STOCKS NEWS EUROPE-BSkyB tops FTSE fallers after Macquarie cut

BSkyB (LSE: BSY.L - news) drops 2.3 percent to lead FTSE 100 fallers after Macquarie downgrades the firm on concerns a forthcoming auction for rights to show Champions League football could hit earnings, traders say.

The entry of BT (LSE: BT-A.L - news) into the pay-TV market has put pressure on BSkyB, the dominant player in the UK market, and with BT flush with 75 million pounds ($121.25 million) after agreeing a deal to show its channels on Virgin Media, Macquarie says there is a high chance BT will be active in the auction.

Macquarie says it expects a 70 percent in the cost to buy the rights to show the Champions League in 2015/2016, based on the most recent winning bid to show English Premier League football, which would knock BSkyB's 2016 estimated earnings by 4 percent.

"With limited upside from current share price levels, potential for negative sentiment coming from another aggressive rights auction, and risk in the coming quarters that BT begins to impact BSY's broadband growth as marketing levels are sustained, we see 5 percent downside," analysts at Macquarie write in a note.

Despite the cut in rating, the analysts maintain their target price of 900 pence. While this is below the current price of 929 pence, they remain structurally positive on BSkyB in the longer term.

"We believe UK Pay TV remains affordable and BSY's position within premium content should allow it to continue to pass on programming inflation to the UK consumer," the note says.

"Given its pricing power, we continue to believe Sky will be the winner within the UK home environment. However, having had an Outperform rating since initiation in June 2009, we are taking a more cautious near-term approach."

($1 = 0.6186 British pounds)

Reuters messaging rm://alistair.smout.thomsonreuters.com@reuters.net