A comprehensive report to clients from investment bank Berenberg and which has compiled a series of ‘price tracker’ statistics on UK content and telco aggregators, says that BSkyB is still engaged in a period of “intense promotional activity” despite such efforts normally being more subdued with the start of the football season.
“This year, however, that has not happened,” says Berenberg. “Sky has ramped up the competitive intensity with an offer of unlimited broadband (DSL) free for 12 months. This is not an entirely new promotion, but the difference this time is that it is being offered to subscribers that are not with Sky TV, and who also do not need to take Sky TV. With fibre also being offered free for six months, this is significantly more aggressive than offers we have seen in the past.”
Berenberg says that amongst the key players (BSkyB, BT, Talk Talk, Virgin Media and Plusnet) basic dual play shows that Headline prices are unchanged over the past month or two. “However, the discounting has become more aggressive, driven by Sky. Interestingly, for the first time in our monitor, Sky Broadband is now cheaper on a discounted basis without Sky TV over an 18-month period than it is with Sky TV (mainly due to the Marks & Spencer gift voucher given away with the broadband package). The discounts for TalkTalk have also both ramped up, while, in contrast, BT has now reduced its discount.”
“This late in the quarter, those that market more aggressively often do so because they have not filled their quota of subscriber adds for the quarter, while those that remove or reduce promotions do so for the opposite reason,” suggests the bank. “The current price moves suggest BT has likely added enough subscribers for the quarter, so it does not feel the need to remain as aggressive. Meanwhile, Sky and TalkTalk’s more-aggressive promoting suggests they may well both be playing catch up. Overall, though, the increased level of aggression, coupled with its longevity, is bad for the overall market, and puts at risk our thesis that H1 for BT and TalkTalk will be dominated by subdued ARPU through discounts while H2 will be boosted by the underlying price increases.”
“One of the most interesting price moves in recent months has been BT’s increase in the price of Sky Sports to £21 from £15.50. This does now include Sky Sports 5, but essentially this is the same content as was previously on Sky Sports 1 and 2. To us, this suggests: 1) the BT base currently taking Sky Sports (small) may now be more loyal to BT Sport, thus reducing the churn risk, 2) BT is now also likely paying Sky more on a retail-minus basis; and 3) BT may be testing the higher pricing points ahead of its own bidding for Premier League rights.”