11th Nov 2013 10:36
LONDON (Alliance News) - British Sky Broadcasting Group PLC saw its shares tumble Monday in the wake of weekend news that growing rival BT Group PLC had beaten it to secure exclusive rights to show Premier League and Europa Cup football matches in the UK for three seasons.
Sky, which has built its subscriber base of over 10 million on the back of showing top football games, accused BT of overpaying for the rights, after its rival secured the deal for EUR1.08 billion, or about GBP299 million a season.
However, BT Chief Financial Officer Tony Chanmugam Monday hit back, saying the company had done the deal because it made financial and economic sense. He reiterated that the deal hasn't changed its financial guidance.
Over the weekend, BT had said it still expects earnings before interest, tax, depreciation and amortization, excluding one-off items to be GBP6.0 billion to GBP6.1 billion in 2013/14, GBP6.2 billion to GBP6.3 billion in 2014/15 and to grow further in 2015/16.
BT Group shares were trading up 0.2% at 372.985 pence Monday morning, having fallen initially. BSkyB shares, meanwhile, were down 9.8% at 839.3 pence, while ITV PLC, which currently shares European cup football rights, was down 1.1% at 188.363 pence.
JP Morgan raised BT to Overweight, from Neutral, in the wake of the news, while Nomura cut BSkyB to Reduce, from Buy. BSkyB and ITV had price targets cut by Goldman Sachs, while Citi raised its BT price target.
BT only launched its sports channel in the summer after winning rights to show some English Premier League matches, although Sky still has the rights to a bigger proportion of those games. Its exclusive three-season deal to show European games will start from the 2015/16 season. Rights are currently shared between Sky and ITV.
BT pledged to show some games for free on BT Sport, including the finals of both competitions. It will be first time since the Champions League rights were first handed out that no games will be available of free-to-air terrestrial channels.
The deal has shown BT is "no longer content to be second-best," Berenberg said in a note to clients. "If BT can maintain its current Premier League content, coupled with its Champions League and Europa League content, it will have the best football proposition in the country, with more high-profile games in its arsenal than Sky."
Analysts said the BT deal would put pressure on Sky's high-margin revenue stream from pubs and clubs, while the company would also struggle to maintain its pricing on its sports channels without the high-profile European games.
The news is also bad news for ITV, which will lose rights to show any UK club football from the start of the BT deal. It recently lost out to the BBC on rights to show FA Cup games.
By Steve McGrath; [email protected]; @SteveMcGrath1
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