£1bn German hit for BSkyB

BRITISH Sky Broadcasting has written off the entire value of its 22% stake in loss-making German broadcaster KirchPayTV, costing it almost £1bn.

Sky also hinted there could be trouble ahead with debt-laden customer NTL. Sky said that in view of the cable company's vast debt and corporate restructuring it was 'keeping its trading relationship with NTL under close review'.

The £985m write-off comes as World Cup broadcast rights owner Kirch struggles to cope with an estimated £4bn debt mountain. Kirch's representative on the Sky board, Dieter Hahn, resigned from the company on Wednesday. Sky is 36% owned by media mogul Rupert Murdoch's News Corp.

Sky chief executive Tony Ball said he had been unable to assess whether Kirch had funds in place to repay Sky for its initial e1.3bn (£800m) investment plus interest if the group exercises a put option to sell its stake back to the ailing German group this October.

The market, though, celebrated Sky's decision not to wade further into its loss-making German affiliate and this, combined with impressive new Sky subscriber numbers, lifted the shares 24p to 726p.

Ball said KirchPayTV lacked a viable business plan and continued to miss targets and a decision to write-down the full £985m value of the stake on its books was sensible. 'We are trying to understand as best we can whether or not they have got any funds to be able to repay us if we do exercise the put in October.' He said the company would exercise the put, which will ratchet up the pressure on Kirch, because 'we want to get our fair value'.

Otherwise, half-year numbers showed Sky continues to attract vast numbers of new subscribers in Britain. A further 218,000 new customers signed up in the three months to 31 December, taking the total of residential subscribers to Sky to 5.72m. Average revenue per user (Arpu) also spiked higher, up 11% to £331, helping core earnings rise 43% to £111m.

Analysts said the numbers were at the top end of their targets. Group turnover rose to £1.32bn from £1.05bn and operating profits before write-downs rose 39% to £70m.

However, the Kirch-related write-off, coupled with a £60m write-down against the declining value of stakes the group owns in football clubs, sent the BSkyB pre-tax loss for the period spiralling to £1.25bn compared with a £260m deficit a year ago.