Today I am explaining why I believe BT Group’s (LSE: BT-A) (NYSE: BT.US) increasingly-aggressive overtures in the television sports market are set to underpin stunning growth over the long-term.
Blockbuster UEFA deal to deliver dazzling earnings
BT Group’s summer move into the shark tank of televised sport has rattled the cage of fellow broadcasting giant BSkyB (LSE: BSY) (NASDAQOTH: BSYBY.US). The business ratcheted up the pressure over the weekend when it announced a gargantuan £897m deal to show UEFA Champions League and UEFA Europe League games from 2015, prising away one of Sky’s crown jewels and acquiring what I believe will prove a massive future earnings catalyst.
The move — which will grant BT exclusive rights to show Europe’s premier football competitions for three years — is considered by many as an extremely high premium to pay, and Sky said that the firm had paid “far in excess” of what it valued the sports franchises at itself. Indeed, the new deal cost more than double the current arrangement.
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Still, the deal sends a clear signal that BT is in the fight for the long-haul, and is reminiscent of Sky’s audacious move more than two decades ago to bring exclusive top-flight English football into Britain’s homes. The exclusive rights to show Premier League football cost Sky £304m — almost 10 times what the then-rights holder ITV had bid to show England’s premier competition — and proved the linchpin behind transforming Sky into the media giant of today.
With television sport proving a massive winner in driving revenues, I believe that BT’s move over the weekend could prove similarly successful for the firm. The company already shows Barclays Premier League football coverage, as well as a host of other competitions across the globe, while other prestige sports tournaments include Aviva Premiership rugby and UFC cage fighting.
And signs are that the firm’s BT Sport channels are steadily making ground into Sky’s backyard. The firm’s sports packages now attract more than 2m customers, and growth here helped to push turnover at its Retail Consumer division 4% higher during July-September, the best performance for more than a decade. As BT grows as a heavyweight sports brand in the UK, I expect its subscriber base — and thus the company’s earnings outlook — to also thunder higher.
