News

U.K.s Sky Postpones Digital Launch Again

1/18/1998 7:00 PM Eastern

London -- A chance remark by a British Sky Broadcastingsupplier last week forced the company to admit it will not launch a digital service inBritain until this June, and possibly later if a highly respected London media analyst isright.

Sky had originally planned to launch its 200-channeldigital service last October, but postponed the debut until this April, beforeacknowledging last week the launch was pushed back again.

Neil Blackley, an analyst at investment house MerrillLynch, insisted that Sky might be better off to wait until after the summer, avoiding Juneand July when Europe will be glued to terrestrial TV watching the World Cup soccertournament.

The latest delay only compounds several problems Sky hasrelated to its digital launch. The first is that it has no satellite in place. TheChristmas Day loss of AsiaSat 3 atop a Proton rocket from the Baikonur Cosmodrome haseffectively placed all upcoming launches on hold until the problem is resolved. Thisincludes Astra 2A, originally destined to service Sky's digital needs. Sky hasconfirmed that it is unlikely to have the correct satellite in place on time, and thatsatellite owners SES/Astra will now move a 'spare' satellite to the new Skydigital position.

Sky's second major problem is related to the supply ofits digital set-top boxes. Even though Sky has reserved capacity with four manufacturers-- Pace MicroTechnology plc, Panasonic, Hyundai and Amstrad -- to build 1 million boxesthis year, it has yet to sign any contracts. That suggests there are still uncertaintiesover the final box specifications.

Malcolm Miller, CEO at Pace, said last week that thecompany had yet to receive its formal order from Sky. Even if the order came in today,Pace 'could not supply much more than pre-production samples within our currentfinancial year,' which ends May 29, he added.

A third major problem for Sky rests with the EuropeanCommission in Brussels. Sky is a 32.5 percent shareholder in British InteractiveBroadcasting. Other partners include British Telecommunications plc, which also holds 32.5percent; Midland Bank, with 20 percent; and Matsushita, with 15 percent. BIB was to be the'arm's length' company that would help finance, or subsidize, the Skydecoder box in order to bring retail costs down to an affordable £199 ($325). But the EChas yet to give the company its regulatory blessing.

New Sky CEO Mark Booth responded by stressing that'significant [box] volumes will be available by the key fourth-quarter sellingperiod,' and that all the various U.K. regulatory bodies had approved its plans forBIB. Additionally, Sky said would it provide a detailed status report on its digital plansat its own interim results presentation next month.

Pace declared its own nightmare last week, with sales down£31 million ($50.3 million) and a loss of £11.2 million ($18.7 million), compared with a£10 million ($17 million) profit in the same six-month period a year ago. The loss wasattributed to a £7 million ($11.7 million) provision for 'alleged possible royaltiesfrom owners of certain intellectual property rights.'

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