Relations between UK satellite giant BSkyB and Germany's Kirch appear close to breaking point.
Continuing losses and repeated changes of management at Premiere World, Kirch's pay-TV brand, appear to have put in doubt BSk'B's investment in the operation. With the prospect of a stockmarket flotation for KirchPayTV looking increasingly remote, BSkyB said it may sell. But it also raised doubts about Kirch's ability to buy back the stake.
In a statement which accompanied BSkyB's third quarter results, and showed losses amounting to $43m (£29m) from its 22.3% stake in KirchPayTV, it said: "Since the consideration by [BSkyB] of the business plan of KirchPayTV in July, there have been a number of strategic, operational and management changes which KirchPayTV have undertaken or plan to undertake in the future. [BSkyB] is currently seeking information from KirchPayTV to evaluate the financial effects of these changes on KirchPayTV. The carrying value of [BSkyB]'s investment in KirchPayTV may be adversely affected by such changes and in these circumstances [BSkyB]'s right to exercise a put option in respect of its stake in KirchPayTV may need to be taken into consideration. The put option becomes exercisable from October 1, 2002, if no initial public offering of KirchPayTV has occurred before then.
"If the put option is exercised, Kirch Holding would be required to pay in cash an amount equal to the cost of acquisition at the time the Group entered into the investment agreement, plus interest. Both Kirch Holding and Dr Leo Kirch are subject to contractually binding terms which preclude assets being transferred out of Kirch Holding on less than arm's length terms. However, there is no certainty that the resources of Kirch Holding will be sufficient to satisfy the put option if exercised." BSkyB paid some $1.4bn (£950m) for the stake last year.
In its own business, the UK satellite giant announced that it had amassed 5.5 million subscribers to its all digital service and in its third quarter results showed increased revenues and reduced pre-tax losses.
DTH subscribers increased by 45,000 in the quarter to 5,498,000, despite having switched off 145,000 subscriptions. Adding in 2.91 million UK cable subs and its Irish subscribers, the total increased by 148,000 to 10.2 million.
Turnover rose 23% to £643m from £520m. After its share of the results of joint ventures, the Group made a loss before taxation of $131m (£89m). Operating profit before goodwill increases by 23% to $66m (£45m). The loss after tax in the quarter was $139m (£95m).