21st Century Fox to Buy Sky Deutschland?
Last week Sky Deutschland’s share price rocketed, from €5.50 to – at one point on the morning of July 5th – a tempting €6.06 and finishing the day at €5.84. The upward move means that in the past year Sky Deutschland’s share price has doubled, which must please principal investor (54.8 per cent) Rupert Murdoch, via 21st Century Fox, happy.
Indeed, Simon thinks that Sky Deutschland is a strong candidate to be wholly consolidated into 21st Century Fox, and far sooner than any attempt might be made by 21st Century on BSkyB which she thinks – at best – is a post-UK General Election prospect.
Berenberg is not alone in fancying Sky Deutschland, but the bank suggests that the past year’s “meteoric” price rise reflects an opinion that there is still mileage left in the stock, and the company’s increasingly healthy position in the German market. “With the upcoming Q2 results, we are reaching the end of the road for SkyD 1.0. The new and improved version, SkyD 2.0, begins life at the start of the new Bundesliga season. In its new incarnation, it will have complete control of the football rights and co-marketing deals with all major distribution platforms. Both will contribute, in our view, to an acceleration in customer additions in H2, into 2014 and beyond,” says the bank’s report to clients.
Berenberg stresses the differences between Sky Deutschland and BSkyB, especially with what Ms Simon explains is Germany’s partnership approach to distribution. “With triple-play bundling, SkyD should be positively affected by the increase in competition which is expected to ensue from the pending Vodafone/Kabel Deutschland transaction. By contrast, BSkyB is likely to experience significant competitive pressure in the coming years. Indeed the comparison of SkyD, which is platform neutral, and BSkyB, which is not, is becoming less and less relevant in our view.”
Besides these aspects Sky Germany has a valuable trump card up its sleeve: The German Bundesliga football rights. Unlike in the UK where BSkyB now faces increasing pressure from BT over football matches, Sky Deutschland’s rights are in place until 2017.
The bank expects Sky Deutschland to announce annualised churn to be about the same (at 12.1 per cent) about 34,000 net additions taking the total to 3.4 million of which 1.699 million will be HD viewers. ARPU will be a record €372 p/a, up from €300 this time last year). The results are due on August 6.
21st Century Fox is the world's premier portfolio of cable, broadcast, film, pay TV and satellite assets spanning six continents across the globe. Reaching nearly 1.5 billion subscribers in 100 local languages every day, 21st Century Fox is home to a global portfolio of cable and broadcasting networks and properties, including FOX, FX, FXX, FS1, Fox News Channel, Fox Business Network, Fox Sports, Fox Sports Network, National Geographic Channels, Fox Pan American Sports, MundoFox, STAR and 28 local television stations; film studio Twentieth Century Fox Film; and television production studios Twentieth Century Fox Television and Shine Group. The Company also provides premium content to millions of subscribers through its pay-television services in Europe and Asia, including Sky Deutschland, Sky Italia and its equity interests in BSkyB and Tata Sky.