UEFA has blown the starting whistle on the next bidding round for broadcast rights for Champions League football, according to reports. This will have massive implications for UK telco BT (BT.A) and its share price.

Word on the street suggests that the formal bidding process will start in March 2017, just weeks after BT announced that it will start charging its broadband customers for football coverage from August.

BT currently owns exclusive rights to broadcast live Champions League games in the UK, having shelled-out £299m per season on a three-year deal that runs to May 2018. That added to its English Premier League deal, where it has rights over one of the six available broadcast packages.

Why is it important?

Since BT first broke Sky's (SKY) virtual monopoly on live football in the UK its consumer division has been transformed.

Prior to the June 2013 launch of BT Sport, BT was losing circa 200,000 consumers per quarter, according to research by analysts at broker Jefferies.

Most of those individuals appeared to transfer to Sky, which at the time was adding broadband customers at an almost identical rate.

How did BT fight back?

Breaking Sky's stranglehold had an immediate impact on BT's position in the market.

Customer losses were slashed by two-thirds. Adding Champions League to the BT Sport line-up in September 2015 reversed subscriber erosion and limited Sky as a force in the UK broadband market.

'Football is central to BT Sport's appeal and the platform would be left with a threadbare line-up,' say Jefferies' analysts if it losses the Champion's League.

It would be left with 42 Premier League games a season, plus Scottish Premier League, FA Cup games and a long tail of other niche content.

Expensive problem

Going all out to secure its near-term football broadcasting future will be very costly.

UEFA recently predicted that forthcoming auctions will raise €3.2bn worldwide, or about 30% up on last time.

BT previously justified the price paid in several ways: capping customer churn, growing its overall broadband subscriber base, upping TV advertising rates, and gradually passing price increases on to customers.

bt_sport_CL

But Sky could yet throw a huge spanner in the works. The satellite broadcaster is in the middle of a full takeover by Fox, Rupert Murdoch's US broadcast business, and assuming the deal goes ahead it could substantially bolster Sky's funding power, even in the face of hefty £6.2bn of net debt (as of 30 June 2016).

'Despite relatively high leverage of three-times net debt-to-EBITDA at 31 December 2016, Sky has the means to bid aggressively for UK Champions League rights,' believes Jefferies.

This will also be helped by limited competition more recently for domestic broadcast rights to Germany's Bundesliga and Italy's Serie A.

Find out how to deal online from £1.50 in a SIPP, ISA or Dealing account. AJBell logo

Issue Date: 23 Jan 2017