BSkyB: “Business as normal”

BSkyB’s board meeting this week might have a few extra items on its agenda, not least whether Chairman James Murdoch should carry on sitting at the head of the table. But as far as its financial numbers are concerned (due to be released early on Friday morning), it is very much “business as usual” which is the term used in a detailed report from investment bankers Morgan Stanley.

The bank’s report states that with around 80 per cent of BSkyB’s income coming from subscriptions and they are proving to be remarkably resilient. It suggests that top-line subscriber growth should be “robust” at about 4 per cent per annum, with improving margins and compound revenue growth over the next three years, running at about 7.3 per cent per annum.

Morgan Stanley says that with only 26 per cent of Sky subscribers taking its triple-play offering, there’s plenty of headroom for growth, plus natural ARPU growth from the shift to HDTV.

However, there are risks, not least the continuing challenges from regulators, and in particular Sky’s wholesale strategy for movie and sports channels. There’s also a very real risk that one regulator or another might force a divestment or restructuring of News Corp’s 39 per cent stake in BSkyB.

The bank also suggests that BSkyB could suffer from spin-down as a result of recessionary pressures which could lead to subscribers trading down, and a slower net addition to its numbers. Next year will see the launch of on-line service You View, which might lead to some unbundling by subscribers.

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