* 750 mln pound share buyback, 253 mln special dividend
* Full-year sales, profits beat expectations
* Customer additions slow
* CEO says won't prejudge Murdoch, outcome of investigations
* Shares close down 0.6 percent
(Adds closing share price)
By Paul Hoskins and Georgina Prodhan
LONDON, July 29 BSkyB will hand out 1
billion pounds ($1.6 billion) to placate investors who lost out
when a phone-hacking and police corruption scandal forced News
Corp to drop its bid for the satellite broadcaster.
BSkyB, whose board on Thursday voted unanimously to keep the
embattled James Murdoch as its chairman, will return 750 million
pounds to investors with a share buy-back and a further 253
million via a 20 percent boost to the final dividend.
News Corp agreed to take part in the buyback to prevent its
stake from creeping above its current 39 percent, BSkyB said on
Friday. Any increase would have been politically contentious
while the phone-hacking scandal hangs over the company.
"We view the share buyback announcement as positive,
particularly given News Corp have agreed to participate," one of
BSkyB's 10 largest shareholders told Reuters.
"The 750 million pounds quantum is sensible and allows a
balanced approach between returning cash to shareholders while
maintaining financial flexibility to pursue growth
opportunities," the fund manager said.
BSkyB also released full-year results that beat expectations
for sales and profits, though a slowdown in customer additions
showed the impact of economic weakness and perhaps the fact that
management attention had been focused on the failed bid.
Shares in BSykB initially rose slightly on the news but
closed down 0.6 percent at 712 pence, broadly in line with the
"Ordinarily, one might expect a buyback of this size,
equivalent to 7 pct of share capital, to lead to both decent
upgrades and a decent share price reaction," said Alex DeGroote,
media analyst at brokerage Panmure Gordon.
"Our sense is that Sky faces a challenging 2012 in terms of
its core business. The company gave an impressive performance in
2010/11, but the management that delivered it probably didn't
expect the plc to remain a going concern in FY12," he said.
As well as being a consolation prize for investors and for
News Corp -- which will make 390 million pounds instead of the
hoped-for consolidation of BSkyB's substantial cash flows -- the
move may signal a shift at BSkyB if growth begins to slow.
"While there's still concern about growth, they may be more
open to share buybacks, and that potentially helps News Corp as
well," said Ian Whittaker, media analyst at Liberum Capital.
Shares in BSkyB have fallen by more than 15 percent since
the News Corp bid premium evaporated and the long-simmering
phone-hacking case erupted into a national outrage this month.
Allegations of hacking at a title since closed by News
International, News Corp's British newspapers unit, in
particular reports that journalists accessed the voicemails of
murder victims, have triggered a judicial inquiry and calls from
some politicians to cap Murdoch's media ownership.
There have also been allegations of payments to police
officers for information and overly close links between News
International personnel and senior police officers. Two of
Britain's most senior officers have already handed in their
This makes any renewed approach for BSkyB, whose current
market value is $20 billion, a distant prospect.
STRONG CASH FLOW
BSkyB's appeal to News Corp was highlighted as the
broadcaster reported a 51 percent jump in adjusted free cash
flow to 869 million pounds on the back of a 19 percent increase
in core profit to 1.4 billion.
The broadcaster, which offers broadband and telephone
services in addition to its core premium sports, movies and
drama pay-TV offerings, increased revenue by 16 percent to 6.6
billion pounds, beating analysts' forecasts.
"Given the tough environment, we're pleased with our growth
this quarter," BSkyB Chief Executive Jeremy Darroch told
journalists on a conference call.
In a sign that its subscribers may be feeling the pinch as
the British economy struggles, the company said average revenue
per user (ARPU) dipped to 539 pounds per year at the end of the
fourth quarter from a rate of 544 pounds in the third.
BSkyB said a technical issue related to less frequent
publishing of a magazine was largely to blame, but its number of
TV customers rose by just 40,000, well below the expected
60,000, taking the total TV customer base to 10.2 million.
Rival Virgin Media , which sells TV and
telephone services alongside Britain's fastest broadband, this
week said it had lost 36,000 cable customers but extracted
higher spending from the ones who remained.
BSkyB has frozen subscription prices until next year, and
Darroch said he expected the consumer environment to remain
difficult. Britain's economy barely grew between April and June,
according to figures released this week.
Nonetheless, Darroch said BSkyB remained focused on organic
growth, and the company said it had won rights to broadcast
Formula One racing in a partnership deal with Britain's public
service broadcaster, the BBC .
The dividend lifts BSkyB's payout for the full year by 20
percent to 23.28p per share, creating a total dividend pot of
405 million pounds of which News Corp, as 39 percent shareholder
in BSkyB, will get about 160 million.
News Corp has seen its stock fall more than 10 percent on
fears of reputational damage to the wider group, wiping billions
of dollars off its market value and shaking Rupert Murdoch's
grip on the media group.
As well as derailing the planned buyout of BSkyB, the
scandal forced Murdoch Snr to shut the 168-year-old News of the
World tabloid at the heart of the scandal and rocked the British
Asked on Friday why BSkyB's board had decided to keep James
Murdoch as chairman while investigations by police, a top judge
and a parliamentary committee continue, Darroch said: "It's not
for me or for Sky to preach as to the outcome of those."
James Murdoch, who is head of News Corp's international
operations, and is based in Wapping, the HQ of the UK newspaper
operations, has already appeared before the British Parliament's
Culture, Media and Sport Committee to give evidence on the phone
On Friday the committee said he would probably be recalled
to clarify details following claims his evidence was "mistaken".
($1 = 0.612 British Pounds)
(Additional reporting by Sinead Cruise; Editing by Chris
Wickham and Will Waterman)