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. Last Updated: 07/27/2016

BSkyB In $1.48Bln Pay TV Deal

LONDON -- Rupert Murdoch's BSkyB made a long-awaited entry into Europe's biggest television market Monday when it agreed to take a 24 percent stake in Germany's KirchPayTV for 2.9 billion Deutsche marks ($1.48 billion).

KirchPayTV operates the major subscription television services in Germany and Austria through its recently merged Premiere and DF1 operations.

Under the alliance, BSkyB will pay 1 billion marks in cash and issue 78 million new BSkyB shares to KirchPayTV, valued at approximately pounds 622 million ($998 million), giving Kirch a 4.3 percent stake in the British company.

The agreement brings together media moguls Murdoch, chairman of BSkyB and News Corp., and Leo Kirch, who heads a German media empire spanning television, music and print.

BSkyB said the deal was expected to dilute earnings per share for a number of years. However, it said, the investment would enable it to benefit from the development of the German market and create long-term value for shareholders.

BSkyB sees significant potential to develop German subscription services. Germany is Europe's largest television market, with some 33 million homes, but the widespread availability of free-to-air channels has limited growth in pay television.

"It's a key strategic development for us. There are very good long term-growth prospects in that market," BSkyB Chief Executive Tony Ball said.

"There's some consolidation in the market now with Premiere and DF1 rolling into "Premiere World" and so I think it's a much more interesting investment than, perhaps, it would have been a while ago," he added.

KirchPayTV had some two million cable and satellite subscribers as of October, a 6 percent penetration of the German market.

Premiere World, a new digital multichannel service, was launched in October and has signed up some 200,000 new subscribers in its first two months.

The aim is to build on this using KirchPayTV content, including Hollywood movies, German Bundesliga soccer and Formula One motor racing.

BSkyB has used a similar diet of movies and sports rights to develop into Britain's leading pay television company over the past decade. It now has 7.9 million subscribers in Britain and Ireland.

KirchPayTV said it expected subscribers to Premiere World to climb to around 2.9 million by the end of next year and about 4 million by the end of 2002.

BSkyB and KirchGruppe said it was their plan to carry out an initial public offering of KirchPayTV shares in 2003.

BSkyB shares dipped 7 1/2 pence (12.06 cents) to 790 pence Monday, easing back after a strong run in recent weeks on speculation of a deal with Kirch plus renewed interest in the sector following a merger agreement unveiled by British television companies United News & Media PLC and Carlton Communications.

News Corp. shares had hit a record high in Sydney as analysts welcomed its planned expansion into Germany.