Departure of top two knocks BSkyB shares

Shares in BSkyB fell sharply yesterday after the announcement that Sam Chisholm, chief executive, and David Chance, deputy managing director, were to leave the company at the end of the year. The news that Mr Chisholm, who is 57, was to step down on the advice of his doctor knocked 22p off BSkyB's share price, dragging it down to 566.5p.

City analysts were nervous about Mr Chisholm's replacement, Mark Booth, who is currently chief operating officer of JSkyB, Rupert Murdoch's Japanese satellite operation. Mr Booth, who is 40, has been in his current position for less than six months. One analyst said: "Mark Booth has nowhere near the skills or reputation of a Sam Chisholm."

Another worried that Booth would be beholden to Rupert Murdoch, chairman of News Corporation, rather than the BSkyB shareholders. The analyst added: "This is a clear but subtle indication that Murdoch is seizing back managerial control of BSkyB. Sam Chisholm is responsible for the BSkyB share price. It is not immediately evident how Murdoch's track record in ruthlessly expanding his TV interests returns value to the shareholders in the medium term."

The changes leave the way clear for Elisabeth Murdoch, Mr Murdoch's 28- year-old daughter, to rise up the ranks of the satellite television operator. Speculation is mounting that she will take Mr Chance's role in January next year.

The timing of the announcement puzzled many in the industry, coming as it did only weeks before the Independent Television Commission's decision on the digital terrestrial television licences. BSkyB, in conjunction with Carlton Communications and Granada Group, has bid for the chance to control digital terrestrial television.

Mathew Horsman, media analyst at Henderson Crosthwaite, said: "This is the end of an era in British broadcasting. It's a bit of a double whammy for Sky to lose the chief executive and his deputy on the eve of the digital revolution." Another analyst, who declined to be named, commented: "This will have a dramatic impact. Sam Chisholm has been a clear driving force. Sky is going through a demanding period in the run-up and transition from analogue to digital. The company needs someone who has that absolute conviction."

But Derek Terrington, media analyst at Teather & Greenwood, said departures were fairly common in Murdoch's empire. He added: "Any multiple departure has to be a bit devastating but departures at News Corp are not unusual." Mr Terrington was less bothered than most about Mr Booth's appointment, saying he had confidence in Mr Murdoch's decisions on personnel.

Mr Chance, who joined BSkyB eight years ago, said that even though he has often been viewed as Mr Chisholm's heir apparent, he declined to be considered for the role. He added that Mr Chisholm will remain a director of the company and Mr Chance is to continue as a consultant.

Mr Chance emphasised that he would be helping BSkyB switch from analogue to digital, and denied that the news would unduly destabilise the company. He said: "Sky's future is tremendously exciting with the launch of the digital initiative." Meanwhile, he paid tribute to the chief executive's work at the company. "Sam has been instrumental in Sky's success story. He inherited a company losing pounds 14m a week at the time of the merger of Sky and BSB. It now has operating profit in excess of pounds 300m," he said.

It has been an open secret in the industry for some while that Mr Chisholm suffers from asthma, and would be forced to take a back-seat role sooner or later.

Sources say that Mr Murdoch came to London last week, and finalised the terms of Mr Chisholm's departure. However, Mr Chisholm is thought to have started discussions to negotiate his way out of his contract some months ago.