BT Pays $1.5 Billion to Keep Champions League Soccer in U.K.

(Bloomberg) -- BT Group Plc will spend 1.18 billion pounds ($1.45 billion) to hold on to broadcast rights for Champions League soccer in the U.K., agreeing to a 32 percent price increase to secure the future of its pay-TV business.

Britain's former telephone monopoly will pay 394 million pounds a year for three seasons ending in 2020-2021, BT said in a statement on Monday. The company, which took the rights from sports-TV powerhouse Sky Plc in 2013, was previously paying 299 million pounds.

“We're clearly very pleased to have secured these rights for the next three years,” John Petter, the chief executive officer of BT's consumer business, said on a call with journalists. The addition of double-header nights with live matches at both 6 p.m. and 8 p.m. means 35 percent more broadcasting slots for BT, he said. “We're paying more, but we've got a huge amount more for it.''

With the renewal, BT strengthens the biggest draw for its pay-TV business and notches a victory over Sky and other rivals bidding in the auction. The win follows a tough year during which the telecommunications company faced an accounting scandal in Italy and a slowdown in its government and corporate outsourcing divisions, while carrying on a battle with U.K. regulator Ofcom over its networks business.

‘Rather Reassuring'

“While we challenge the return on investment of the media strategy, the news is rather reassuring,” Stephane Beyazian, an analyst at Raymond James in London, said in an email. European games remain “rather affordable” versus English games at 1.7 billion pounds a year, he said, and the increased price BT is paying isn't significant, even if it means the company can't meet cost-cutting targets, he said.

A Sky spokesman declined to comment.

The annual Champions League competition is the most prestigious tournament in club soccer, bringing together 32 top-ranked teams from across Europe. The deal also includes the Europa League contest, which usually features teams that narrowly miss out on Champions League qualification, including some that won their domestic cup competitions.

BT will have exclusive rights to all live games, highlights and in-match clips. The company said the customer base it gained with the purchase of wireless carrier EE last year will help it drive revenue.

Plans to show clips and weekly highlights on social media may partly answer the pressure from Union of European Football Associations sponsors to increase the Champions League's visibility. Finals for both tournaments will be shown for free on social media, BT said. Champions League sponsors including Heineken NV had urged UEFA to include a greater commitment to broadcasting free-to-air games.

"I believe one game at least should be on public television," Heineken's head of global sponsorships, Hans Erik Tuijt, told Bloomberg News in January, when the beer maker renewed its UEFA marketing deal through 2021. “I am a big advocate to get solid reach, otherwise you won't remain relevant.”

Cost, Benefit

While BT's sports strategy has faced some skepticism from analysts worried about the high costs putting pressure on its dividend, BT Sport is also credited with helping the company retain broadband subscribers.

The proposition isn't only about traditional pay-TV viewers, but also about generating revenue on wholesale distribution of sports, from pubs and clubs and from advertising, Petter said. The deal doesn't change BT's broader outlook or guidance and will be entirely funded by free cash flow from BT's consumer division, he said.

BT shares rose 0.2 percent to 334.70 pence at 9:32 a.m. in London. The stock is down 9 percent this year.

--With assistance from Joe Mayes and Tariq Panja

To contact the reporter on this story: Rebecca Penty in London at rpenty@bloomberg.net.

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Ville Heiskanen