Sky share price down, secures Premier League rights for £4.2 billion

Sky Plc kept the best Premier League soccer rights during the latest action, but managed to do so by launching a record bid, sending its shares 5% down during early trading on Wednesday.

Britains pay-TV company agreed to pay £4.2 billion over three years for the exclusive right to broadcast live soccer matches from 2016 to 2019. The amount represents an 83% increase compared to Skys current deal.

During the auction, ended Tuesday, the company purchased the rights to 126 live games per season over the three-year period, or the maximum allowed.

While rival BT, which has been trying to beef up its sports portfolio to challenge Sky for subscribers, won to right to 42 games for £960, 30% more than its previous bid, but significantly less compared to Sky.

Overall, the auction raised £5.14 billion versus the £3.02 billion that the companies paid in 2012 for the rights over the 2013-2016 period.

In the latest auction, the Premier League offered five packages each containing 28 matches per season and two packages consisting of 14 matches.

Under the deal, Sky will pay £1.39 billion per year in order to broadcast ten more live matches compared to its current contract with the Premier League.

However, many analysts disagreed with the substantial increase, which reflected in a 5% fall of Skys shares.

And while rival BT received just four more games a season compared to its existing deal, its shares edged up around 3%. BT also said it was considering its “financial discipline” when placing a bid in the auction.

Sky said its plans to reduce its annual costs by an additional £200 million, outlining efforts to offset the higher price. The new plan follows the acquisition of Sky Deutschland and Sky Italy, after which the company pledged to cut costs by £200 million.

“We went into the Premier League auction with a clear objective and are pleased to have secured the rights that we wanted,” said Chief Executive Jeremy Darroch, while adding that Skys strong performance and its clear plan can support the significant increase.

Sky gained 0.21% on Tuesday and closed at GBX 954.00 in London. On Wednesday the stock dropped 2.10% to GBX 934.00 at 13:01 GMT, marking a one-year increase of 3.83%. The company is valued at £16.37 billion.

According to the Financial Times, the 25 analysts offering 12-month price targets for Sky have a median target of GBX 975.00, with a high estimate of GBX 1 200 and a low estimate of GBX 610.00. The median estimate represents a 2.20% increase from the last closing price.