BSkyB could own more of Sky Deutschland than expected - CEO

By Kate Holton

LONDON (Reuters) - Britain's BSkyB (BSY.L) could end up buying more of Sky Deutschland (SKYn.DE) than originally expected, it said on Thursday, as the recent bout of broad stock market weakness makes its low-ball offer more attractive.

Britain's dominant pay-TV provider agreed in June to pay $9 billion for Rupert Murdoch's 57 percent stake in Sky Deutschland (SKYDn.DE) and all of Sky Italia to create a media powerhouse with 20 million customers.

Under stock market rules, BSkyB extended its 6.75 euros per share offer for the German business to other shareholders. But the bid was pitched at a small premium to Sky Deutschland's price before the deal and the British company said it was happy to only take the 57 percent stake.

Sky Deutschland advised minority shareholders to keep hold of their shares, but BSkyB Chief Executive Jeremy Darroch said on Thursday investors may now rethink that idea.

"I wouldn't be surprised if we get a lot more take up and I think the volatility we are seeing is probably making people reflect on that," Darroch told reporters after the company reported robust first-quarter results.

"We are very happy at 57 percent and we think we can do all the things we need to do in the business with that, and we'll see how many trade in."

Shares in Sky Deutschland were trading at 6.72 euros, still a slight discount to the BSkyB terms and possibly indicating an expectation that many holders will take up the offer. European stocks as a whole (.FTEU3) were down 0.2 percent at 1,249 by 0815 GMT, having slumped from a peak of 1,411 set in mid September.

TOUGH CONDITIONS

BSkyB has decided its future growth lies in creating a European pay-TV leader that will operate in Britain, Ireland, Germany, Austria and Italy, after encountering the toughest market conditions in its 25-year history.

After growing rapidly in the last two decades by offering premium TV channels carrying movies and sports, Sky has recently focused on selling its existing customers more services, such as additional TV products and broadband, as the number of new households signing up starts to slow.

On Thursday the group posted results for the three months to the end of September showing a record 309,000 users signing up to its Sky Go Extra service which allows subscribers to watch programmes on phones and tablet computers when away from home.

It also added 46,000 net new TV customers and 75,000 new broadband customers, helping lift adjusted operating profit by 11 percent to 316 million pounds, slightly ahead of an average forecast of 311 million from five banks and brokerages polled by Reuters.

The deal to buy the German and Italian operations is due to be completed in mid November and BSkyB said it would have a better idea of how much of the German business it would own by Nov. 6 or 7.

It said at the time of announcing the deal it was fully covered from a funding point of view if 100 percent of Sky Deutschland investors took up the offer.

(Editing by Paul Sandle and David Holmes)