgrades, but regard the aggressive broadband offer as confirmation that Sky is upping the ante against a resurgent BT.”

“The new channel will be the home of European qualifiers, Champions League, Spanish and Dutch live football, plus a host of associated content. The most important, clearly, is the Champions League, the rights for which BSkyB has for only one more year. From August 2015, these rights will be exclusively held by BT: we expect the company to focus on using these rights to further drive market share gain and revenue growth in its consumer business,” adds the bank.

“With only Dutch football being incremental to the existing offer – the other rights were already held by BSkyB – we do not regard the new channel as likely to drive either upgrades to Sky Sports, or incremental TV customers. However, with customers required to register for the new channel (from June 12th), this gives BSkyB the opportunity to sign up households to its latest broadband promotion: free for two years

Berenberg reminds investors that BSkyB’s ARPU has flattened out, and while the latest [free broadband] deal is more aggressive than usual the financial benefits might be slow to materialise.

The bank says it sees BSkyB as “under pressure in its TV business as a result of accelerating rights cost inflation, while the maturity of the broadband market means that Sky must either face lower gross margins or declining market share. In our view, the plan for “Sky Europe” indicates that management, even if not admitting it publicly, understands that the UK business is under pressure.”

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