LONDON (Reuters) - Britain's BSkyB (L:BSY) is launching a sports channel dedicated to European football, and is throwing in two years of free broadband, in a fresh assault on BT (L:BT) before its rival starts showing the flagship Champion's League next year.
The channel, which will be free to subscribers, brings together Sky's European football assets, including European qualifiers, Champions League and Spanish football, and adds Dutch live football.
While not offering much new content, analysts said Sky would use the new channel to sign up subscribers to its latest broadband promotion, which it said was its best to date.
Shares in BT were trading down 2.6 percent at 395.7 pence by 12.14 p.m. BST, the biggest faller in the FTSE 100 L:FTSE, while BSkyB was down 1.2 percent at 865.5 pence.
Analysts at Berenberg said they did not see the channel as a driver of customer growth or upgrades, but they regarded the aggressive broadband offering as confirmation that Sky was upping the ante against a resurgent BT.
"In our view, the plan for 'Sky Europe' indicates that management, even if not admitting it publicly, understands the UK business is under pressure," they said.
Berenberg have a "sell" rating on Sky shares.
BT has moved aggressively into sports programming to bolster its broadband services, starting by buying a package of English football Premier League rights in 2012, and later winning an auction to show all UEFA Champions League matches for three seasons from August 2015.
Mike van Dulken, head of research at Accendo Markets, said Sky's new channel was a shot across the bows for BT, whose shares have outperformed its rival's since last November's win of the exclusive Champions League rights.
"While the news might benefit Sky subscriber figures for the upcoming 2014/15 season, will free broadband for the next be enough for those footy-mad Sky punters facing the prospect of no Champions league for 2015/16?," he said.
(Reporting by Paul Sandle; editing by Tom Pfeiffer)