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BSkyB unveils BT interactive TV link-up

British Sky Broadcasting and British Telecom yesterday unveiled their long-awaited and controversial partnership to spearhead the drive into interactive digital satellite television, creating a pounds 265m company to subsidise the introduction of the electronic set-top box technology.

BT said it would be interested in floating the new company, British Interactive Broadcasting (BIB), if its ambitious plan to create the dominant platform for digital pay- TV catches the public imagination. Rupert Gavin, BT's head of multimedia services, said: "If the company achieves success it obviously would be a candidate for a float."

However, BIB confirmed that it would not be able to offer a service until next spring because of the delays to the launch of a new Astra satellite, allowing the cable companies to gain a head start with their digital service, planned for November. Full interactive services, including home shopping, banking and educational products would not be available until the summer of next year.

The deal is also likely to be scrutinised by the European Commission and the Office of Fair Trading. An OFT spokesman said: "This might fall under the restrictive practices act." He said the OFT would wait until the service started before making a judgement.

BIB inisisted it was "confident" it would receive regulatory clearance on the grounds that the market is too new to create a monopoly. Don Cruickshank, the telecommunications regulator, said the venture would be "good news for consumers" if it did not distort the market. He has proposed guidelines covering fair access to the box technology.

BT and BSkyB will each own 32.5 per cent of BIB, with Midland Bank taking a 20 per cent share, and Matsushita, the Japanese electronics giant behind the Pansonic brand, taking the remaining 15 per cent. The initial cash injection of pounds 265m will cover the first five years of operations, split pro rata between the four shareholders. Matushita said the cash would not all be paid up front: "There is no logic in putting money in on day one if it's not needed for three or four years."

BIB surprised analysts with a much bigger than expected order for 1 million set-top boxes which allow consumers to decode programmes. Cable companies have already placed their order for just 10,000 boxes, though a cable source suggested their policy of ordering boxes as the demand emerged was "more prudent".

BIB's order is split between Matsushita, Amstrad, Pace Micro Technology and Grundig/Hyundai. Matsushita said it had not been decided how to split the boxes between the four manufacturers. Most of the investment will subsidise the cost of boxes in the shops, which will be priced at pounds 200, against a manufacturing cost of some pounds 350. The total subsidy over 10 years could be pounds 700m.

Cable companies attacked the venture, claiming BIB would be unable to offer the level of interactivity available from cable technology.

The announcement came as BSkyB reported results for nine months ended 31 March 1997, slightly below market expectations. Profit before tax was up 21 per cent to pounds 215m, and total paying subscribers were up by 121,000 to 6.2 million in the quarter.

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