Broker snap: Nomura downgrades BSkyB after BT-UEFA deal

11th Nov 2013 09:06

Pay-TV broadcaster British Sky Broadcasting was trading firmly in the red on Monday after news that BT has won the exclusive rights to the UEFA Champions League and UEFA Europa League tournaments for three seasons.The announcement prompted Nomura to downgrade its rating for the stock from 'buy' to 'reduce', saying that BT's willingness to overpay for the UEFA deal is "worrying for Sky and a bad sign for the next Premier League auction".BT is paying £299m per season for three years for the UK TV live rights, the first time such exclusivity has been given to one broadcaster; BSkyB and ITV share the rights currently. This price compares with £160m at the previous auction and the £132m for the Champions League rights alone.Nomura said: "This possibility is something we flagged a number of times but still assigned a low level of probability given Sky was expected to defend itself aggressively."Looking ahead, the broker said that the Premier League auction in mid-2015 is a "must-win" for Sky as it raised its inflation assumption from 40% to 60% from the previous price. "Sky cannot afford to be disciplined on this one," it said.Nomura has cut its 2017 earnings per share forecasts for BSkyB by around 20% due to the higher assumed inflation from the Premier League auction."BT's move could push Sky towards a wholesale sports deal but even that may not be enough to limit the rivalry in package ownership. Uncertainty is likely to drive a de-rating."The target price for the stock has been cut from 1,040p to 850p.The share price was down 9.52% at 841.5p in morning trade on Monday.BC