All the recent attention to BSkyB has had to do with the proposed News Corporation takeover and its impact on the share price. For the BSkyB business itself, we think the troubles of News International have so far had very little effect, as there is nothing to link the pay-TV operator Sky directly with the News of the World, the epicentre of the current judicial and political storm. Nothing, that is, apart from the Murdoch factor, which certainly seemed to do no harm to sales of the final News of the World edition on Sunday 10 July which topped 4.5 million.

In our view a bigger concern for BSkyB is the impact of the current squeeze on consumer spending. This may best explain the press release of 8 July, which announced both the launch of Sky Go as an added TV Anywhere extra to Sky customers at no extra cost to their existing packages and the freezing of package prices until 31 August 2012.

Ofcom is entitled to consider whether News Corp is ‘fit and proper’ to own BSkyB’s channels, not the company itself

Precedent suggests that Ofcom will only be able to conclude that News Corp is unfit if the acquiring company’s directors are found guilty of a serious criminal offence. Suspicions, allegations and mistrust are absolutely not enough

We believe that Ofcom will only be able to assess whether News Corp is ‘fit and proper’ to own Sky channels after the transaction is concluded

France’s Canal+ has won the rights to show two Ligue 1 games a week from 2012 to 2016 for €420 million per year. A surprise (and skilful) bid by Qatar’s Al Jazeera won two lower profile games for €90 million per year

We believe Al Jazeera could, at best, reach EBITDA break even by the end of the four year licence. Merging with CFoot and Orange sport would help

No bidders met the reserve price for the package of lower tier six games, but Canal+ would be well advised to bid in order to avoid the strategic risk of leaving competitors with most Ligue 1 games. Without this package, Canal+ faces limited subscriber and ARPU erosion balanced by €45 million savings on the current licence

We expect Jeremy Hunt to announce the fine details of the proposal to give editorial independence to Sky News within the next few days. After a perfunctory further consultation, the regulatory barriers to the purchase of BSkyB by News Corp will be cleared in July

News Corp will need to reach agreement with BSkyB over price and only then can proceed with its proposal for a ‘scheme of agreement’ to take over the company. We expect the purchase to be concluded by about the middle of October if BSkyB cooperates, but early in 2012 if News Corp is forced to use a takeover bid

News Corp can acquire BSkyB while any judicial review of Mr Hunt’s decision is taking place but it runs the very small risk of having to unwind the transaction

In the attached note we present our analysis of BSkyB revenue and cost trends over the five years 2006 - 2010 and our forecasts to 2015

More than a year has passed since News Corp proposed to buy the 61% of BSkyB that it did not already own. With clearance of the proposed transaction now imminent, this note examins the strategic value of the BSkyB acquisition to News Corp. In examining the business prospects of BSkyB it concludes the business is embarked on a high growth trajectory in revenues and operating profits over the next three to four years, putting BSkyB in a good position to face more challenging competitive conditions in the future

We have revised our central case forecasts of total year-on-year NAR (Net Advertising Revenue) growth in 2011 from 5% to 1%, as the advertising outlook has progressively worsened since mid April

2011 is marked by a further round of consolidation in airtime sales and a number of noteworthy channel and programming changes

Channel 4 Sales, and above all its flagship Channel 4, appears the most challenged of the leading market players, while we expect the ITV group to continue to outperform the NAR market in the rest of 2011 and 2012

Sky’s revamped model has delivered a sharp reduction in churn and higher gross additions, accelerating subscriber growth. Rising high definition take-up is sustaining the increase in average revenue per user

Business prospects are improving on stronger private consumption and a carriage deal for HD versions of German commercial channels

Our forecasts have been revised upwards and we now expect faster improvement in cash flow, though it will still be negative in 2013

Sky is managing to sustain strong underlying growth in the face of a challenging retail environment, in which it has maintained strong growth rates in quarterly gross TV additions and home communications products

Revenues were slightly down on the previous quarter, but this was mainly due to the January increase in VAT and seasonal variations in advertising spend, while the results confirmed the company’s strong discretionary control over costs

As the period of peak product additions passes, we can look forward to a strong growth trajectory in operating profits over the next three years

VMed’s Q1 results were respectable, helped by strong revenue growth at Virgin Media Business

However, growth in volume, ARPU and OCF, while still positive, is trending downwards, and we retain our expectation of more limited progress in 2011 compared to 2010

VMed’s strategy is coherent; the issue is the pace at which initiatives such as high speed broadband, service convergence and footprint expansion can be converted into cash flow growth

The concept of demerging Sky News is evidently a plausible one and we consider it very unlikely that critics of the deal will have much success undermining its appropriateness as a protection of plurality

However, it is harder to judge whether the proposed implementation secures the channel’s independence as fully and clearly as it might

We outline a series of issues that the information supplied for the public consultation does not appear to deal with. We note, in particular, that the proposed undertakings seem not to block Rupert Murdoch, or members of his family, from buying the 60.9% of the shares in Sky News not to be held by News Corp