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Bigger Sky

December 22, 2009

Rupert Murdoch's News Corp has announced it would buy some 49 million shares in Sky Deutschland to raise its stake in the broadcaster to about 45 percent. It is the second News Corp investment in the company this year.

Rupert Murdoch
Rupert Murdoch has expanded his empire in GermanyImage: AP

Sky Deutschland's shares soared by 11 percent on Monday following the announcement that US media giant News Corp would buy even more shares in the German TV station. The money is expected to help the company invest in more marketing to win over a reluctant German audience that has cost it millions of euros in its attempt to win subscribers.

News Corp will raise its stake in the company, previously called Premiere, from just below 40 percent to an expected 45.4 percent. News Corp is reported to be buying around 49 million shares for up to 120 million euros ($172 million).

Satellite TV is facing heavy competition from the InternetImage: AP

News Corp is investing in Sky even though many media companies are suffering from falling ad revenue because of the recession, as more people seek news and entertainment on the Internet.

"For us it's a great show of faith from News Corp," Sky spokesman Hans-Juergen Croissant told Deutsche Welle. "It means that we'll be looking to develop our HD department."

News Corp CEO Rupert Murdoch maintains that his corporation is in good health despite these pressures and that he expects 2010 to be a stable year.

Struggling Sky

Sky Deutschland said it expects to have just under 2.5 million subscribers at the end of this month, well below its target of 2.8 million, and has said it needs a minimum of three million to make a profit.

The company is not expecting to reach this goal until the first quarter of 2011, though it will raise turnover per customer significantly next year. In the first quarter of 2010, it is estimating 29 euros per customer, 1.5 euros more than it took in this quarter.

One of Sky's main draws is its Bundesliga coverageImage: picture-alliance / Pressefoto UL

According to the company's own statement, Sky Deutschland will not earn money for its shareholders for at least two years. Earnings before interest, taxes, depreciation and amortization (EBITDA) will be positive in 2011, but the company will still generate a loss that year.

This year's gross losses are expected to amount to between 255 million and 265 million euros. According to media reports, Sky Deutschland's management is expecting losses of between 130 million and 170 million euros.

Outgoing boss

In reaction to Monday's news, Sky Deutschland CEO Mark Williams, who is leaving in March, said: "This is the right time to invest in the future growth of this company."

The announcement of Williams' departure, which came earlier this month, drove shares to a six-month low and marked the loss of its third chief in four years.

bk/AFP/Reuters
Editor: Sam Edmonds

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