Market Report: BSkyB slides on worries over broadband costs

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James Murdoch, the chief executive of BSkyB, must have some sympathy with child actors and sports stars the world over. Like many of them, he has a somewhat overbearing parent.

The German broker Deutsche Bank reports that Rupert Murdoch, James's father and chairman of BSkyB, told an analyst meeting in Sydney that BSkyB's broadband costs could drive the company's pre-tax earnings down to £650m in the current year. That is almost £250m less than last year and significantly less than previous City forecasts.

According to some investors, the increasingly competitive home broadband market could prove to be more trouble than it is worth. One trader said: "In trying to grab market share BSkyB is in danger of losing sight of what it does best. There is no proof that providing free broadband to home customers is going to make any money, but the company seems to be determined to throw plenty at it in trying to prove it." Shares in BSkyB closed 13p worse at 537p.

There was little movement in the mining sector after Monday's big sell-off. Lonmin fell 3p to 3,081p before today's full-year numbers, and traders are still holding out some hope that a rival will bid for the company. However, for most sector analysts, such a move is still unlikely. Elsewhere in the miners, a rally in the copper price saw Vedanta Resources close 25p better at 1,392p and Kazakhmys add 20p to close at 1,160p.

After a period of frenzied bid speculation, some of it real but most of it fictional, investors cashed in on the utility sector. Water and electricity producers led the blue-chip index into negative territory, with Kelda Group off 15p to 914.5p, Drax Group 16p worse at 864p and Severn Trent down 23p to 1415p, the worst hit. Even so, it will take a much more sustained sell-off for any investor who has bought into the sector in the last year to start worrying about stop losses.

In the wider market, a weak start to trading on Wall Street saw London shares extend losses into the afternoon. With little to get excited about traders stayed largely on the sidelines as the FTSE 100 closed 7.6 lower at 6186.6.

Babcock International, the military and civil engineering support services group, topped the mid-cap leaderboard with a 37.75p gain to 417.5p, after interim results were significantly better than expected. The company also said it expects to beat forecasts for the full year. Broker Citigroup remains very upbeat on prospects for Babcock and reiterated its "buy" stance on the shares, although it is safe to assume the bank will be reviewing its 380p price target. The word among traders is that the company could sign a number of new contracts before the end of the year.

Traders are still betting on another offer being made for support services group Amec after the company confirmed market rumours on Monday that it has turned down a takeover bid. The stock has rallied more than 55 per cent since mid-August and the word is that a final offer could see the shares valued at close to 500p. The shares closed 13.25p better at 428.25p.

Rumours that Warner Music is considering a bid for computer games designer SCi Entertainment refuse to go away. The shares rallied 8p to 517p, helped by the global launch of Sony's PlayStation 3, and the word is that a 600p-per-share bid is in the offing.

Disaster of the day in the small caps was Acambis, the biotechnology group, after it revealed that the US government has ruled the company out of another lucrative smallpox vaccine contract. The news came out of the blue for shareholders, sending the shares crashing to a new six-year low, down 59.75p to 94.75p.

Aim Resources found some solid buying support on rumours the company is poised to report a significant uranium find in Africa. The company said it knew of no reason for the share price movement last week, when the stock rallied from 5p, but more demand saw the shares add 2.62p to 11.12p.

Another bright spot in the small cap end of the market was a bumper set of results from Aveva Group, a provider of information technology and design technology. The company reported a 191 per cent jump in pre-tax profits to £12.8m. Brokers were quick to upgrade their numbers and the stock closed 74p better at 699p, an all-time high.

There was a solid first day of trading on AIM for the marketing and communications group Hasgrove, after it raised £6.25m of new capital through a placing by KBC Peel Hunt. The shares were placed at 120p and closed the session 13.5p better.

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