Murdoch under pressure to pay more for Sky

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The Independent Online

BSkyB put pressure on Rupert Murdoch to raise his takeover bid for the broadcaster yesterday by posting a strong set of annual results as its high-definition services continued to attract customers.

Mr Murdoch's News Corporation, which owns close to 40 per cent of Sky, last month expressed its intention to launch a full bid valuing the company at £12.9bn, and is currently undergoing regulatory clearance for an offer.

Sky's chief executive Jeremy Darroch, said yesterday it was "business as usual" as News International had yet to table an official bid. "The management team are entirely focused on what is going to be a great year for Sky."

Analysts and shareholders, however, have been calling for the group's largest shareholder to increase its 700p per share bid significantly. The independent board members evaluating the deal called for an offer closer to 800p. Paul Richards, at Numis Securities, said: "The strength of the results underpin the stance of the independent directors that they want 800p. Anything above that would be a victory." Analysts at Nomura have said the bid should be more like £10 a share.

Sky's chief financial officer Andrew Griffith said the "time for the real debate over price will be if and when News Corporation come back with a bid. Then it will be up to the shareholders to decide". Shares in Sky yesterday closed down 8.5p at 713p.

Sky reported an 11 per cent increase in revenues last year to £5.9bn, with operating profits up a tenth to £855m. The group also lifted its dividend 10 per cent to 19.4p, double that of five years ago.

The growth in revenues was once more driven by customers flocking to the high-definition package, which offers viewers better picture and sound quality for an additional cost. In its fourth quarter, 429,000 customers switched to HD services, bringing it to 30 per cent of Sky subscribers. It now offers 43 HD channels.

Mr Darroch said: "High definition goes from strength to strength, with more than twice as many customers as a year ago." The company believes the trend will continue as households replace their standard TVs with HD-ready sets.

The group gained 90,000 new customers in the three months to the end of its financial year, bringing its total number of customers to 9.8 million.

Sky is also launching a dedicated 3D channel to homes in October. It began showing Premier League football matches in 3D in pubs earlier this year.

Media companies have been increasingly looking to tie in customers to several services. Sky said that one in five of its customers now take a bundle of its TV, broadband and fixed line telephone services. Its broadband operations continued to grow as it added 119,000 customers in the fourth quarter as it, along with the telephony business, moved into profitability for the first time

The group said yesterday: "This performance reflected a number of initiatives over the last 18 months, including an improved take-up of bundled products and a continued focus on cost efficiency."

Thomas Singlehurst, an analyst at Citi, said: "These are good results and the focus on delivery is to be applauded; there is no doubt in our mind that Sky is increasingly becoming a 'jam today' story."

Showtime: Sky signs HBO deal

Sky has signed an exclusive deal to screen new content from HBO, whose critically acclaimed shows include The Sopranos and The Wire, to bring in new customers in the UK.

The deal will give Sky the rights to show series including Martin Scorsese's highly anticipated Boardwalk Empire and Luck, starring Dustin Hoffman and written by David Milch, responsible for HBO's epic Western series Deadwood. The coming series of established HBO shows, such as Entourage and Big Love, will also be available only on Sky.

Sky said the move was part of its "commitment to invest in standout content that differentiates the pay-TV experience and creates more reasons for customers to subscribe". The contract spans five years, but Sky would not confirm the size of the deal. One source said the deal was worth "double digit millions of pounds a year".

Tim Westcott, senior TV analyst at Screen Digest, said: "HBO has a great track record. The hallmark of what it's done is to pick creative people and give them artistic freedom. It also spends a lot of money." He said its content, which also includes Sex and the City, Six Feet Under and Band of Brothers, has been popular in the UK

"The upcoming shows will give Sky kudos with viewers," Mr Westcott said. "It has previously invested in content but it has not been easy to build up a profile in drama." In the past Sky has brought in US content including Lost and House, although they had previously been on terrestrial TV.

Mr Westcott said: "This is part of Sky's overall strategy to reinforce its content. It is partly a reflection that after making its name in sport, it has to show other strings to its bow." He added that it could help encourage some who had previously resisted subscribing to Sky, although he added it was "about keeping existing customers happy".

HBO, which traces its roots to 1965, initially screened pay-per-view boxing and old movies in the US, before making its name in drama with Oz in 1997 and The Sopranos two years later.

Sky is also preparing to launch a video on demand service called Anytime+ which will offer subscribers access to HBO's classic shows.

Separately, Sky announced a slate of original comedy shows for its Sky1 channel. These include Stella, developed by Ruth Jones, who starred in BBC hit Gavin & Stacey. There will also be a season of autobiographical shows from comics including Dawn French, Kathy Burke and Stephen Fry.