BSkyB numbers: “Mixed bag” or “Gaining Momentum”?
May 3, 2012
Two different views emerged following BSkyB’s May 2 set of numbers (for the 9 months to March 31st). You could take the Financial Times headline comment that Sky’s results represented a “mixed bag” for the broadcaster and quoted a US-based analyst who highlighted the “very low” net household additions and a Q2 of slower growth in TV than Virgin Media, its cable rival. One can only wonder if the normally influential FT fully realise that the UK is now a 98 per cent multichannel market. Or you could take the comments of analysts at Morgan Stanley which took a far more (“remarkable”) upbeat view of the picture at Sky. Morgan Stanley was impressed with Q3’s overall 904,000 product additions, an improvement on Q2’s 772,000 net gain. In fact, implies the bank, Sky’s prospects are sound given that only 31 per cent of Sky’s customers take their “triple play” of TV, broadband and telephony.
There’s not much doubt that BSkyB’s core TV subscriber growth is slowing. But Sky is making hay with HDTV sales, multi-room and other add-ons. Moreover, it will likely raise its monthly fee later this summer having been on a ‘price freeze’ for the past two years. As the bank’s report to clients notes Sky has passed the peak of its investment (in HDTV and broadband) and will thus enjoy increased earnings-per-share in the years ahead. The future will see an OTT service (“NowTV”) launched later this year, growing numbers for its SkyGo service (already at 2.6m).
Of course, the downside for BSkyB that a negative Ofcom report might prove catastrophic for the current News Corp 39 per cent stake. There’s a renewal of its Premier League soccer rights to worry over, as well as a Competition Commission investigation. One can almost imagine Jeremy Darroch (CEO) sighing at the latest Parliamentary shenanigans and saying “not another one”, given the long, long line of similar investigations and reports from a slew of troublesome regulators.
Darroch’s main worry now is the whole “fit and proper” debate now underway at regulator Ofcom. Morgan Stanley says: “We still think that this can be avoided either by News passing the ‘fit and proper’ test, by further reducing the links between Sky and News or setting a firewall up between the two companies. News already has an autonomous Management and Standards Committee for instance. There may be circumstances under which Ofcom finds News not to be ‘fit and proper’ which in turn might mean that News has to reduce or sell its stake. A precedent might be the requirement in the case of ITV when Ofcom insisted BSkyB’s stake was brought down from 17.8 per cent to 7.5 per cent to achieve due lack of control. This issue is likely to roll on for the rest of this year with no early decision from Ofcom.”