BSkyB blows the whistle over football rights deal

BSkyB's Tony Ball yesterday warned the Football Association that any fresh television rights deal would be on less favourable terms than the existing one as the pay-TV company swung into the black in its third quarter.

The group's chief executive said unless it could renew its contract with the FA, which it shares with the BBC, on better terms it might drop plans to bid for the rights.

"If we do end up with an FA deal it will only be at much better value than the one we presently have," Mr Ball said. "Will we bid for it? I haven't really decided. It's a more complicated structure than in the past." The current £405m deal, which runs until the end of the 2004 season, covers all FA Cup and England home matches.

Mr Ball's comments came as BSkyB announced a sharp jump in third-quarter profits, boosted by a hike in subscription revenues for its satellite channels and a surge in new subscribers.

The group, which is partly owned by News Corp, said the 150,000 increase in new customers to 6.7 million put it on track to hit its target of 7 million subscribers by the end of the year. Its "churn rate", which measures how many subscribers leave, dropped to a low of 9.3 per cent. "It's phenomenal when you consider that the quarter usually has high churn and low net new subscribers," said Anthony de Larrinaga, a media analyst at SG Securities.

The company reported pre-tax profits for the three months to end-March of £37.3m, compared with a loss of £26.4m a year earlier. Excluding goodwill and exceptionals, pre-tax profits were £65.8m against £11.8m – beating City expectations.

Asked how the negotiations for the Premier League contract were faring, Mr Ball said the timetable was in the hands of the European Union's competition authorities but that he expected an outcome before the next football season. He expects to receive a tender document for the next round of rights by the middle of next month. The current three-year deal costs the group £1.1bn. "We hope to see a reasonably significant reduction in Premier League cost," Mr de Larrinaga added.

The subscription price rise in January lifted the average spend per viewer by £13 to £364 on the previous quarter. Advertising revenue rose 15 per cent to £204m. Mr Ball said the group would continue its cautious approach to increasing customer numbers. "We won't chase subscribers that don't give the right return," he said.

Separately, News Corporation, which has a 35 per cent shareholding in BSkyB, said it had swung into profit in its third quarter despite the high costs of covering the war in Iraq.

Net profits in the three months to end-March were $275m, against a loss of $4.3bn the previous year, which included a $4.1bn write-down in the value of its stake in Gemstar. The newspaper arm, which owns The Times, fared less well. Operating income fell 9 per cent to $115m, dragged lower by the cost of funding the price war at The Sun. The UK newspaper group saw operating income sink by 26 per cent.