BT Group may be set for ‘modest upside’ from DAZN deal, but Sky pact is seen as an obstacle


The sale of BT Sport promises upside for BT Group PLC (LSE:BT.A) shareholders as the market gives the telecoms only limited credit for the sports broadcasting business, according to UBS.

A report in the Financial Times on Tuesday said BT was in advanced talks with DAZN, a streaming service sometimes referred to as ‘the Netflix of sport’, which could acquire BT Sport in a deal pitched “in the region of hundreds of millions of pounds”.

“We think this could add a modest amount of upside to the BT share price and lead to a more focused communications business,” UBS analyst Polo Tang said in a note.

The analyst added: “We think consensus has factored in limited value for BT Sport and we estimate every +GBP100m achieved for BT Sport would add +1p to the BT share price.”

Tang cautions, however, that a pact between BT and Sky could be an obstacle to DAZN.

In 2018, after a previous period of rivalry, BT and Sky arrived at a sort of co-dependent arrangement that was necessary due to Sky being the biggest external customer for its Open Reach business and BT’s need to bundle Sky TV subscriptions through its broadband + TV packages.

The reciprocal content agreement has been s instrumental in helping reduce bidding tension for key sports rights, Tang noted, but it gave each party a number of specific rights.

DAZN’s acquisition of BT Sport would likely require Sky’s approval, according to the analyst, as the transaction could have a multitude of ramifications.

“From a Sky perspective, it is not clear whether it would be happy having a new competitor in the UK market (DAZN outbid Sky in Italy for the domestic Serie A rights),” the analyst said.

“Therefore, there could be a risk that Sky withdraws its content from BT or that the financial terms of the Now TV change. Either scenario creates uncertainty for the BT Consumer unit.

“Sky is also the largest external wholesale customer of Openreach and it is unclear whether Sky will seek to diversify its wholesale broadband provision and partner with Virgin Media (NASDAQ:VMED) O2 – see our note looking at the maths behind cable wholesale/a fibre JV (link).”

UBS rates BT Group as a ‘sell’ with a 130p price target, versus a prevailing market price of 160p.


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