BSkyB Takes Control Of Open, Plans To Improve Look, Feel and Services
BSkyB has confirmed that from today it will take a controlling stake in Open, the interactive TV service company, in a move rumoured to be imminent last week (see BSkyB Seeks Control Of Open
Tony Ball, chief executive of BSkyB said plans for the future of Open included, “increased usage, more content partners, a wider range of services and an improved look and feel.” He went on to say, “By increasing our shareholding substantially, we are set to create a strong new revenue stream and establish long-term value.”
BSkyB has said it anticipates seeing revenues amounting to £50 per subscriber per annum by 2005. Research claims that during June this year, 1.6 million homes used Open, of 3.4 million homes where the service is available.
BSkyB will also take on responsibility for the future funding of the company, which has so far received aggregate equity and debt funding of around £400m from shareholders. BSkyB believes British Interactive Broadcasting (BiB), the company which operates through Open, will require up to £250m to bring about operational breakeven, which is expected within 24 months. This would include the full cost of set top box subsidies. Prior to completion, BSkyB has agreed to fund commitments entered into by BiB between the date of purchase agreement and completion, and to fund operational expenditure of up to £40m.
The transaction terms of the deal mean that BSkyB will be required to pay £263m of the new BSkyB shares to HSBC and Matsushita on completion, with the remaining £131m payable 18 months later. Up to 50% of the BSkyB shares issued can be sold off immediately, while the other 50% will have a lock-up period of 12 months. If the valuation of Open increases to more than £3bn at either 30 or 36 months from the purchase agreement date HSBC will receive a further £75m and Matsushita a further £56m.
BSkyB will subscribe on completion for new ordinary shares in Open at £1 per share. This will effectively dilute BT’s holding in the company so that BSkyB will own 80.1% (compared to its previous 32.5%) while BT will control the remaining 19.9%.
Open launched just over nine months ago (see Interactive TV Launches In The UK). It now has access to more than 9 million television viewers through its set top boxes and digital televisions. Research has found that Open homes access the service over 7 times per month, spending an average of 17 minutes shopping, banking, sending messages, playing games and accessing information. There are now 900,000 registered Open email users, making it one of the top five providers of email services in the country. Since October 1999, 267,000 Open homes have made purchases via the service, and 35% of these have returned to make a repeat purchase.
BSkyB: 020 7705 3000 British Interactive Broadcasting: 020 7332 7000