Sky tackled by the referee

Investors should play a waiting game as the satellite broadcaster is investigated by the OFT

NETTING the TV rights to a large chunk of British league football gave BSkyB, the satellite broadcaster controlled by Rupert Murdoch, a rosy start to last week. BSkyB tied up the Endsleigh League - a hat-trick of divisions one, two and three - in a pounds 125m five-year deal, replicating its pounds 300m capture of the Premiership three years ago.

From next season, even more fans will have to shell out for a satellite dish or cable TV subscription or pop down to the local Sky Sports pub.

But BSkyB's ambition may yet be its undoing. In a twist worthy of any FA Cup Final, the Office of Fair Trading shocked the market on Friday by re-opening an inquiry into Mr Murdoch's near stranglehold on pay TV.

BSkyB's shares slumped 70p from a record high of 462p immediately after the announcement, following a relentless rise from around 270p since June. They rallied quickly, ending the day just 5.5p down at 428.5p, after the company dismissed complaints as nothing new.

The OFT's move, however, strengthened the argument of some market pundits that the honeymoon may be over. "The company's valuation has built up on a clear run that has ignored a high level of regulatory risk and possible future competition," one media analyst said.

BSkyB has been here before. In March, it signed a series of voluntary undertakings ending conditions that forced cable TV operators to take a "bundle" of Sky channels in order to qualify for price discounts.

Independent channels had long complained that the arrangements prevented access to cable because of BSkyB's programming muscle, notably in sport and films. However, the company, run by no-nonsense New Zealander, Sam Chisholm, has proved adept at staying just on the right side of the rules.

In May BSkyB signed 10-year programme deals with TeleWest and Nynex, the two biggest cable TV firms. Discounts and non-compete clauses attracted the wrath of the OFT, but the deals succeeded in scuppering a cable get- together aimed at outbidding BSkyB for events.

The company was formed in 1990 through the merger of Mr Murdoch's Sky with British Satellite Broadcasting. The objective was to stop the two fledgeling stations competing themselves into the ground.

Under Mr Chisholm, the upturn has been rapid. With live sport to the fore, the company has enjoyed a virtuous circle of rising subscriptions, strong advertising and lower cancellations. As one industry observer puts it: "The Premier League made BSkyB."

Investors have made vast profits on the company's pounds 4.4bn flotation at 256p last November, but the share price only started motoring four months ago after Pearson decided to cash in a pounds 550m stake, propelling BSkyB into the FT-SE 100.

Inclusion in Morgan Stanley's international index last week also led more index-tracker funds to buy in.

Pre-tax profits for 1994/5 leapt 67 per cent to pounds 155.3m as more than 4 million satellite and cable subscribers tuned in. Analysts are forecasting pounds 250m to pounds 350m next year and up to pounds 560m for 1997/8, the most explosive growth in the sector.

BSkyB puts the OFT's inquiry down to trouble-making by smaller cable firms: "We're happy to co-operate. The big cable companies have good relations with us and just want to grow the business," said deputy managing director David Chance.

But with digital TV on the way, the OFT, under new director-general John Bridgeman, looks like taking a closer look at BSkyB's deals, its monopoly of signal-scrambling technolgy and its huge, exclusive subscriber list. A full-blown Monopolies and Mergers Commission reference cannot be ruled out.

At the current price, boosted by indexation demand, the shares stand at 28 times the lowest 1997 earnings forecasts, a huge premium. Warnings about over-valuation may yet be right and the stock should be avoided until the outcome of the OFT inquiry is known.


Share price 428.5p

1994 1995 1996* 1997*

Turnover pounds 551m pounds 778m pounds 925m pounds 1.06bn Pre-tax profits pounds 92.9m pounds 155.3m pounds 255m pounds 345m Earnings per share 6.8p 9.2p 13.8p 17.9p Dividend per share - 2.5p 6.5p 9.0p Price-earnings ratio - 45.6 31.1 23.9 Gross yield - 0.7% 1.8% 2.4%

* Estimates

The data shows that the number of “unlawfully” large infant classes has doubled in the last 12 months alone
i100Mike Stuchbery, a teacher in Great Yarmouth, said he received abuse
Arts and Entertainment
The starship in Star Wars: The Force Awakens
filmsThe first glimpse of JJ Abrams' new film has been released online
Rio Ferdinand returns for QPR
sportRio Ferdinand returns from his three-game suspension today
The Speaker of the House will takes his turn as guest editor of the Today programme
arts + ents
ebooksNow available in paperback

Watch the spoof Thanksgiving segment filmed for Live!
Billy Twelvetrees will start for England against Australia tomorrow with Owen Farrell dropping to the bench
rugbyEngland need a victory against Australia today
Arts and Entertainment
The cover of The Guest Cat – expect to see it everywhere
Tyson Fury poses outside the Imperial War Museum in south London ahead of his fight against Dereck Chisora
boxingAll British heavyweight clash gets underway on Saturday night
i100 Charity collates series of videos that show acts of kindness to animals
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Austen Lloyd: Company Secretary

Excellent Package: Austen Lloyd: EAST ANGLIA - SENIOR SOLICITOR LEVEL ROLE** -...

Citifocus Ltd: German Speaking Client Specialist

£Attractive Package: Citifocus Ltd: Prestigious asset management house seeks a...

Citifocus Ltd: Performance & Risk Oversight

£Negotiable: Citifocus Ltd: This is a varied role focusing on the firm's mutua...

h2 Recruit Ltd: Sales Director - SaaS (SME/Channel) - £140,000 OTE

£90000 - £140000 per annum + benefits: h2 Recruit Ltd: Are you a high achievin...

Day In a Page

Homeless Veterans Christmas Appeal: ‘We give them hope. They come to us when no one else can help’

Christmas Appeal

Meet the charity giving homeless veterans hope – and who they turn to when no one else can help
Should doctors and patients learn to plan humane, happier endings rather than trying to prolong life?

Is it always right to try to prolong life?

Most of us would prefer to die in our own beds, with our families beside us. But, as a GP, Margaret McCartney sees too many end their days in a medicalised battle
Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night - is that what it takes for women to get to the top?

What does it take for women to get to the top?

Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night and told women they had to do more if they wanted to get on
Christmas jumper craze: Inside the UK factory behind this year's multicultural must-have

Knitting pretty: British Christmas Jumpers

Simmy Richman visits Jack Masters, the company behind this year's multicultural must-have
French chefs have launched a campaign to end violence in kitchens - should British restaurants follow suit?

French chefs campaign against bullying

A group of top chefs signed a manifesto against violence in kitchens following the sacking of a chef at a Paris restaurant for scalding his kitchen assistant with a white-hot spoon
Radio 4 to broadcast 10-hour War and Peace on New Year's Day as Controller warns of cuts

Just what you need on a New Year hangover...

Radio 4 to broadcast 10-hour adaptation of War and Peace on first day of 2015
Cuba set to stage its first US musical in 50 years

Cuba to stage first US musical in 50 years

Claire Allfree finds out if the new production of Rent will hit the right note in Havana
Christmas 2014: 10 best educational toys

Learn and play: 10 best educational toys

Of course you want them to have fun, but even better if they can learn at the same time
Paul Scholes column: I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season

Paul Scholes column

I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season
Lewis Moody column: Stuart Lancaster has made all the right calls – now England must deliver

Lewis Moody: Lancaster has made all the right calls – now England must deliver

So what must the red-rose do differently? They have to take the points on offer 
Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game