Murdoch poised for victory in British satellite TV battle Duel with rival ends in merger

November 11, 1990|By Gilbert A. Lewthwaite | Gilbert A. Lewthwaite,London Bureau of The Sun

London -- International media tycoon Rupert Murdoch has emerged the likeliest winner at the end of a duel between his Sky Television and its rival British Satellite Broadcasting, ending a multibillion-dollar war for viewers.

The joint company will operate as British Sky Broadcasting. Broadcasting programs to subscribers via 2-foot-wide aerial dishes, it is forecast to become a real competitor to the four terrestrial channels of the BBC and ITV.

British Satellite officials, in a meeting with media analysts, reportedly projected dividends of almost $800 million a year by the turn of the century.

A profitable satellite television system in Britain could affect Sky Cable, a similar U.S. venture announced with fanfare in February, which also involves Mr. Murdoch. But many hurdles still face Mr. Murdoch and satellite television in Britain, despite the Nov. 2 merger.

Mr. Murdoch's concentration of British media ownership will undergo regulatory scrutiny. And U.S. observers report widespread speculation that Mr. Murdoch could be forced to sell some of his assets to reduce his debts.

Sky Cable claims to reach 1.66 million of the more than 20 million households in the United Kingdom and Ireland -- 1 million with receiving dishes, the rest through cable or communal systems.

British Satellite launched its five channels in April this year. It claims 750,000 subscribers, but only about one in five has a satellite dish.

Mr. Murdoch's Sky Television launched its four channels in February 1989. It immediately began draining resources from his other companies. The losses were particularly alarming because Murdoch was already under heavy debt pressure. The looming recession in Britain also made any sudden spurt in sluggish subscriptions to the satellite service unlikely.

Mr. Murdoch, who already owns a third of Britain's daily newspapers -- the Times, the Sun, Today, the Sunday Times and the News of The World -- owns 50 percent of the new television company through his News International PLC.

His steady accrual of media power has drawn the attention of government regulators. Legislation to limit newspaper companies from owning more than 20 percent of a television franchise is pending, and government officials are considering whether to recommend referring the television deal to the Monopolies and Mergers Commission.

The Labor Party's deputy leader, Roy Hattersley, said that future Labor government would order an investigation into overlapping newspaper and television ownership "with the intention of breaking up unacceptable concentrations of power."

Mr. Murdoch dismissed his critics. "The fact is," he said, "they hate the idea of a competitive society, and it is only companies like ours that have the guts and strength to risk everything in building a competitor the existing monopoly" of the BBC and ITV.

Britain's Independent Broadcasting Authority, the oversight agency for the airwaves, also is investigating whether the merger offends the new Broadcasting Act, which was passed by Parliament just 24 hours before the television deal was &r announced. The new law stipulates that a non-domestic satellite operator cannot have an interest in a domestic satellite company, but the statute is not effective until 1993.

The Australian-born Mr. Murdoch is a U.S. citizen, and Sky Television is broadcast through a satellite system based in Luxembourg.

The merger ends a debilitating competition that cost the two companies a total of almost $2.5 billion and was burdening them with combined losses estimated at $5 million a week.

The new service eventually will use Sky Television technology and will operate from that company's west London headquarters. Most of the staff cuts are expected to come from British Satellite's work force.

The systems are incompatible. Sky Television broadcasts through the Astra satellite system, and the signal is picked up throughout Europe on round dishes. British Satellite broadcasts via a United Kingdom satellite for the domestic market only, and its signal is picked up on "squarials," small, square dishes.

The combined company will use both systems to broadcast its five channels initially but eventually will switch over to the Astra system. Original British Satellite subscribers will be offered free technology to replace their outmoded dishes.

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