The City’s results season kicks off next week with figures from blue-chip firms including broadcast rivals BT and BSkyB.
The battle between home communications giants BSkyB and BT will heat up with figures due from both firms amid reports that Sky is in talks over a tie-up with Vodafone to curb the power of their resurgent rival.
Sky Sports broadcster BSkyB has been left reeling after losing out on the UK rights to show Champions League and Europa League matches in November as BT continues to step up pressure.
BT, which updates on third quarter trading on Friday, agreed an exclusive deal worth almost £900 million to show both UEFA competitions for three seasons from 2015/16 in a move marking the first time a single UK broadcaster has won exclusive live rights for all 350 matches from the two tournaments per season.
But it is thought that Sky and Vodafone have been discussing ways to strengthen their defences against BT, possibly involving a deal on Sky’s sports and mobile channels and working together on a high-speed broadband service. It comes ahead of BT’s joint venture with T-Mobile and Orange parent EE to launch a mobile phone service this year, which could be bundled with its other offerings in a so-called “quad play” package. While the talks are said to be exploratory only, it shows how seriously the threat from BT is being taken in the market.
It launched BT Sport in August, which helped double the number of new broadband customers in the July to September quarter to 156,000 as many were lured in by a package including 38 top-flight football matches a season on its TV service.
It has pledged to make European football “far more accessible and affordable to fans”, and will show a selection of the games for free on BT Sport even to homes that have not signed up to the channels, although it does plan to introduce charging for the UEFA matches. The group grew overall pre-tax profits by 2% to £609 million in the second quarter, but analysts are pencilling in a slight dip in third quarter underlying profits to £672 million from £675 million a year earlier.
Simon Weeden, an expert at Citi, said while BT Sport had provided a boost to its broadband business, it has come at a hefty cost.
He estimated BT would need to charge a two million-strong customer base around £12.50 a month plus VAT to recover its UEFA rights costs, which followed hot on the heels of its £738 million deal for 38 live Premier League matches.
“We see the cost of the UEFA football rights as disproportionately high for the value they will provide to BT and see the potential for financial risk as rights renewals come around, such as with the English Premier League,” said Mr Weeden.
Solid progress from BSkyB in its interims on Thursday is set to be overshadowed by its loss of prized football rights to BT, according to Numis Securities analyst Paul Richards.
“We expect more of the same operationally in the second quarter, with solid net additions in ‘traditional’ products and further very strong growth in connected services, which continues to be a key focus for Sky,” he said. He is estimating 70,000 net additions for TV, 100,000 for HD and 75,000 for broadband.
But this would be less than the 111,000 broadband customers added in the three months to the end of September.