Sky's stratospheric soccer bill sends shares falling
11 February 2015, 14:14
London - Shares in Sky fell more than 4 percent on Wednesday after the pay-TV group agreed to pay a record 4.2 billion pounds ($6.4 billion) to retain its dominance of Premier League soccer broadcasting rights in Britain.
Analysts had expected Sky to pay about 40 percent more than the 2.3 billion pounds it shelled out for the current three-year contract. Instead, under pressure from fierce rival BT, Sky offered an 83 percent increase to secure the new contract running from 2016 to 2019.
Sky, 39 percent-owned by Rupert Murdoch's 21st Century Fox and synonymous with top-flight English soccer, will show 126 live games a season under the new deal.
BT, which entered the sports pay-TV market in 2012, will pay 960 million pounds to screen 42 matches a season over the three years.
Though that represents a 30 percent increase from the 738 million pounds for BT's previous deal, investors appeared to welcome the company's relative restraint in the bidding battle, lifting its share price 3.5 percent by 0855 GMT.
BT had already ramped up the pressure on Sky by winning the rights to screen all live European Champions League matches for three years from the 2015/16 season, forcing Sky to up its game in the English auction to retain its position as a leading sports broadcaster.
Analysts at Citi said the headline figures are likely to concern investors but that Sky had done well to retain the lion's share of the rights.
"Putting this together, we think the first take on the inflation may well be negative and this may weigh on the shares initially," the Citi analysts said in a note.
Also read: Sky pays record 4.2 bln pounds for top English soccer rights
"But ultimately we think this will be taken well when investors consider the alternatives."
Citi rates Sky shares as a "buy".
Sky said it would pay for the new contract by finding savings elsewhere in the business and by limited price rises for customers. It gave no indication on the size of any potential price increases, but added that it aims to minimise the impact on cutomers.