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Bank: ‘Sky has unmatched content’

An 80-page report from equity analysts at Exane/BNP-Paribas delivers a glowing testament for Sky’s European businesses. The report (headlined “Fortitude”) has resulted in an upgraded “Outperform” rating on the broadcaster.

“We find Sky’s platform offers consumers unmatched content differentiation at a perceived reasonable value. We see the structural bear case as overdone. Flexible and cheaper pricing vs US peers is supportive, as is effective market segmentation. Content cost inflation will remain high but controllable,” states the bank.

Even more upbeat is the bank’s argument that “Sky can further grow the UK TV ecosystem through innovation and segmentation driving sustainable mid-single digit revenue growth and healthy EPS growth. We stand c.10 per cent ahead of FY18/19 EPS consensus.”

The comprehensive examination of Sky’s prospects states that the broadcaster is better placed than its US-based counterparts, and helped by Sky’s “cheaper and more flexible pricing and greater content differentiation limit risks from global OTT driven revenue deflation.”

The report admits that there are “widely diverging views on the company’s top-line prospects, content cost inflation trajectory, risk/reward from regulatory change and exposure to structural headwinds.”

“The structural risks of pay-tv are an inevitable and necessary part of any Sky investment case. We see two key risks for Sky. Firstly, new forms of video consumption driving increased (and global) competition could deflate the UK revenue pool. Secondly, competition, in the context of an increasing role for content in the TV ecosystem value chain, could lead to unsustainable content cost inflation. We see Sky as well placed to resist both of these,” states Exane/BNP-Paribas.

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