Sky issues profit warning over Virgin Media
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BSkyB has warned investors that the financial impact of not concluding a basic channels carriage deal with Virgin Media could amount to a reduction of between £15m and £20m in operating profit for the remainder of Sky's financial year, ending on June 30.
Sky's statement to the City said the figure included lost carriage fees and lower advertising revenues, but did not include "any of the future benefits or costs associated with accelerated customer growth should cable customers decide to switch to Sky".
Last Friday Virgin Media CEO Steve Burch said he anticipated the withdrawal of Sky's basic channels—which include Sky One, Two and Three, and Sky News—at the end of February after talks broke down between both parties. Burch said Sky had demanded a doubling in the carriage fee, a claim Sky went on to deny. At the weekend Virgin Media took press ads explaining to its 3.3m TV subscribers why the Sky basic channels were likely to disappear.
In Sky's statement this morning, the pay-TV giant said it had negotiated "in good faith" with Virgin Media and had shown flexibility in price. More channels were being offered, and Sky had increased its investment in its basic channels "by 68% over the last five years to around £200m per annum, and as a consequence, the most-watched pay-TV programmes in cable households are on the Sky basic channels".
Sky's chief financial officer, Jeremy Darroch, said: "We are disappointed that Virgin Media appear to have walked away from negotiations. Sky offered more channels to Virgin Media than ever before. We have invested in developing our channel offering and sought a fair price which reflects that fact. With three days still to go before the deadline, we hope that Virgin Media will focus on getting a deal done rather than on their PR offensive."
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