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SBD Global/January 17, 2014/Media

U.K. Broadcasting Company Sky Retreats Amid Talk Of Football Auction

Sky shares "jumped earlier this week after UBS predicted" that 21st Century Fox, its 39% shareholder, "would look at merging its German and Italian operations with the UK listing," according to Bryce Elder of the FINANCIAL TIMES. To Credit Suisse, "that idea seemed far fetched" -- at least until after an EPL rights auction "due mid-2015 at the latest." Sky "needs to neuter BT Group’s competitive threat by bidding for an extra rights package," which could more than double the annual bill. The importance of the Premier League to Sky’s business means “it makes little sense to expect any M&A ahead of the auction.” Credit Suisse said, “Sky could critically damage BT’s ability to monetize its existing deals (including the expensive UEFA Champions League contract) and thereby eventually force it out of the wholesale content market altogether. We think the rational strategy for Sky is to acquire six packs, take the short-term hit to earnings, but then reap the longer term benefits from reduced competitive intensity in UK triple play" (FT, 1/16).
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