Build Fiber? Sell Mobile? Comcast Faces Some Big Choices on Sky
(Bloomberg) -- Now that Comcast Corp. has won the battle for Sky Plc, Chief Executive Officer Brian Roberts faces a pressing question: What does he do with Europe’s biggest satellite pay-TV company?
Buying Sky gives Roberts the power to disrupt the continent’s media and telecom landscape, whether it’s in sports rights, broadband delivery and mobile services or original content. Rupert Murdoch’s 21st Century Fox Inc. conceded defeat to the biggest U.S. cable carrier on Wednesday in their $39 billion contest for Sky, clearing the way for Roberts to take full control of the London-based company.
Here are the strategic calls Roberts faces in the months ahead:
Roberts has built his $162 billion company upon twin pillars -- owning TV shows and sports content, movies and news while building America’s biggest broadband network to distribute it. Sky has no broadband networks in its biggest markets, relying on other carriers in its gradual shift from satellite to terrestrial distribution. That has made Sky a key wholesale customer of Britain’s main broadband network owner, BT Group Plc’s Openreach. To refashion Sky in its own image, Comcast could reduce its reliance on Openreach and invest in building its own fiber network, said Bloomberg Intelligence analyst Matthew Bloxham. That would give it greater control over the technology and could be a significant blow to BT. Comcast may try to buy fiber infrastructure by acquiring a smaller player such as TalkTalk Telecom Group Plc or CityFibre Infrastructure Holdings Plc. Comcast declined to discuss its plans for Sky.
Ramp Up Sports?
Comcast needs to decide whether to continue Sky’s strong investment in sports such as English Premier League soccer. Comcast’s balance sheet would give Sky more firepower to take on BT or any new entrants in future auctions of broadcast rights for competitions such as the UEFA Champions League, said Mike Darcey, a former chief operating officer at Sky. Comcast will be keeping a close eye on Amazon.com Inc., which has acquired a small package of live rights to the Premier League season starting in 2019.
Sky’s mobile phone business is yet to gain significant traction since its launch in 2016. It uses Telefonica SA’s U.K. network O2 to run the service and Comcast may look to acquire its own mobile spectrum so it can be a full network operator. Sky could learn from Comcast’s wireless business and use their combined size to demand better terms when buying handsets from phone makers. Alternatively, Comcast could look to sell Sky’s telecom assets to pay down debt, although RBC analyst Wilton Fry sees this as unlikely. “Comcast has considerable scale and operational experience as a telecom operator,” Fry wrote in a note to clients. “It could use this to invest aggressively in both fixed and mobile in the UK, increasing the competitive pressure on existing operators.”
Sky has been ramping up investment in its own original content including high-end dramas such as “Babylon Berlin” in an effort to stop subscribers switching to the likes of Netflix Inc. or Amazon’s Prime Video. Comcast’s NBCUniversal could make more of those shows in-house and distribute them exclusively in the U.S. on its Xfinity platform, said Paolo Pescatore, an independent media consultant.
Comcast is likely to continue Sky’s expansion in Europe, said Richard Greenfield, media and technology analyst at BTIG. Already in Germany, Italy and Austria, and with a more limited presence in Spain and Switzerland, Sky could grow more aggressively in other countries on the continent. Canal+, the French pay-TV provider and big film producer owned by Vivendi SA, could pop up on Comcast’s radar, although the idea of U.S. ownership could stir political opposition in Paris. Sky’s streaming technology could also help Comcast distribute in parts of the U.S. where it doesn’t have cable coverage, Greenfield said. “What Sky has done far better than Comcast is expand beyond their legacy markets,” he said.
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