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BSkyB dishes out $1.6 billion to calm investors

BSkyB will hand out 1 billion pounds ($1.6 billion US) to placate investors who lost out after News Corp bowed to public fury over a hacking scandal and dropped a bid to take full control of the satellite broadcaster.

BSkyB, whose board on Thursday voted unanimously to keep James Murdoch as its chairman, will return 750 million pounds to investors with a share buy-back and a further 253 million pounds by boosting the final dividend to 14.54 pence a share.

News Corp has agreed to participate in the buyback, meaning its 39 percent stake will not change, BSkyB said. Without News Corp's participation in the process, its stake could have crept up, which would have been controversial in the current climate.

The payout was announced on Friday alongside full-year results that beat expectations for sales and profits, although a slowdown in customer additions showed the impact of the weak British consumer economy.

Shares in BSkyB have fallen over 15 percent since the News Corp bid premium evaporated and the long-simmering phone hacking case erupted this month.

Allegations of hacking at News Corp's British newspapers, in particular reports that journalists accessed the voicemails of murder victims, have triggered a judicial inquiry and calls from some politicians to cap Murdoch's media ownership.

This makes any renewed approach for BSkyB, whose current market value is $20 billion, a distant prospect.

BSkyB's appeal to News Corp was highlighted on Friday as the broadcaster reported a better than expected 16 percent jump in full-year revenue to almost 6.6 billion pounds and a 23 percent rise in operating profit to 1.07 billion pounds.

Analysts had expected revenues to come in at 6.45 billion pounds according to the average forecast provided by Thomson Reuters StarMine SmartEstimates, while operating profit had been seen at 1.06 billion pounds.

"Given the tough environment, we're pleased with our growth this quarter," BSkyB chief executive Jeremy Darroch told journalists on a conference call.

In a sign that its subscribers may be feeling the pinch as the British economy struggles, the company said average revenue per user (ARPU) dipped to 539 pounds per year at the end of the fourth quarter from a rate of 544 pounds in the third.

BSkyB said a technical tax issue was largely to blame for the drop, but its number of TV customers rose by just 40,000, well below the expected 60,000, taking the total TV customer base to 10.2 million.

BSkyB has already frozen subscription prices until next year, and Darroch said he expected the consumer environment to remain difficult. Britain's economy barely grew between April and June, according to figures released this week.

Analysts said revenues and profits were above their expectations but some saw the weak customer numbers as cause for concern. A few said the buyback, while welcome, was smaller than expected.

The dividend lifts BSkyB's payout for the full year by 20 percent to 23.28 pence per share, creating a total dividend pot of over 400 million pounds of which News Corp, as 39 percent shareholder in BSkyB, will get about 160 million pounds.

News Corp has seen its stock fall more than 10 percent on fears of reputational damage to the wider group, wiping billions of dollars off its market value and shaking Murdoch senior's grip on the media group.

As well as derailing News Corp's planned buyout of BSkyB, the scandal forced Rupert Murdoch to shut down the 168-year-old News of the World tabloid, ended the careers of two top policemen and rocked the British political establishment.

Asked why BSkyB's board had decided to keep James Murdoch as chairman while investigations by police, a top judge and a parliamentary committee are under way, Darroch said: "It's not for me or for Sky to preach as to the outcome of those."

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