Where Lloyds Banking and British Sky Broadcasting Meet

LONDON -- BSkyB's (LSE: BSY  )  shares dropped over 6% yesterday after BT  (LSE: BT-A  )  announced it would be giving away its newly developed sports channels for free to people who bought BT broadband services.

BT has spent approximately 1 billion pounds to get the content for these channels and to get them up and running... and they are going to give them away? You bet.

BT is making an aggressive play to steal customers from Sky after the latter announced a move into broadband offerings. And since BT has nothing to lose in the sports arena, any customer they can get to switch from Sky is a win -- potentially.

The real trick will be getting them to stay and start paying for services further down the line, but that is something for later. In the now, BT's ploy threatens Sky's essential monopoly and attractive margins.

You said something about banks?
This is not dissimilar to what the large U.K. banks are likely to be facing shortly. Just as Lloyds  (LSE: LLOY  ) (NYSE: LYG  )  and RBS appear to be pulling themselves out of the financial crisis wreckage -- and, admittedly, Lloyds looks further along than RBS -- they are going to have to face a whole new set of challenges.

Or I should say, challengers. There are a lot of new names popping up in high-street banking. Tesco's offering is just gaining momentum after a delayed start as the company built out its banking IT platform. J Sainsbury has decided to take full control of its banking operations.

Then you've got private upstarts like Metro Bank and Shawbrook Bank looking to take a piece of the pie, while Lloyds struggles to repair its reputation.

Learning to share
With more players in the game, there is going to be more competition for deposits and loans, which will likely mean pressure on Lloyds' margins and profitability. If the competition is successful, it could mean lower growth, lower returns on equity, and lower dividends.

Shares of Lloyds Group have climbed nicely over the past year, and at just under book value, they still look historically cheap. Investors need to ask themselves: "Is historical performance relevant?"

With a changing competitive landscape, expecting Lloyds to rebound to what was once normal may not be realistic.

Competition is a concern for every business, but we think we've found a handful of companies that have sustainable competitive advantages that should serve investors well for years to come. We've outlined them for you in this exclusive report.

Just click here for the report -- it's free.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2423961, ~/Articles/ArticleHandler.aspx, 4/18/2014 12:12:10 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 14 hours ago Sponsored by:
DOW 16,408.54 -16.31 0.00%
S&P 500 1,864.85 2.54 0.00%
NASD 4,095.52 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

4/17/2014 11:35 AM
BSY $890.00 Up +1.50 +0.00%
British Sky Broadc… CAPS Rating: No stars
BT-A $369.50 Up +7.50 +0.00%
BT GROUP ORD 5P CAPS Rating: No stars
LLOY $74.28 Up +1.42 +0.00%
Lloyds Banking Gro… CAPS Rating: No stars
LYG $5.02 Up +0.07 +0.00%
Lloyds TSB Group CAPS Rating: ***

Advertisement