BSkyB Unveils Drive Into Broadband Market
Posted on: Tuesday, 18 July 2006, 15:00 CDT
LONDON - Satellite TV operator British Sky Broadcasting Group PLC unveiled an aggressive drive into the British broadband market Tuesday, earmarking more money than expected to cover the cost of signing up new customers.
The company is also in talks with Time Warner Inc. to acquire AOL U.K., BSkyB Chief Executive James Murdoch said Tuesday.
The British satellite broadcaster said it expects to spend 400 million pounds ($730 million) over the next three years on launching its new product, Sky Broadband. It expects the service to start contributing to earnings in the fiscal year ending in June 2010.
Sky, Britain's largest pay-TV operator with 8.1 million subscribers, said it will offer free broadband access to any existing customer covered by the BSkyB broadband network. It will offer three levels of access, from a free service with speeds of up to 2Mb per second to a connection of 16Mb per second, priced at 10 pounds ($18.25) per month.
BSkyB's U.S.-listed shares fell $1.75 or 4.4 percent to $37.74 on the New York Stock Exchange as analysts said the capital expenditure had exceeded market expectations and the time to break-even was longer than expected.
But Murdoch said BSkyB expected 30 percent of its customers to take the new broadband product by 2010.
"The business case is clear," Murdoch said in a statement, saying the investment "will enhance top-line growth, be earnings enhancing from 2010 and with the benefits of scale, deliver increasingly attractive returns thereafter whilst offering substantial savings."
Speaking at the launch of the broadband service, Murdoch also said his interest in the AOL unit was "opportunistic," but said he wouldn't overpay for it.
BSkyB's move into broadband comes as competition mounts from British telecom operator BT Group, cable company NTL Group and France Telecom, along with mobile operator Carphone Warehouse Group. All have launched, or are launching, broadband or Internet television services.
The move also follows BSkyB's acquisition last year of Easynet, which will allow it to take the broadband connection directly to homes and businesses in Britain.
BSkyB also believes broadband will help it achieve its goal of 10 million pay-TV subscribers by 2010. The company said it would begin broadband sales in early August, and is still on track to deliver its 2010 subscriber target.
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Source: Associated Press/AP Online
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