Nov 2001

Rupert Murdoch, Chairman of News Corp, said in London on Friday (2/11/01) to advanced-television that although his current bid for DirecTV is effectively dead, he believes that Echostar's successful rival offer for the US direct-to-home satellite broadcaster faces "considerable regulatory risk."

Murdoch did not rule out making another bid for DirecTV in what has been an "exacting and difficult" take-over battle, which saw his media group beaten at the last minute by EchoStar's $29 billion bid.

Murdoch told reporters in London gathered for the AGM of BSkyB, the 40 per cent owned News Corp unit, that General Motors, the owner of DirecTV, told him 10 minutes before a board meeting that he had "unanimous approval" for his bid.

And yet seven hours later it was EchoStar which trumped News Corp's offer to buy its biggest rival.

Stories differ as to whether Murdoch pulled out before GM told him of its decision to go with Echostar, or if the legendary deal maker was taken by surprise. Murdoch said today that he pulled out when GM said it had decided to give Echostar more time.

Putting together Echostar's Dish service and DirecTV will combine the two largest DTH platforms in the US, which has dismayed consumer groups worried about monopolistic pricing. But the deal needs regulatory approval and Murdoch believes that Echostar faces big hurdles. "They do run considerable regulatory risk in Washington and if the deal was rejected then General Motors may come back to us as the only bidder and we would have to look at the state of the business at that time," said Murdoch.

Murdoch was in London in his capacity as Chairman of BSkyB, which announced an eight per cent increase in average revenue per subscriber to £317, moving it closer to its 2005 target of £400. Sky has so far sold 10,000 of its new £300 Sky Plus boxes, ahead of its forecasts. The new boxes include a personal video recording capability and a hard drive.

The UK pay TV operator added 190,000 new digital DTH subscribers in the most recent quarter to pass the 5.5 million subscriber mark. However, after accounting for churn from analogue subs who either chose not to upgrade to digital when the analogue signal was turned off on September 27 (77,000) and those subscribers who either transitioned to digital or switched off their service altogether before Sky's switch off (68,000), the net new subscriber number for the quarter was 45,000. Churn increased slightly to 10.4 per cent, still half of the churn at digital terrestrial rival ITV Digital.

BSkyB announced a narrowed pre-tax loss of £89.2 million for the first quarter of its fiscal year on turnover that rose 23 per cent to £642.7 million from £520.3 million and earnings before interest tax, depreciation and amortisation (EBITDA) rose to £64.5 million from £48.9 million. BSkyB's shares traded up on Friday November to 785p.

Murdoch confirmed that BSkyB is talking to Channel 5 about leasing some of its digital terrestrial TV (DTT) capacity, likely as a way to launch its Sky News 24-hour news channel. The leases for these channels come up for renewal early next year. If Sky News launched on the Channel 5's DTT capacity it would no longer have to pay ITV Digital to be on its platform.

Murdoch said he is not interested in bidding for a UK terrestrial TV company, like Carlton, or bailing out ITV Digital, because he believes that competition watchdogs and the "anti-success" culture of the UK would block any such a move. In legendary Murdoch language he said that he wanted ITV Digital to continue running because if it failed BSkyB would get the blame.

"If it fails we'd get be blamed for it wrongly, " said Murdoch. He also said that if BSkyB had been allowed to be involved from the outset in ITV Digital "We would have made a success of it, because we would have put in a good technology that works."

* In a separate move that Murdoch would probably see as substatiating his view, the UK Office of Fair Trading (OFT) is becoming embroiled in negotiations between BskyB and the UK cable companies NTL and Telewest over the nature of their carriage deals for BskyB's channels. A report in Friday's (2/11/01) Financial Times newspaper says that NTL's proposed five year deal with BSkyB is a 'dead letter ' while the OFT investigates BSkyB for alleged abuse of its dominant position in the market. Sky could be fined up to ten per cent of its UK turnover if such abuse was confirmed when the OFT ends its invesitgation, expected to complete by the year end.