Sky’s operating profits could be reduced by £15 to £20 million if the satellite broadcaster cannot reach a deal with Virgin Media over its basic channel package.
This figure includes the four months between now and the end of Sky’s financial year on June 30.
It was reported on Friday that Sky was to remove its major channels from Virgin Media at the end of this month after negotiations concerning the rate which Virgin Media would pay for the satellite broadcaster’s basic channels broke down.
In a statement released today, Sky said: “The company wishes that the Sky basic channels that Virgin Media currently carries, including Sky One, Sky Two, Sky Sports News and the award-winning Sky News, remain available to Virgin Media customers and has negotiated in good faith with Virgin Media and shown flexibility on price.
“Despite the constructive approach adopted by Sky throughout these negotiations, the recent behaviour of Virgin Media appears at odds with a genuine desire to conclude a commercial agreement and at this time there exists the real possibility that agreement will not be reached before expiry of the current contract at midnight on 28th February, 2007.
“Sky receives revenue in relation to the carriage of its basic channels on Virgin Media’s cable network, both directly from Virgin Media in the form of monthly carriage fees and, indirectly, via advertising on those channels which are viewed within Virgin Media households. The company estimates that the financial impact on Sky, were an agreement not to be concluded in relation to the remainder of the year to 30 June 2007, would be a reduction of £15 to £20 million of operating profit.”
Jeremy Darroch, Sky CFO, said: “We are disappointed that Virgin Media appear to have walked away from negotiations. Sky offered more channels to Virgin Media than ever before.
“We have invested in developing our channel offering and sought a fair price which reflects that fact. With three days still to go before the deadline, we hope that Virgin Media will focus on getting a deal done rather than on their PR offensive.”
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