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Sky’s ‘Capital Markets Day’ examined

Last week Sky delivered a somewhat ‘light’ Q1 results statement that was much criticised by the market given that many of its usual headline numbers on DTH subscriber growth (or fall) and Churn data was missing. Sky said a week ago that Q1 trading was “slower” although price increases had helped drive revenues to a 5 per cent y-o-y growth.

In place of the ‘light’ set of results numbers Sky held a Capital Markets Day (CMD) on October 21st, where analysts could hear from each of the broadcaster’s three businesses (UK, Germany and Italy), and get a better feel as to what ‘Sky Europe’ is doing, and planning.

Top of the list was firm news that Sky is looking to seize a “substantial” slice of the £15 billion (€16.8bn) UK cellular market. Its market offering would launch next week on October 31st and Sky Mobile wold launch by year-end.

Analysts at investment bank Exane-BNP/Paribas described the CMD as “much anticipated” and summed up the day’s presentations as “bullish”. However, there were some harsh comments from Sky on its own performance, not least describing Sky Deutschland’s poor performance as being due to management missteps.  Despite this Sky’s overall plan saw significant opportunities in Europe. The bank’s report said it remained “cautious” on Sky’s involvement in Europe, but reiterated its “Outperform” advice to investors.

A detailed examination by Deutsche Bank focussed in part on the complete SkyQ position, and where Sky now owned the new boxes. The bank reminds investors that under accounting rules this ownership has to be capitalised and then depreciation of the asset.  “The obvious point here is that what has changed is the falling prices on SkyQ equipment. The company has highlighted that take-up has also been stronger than expected. However, there is a valid claim that Sky had communicated to the market that SkyQ was being positioned as a premium offer, part of the segmentation strategy at the product launch which was only at end January. It had not offered any indication that it was considering such a change.”

Deutsche Bank holds to its ‘BUY’ recommendation.

Sky’s share price, already under pressure, fell back a further 4 per cent on October 20th.

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