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The Surprising Buy Case For BT Group plc

Today I am looking at why, despite a relatively slow start in terms of viewership, BT Group’s (LSE: BT-A) (NYSE: BT.US) new sports channels have helped deliver a stunning boost to the company’s television arm.

Sports packages boost TV grab

BT Group has shelled out a fortune in order to furnish its recently launched sports channels with live Barclays Premier League action. But despite this, the company has made a relatively subdued start in its quest to upset sports channel behemoth British Sky Broadcasting (Sky). Just this week, The Telegraph published figures showing that viewing figures of top-flight games were down 10% from those shown on BSkyB rival ESPN at the same point last year.

However, the somewhat unspectacular start of the company’s BT Sport and ESPN offerings fail to reveal the positive impact of the channel roll-outs on the uptake of its television services on the whole, as recent research by Liberum Capital has revealed.

The broker advised in its latest quarterly update last month that the launch of BT’s sports packages in August has helped to boost the popularity of the firm’s entire TV division in the pay-TV market. BT “has benefitted from its aggressive promotional stance and higher media profile as a greater proportion of respondents have indicated they have and will consider switching“, Liberum Capital said.

Respondents with some type of pay-TV subscription rose by 2 basis points in July-September, Liberum Capital said. But while BT saw its customer base increase during the period, both Sky and Virgin Media reported falls in viewer numbers.

The broker said that the impact of costs on paying customers’ buying habits, as clients wrestle with rising household bills, had a huge impact upon the responses of its participants. In this respect, BT has played a masterstroke by offering its sports channels free to all of its broadband customers on top of other promotions to take on the might of Sky.

In addition to this, the quality of all-round packages is also cited as a major driver behind customer selections in the TV space. Not only has BT spent huge sums to nurture bolster its television services, but it has also seen capital expenditure go through the roof by laying new broadband fibre across the country. The firm is set to spend a further £2.5bn on this drive alone this year, leaving the firm in great shape to benefit from the rising popularity of multi-service bundle providers.

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> Royston does not own shares in any of the companies mentioned in this article. The Motley Fool has recommended shares in British Sky Broadcasting.