Report Sees Explosive U.K. Digital Growth


London -- The growth of digital television in the United
Kingdom, which kicks off next month, will be "explosive," reaching 16.4 million
households by 2006, investment bank Bear Stearns International Ltd. forecasted in a major

Bear Stearns also predicted that the new
digital-programming services are "powerful enough to achieve 66 percent-penetration
of U.K. homes on their own," without even factoring in digital growth that will come
from a mandated U.K. government switch-off of analog signals around 2010.

Most previous U.K. studies have been much more
conservative, and the new ones due out are expected to be less optimistic than the Bear
Stearns report.

However, Bear Stearns presented some strong arguments to
back up its data. Nick Bell, head of Bear Stearns' European equity-research unit,
acknowledged that British Sky Broadcasting has worked hard to grow its analog base, but he
said Sky has "become a high-priced premium service," having pushed its prices
"much more than inflation" over the past few years.

New growth in digital will come largely from
digital-terrestrial television, Bell added.

He also forecasted that Sky's digital expansion will
be based largely on migration of its current customers from analog, growing a bit more
than one-third from its 3.6 million-subscriber analog direct-to-home base by 2005.

However, he predicted that DTT households will grow from
just 15,000 at end of this year to 7.4 million, or 45 percent of the market, by 2005.

"Cable may prove to be the dark horse," he added.
"But for now, we take a conservative approach, given past problems and the lack of
firm digital-rollout plans" within the U.K. cable industry.

Bell predicted that cable's share of the digital-TV
market will total more than 4 million homes by December 2005.