ABN Sees ‘Interesting Dilemma’ In BSkyB
ABN Amro has upgraded its rating on satellite broadcaster BSkyB from Add to Hold this morning, saying that it has ‘excellent fundamentals’ which are offset by potential technical and regulatory risks. This, says the broker, positions Sky as an ‘interesting dilemma’.
BSkyB’s shares have underperformed the market by around 13% in the year to date and this may be compounded later in the coming months as a number of investors seek to sell their shares in the company. France’s Vivendi Universal, for example, holds a 22% stake in Sky (see Sky Shares Shaken By Vivendi Stake Sale Speculation) of which it must divest before the end of next year. HSBC and Matsushita, stakeholders in interactive services company BIB, might sell their holdings now that the Open service has been taken under Sky’s control (see BSkyB Completes Open Acquisition).
ABN believes that BSkyB is on schedule to meet its targets of 7 million subscribers by 2003 and average revenue per user (ARPU) of £400 by 2005. However, the broker believes that technical and regulatory risks could cause Sky’s stock to trade at a ‘discount to fair value’. One such regulatory risk is the OFT’s review of Sky’s dominant position in the market (see BSkyB Faces OFT Investigation); it is due to report in September.
By mid-morning today Sky stock was down 12p at 782p.
