(Corrects format of cross reference in first bullet point)
* For more Reuters BUY OR SELL stories click on
* Bears see risks from Bundesliga auction, capital increase
* Bulls see risks priced in
By Maria Sheahan
FRANKFURT, Jan 3 A bidding war over rights
to show top-flight German soccer league matches could prove
risky for Sky Deutschland.
The German pay-TV broadcaster's stock has lost about a
quarter of its value over the past three months on concern that
a battle with Deutsche Telekom for Bundesliga rights
could hurt profit and that it may need a capital increase soon.
The Bundesliga is Sky Deutschland's main draw.
While bears see the risks as too big to make Sky Deutschland
a worthwhile investment at the moment, more bulls are emerging
who say that talk of the risk from a rights bidding war is
overdone, and that Sky Deutschland's operating performance has
become more solid.
Royal Bank of Scotland analysts raised their recommendation
on Sky Deutschland stock to "buy" from "hold" on Tuesday, saying
they expect the outcome of both the Bundesliga auction and any
capital increase to be satisfactory, helping its stock recover.
They also said innovations such as high definition TV and 3D
were helping Sky Deutschland, in which News Corp holds
a 49.9 percent stake, to gain traction in Germany.
UBS affirmed its "buy" recommendation on Sky Deutschland,
saying it expects that the company's business was robust in the
fourth quarter and that Deutsche Telekom will bid only for a
minority of Bundesliga rights.
"If Deutsche Telekom has high ambitions for its Entertain
Sat service... we believe it would be cheaper to buy Sky
Deutschland with all its rights and established subscriber base
rather than pay 300 million euros or more for the Bundesliga
rights," UBS said in a note.
Credit Suisse cut its recommendation on Sky Deutschland
stock to "underperform" from "neutral" three weeks ago, saying
competition from Deutsche Telekom in the Bundesliga auction
could increase the price of these rights, meaning it would take
longer than expected for Sky Deutschland to reach breakeven.
"The main reason why Deutsche Telekom might choose to be
disruptive is simply that exclusive live Bundesliga rights would
significantly improve the differentiation of its triple play
offering, particularly versus cable," it said, cutting its
target price on the stock to 1 euro from 2.50 euros.
It said it expects Sky Deutschland to have to pay 300
million euros for rights to the 2013/14 Bundesliga season, 9
percent more than before, and 320 million euros for 2014/15.
Sky Deutschland has said it expects to report a 2011 core
loss of between 145 million and 175 million euros and has said
it will break even when its subscriber base grows to 3.0-3.2
million from 2.9 million at the end of September.
German soccer league DFL is due to announce details of the
bidding structure and rules of the Bundesliga tender in the
second half of January.
($1 = 0.7703 euros)
(Editing by Jodie Ginsberg)