Cloudy outlook for BSkyB as brokers cut valuations

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The Independent Online
CITY valuations of BSkyB, the satellite television company controlled by Rupert Murdoch's News International, have fallen sharply in recent weeks to less than the amount invested in the business.

The downgrades are despite new claims by BSkyB that sales of satellite dishes are booming in the wake of its exclusive deal to screen live Premier League football matches.

Smith New Court, the stockbroker, recently valued BSkyB at just pounds 1.1bn. This compares with valuations quoted by the company of more than pounds 3bn.

Shareholders have made an initial investment of pounds 1.3bn, mostly in the form of debt. They include News International, which has a 50 per cent stake, Pearson, Granada and Chargeurs of France.

Smith's valuation is less than half that of Warburg Securities, which recently reduced its estimate from the top of the range to pounds 2.5bn. BZW Australia valued the company at pounds 1.8bn to pounds 2.1bn, net of debt, in May.

The top of the range is occupied by Morgan Stanley, which says the company is worth pounds 3.5bn.

Observers say even the Smith valuation could be too high. The firm is working on the basis that there were 2.1 million satellite dishes installed by the end of last year.

This is in line with figures used by Continental Research, a market research company. But a recent survey by GfK Marketing Services, based on a survey of 25,000 households, puts the figure at 1.6 million dishes, while a third puts the figure at 1.8 million.

Nick Ward of Smith says: 'If the lowest figure were to prove more accurate then there would almost certainly be downward revisions of BSkyB's prospects.'

Richard Brooke, BSkyB's chief financial officer, recently said that BSkyB had reached operating profitability and cash flow neutrality. He said the company had contracted to spend pounds 950m on films from Hollywood studios. This amount was not provided for in the company's accounts.

Sky Television said there had been a 'dramatic' increase in dish sales recently, although it did not give hard figures to back the claim. Dixons, the electrical retailer, also said there had been a surge in sales, and at one point last month demand had threatened to overtake supply.