The report, by brokers Henderson Crosthwaite, says that the lion's share of the spoils over the 12-year period of the concession will go to Rupert Murdoch's BSkyB if the consortium wins the right to begin broadcasting the 30-channel service next year.
Although each of the partners in BDB has the same 33 per cent stake, the report estimates that the three licences on offer would add pounds 1.1bn to the value of BSkyB against only pounds 230m for Granada and pounds 178m for Carlton. This equates to 64p a share for BSkyB, 27p for Granada and 31p for Carlton.
The rival bidder for the licences is Digital Television Network, a subsidiary of the US cable operator International CableTel, Britain's third biggest cable television company. The report values DTN at pounds 600m.
The three licences or "multiplexes" as they are known, will carry 30 channels. Half will be existing free BBC, ITV and Channel 4 channels and half will be pay channels. The Independent Television Commission is due to award the licences in late May or early June and the new service is expected to start in the middle of next year. The set-top boxes needed to receive digital television are initially expected to cost pounds 300-pounds 500 although this could eventually fall to pounds 200
Mathew Horsman, media analyst at Henderson Crosthwaite and the author of the report, said that although BSkyB's dominant position in BDB constituted a risk to competition, this was outweighed by the need to select a consortium that would make a success of the new medium. "Digital terrestrial broadcasting, offering just 30 channels, will face competition from digital satellite and digital cable (200 channels). Therefore it must have well-financed backers with proven programming if it is to succeed. BDB is more likely to ensure its success than the rival Digital Television Network."
It is open to the ITC to split the award between the two bidders, although Henderson Crosthwaite thinks this is unlikely because of the financial risks of having two competing operators providing just 30 channels. "Based on our comparison of the two bids, we believe the best outcome for the development of DTT would be an all-out win for British Digital Broadcasting," Mr Horsman added.
The report forecasts that both bidders would break even in 2004 when their funding requirement peaks at pounds 360m for BDB and pounds 730m for DTN. It forecasts that the number of subscribers will rise from just under 600,000 in 1999, the first full year of operation, to nearly 3.4 million in 2009, the last year of the concession.
BDB would make a pounds 95m loss on revenues of pounds 103m in 1999, turning into a profit of pounds 78m on turnover of pounds 974m in 2009. DTN is forecast to make a much bigger loss of pounds 243m in year one but a profit of pounds 430m in the last year on revenues of pounds 1.2bn.Reuse content