UBS concerned for BT and Sky as Premier League auction heads for second round

Concerns about overpaying for Premier League (EPL) broadcast rights were weighing on shares BT and Sky on Monday, amid reports that the auction could be heading for a second round and with a third bidder.The two companies are going head-to-head in the battle for the 2016/2017 to 2018/2019 seasons, but as bidding continues there is speculation that a new party has emerged and could displace current provider BT."At first glance, news that the bidding is ongoing may be negative for sentiment for both Sky and BT as investors worry about escalating EPL costs," said analysts at UBS."Several press reports suggest that Discovery (owner of Eurosport) has entered the fray and this may be causing the complication in the auction process. Specifically, we think there may be scope for Discovery to replace BT rather than Sky."Bidding kicked off on Friday but press reports have suggested that there was no conclusion, with no statement as of yet from EPL. As such, bidding could go to a second round with new bids due on Monday and a result announced on Wednesday.The rights are split into seven packages and blind bids are submitted for each package. "When the bidding moves to the next round, no indication is given as to where each of the bidders stands," UBS explained.Sky currently holds five out of the seven packages, paying £760m a season, while BT spends £245m a season on the remaining two packages.Going into the auction, UBS said it had expected Sky to retain the majority of the rights but for costs to rise 45%. However, with bidding potential entering a second round, the bank said that BT may be "constrained" by a number of issues, namely its pending £12.5bn purchase of EE and Ofcom's 'margin squeeze' rules.At the same time, UBS also said that "Discovery could be a potential partner for Sky on the EPL rights rather than a new competitor".BT was down 1.7% at 435.7p by 10:35, while Sky fell 0.8% to 957.5p.