Sky Germany out-performs market

Sky Deutschland is Germany’s best-performing media stock this year, up 68 per cent, and helped by the consensus view that by about this time next year the company will have achieved its all-important target of 3 million subs and thus move into cashflow positive territory.  HDTV has proven to be the cornerstone of Sky-D’s success, with CEO Brian Sullivan looking to end this year with at least 30 HD channels.

More hard information will emerge next week, May 12, when Sullivan talks about his latest Q1 trading results. Meanwhile, investment bankers Morgan Stanley say they are optimistic that Sky Deutschland’s quarterly net subs additions will hit the 50,000 mark. Q2 net additions should be around 40,000 says the bank. The recent pattern has been: Q3 last year, 44,000 and Q4 last year, 132,000. Few expect the pre-Christmas quarter to be matched, but the introduction in March of a new €149 HDTV-PVR, plus a zero cost ‘basic’ HD box, cannot do any harm to subscriber growth.

Besides, at last HDTV seems to be taking off in Germany. Sky has confirmed it passed the ‘1 million HD subs’ mark on February 28, “suggesting strong demand for HD during Q1,” says Morgan Stanley, which adds that there’s also good anecdotal evidence of a strong HD take-up from Sky’s cable competitors, helped by having Sky’s channels available on their platforms. There’s also a clue in that Capex spend by Sky-D has risen in Q1, and that – says the bank’s report – suggests they are buying plenty of boxes!

The bank states: “The new PVR boxes should stimulate demand throughout Q2. Sky-D’s counterpart KDG has observed that it is selling PVRs in ‘droves’. The benefit of this should help to stimulate growth in a quarter that has tended to be held back by subscribers rolling off the Bundesliga service at the end of the season in May. We met with KDG recently and they described HD as a ‘game- changer in the pay TV market’ … ‘customers are willing to pay for HD’. KDG surmises that this is due to the proliferation of large flat screen TVs in Germany (there are 14 million-plus HD-ready TVs in Germany). KDG sees Sky-D as being ‘clearly more aggressive on the marketing front.’

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