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BSkyB Launches Broadband Promotion Amid Intensifying BT Rivalry

The British pay TV giant and the telecom company have increasingly competed for key sports rights and subscribers.

U.K. pay TV company BSkyB, in which Rupert Murdoch's News Corp. owns a 39 percent stake, has quietly unveiled a new broadband promotion amid an intensifying rivalry with telecom giant BT.

BSkyB on Friday announced that it would offer free DSL service for a year (a value of $140, or £90) or free fiber-based broadband for six months ($189, or £120) to new broadband subscribers who also take its Sky Sports TV package.

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Under the promotion, new broadband subscribers who do not take Sky Sports will get DSL broadband for half the normal price for a year, compared to a previous half-price offer for half a year.

The British pay TV giant and the telecom powerhouse have competed for key sports rights, with BT set to air English soccer games for the first time later this summer. They have also increasingly competed for subscribers.

BT last month announced that its three new sports channels would be offered free to its 5 million-plus broadband subscribers. Programming on the networks includes 38 live matches from the English Premier League, which has long been a key business driver for BSkyB.

"We expect this new BSkyB offer to run up until the start of the new English Premier League [soccer] season in August," said UBS analyst Polo Tang on Monday. "We see the BSkyB offer as effectively a mirror image of the offer from BT that gives free BT Sports for a year (normally $20, or £13, per month) to BT broadband subscribers."

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When BT unveiled its offer, some analysts and investors were concerned that BSkyB could launch a big, broad-based discount offer in retaliation.

"Investors will be relieved that [BSkyB] is not going for the "nuclear option" and repricing its entire base," said Tang. "Rather it is using a tactical promotion for a finite period."

Discussing the possible earnings impact on BSkyB, Tang said: "Overall, we believe there would be a marginal impact on consensus [expectations] from this move."

Through Friday, BSkyB shares have fallen 9 percent since the BT Sports announcement. Tang maintained his "neutral" rating.

"Concerns about an escalation in the price war are likely to overhang BSkyB shares, and there is only likely to be visibility on the issue post the start of the English Premiere League season in August," Tang argued.

E-mail: Georg.Szalai@thr.com
Twitter: @georgszalai