Horizon darker for BSkyB

JAMES Murdoch was always going to have a tough fight proving to the City that he was the right person to run BSkyB. But he could never have guessed how bloody it would be.

Murdoch's confession that the growth in subscriber numbers is slowing and that heavy spending will be required to bring the company's infrastructure up to scratch was greeted in the City like a cold bath.

The shares were ruthlessly sold off, plunging 19% on the day, and raising questions about whether the 31-year-old Murdoch is really the best person to be running Britain's trend-setting satellite broadcaster.

Certainly, the younger Murdoch cannot be blamed for the company's woes after less than a year in the job.

All the signs are that his predecessor Tony Ball, who walked away with an enormous non-compete fee of £10m, was running the company for quick returns and not for the longer term. But investors who have loyally backed BSkyB, despite concerns about its corporate governance, will be deeply disappointed.

BSkyB shares have been valued as one of the few hi-tech expansion companies to emerge from the dotcom meltdown in good shape.

The theory was that over the next few years it would generate billions of pounds cash for investors and might even link with the Star satellite network in the Far East and DirectTV in the US to create a global satellite giant.

Now its ambitions are more prosaic. The company has to spend £450m improving its technology platform, modernising call centres, acquiring new premises and improving production values.

As a result of this and the slower than expected subscriber growth, profits could fall short of expectations through to 2007.

It seemed for a time as though BSkyB was going to be the only successful player to emerge from Britain's highly-competitive television market.

Now it looks like just another player. The BBC's Freeview has proved a formidable rival.

The restructuring of cable operators Telewest and NTL means it faces competitors that are not laden with debt.

Moreover, it is trying to expand into a British television market where disillusion has set in, as seen in the sharp decline in viewer figures at ITV - where shares have plunged to their lowest level since the Granada/Carlton merger.

After the drama of last year in the BSkyB and ITV boardrooms one might have expected a period of calm. Not any longer.

Fresh questions are likely to be asked about the wisdom of the father-son combination at BSkyB. And Charles Allen at ITV may find that his luck is finally running out.

Barclays lift

EUROPEAN banks continue to dismiss the idea of cross-border takeovers in the wake of Santander's bid for Abbey.

But that is not the way it is looking to the London stock market. The Abbey takeover and the possibility that others might join the chase has sent a shiver of excitement through the banking sector.

In latest trading it is Barclays, which will produce its interim results today, that is the centre of attention. In a surge of late buying the stock climbed 2% - putting it among the biggest risers - and reversing earlier losses.

The focus of attention was speculation of a bid from Citigroup or Bank of America, which is understood to have held talks with Barclays earlier this year.

Barclays has until now feigned disinterest, arguing that it is competing globally on several fronts through Barclaycard, its investment banking arm Barclays Capital and fund manager Barclays Global Investors, which is now really starting to throw off cash.

Bank of America is thought to be the most likely of the US banks to dip its toes into Britain because it is coming close to regulatory limits as far as expansion in its key domestic markets are concerned.

It may well be that the Santander bid for Abbey has brought home to the international banking community just how cheap some of Britain's domestic banks are, compared to Continental rivals.

Matt Barrett will have to extract a good price if he is not to be seen as selling the brand he repaired down the river.

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