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Investment bank Morgan Stanley is raising its advice to clients as to the broadcasters future prospect as an investment case from “equal weight” to “overweight”. Additionally, the bank says that Sky will continue to add multiple revenue streams over the next few years.
The bank says that it expects Sky to shortly increase prices (they have been ‘frozen’ for the past two years), with subscribers receiving their price increase letters in July. Morgan Stanley say that the upcoming English Premier League (EPL) football rights now look less worrying for BSkyB, with many potential challengers dropping out of the bidding process. The bank expects the EPL rights to again be won by Sky but costing about £649 million p/a (currently £541 million p/a). The report expects that BSkyB’s own ‘Now TV’ product will be launched within weeks, while the BBC-backed YouView will slip to Q4. The bank also expects the ‘fit and proper’ debate to rumble on in parliament but dows not expect News Corp having to sell its Sky shares.
But the best news, as far as Morgan Stanley is concerned, is Sky’s overall prospects especially as far as non-broadcast products are concerned. The report suggests that Sky’s core TV subscriber numbers (10.3 million) are the rock upon which the rest of the empire is being built. Moreover, the 10.3 million are “recession resilient”. Add in the 3.3 million broadband clients, as well as Sky+, HDTV, 3D and telephony add-ons, and the fact that only 31 per cent of customers are currently triple-play clients, suggests that Sky can steadily increase its multiple Revenue Generating Units (RGUs) to a spectacular 35.1 million by 2015 (currently 25.3 million at end of 2011).