Murdoch eyes pan-European Sky combination
Rupert Murdoch is exploring using his minority stake in BSkyB to combine his Sky-branded businesses in the UK, Italy and Germany into a pan-European pay-television platform, according to people familiar with the situation. A transaction is at the early stages of consideration which would see the £14bn UK satellite and broadband group buy the Sky Italia and Sky Deutschland businesses he controls through 21st Century Fox, his US entertainment group, the people said. One person cautioned that no deal talks were taking place between BSkyB and Fox, and that no transaction was imminent, but another said Fox was keen to explore a pan-European combination to create more value from three currently fragmented assets.
Any deal would depend on “stars aligning”, a third person added, including Sky Italia securing Serie A football rights and the share price of the publicly quoted Sky Deutschland, in which Fox has a controlling stake, being at an affordable level. The Sky Deutschland business, with more than 3.5m subscribers, had a market capitalisation of more than €5.5bn on Friday and is majority-owned by Fox. The value of Sky Italia, which has almost 5m subscribers and is owned outright by Fox, is less clear. Mr Murdoch and his son James tried in 2010 and 2011 to buy full control of the UK group in which Fox holds a 39.1 per cent stake but were derailed by political uproar in the wake of revelations about phone hacking at their UK newspapers. James Murdoch, the former BSkyB chief executive and chairman who chairs Sky Deutschland and is Fox’s co-chief operating officer, said last year that the company needed to “resolve” its pay-TV strategy in Europe, saying the separation between BSkyB, Sky Italia and Sky Deutschland was “not optimal”. The three companies already share set-top box technology and other costs. However, a unified set-up could allow them to bid for sports and entertainment rights on a Europe-wide basis, potentially outflanking BSkyB’s major rival BT, whose television strategy is limited to the UK. The idea of combining Fox’s European pay-TV businesses, first reported by Bloomberg, could require reassurances to European regulators. It would also have to win over independent investors in BSkyB. One of the perceived obstacles to a long-mooted European tie-up has been whether shareholders in the UK business would welcome increased exposure to the Italian television market. ©Bloomberg Rupert Murdoch: regretted 'ever [having] agreed to' BSkyB’s IPO Rupert Murdoch said two years ago that he regretted “ever [having] agreed to” BSkyB’s initial public offering in 1994, although he added “they were different times and there were probably monetary pressures which encouraged it”. The UK, Italian and German businesses, which between them have 19m television subscribers, are at different stages. Sky Deutschland’s customer numbers are growing, while Sky Italia’s have been shrinking. Meanwhile, Sky Italia does not yet offer broadband, which has been one of the growth engines for BSkyB in the UK. There has also been speculation that a combined ‘Sky Europe’ would subsequently seek to enter France, by acquiring Canal Plus. The move comes as pay-TV operators across Europe ponder how to respond to online video services such as Netflix, which already has an estimated 2m subscribers in the UK and which analysts expect to launch in France and Germany in the autumn. Fox and BSkyB declined to comment.