When BSkyB reports its full-year results tomorrow, it is expected to announce a deal to acquire 57% of Sky Deutschland and 100% of Sky Italia from 21st Century Fox. Speculation has swirled that this deal is near since it emerged that Rupert Murdoch’s behemoth had bid $80B bid for Time Warner. In May, UK pay-TV giant BSkyB confirmed it had initiated preliminary discussions with Fox to evaluate a potential acquisition of the latter’s pay-TV assets in Germany and Italy. Fox also owns 39.1% of BSkyB. A combination of the businesses would have about 20M subscribers, and could also provide a payday to Fox of an estimated $13B. I’ve been cautioned that these funds are not necessary for Fox to be able to up its bid for TW, but it would put extra money in the coffers while creating a huge pan-European group. “It could just be that 21st Century Fox sees it as a useful way of generating funds and eases management time to concentrate on other things. But the reason for doing it would exist on its own merits,” Enders Analysis’ Toby Syfret tells me. It’s worth remembering that English Premier League soccer rights are coming to auction again in 2015 and extra cash could certainly come in handy.

If BSkyB does indeed acquire its cousins in Italy and Germany, The Financial Times notes that Sky Europe would have scale to invest in original productions and technology and would be able to better compete against the likes of Netflix. Amid a wave of consolidation in the European TV sector, it’s often said that scale is the key word. The FT also noted that BSkyB investors would gain exposure in Germany where there is still growth potential for pay-TV. Sky Italia, however, has lost customers over the past two years. Although well-run, it has marginal profits in Europe’s “most inflated football rights market and in a structurally stagnant and weak economic climate,” said a recent note from Enders. If a deal does go through, Fox is not expected to raise its stake in BSkyB. If it did, it would trigger a competition investigation in the UK. Regardless, a deal would be examined by the European Commission’s competition authority. Enders said it believes the watchdog would not stand in the way, however, given the Commission’s active support for telecoms and an EU-wide market for broadcasting rights.

Meanwhile, there has also been chatter about Fox ultimately divesting of its stake in BSkyB, but conventional wisdom would dictate that that’s not going to happen. Murdoch has made a run at the whole before, but was famously thwarted just after the phone-hacking scandal came to light, and many believe he still covets the asset. While watchers don’t expect another go at BSkyB soon, one tells me, “I don’t think there’s any prospect of him reducing his share.”

Jamie Murphy
2 months
My big question, would competition regulators in the UK, Germany, Italy and the European Union allow the...