Blue Sky thinking

A Triple Platinum mega-value reader calls my attention to an interesting article in The Guardian today about the potential use of proceeds from BSkyB's impending GBP1bn bond issue. I started off the year by writing a very long report on Sky which focused centrally on the lack of a broadband return path and inherent inability to provide on-demand content. Clearly unbundling is the way to go in the current market, and I generally agree with the takeover candidates mentioned in the article (two of which are in my long-running list of inevitable M&A targets).

I'm not so sure about the likelihood of HomeChoice being on the short list. HomeChoice has a great product, to be sure, but there would undoubtedly be duplication of effort in areas as basic as the set-top box, EPG, and content (Sky content is already available via HomeChoice in any event). If an interactive pipe is what they're after, then I think Pipex is probably the best bet at this point. Intriguingly, it also has a nationwide WiMAX license, which may also hold some appeal longer term (recall Chase Carey of sister company DirecTV's statements on broadband wireless back in the Q2 results). This would also give Sky an expanded mobile presence in future iterations of the technology. Pipex is up 12% so far this month, but still only has a market cap of GBP200m, so a bond issue of the size being discussed would easily cover it and the cost of accelerated unbundling (GBP100 - 200m according to the article). This makes me wonder what Premiere may be thinking in the German market.