Sky UK Unveils New Sky Q TV Upgrades as Comcast Bids £22.1bn UPDATE

Sky (Sky Broadband) has announced that their premium Sky Q TV platform will, starting from March 2018, be enhanced by multiple new features (e.g. HDR content, Spotify, improved voice controls etc.). On top of that Comcast has moved to counter Murdoch with a £22.1bn takeover bid for Sky.

Overall Sky intends to make several big changes and improvements to their Sky Q platform and we’ll cut to the chase by summarising these below. Headline features include support for Spotify, a new widescreen User Unterface (UI) and the amount of Ultra HD (4K) content available will double this year.

The Sky Q Changes

· Spotify will launch on Sky Q in the UK and Ireland. Customers will be able to use the ad-supported Spotify service for free, or log in to their premium account. Along with Sky Soundbox, customers will be able to augment their existing Sky Q audio services, including the ability to stream to TV speakers via AirPlay or Bluetooth.

· The amount of Ultra HD (4K) content available will double this year.

· Voice functionality extended to give personalised recommendations (e.g. “show movies for me“) and app specific requests (e.g. “what is the weather today?“).

· More personalised experience throughout the user interface, with use of deeper Machine Learning and detailed algorithms based on a household’s viewing habits, including reflecting times of day, ensuring customers are served content most relevant to them.

· The Sports section will be personalised to reflect customer’s favourite sports and teams, seamlessly integrating with the Sky Sports app, to help customers know what’s on and what the latest relevant news is.

· Introduction of a brand new widescreen User Interface (UI) which will help customers navigate a mixture of personalised and curated sections of content. A newly designed homepage including ‘Most Recent Recordings’ and ‘Favourite Channels’ along with editorially curated selections of Box Sets, Movies, and Catch-Up TV, will aim to make everything both quicker and easier than before.

· The viewing experience will be upgraded with the launch of HDR (High Dynamic Range), to give customers with 4K televisions the most stunning definition and clarity available. At present it’s unclear how much HDR supporting content will actually be available.

· New kids mode – integrated with the kids app – will aim to give parents peace of mind over what their children can access and watch.

· Customers with multiple devices will be able to stream Sky content on the Sky Q app on even more devices at the same time.

· A Sky Q app will also become available on smart TVs and third-party devices, allowing even more people to enjoy the Sky Q experience.

Sky’s Group Chief Executive, Jeremy Darroch, said:”Sky Q keeps getting better and better. With this suite of innovation, we are taking the user experience to another level – and we won’t stop there. We will continue enhancing Sky Q and finding new ways to bring customers more of what they love, and in so doing ensure we appeal to every household and every one in that household. With Spotify joining our Sky Q platform, we are giving customers the best home entertainment experience in Europe.”

Meanwhile Rupert Murdoch’s (21st Century Fox) on-going £18.5bn effort to acquire Sky has been dealt a blow after US cable TV giant Comcast tabled a more attractive £22.1bn takeover bid for Sky. The move could be more politically and economically acceptable than Murdoch’s offer, which might just swing the pendulum in Comcast’s favour. However Fox and Sky have already signed an agreement and this may complicate matters.

Brian L. Roberts, Chairman and CEO of Comcast, said:

“We think Sky is an outstanding company. It has 23 million customers, leading positions in the UK, Italy and Germany, and is a consistent innovator in its use of technology to deliver its customers a great experience. Sky has a proud record of investment in news and programming. It has great people and a very strong and capable management team.

We think that Sky would be very valuable to us as we look to expand our presence internationally. The Superior Cash Proposal values each Sky share at £12.50 in cash – a significant premium to the 21CF price currently recommended. We would like to own the whole of Sky and we will be looking to acquire over 50% of the Sky shares. We are confident that we will be able to receive the necessary regulatory approvals. If successful, the acquisition will enhance our free cash flow per share in the first year.

The UK is and will remain a great place to do business. We already have a strong presence in London and Comcast intends to use Sky as a platform for our growth in Europe. We intend to maintain and enhance Sky’s business. Adding Sky to the Comcast family of businesses will increase our international revenues from 9% to 25%. We believe that there are significant opportunities for growth by combining these businesses. We are continually seeing that customers’ demands and expectations are evolving rapidly as technology enables new products and services. By combining the content, technology expertise and investment of Comcast with the market leading businesses and talent within Sky, we will create a very exciting platform for growth across Europe.

We hold the management of Sky in high regard and would welcome the opportunity to meet with them and the independent directors of Sky to discuss our plans for the business, particularly with respect to maintaining Sky’s strong platform in the UK. In due course, we very much hope that the independent directors will recommend our proposal.”

The proposal (£12.50 per share) represents a premium of approximately 16% versus the current 21st Century Fox offer price of £10.75 for each Sky Share. The full market announcement can be found here.

In the USA Comcast also sells a cable (DOCSIS) and FTTH ultrafast broadband service via their Xfinity brand.

UPDATE 12:36pm

Sky has now responded to issue the following statement, which is largely following standard procedure.

Sky’s Statement

The Independent Committee of Sky notes today’s announcement from Comcast regarding a possible all cash offer for Sky at £12.50 per share (the “Possible Offer”).

The Independent Directors of Sky are mindful of their fiduciary duties and their obligations under the UK Takeover Code.

Since no firm offer has been made at this point, shareholders are advised to take no action.

A further announcement will be made as and when appropriate.