Markets Digest Skys Digital Plans

8/09/1998 8:00 PM Eastern

LONDON -- British Sky Broadcasting chief executive Mark
Booth confirmed Sky's United Kingdom digital launch will take place Oct. 1, but some
elements of the rollout received a cool reception and the company's shares have
drifted downward since.

Booth, who announced the launch on July 30, said he
believes that Sky will have a "first-mover advantage" over its digital
terrestrial television (DTT) rival, ON Digital, which has yet to confirm its specific
launch date in the fall.

Booth said Sky wants to achieve 50 percent digital
penetration of television households by 2003, and to gain at least 50 percent of all
digital connections, whether from direct-to-home (DTH), cable or DTT.

Sales will be primed with a surprising plan to offer free
dish installations, which is expected to cost Sky as much as $790 million if continued
over the five-year period to 2003. Booth says Sky will offer "much cheaper entry
prices, lower in real terms from the entry price today." Sky will spend $100 million
on advertising in the first year. Existing analog subscribers will pay $260 for the
equipment to upgrade to digital, and new subscribers will pay $329.

The U.K. and U.S. stock markets haven't been
enthralled with the news of Sky funding free installations in the digital realm. Upon the
announcement, Sky's shares in the U.K. slid 9 percent, and continued to decline last
week. In the U.S., Sky's shares closed at 41-1/16 last Wednesday, more than 20
percent off their 52-week high of 50-1/2, reached in mid-July.

Morgan Stanley said "digital presents opportunities
and threats to profitability [for Sky, and] investors should not become too

Also tempering any investor enthusiasm last week was news
that the European Union will require British Interactive Broadcasting, a consortium that
will fund Sky's digital subscriber box discounts, to sell equipment to all buyers --
even those who refuse a subscription to Sky's digital packages.

Analysts at Merrill Lynch trimmed Sky's profit
forecasts from $486.8 million to $308.6 million for the fiscal year ending next June.

Sky's chief financial officer, Martin Stewart, said
the company wants to boost DTH subs from 3.6 million today to 6 million in 2003, which he
termed "realistic ambitions."

Want to read more stories like this?
Get our Free Newsletter Here!