Murdoch takeover bid overshadows BSkyB 10m subscription milestone

BSKYB will strike a much bigger interim profit this week after busting the 10 million subscribers barrier last November, but it will be overshadowed by Rupert Murdoch's attempt to acquire the broadcaster.

City analysts say the odds have narrowed sharply on regulators and politicians allowing Murdoch's News Corp to buy the 61 per cent of BSkyB it does not already own.

It is believed News Corp has told Culture Minister Jeremy Hunt that it might separate Sky News from BSkyB, including a possible sale of the news channel, to address competition concerns. Another possibility, say analysts, is that an independent trust is set up to manage Sky News. Murdoch's newspapers in the UK include the Sun, News of the World and The Times.

Patrick Yau, media analyst with broker Peel Hunt, said: "The City is fixated on the Murdoch bid, what might happen, rather than the numbers this week." Murdoch's News Corp currently has a rejected 7.8 billion bid for Sky on the table that is being looked at by Culture Secretary Jeremy Hunt.

Regulator Ofcom and the rival media groups have urged Hunt to launch a full Competition Commission inquiry into the bid.

Yau said: "The ten million subscriber target at BSkyB was totemic at first because it was a definite statement of intent. But it has been out there so long now, and now everyone is concentrating on News Corp.

"I expect the deal to be done as there are a number of levers Murdoch could press, such as ring-fencing the newsroom from the rest of Sky by carrying other news services on the Sky network."

Opponents of the deal have been quick to say an independent trust for Sky News would not go far enough, arguing that similar trustee boards were established at The Times and Wall Street Journal when they were bought by News Corp.

Many analysts also dismiss the idea of a sale of the lossmaking Sky News, because of a shortage of potential buyers.

Yau said Sky should have made more progress on the new subscriber front, "having benefited from Q2 taking in the Christmas period with all the group's heavy advertising in that period".

Yau is forecasting an adjusted interim pre-tax profit at the group of 543 million against 389m in the same period last year - up nearly 40 per cent. He predicts revenues will come in at about 3.05bn compared with 2.87bn.

Another analyst said that he expected Sky to reveal this Thursday that its churn rates - the number of subscribers quitting the broadcaster - would be "stable" at about 11 per cent , and that the company had also made "healthy progress" in areas like broadband and high-definition TV.

But he added: "However, it's pretty irrelevant in the current takeover situation with News Corp, with very little business being done in the shares."

A note from Numis Securities says: "We expect the group to report strong interims and forecast Q2 net additions of 153,000 and (first half] profit before tax of 455m (up 30 per cent]. This follows on from another strong operational performance in Q1, in which gross additions, churn and broadband all impressed.

"Meanwhile, revenue growth remains robust as the group continues to sell more products to more customers, and with investment in high definition/broadband having peaked, returns are accelerating markedly."