Sky Deutschland Slides After Announcing BaFin Finds Flaws in Statements

Sky Deutschland AG, the pay- television operator controlled by Rupert Murdoch’s News Corp., fell the most since Nov. 2 after the German financial regulator said some of its past trading statements were flawed.

Sky Deutschland shares closed 5.9 percent lower at 1.47 euros in Frankfurt trading. Late yesterday, the Unterfoehring, Germany-based business said financial regulator BaFin had found irregularities in the unprofitable company’s statements for 2007 and the first half of 2008 that could result in fines or claims for damages.

While the implications of the BaFin charges remain unclear, it is “another drop in the bucket for people to say it’s not worth it,” said Boris Boehm, who helps manage about 1 billion euros ($1.35 billion) at Aramea Asset Management in Hamburg.

News Corp., which also owns a controlling stake in British Sky Broadcasting Plc and Sky Italia in Europe, bought a 14.6 percent stake in January, 2008 in the German company that was then called Premiere AG. The New York-based media group now owns 49.9 percent of Sky Deutschland, which listed on the Frankfurt bourse in March, 2005.

Sky Deutschland yesterday said the regulator’s claims are “inapplicable” and will be legally reviewed, and have no immediate effect on its balance sheet.

The company is in the midst of a turnaround plan under Chief Executive Officer Brian Sullivan. It has a “long way to go” before becoming profitable, Sullivan said at a conference in Barcelona last week.

Accounting Norms

On Aug. 2, the company, which posted a loss in 2009, said it expects a loss before interest, taxes, depreciation and amortization in 2010 and that although 2011 will be “significantly better,” it “will still remain negative.”

According to BaFin, the pay-TV operator overstated profit as a result of incorrect accounting for the purchase of World Cup soccer broadcast rights and didn’t sufficiently point out credit risks.

At the end of 2007, the company’s value was overstated by 248.4 million euros because of inaccurate accounting for some acquisitions, the regulator said.

Sky Deutschland currently owns the broadcast rights for games in the Bundesliga, Germany’s first-tier soccer division, though not over Internet TV or on mobile devices, where Deutsche Telekom AG owns the rights.

To contact the reporters on this story: Sarah Rabil in New York at srabil@bloomberg.net; To contact the reporter on this story: Matthew Campbell in Paris at mcampbell39@bloomberg.net. To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net.

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