British DTH giant Sky has mandated Lazard to advise it on the consolidation that looks set to take place in the telecoms and media sectors in the UK.
The move follows Sky’s great rival in pay-TV and broadband, BT, confirming last week that it was in…
British DTH giant Sky has mandated Lazard to advise it on the consolidation that looks set to take place in the telecoms and media sectors in the UK.
The move follows Sky’s great rival in pay-TV and broadband, BT, confirming last week that it was in talks to buy either O2 or EE – a move which would allow BT to add mobile to its suite of services meaning it could offer quad-play bundles.
Sky has hired the bank to explore possible deals and evaluate its options, SatelliteFinance understands. However, Sky is not on verge of any deals and the company considers the appointment of Lazard as standard practice in the circumstances, a person familiar with the matter told SatelliteFinance.
Sky and BT are also sparring ahead of next year’s auction of Premier League football broadcasting rights, with reports suggesting that Sky believes BT’s increased focus on mobile could benefit it in the tender process.
Sky currently pays £760m a year to show 116 Premier League football matches per season while BT pays £246m to broadcast 38 games. Industry analysts predict that the total amount will rise from around £1bn to £1.5bn in the forthcoming auction.
Both Sky and Lazard declined to comment on the reports.
The question for Sky is whether it wants to pursue mobile. Its broadband rival Virgin Media already has a successful MVNO in Virgin Mobile, and BT and TalkTalk are preparing to launch new MVNO services, piggybacking on EE and O2’s networks respectively.
Sky has a relationship with Vodafone whereby the mobile operator offers its content, but nothing more.
Sky’s CEO, Jeremy Darroch, has previously expressed scepticism that there is real consumer demand for quad-play bundles, but has said it would be logical for the company to offer mobile.
In a quarterly results conference call in October, Darroch said: “On quad-play or in fact any service, we’re going to be led by what we see the customer wants. If I look at the existing quad-plays in the market, not just in the UK, but pretty much everywhere, I think they’re very much driven by the providers who want to extend their offering, rather than, I think, any significant demand from customers. But having said that, we’ll always remain open to opportunities, and this is something that we keep a close eye on.
“We keep our options under review. If we thought there was strong customer demand, then we can be in a good place to respond. We’ve got a very significant customer base already that we know we can cross-sell into very successfully. We’ve obviously got a really good marketing capability, and we’ve got good relationships with all the mobile operators, so it would be a good distribution channel for one or all of them. So we’ll keep watching what goes on, but as I say, right now we don’t see this as a huge customer idea, but if it changed, then we may look again.”
Vodafone has itself been rumoured to be considering making its own convergence play. The company is reported to be having discussions regarding an acquisition of pan-European cable group Liberty Global – owner of another Sky rival, Virgin Media – and is weighing up the viability of a deal. One significant stumbling block to that deal is Liberty’s net debt pile, which stood at US$41.1bn as of 30 September following its acquisition spree over the past few years
If that merger were to take place, however, it would make it extremely difficult for Sky to maintain its relationship with Vodafone, let alone launch an MVNO piggybacking on the telco’s network.
Meanwhile, Hutchison Whampoa, owner of the UK’s smallest network operator Three, is reported to be waiting for BT to make its move for EE or O2 and could then look at the possibility of acquiring the mobile player BT passes on.
If BT goes with O2 then Hutchison could face competition from private equity firms to acquire EE.
KKR and Apax are reported to be considering buying EE, which they have looked at before, if BT overlooks it. However, O2 is reported to not be considered an attractive asset to private equity.
Sells Sky Bet to CVC
Meanwhile, Sky has agreed to sell its online betting and gaming business, branded as Sky Bet, to CVC Capital Partners.
The private equity firm has agreed to pay £600m on closing and up to £120m in further deferred and contingent payments in exchange for 80% of the business.
The deal values Sky Bet at £800m, which represents a multiple of approximately 15x its EBITDA for the 12 months ended 30 June 2014.
CVC has signed a long-term brand licence agreement to use the Sky bet name.
Commenting on the sale, Darroch said: “This transaction will allow us to focus further on the substantial growth opportunities in our core international pay-TV business while realising significant value for our shareholders.”
