Sky's not the limit for European media mergers

Fri Dec 16, 2016 8:03am EST
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By Sophie Sassard

LONDON (Reuters) - Rupert Murdoch's bid for Britain's Sky is expected to drive traditional European media players to do their own deals to attain the scale they need to compete with online platforms like Netflix for increasingly costly programs.

While Twenty-First Century Fox's offer for Sky is not a done deal, bankers and industry sources expect it will win control of a 22 million household pay-TV network in Britain, Ireland, Austria, Germany and Italy and spark deal-making. "Without doubt we will see further consolidation across the sector in the months ahead, and crucially, at a quickening pace," said David Elms, UK head of Media at KPMG.

Consolidation among European broadcasters such as ITV, Prosieben and RTL Group has so far been held back because the companies were pursuing different strategies focused on their home market.

However, the rapid emergence of global players such as Netflix and Amazon means scale is becoming crucial to buying and producing high-quality content. Sky's deal to bring Sky Italia and Sky Deutschland under one umbrella was a first move which others could follow, said the bankers.

"Scale is becoming increasingly important, with companies who have a broad suite of offerings in terms of content and distribution platforms growing in strength and, from an M&A perspective, increasing in firepower," KPMG's Elms said.

Murdoch's move to buy the 61 percent of Sky that Twenty-First Century Fox does not already own is the latest deal to marry a distribution network with content after AT&T's $85 billion bid to buy Time Warner Inc earlier this year.

The business case for bundled services including mobile, fixed-line communication and pay-TV services was also underlined by French telecom operator Orange which said earlier this week it would be interested in buying pay-TV channel Canal+ if owner Vivendi was to sell.

Analysts at UBS said such a move would mirror Telefonica acquiring pay-TV operator Digital+ in Spain and that Orange would benefit from cost synergies in areas such as call centers, customer billing, marketing and corporate overheads.   Continued...

A Sky logo is seen at the company's UK headquarters in west London July 25, 2014.  REUTERS/Toby Melville/File Photo