26th Feb 2007 07:03
British Sky Broadcasting Group PLC26 February 2007 British Sky Broadcasting Group plc Sky basic channels carriage on Virgin Media As has been widely reported, Sky is currently in discussions with Virgin Mediaabout the carriage of Sky basic channels(1). The Company wishes that the Sky basic channels that Virgin Media currentlycarries, including Sky One, Sky Two, Sky Sports News and the award-winning SkyNews, remain available to Virgin Media customers and has negotiated in goodfaith with Virgin Media and shown flexibility on price. More has been offeredto Virgin Media than ever before, including HD services and new channels such asSky Three and Sky Arts, the UK's only dedicated arts channel. Sky has increased investment in its basic channels by 68% over the last fiveyears to around £200m per annum and, as a consequence, the most watched pay TVprogrammes in cable households are on the Sky basic channels. We are simplyseeking a fair price so that we can continue to provide the great shows andchoice that Virgin Media customers value. Despite the constructive approach adopted by Sky throughout these negotiations,the recent behaviour of Virgin Media appears at odds with a genuine desire toconclude a commercial agreement and at this time there exists the realpossibility that agreement will not be reached before expiry of the currentcontract at midnight on 28th February, 2007. Unlike the open satellite platform, Virgin Media's cable network is closed. Theonly way Sky's channels can be available to cable viewers is if Virgin Mediachooses to carry them. As a consequence, Sky's basic channels would becomeunavailable to all Virgin Media customers for an indeterminate period of time. Sky receives revenue in relation to the carriage of its basic channels on VirginMedia's cable network, both directly from Virgin Media in the form of monthlycarriage fees and, indirectly, via advertising on those channels which areviewed within Virgin Media households. The Company estimates that the financialimpact on Sky, were an agreement not to be concluded in relation to theremainder of the year to 30 June 2007, would be a reduction of £15 to £20million of operating profit. This reflects the impact of lower wholesalecarriage fees and lower advertising revenues. It does not include any of thefuture benefits or costs associated with accelerated customer growth shouldcable customers decide to switch to Sky. This would include subscriberacquisition costs and any revenues received either through on-goingsubscriptions or one-off installation and equipment costs. Sky continues to be willing to negotiate with Virgin Media in good faith at anytime. Jeremy Darroch, CFO said: "We are disappointed that Virgin Media appear to have walked away fromnegotiations. Sky offered more channels to Virgin Media than ever before. Wehave invested in developing our channel offering and sought a fair price whichreflects that fact. With three days still to go before the deadline, we hopethat Virgin Media will focus on getting a deal done rather than on their PRoffensive." For further information, please contact: Analysts/Investors: Andrew Griffith Tel: 020 7705 3118Robert Kingston Tel: 020 7705 3726 E-mail: [email protected] Press: Matthew Anderson Tel: 020 7705 3267Stephen Gaynor Tel: 020 7705 3446 E-mail: [email protected] Finsbury: Alice Macandrew Tel: 020 7251 3801 Notes 1. Virgin Media currently carries Sky One, Sky Two, Sky News, Sky Sports News, Sky Travel and Sky Travel Extra. In addition, Sky has offered carriage Sky Arts (formerly Artsworld), Sky Three, Sky Travel+1 and Sky Travel Shop. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Sky