BSkyB tightens grip with launch of free-to-air satellite service

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BSkyB moved to cement its stranglehold over satellite television yesterday as it announced plans to launch a free-to-air service that will enable consumers to receive more than 200 television and radio channels for a one-off fee of £150.

BSkyB moved to cement its stranglehold over satellite television yesterday as it announced plans to launch a free-to-air service that will enable consumers to receive more than 200 television and radio channels for a one-off fee of £150.

The move deepens Sky's involvement with "free" television and pre-empts a recent announcement from the BBC that it was planning to start a free satellite service. Analysts said the development was also a response to the runaway success of Freeview, the digital free-to-air terrestrial service that is in more than 3.5 million UK homes but offers no way of upgrading to a Sky subscription.

The new digital proposition from Sky would give consumers a satellite dish, a decoder box and installation for £150. This would give access to about 115 television channels that are broadcast free-to-air, plus 81 radio stations. That compares with 26 televisionand 21 radio stations on Freeview,in which Sky is also a partner. About half the country either cannot receive the Freeview signal or requires an aerial upgrade to receive it. FreeSat will cover the entire UK, paving the way for the Government's aim of switching off the analogue television signal.

Anyone taking Sky's FreeSat service will be able to take out a subscription to one of the company's pay-television packages with just a phone call. Kingsley Wilson, at Investec, said: "We view the launch of the FreeSat offering as a defensive move, given the success of Freeview. However, with no cost to BSkyB, the strategy is sound as it will be easier to upgrade FreeSat homes to pay than Freeview homes."

Sky also announced it would offer a new service for the opposite end of the market: a premium proposition for subscribers that would deliver content in the High Definition Television format, which gives superior picture quality. Richard Freudenstein, Sky's chief operating officer, said: "The announcements will help drive Arpu [revenues per user] at the top end with HDTV, while free-to-air satellite will help drive ... growth at the bottom end."

Analysts said the news was part of an evolving strategy being formulated under James Murdoch, who was appointed chief executive at the end of last year, to target a wider range of potential customers.

At the end of March, 43 per cent of UK households had pay-television. Sky has more than 7.3 million households, while cable has 3.3 million homes.

Speaking at a City media conference yesterday, Mr Murdoch reiterated his ambition to drive total pay-television penetration in the UK to 80 per cent. Sky has a target of 8 million homes by the end of next year. The FreeSat announcement was welcomed by the media regulator, Ofcom, and the BBC.

Shares in BSkyB rose 2.78 per cent yesterday, making it the largest riser in the FTSE 100.

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