BT finds extra 32% for European footy rights

The recent performance of British teams in UEFA's Champions League may have been dismal, but that hasn't deterred BT from paying 32% more per year for the rights to show Europe's premier club competition.

The telecoms giant will have Champions League and Europa League fixtures in its schedules until 2021, extending a deal first struck with UEFA in 2013. Losing the rights would have been a significant blow to its broadcast strategy.

As a result, the £394 million a year - or £1.2 billion over the three years - it has agreed to pay came in towards the top end of City expectations. However, this is offset by a number of deal enhancements, such as split start times for group matches (6pm & 8pm).

The prospect of European football night double-headers will boost commercial revenues through a greater number of broadcasting slots from which to sell advertising or engage with pubs and clubs.

This deal also gives BT exclusivity across live games and highlights for the first time, while there's no obligation to show any content on free-to-air channels.

Instead, there's the potential for BT to run exclusive clips on EE, the mobile phone business it bought for £12.5 billion last year.

EE has more than doubled BT's marketable customer base, so the company should be in a strong position to monetise its European football investment through subscription, wholesale, commercial, and advertising revenues.

UBS analyst Polo Tang said the price paid by BT suggested that satellite TV rival Sky was active in bidding, having lost out to the broadcasting newcomer in the last auction.

Amid expectations that Sky could pay £150 million a year for part of the UEFA rights, UBS said today's outcome would, in theory, lead to a 7.5% upgrade for Sky's underlying operating profit and 10% rise to earnings per share in 2019.

However, it believes that Sky is more likely to re-invest any savings in original programming, which means the scale of any upgrade will be muted.

With increased visibility over Champions League rights, there may be implications for 21st Century Fox's 1,075p a share takeover bid for Sky, particularly as UK net additions are returning to a more normal quarterly trend.

Tang said: "This could give independent shareholders more confidence on medium-term estimates and lead them to push for a higher offer price from Fox."

It's also possible that the price paid for UEFA rights may limit BT's ability to bid for Premier League rights, which is expected by the middle of next year.

Sky and BT shares were largely unmoved by the UEFA auction today. However, the result is certainly a fillip for BT after a difficult few weeks in which its shares have been smashed by an accounting scandal at BT Italia. It is also still locked in negotiations with regulator Ofcom over the future of its Openreach division.

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