City 'cools' to Sky's AOL UK auction bid
The City is reportedly cooling to the prospect of BSkyB buying A*L's up-for-auction UK internet access arm. Last month Sky was said to be considering a bid for the A*L unit—which is expected to fetch around £660m—as part of its drive into broadband-delivered digital television bundled with telecommunications services.
But the Financial Times said analysts and investors believed Sky's £400m investment in its own broadband service—announced on Tuesday—now made it less necessary to acquire another internet service provider.
Sky aims to have 3m broadband subscribers by 2010, the year its current 8m digital TV subscriber base is targeted to have grown to 10m. Sky acquired broadband internet provider Easynet last year for £211m. Murdoch this week confirmed Sky was still interested in the A*L UK auction but said the company would only look at the business on an "opportunistic basis".
Conor O'Shea, an analyst at Teather & Greenwood, told the FT: "Our view is that the [broadband] investment simply replaces that of buying A*L UK for a similar price."
Sky's shares fell after announcing the broadband strategy, though recovered some of their losses on Wednesday. Investec analyst Steve Liechti said the broadband launch was "more painful than expected in profit and loss terms, and for competitors", but the move would help to "underpin pay-TV prospects in competitive markets" since the free broadband offer for all subscribers at 2 Mbps would help reduce churn.
"We expect most initial subscribers will select the 'free' base package initially and upgrade in time as usage increases," said Liechti.
"Churn is important—Sky can lock in subscribers with bundled products (especially basic subscribers now) against increasing competition and it stands more of a chance to increase long-term net TV subscriber additions, against ntl/Virgin, BT and Freeview."
Investec's telecoms analyst Christian Maher said Sky's "arrival into broadband is worse than expected for the UK telecoms sector". "While the size of Sky's ambitions for broadband is particularly negative for BT, the price points of the offer are negative for Carphone [Warehouse] and the resellers like THUS, Pipex and PlusNet."
Regards Satdude.
The City is reportedly cooling to the prospect of BSkyB buying A*L's up-for-auction UK internet access arm. Last month Sky was said to be considering a bid for the A*L unit—which is expected to fetch around £660m—as part of its drive into broadband-delivered digital television bundled with telecommunications services.
But the Financial Times said analysts and investors believed Sky's £400m investment in its own broadband service—announced on Tuesday—now made it less necessary to acquire another internet service provider.
Sky aims to have 3m broadband subscribers by 2010, the year its current 8m digital TV subscriber base is targeted to have grown to 10m. Sky acquired broadband internet provider Easynet last year for £211m. Murdoch this week confirmed Sky was still interested in the A*L UK auction but said the company would only look at the business on an "opportunistic basis".
Conor O'Shea, an analyst at Teather & Greenwood, told the FT: "Our view is that the [broadband] investment simply replaces that of buying A*L UK for a similar price."
Sky's shares fell after announcing the broadband strategy, though recovered some of their losses on Wednesday. Investec analyst Steve Liechti said the broadband launch was "more painful than expected in profit and loss terms, and for competitors", but the move would help to "underpin pay-TV prospects in competitive markets" since the free broadband offer for all subscribers at 2 Mbps would help reduce churn.
"We expect most initial subscribers will select the 'free' base package initially and upgrade in time as usage increases," said Liechti.
"Churn is important—Sky can lock in subscribers with bundled products (especially basic subscribers now) against increasing competition and it stands more of a chance to increase long-term net TV subscriber additions, against ntl/Virgin, BT and Freeview."
Investec's telecoms analyst Christian Maher said Sky's "arrival into broadband is worse than expected for the UK telecoms sector". "While the size of Sky's ambitions for broadband is particularly negative for BT, the price points of the offer are negative for Carphone [Warehouse] and the resellers like THUS, Pipex and PlusNet."
Regards Satdude.