The titanic battle between BT Group (LSE: BT-A) and Sky (LSE: SKY) in claiming the British ‘paid-TV’ crown is arguably set to reach its most critical juncture this Friday.
Sports fans and business pundits alike will be glued to the unfolding action at the Football Association when the next round of FA Premier League broadcasting rights go under the hammer, with media giants Discovery Channel and BeIN Sports also rumoured to be entering the battle to screen up to 168 live games from 2016-2019.
The cost of the rights is expected to dwarf the £3.018bn forked out for the previous three-year period, and some analysts believe the final cost could ring in at up to £4bn.
A league of its own
These sums are of course colossal, but BT has already shown it is prepared to splash the cash to bash Sky’s dominance of the world’s major sporting events. Famously the company gave its satellite rival, as well as ITV and Channel 5, a bloody nose in November 2013 by shelling out £900m to secure exclusive live rights for the UEFA Champions League and UEFA Europa League competitions from this year until 2018.
Needless to say, Sky’s position as THE top Premier League broadcaster has been the lynchpin to the company’s soaring success for almost a quarter of a century. So although BT chief executive Gavin Patterson advised back in October that “if the [bidding] price becomes even more crazy, we’re not going to be chasing that,” the opportunity to leave its rival’s football coverage in the wilderness could be too much to resist.
Multi-services charge paying off handsomely
On top of this, the success of the broadcaster’s BT Sport channels in driving revenues at its Consumer arm could encourage BT to throw the kitchen sink at securing the lion’s share of Premier League rights. The firm advised last week that turnover at the division revved 7% higher during October-December, to £1.1bn, continuing the strong momentum posted in the prior quarter.
BT has intelligently utilised investment in its sports portfolio and broadband to boost its multi-services proposition, offering its internet customers free access to BT Sport whilst expanding its ultra-fast fibre coverage to three-quarters of the country. This helped make the last quarter the best on record in terms of net fibre broadband additions.
On top of this, BT is also stealing a march on Sky through its £12.5bn acquisition of EE, terms of which were finalised just today — the purchase of Britain’s largest mobile operator puts BT in prime position in the ‘quad-play’ sector.
Sky counter-punched against the deal last week by inking a wholesale partnership with O2, a move which allows the Brentford-firm to provide voice calls and data by piggybacking the operator’s masts. However, this is not due to be launched until 2016.
Given BT’s aggressive investment in the multi-services sector, I fully expect the business to bid big in this week’s critical Premier League auction. And should the business succeed in taking Sky out of the game, I believe that BT will be in great shape to deliver terrific long-term earnings growth at the expense of its rival.
