Pipex Communications Discussion

BSkyB throws down internet gauntlet
Evening Standard
21 October 2005
JAMES MURDOCH today thrust BSkyB back into the forefront of the communications revolution with a £211m knockout bid for broadband internet group Easynet.



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The 175p-a-share bid was far higher than anyone expected, signalling that the BSkyB chief executive shares father Rupert's view of the broadcasting's future and wants no interference from rival bidders.


The offer is at a staggering 81% premium to Easynet's share price a week ago, before suggestions of the takeover first appeared in the weekend Press. But BSkyB can easily afford the £211m take-out price, having just raised £1bn through a series of bond issues.


Easynet has already placed its broadband kit inside 232 BT exchanges and plans to raise that to 350, giving BSkyB potential access to 5.8m homes. Broadband would give it eventual access to the 2m - out of 24m - UK homes which cannot receive a Sky signal.


'Today's offer reflects the exciting opportunities that now exist to combine quality entertainment with significant highspeed connections,' James Murdoch said.


'Entertainment is the core of Sky's success. We see value for families in moving well beyond just another triple play to offer a new level of connected entertainment and communications.'


But he made clear that his ambitions run much wider, describing broadband as the fastest growing sector of the UK communications market and throwing down a gauntlet to BT. Sky would now own 'key parts of a national network, giving it control over the quality and availability of services to customers,' he said.


Easynet admitted receiving a bid approach from an undisclosed party on Monday. Its shares jumped 22% to 117½p on that news and climbed further to 127p by last night's close.


The BSkyB bid's most cited potential competitors have their own agendas. Cable & Wireless has had trouble bedding down last year's broadband purchase, Bulldog, which was until this week the focus of a customer services inquiry by Ofcom. Wanadoo, the France Telecomowned internet provider which took over Freeserve, announced plans to enter Easynet's market earlier this week.


If Murdoch wants to expand his broadband base further, the next obvious takeover target would be Pipex, which like Easynet has access to BT exchanges. It took over Freedom to Surf for £10m this week to lift its consumer base from 215,000 to 255,000, making it the fifth largest consumer broadband group in the UK. It is valued at just short of £200 million.