Company Watch - BSkyB

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COMPANY WATCH

The company that I have chosen that is in the Ftse 100 is BSkyB and the rival company to BSkyB that I have chosen is Cable & Wireless (C & W). I will be monitoring these companies over four weeks and recording and analysing their share prices as well as the Ftse 100. I will be using The Times newspaper to obtain share prices and business information regarding the companies and the Ftse.

HISTORY OF BSKYB

In 1989 Sky introduced satellite television to the UK with four channels. By 1990 sky reached one million homes and merged with British Satellite Broadcasting (BSB) to form BSkyB. In 1991 Sky and BSB streamline their channels into five separate channels. Between 1992 and 1993 BSkyB secures exclusive rights to live FA Premier League football coverage and Sky Multi-Channels launch with a package of 14 channels at basic subscription level. In 1994 five more channels are introduced and Sky announces £13 million investment in British films including a major output deal with British Screen. Also in 1994 17% of BSkyB is floated on the UK and US Stock Exchanges.

By 1995 BSkyB enters the FTSE 100 index, six more channels are added and subscribers exceed five million. In 1996 BSkyB secure a contract for FA Premier league football until 2001 season. In 1998 Sky digital launches offering 140 channels. More than 100,000 decoders are sold in the first 30 days.

In 1999 BSkyB enters the list of world's top 250 companies. Also Sky digital is the fastest growing digital platform in Europe acquiring over 1.2 million subscribers in just 10 months and free set top digital box offer increases subscribers. In 2000 Sky receives Gold Award for outstanding contribution to television at the Royal Television Society Programme Awards and digital subscribers grow to 3 million.

In 2001 BSkyB reaches its target of 5 million subscribers and switches off its analogue signal, BSkyB also launch Sky +, Europe's first fully integrated personal television recorder. By now in 2002 Sky digital now reaches 5.7 million households which is a quarter of all British homes and has a target of 7 million digital subscribers by the end of 2003. For the first time, more people are watching multichannel television than the five traditional public service channels.

HOW BSKYB HAS FARED OVER 4 WEEK PERIOD

Articles Concerning BSkyB

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This is a preview of the whole essay

HOW BSKYB HAS FARED OVER 4 WEEK PERIOD

Articles Concerning BSkyB

Over this period the main articles for BSkyB in the news were that Dawn Airey will become the managing director of BskyB, being paid £1 million a year. Dawn Airey formerly work as the Channel Five chief executive but was seemingly joining the ITV network but was snatched over by BSkyB to operate all non-sport content at Sky. The delays by Carlton and Granada (the two main ITV companies) over her contract contributed to her decision. This will come as a major blow to ITV as well as Channel Five but will be a bonus to BskyB.

BskyB, the BBC and Crown Castle International have teamed up to launch a replacement for ITV Digital, the collapsed broadcaster. It will be called Freeview and be launched on October 30th with about 30 free-to-view channels.

The chief executive of BskyB, Tony Ball, has become one of the highest paid executives in the UK earning more than £7 million last year.

Share Prices

Over the past four weeks the Ftse 100 value has fallen but has been fluctuating up and down shown in the graph. But over the past year the value of the Ftse has decreased dramatically. On Wednesday 18th September the Ftse dropped below 4000 to 3865.4, which was its worst close since July 24th. This has been due to heavy losses by leading financial stocks and fears over war with Iraq. Also the falling UK interest rates have left British investors worried. On Friday 20th September the Ftse reached a six-year low of 3860.1 and continued to drop until Tuesday 24th September to 3671.1 which was the lowest result that I recorded over the four week period. Regarding this information the Ftse 100 has only dropped -0.023% over the four-week period. But the highest percentage change was -9.2% between Monday 16th September and Tuesday 24th September.

For BSkyB the share value has also fallen and the percentage change over the four-week period was -0.086%. The highest recorded value over this period was 569.0 on Monday 16th September and the lowest was 458.0 on Wednesday 9th October. The BSkyB graph shows a very similar shape as the Ftse 100 graph as it relies on the Ftse for changes in share prices. The BSkyB year high was 942 and the year low was 448. If I had 1000 shares in BSkyB on Monday 16th September they would be worth £5690.00 but on Friday 11th October they would be worth £5200.00, which is a £490 drop in value. Eventhough the company has had some bonuses over the period, for example the arrival of Dawn Airey into the company, the share values have dropped but BSkyB has fared reasonably well.

The value of Cable & Wireless’s shares has also dropped due to the Ftse. The percentage change over the four-week period was -0.116%, which is a higher percentage drop than BSkyB and the Ftse. The Cable & Wireless graph is also a similar shape to the Ftse upon which it relies. The highest result has been 142.5 on Monday 16th September, which is also date on which the Ftse and BSkyB is the highest, and the lowest has been 114.5 on Wednesday 25th September. If I had 1000 shares in Cable & Wireless on Monday 16th September it would be worth £1425.00 but on Friday 11th October they would be worth £1260.00, which is a £165 drop in value. There is some evidence that Cable & Wireless haven’t fared particularly well over the period. Over the period there has been articles in the news of profit warnings of Cable & Wireless and that a break-up maybe inevitable.

SWOT ANALYSIS

Strengths

BSkyB is the only digital television service available throughout the UK
BSkyB offers the most television channels, more than any other digital service.
BSkyB offers a free satellite dish and set-top box upon subscription.

Weaknesses

Competitors – NTL, Cable & Wireless.
Free-to-view digital terrestrial television requires no monthly subscription whereas Sky does.
Sky requires a satellite to be fitted.

Opportunities

BSkyB has introduced Sky + which is brand new technology that offers multi-channel viewing and recording digitally on a set-top box.
Expanding into the European market.
Expanding channel range.
The recent join of Dawn Airey to BSkyB as managing director.

Threats

Competitors are expanding their catchment area for their service.
Competitors offer other services including telephone and internet which reduces television subscription prices to customers has appeal.
Falling share values reduces the value of BskyB’s shares.
All competitors use cable so no satellite dish is required.

EVALUATION

There are numerous reasons for the falling prices of shares which have affected the Ftse, BSkyB and Cable & Wireless.

Over the past five years shares have been over valued. So now the prices of shares are falling to compensate and to revalue shares to a realistic level.

There are fears of potential wars especially with recent affairs with Iraq and fears from further terrorist activity from September 11th. Also rising oil prices has affected the prices of shares.

At the moment the American economy is in recession which affects the UK economy. There are also fears that the UK economy may follow the recession.

In the UK interest rates have been falling which has encouraged more borrowing. As a result more and more people are investing in housing which has resulted in rising property prices and falling share prices.

Overall BSkyB has fared better than Cable & Wireless. BSkyB has many opportunities for the future including further growth into Europe, BSkyB also has many advantages over the competitors. BSkyB is the biggest provider of digital multi-channel television in the UK and is growing fast with increasing numbers or subscribers. There are 6.1 million subscribers and the target of 7 million by 2003 is well on track. BSkyB make on average £347 revenue per subscriber which is up 11% and BSkyB profits have increased 20% year-on-year, which has generating positive free cash flow.