BSkyB could become a Europe-wide colossus as part of Murdoch master-plan: 'Long-awaited quest'


By Noel Young | Correspondent

May 12, 2014 | 5 min read

Rupert Murdoch wants to transform British Sky Broadcasting Group into a European satellite-TV giant leaving his U.S.-based 21st Century Fox focused on entertainment programming, says a Bloomberg report.

Rupert Murdoch: Long-held ambition

BSkyB, 39 percent owned by Fox, has said it’s in talks to buy the Italian and German pay-TV assets of Fox. Such a deal, for control of satellite carriers Sky Italia and Sky Deutschland , would be valued at about 10 billion euros ($14 billion), people with knowledge of the matter told Bloomberg .

Bloomberg first reported the talks on May 9. Fox has about 57 percent of Sky Deutschland and 100 percent of Sky Italia.

The deal would give BSkyB, already the biggest pay-TV provider in the U.K., oversight of companies that sell satellite programming to 8.5 million homes across Germany and Italy.

In America by shedding the pay-TV units, Fox would be left with cable and broadcast networks plus movie and TV studios.

This would make it more attractive to investors who want to bet solely on video production -- not distribution, said Bloomberg.

“This combination would have the potential to create a world-class multinational pay-TV group,” British-based BSkyB said in a statement.

Sky Deutschland shares jumped as much as 8.1 percent and added 6.7 percent to 6.76 euros at 1:42 p.m. in Frankfurt. They had fallen 21 percent this year through May 9. BSkyB fell 2.5 percent to 868 pence in London, giving the company a market value of 13.6 billion pounds ($23 billion).

The talks haven’t progressed beyond a preliminary stage, no agreement has been reached on terms, value or transaction structure and there is no certainty that a deal will occur, BSkyB said.

“Over the years we’ve had numerous internal discussions regarding the organizational and ownership structure of the European Sky-branded satellite platforms,” New York-based Fox said in a separate statement. “From time to time these conversations have included BSkyB, however no agreement between the parties has ever been reached.”

BSkyB said it initiated the discussions with Fox. The companies have been in talks for months, and a deal could be announced this summer, said the people familiar with the matter.

Murdoch’s Fox had previously sought to take full control of BSkyB. Fox was forced to abandon its pursuit of full ownership of the company in 2011 amid the British phone-hacking storm.. Any attempt by Fox to increase its stake in BSkyB would require approval by U.K. regulators.

Bloomberg in a later report said Murdoch "was embarking on a long-awaited quest to build a European pay-TV colossus -- a plan that’s poised to pit him against an old adversary, John Malone."

"Murdoch had once tried to build a satellite-TV giant in the U.S., only to lose it to Malone a decade ago. After emerging relatively unscathed from a phone-hacking scandal that tarnished his media empire, Murdoch is trying again, this time in Europe. It’s where Malone has spent almost $50 billion in the past decade amassing his own TV fiefdom.

Bloomberg said, "What we’re seeing are the flickering flames of a never-extinguished idea -- of creating a pan-European entity that encompasses the Skys,” said Claire Enders, chief executive officer of research firm Enders Analysis in London. “This is the long-cherished dream of the family.”

Malone spent the past decade corralling the biggest European cable providers under his Liberty Global Plc (LBTYA), whose pay-TV operations stretch from Hungary and Austria to Germany,Belgium and the U.K. Its acquisition of Virgin Media Inc. in the U.K. last year put Liberty Global in head-to-head competition with BSkyB. London-based Liberty Global has 25 million subscribers.

Malone, whose cable cowboy nickname became the title of a biography, has amassed a European pay-TV empire that’s bigger than any cable operation he ever owned back home. The Colorado-based billionaire largely exited the U.S. cable market in 1999 when he sold Tele-Communications Inc. to AT&T Inc. for $59 billion.“We’ve made no secret of our belief over the years that we think the Skys are strong together,” James Murdoch said on a conference call last week before Bloomberg reported the talks. “Currently our focus is on operating each of those businesses as best we can.”

James, who previously ran News Corp.’s European operations and spent nine years in total as either chairman or CEO of BSkyB, is now co-chief operating officer of Fox. Last September, he was named chairman of Sky Deutschland.

Over the course of decades, Murdoch and Malone, both strong-willed billionaires with outspoken personalities, have been sometime allies and rivals.

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