BSkyB is in danger of losing its powerful position in the pay-TV market when digital television launches later this year, according to a report by broker JP Morgan.
Despite the fact that a 20% growth in subscriber revenue is predicted over the next eight years (from £3.6 billion to £16 billion), JP Morgan believes that the barriers to entry which BSkyB has historically enjoyed are being eroded: transponder space will no longer be a scarce commodity in the digital era; access to quality sport and movie rights is no longer guaranteed in the future; and conditional access to BSkyB’s subscriber base systems may have to be licensed to third parties on a different basis.
The possible scenarios which the report envisages (the possibility of a new entrant, the loss of the Premier League rights and adverse regulatory rulings on unbundling and wholesale rates charged to cable) could each reduce the value of BSkyB shares by 100p.
The report also suggests that if BSkyB successfully retains the rights to the Premier League it will have to pay an “inflated” fee of £1 billion. This could also have a negative effect on the share price.
Overall, JP Morgan rates BSkyB stock as a Market Underperfomer.
Nick Bertolotti, JP Morgan: 0171 325 4365
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