BSkyB: Now the fun begins

This Thursday will see BSkyB unveil its latest profit and subscriber numbers for its 3Q trading period to March 31st. Analysts are talking about net subscriber growth of some 40,000, and underlying profits up 15 per cent to £252 million. Annual average ARPU is also expected to top a spectacular £540 as the number of subs taking bundled packages, including telephony and broadband plus Sky+ and HD grow.
The market is also likely to shortly hear whether the UK government will permit News Corp to proceed with its bid for the 61 per cent of BSkyB it does not already own. On April 25, the Financial Times suggested that Culture Secretary Jeremy Hunt will give the merger his clearance. There’s not likely to be much news until May 6th because of UK elections which take place on the 5th.
But a UK governmental clearance does not mean the merger will happen. That is just when the fun begins and we start to see how Rupert Murdoch will finesse the deal. The current position is that BSkyB’s existing institutional shareholders are looking for much more than the 700p already on the table. That offer was made when the typical share price for BSkyB was below the 600p mark, and represented an attractive premium for investors. The problem is that the share price is now close to 850p – a nine-year high for the business – and some investors have suggested that 900p or even 1000p would now be a fairer price.
Some analysts suggest that Murdoch will play a waiting game, permitting a little of the froth to escape. Most expect News Corp will have to pay a ‘super-premium’ for Sky not because of the state of the share price, but that BSkyB is in such great shape.
And News Corp needs to conclude this matter. BSkyB is now operating with Chinese Walls so high and so thick that even close cousins such as Sky Deutschland can no longer access Sky’s Osterley headquarters for fear of being seen.