The market response on BSkyB’s quarterly numbers, released this morning, is highly favourable. Morgan Stanley’s comments were typical, saying that despite market fears of new competition “TV adds continued to grow with 20,000 net additions (Morgan Stanley’s forecast was 10,000). This puts into perspective recent concerns that Sky might suffer a fall in net adds as seen with Scandinavian counterpart MTG. Indeed, the strength of Sky’s platform position and premium TV offering is reinforced by another 21,000 Multiroom adds, 125,000 HD adds and 2.8 million Sky Go users. Churn in Q1 at 10.9 per cent was also the lowest for four years.”
As usual BSkyB had under-promised and over-delivered with BSkyB’s numbers beating expectations at both the operating and financial level, added the bank’s speedy report on today’s numbers.
One area saw Sky suffering, which was in its advertising numbers, down 9.5 per cent on the same period last year, and not helped by the slew of high-profile free-to-air events which took place during the quarter.
BSkyB will have its AGM today (November 1st) and will declare that it has bought in for cancellation a total of £724 million-worth of its own shares, and shareholders will be given the option to vote on another £500 million of buy-backs.
Morgan Stanley says there are three broad implications from the Sky results:
1) BSkyB appears to be safely on target for reasonably demanding full year EPS growth expectations (+16 per cent) with operational numbers showing slower but robust growth.
2) The company has demonstrated the resilience of demand for its premium TV products even through the period of the launch of YouView and a series of major free to air sporting events.
3) Sky has continued to strengthen its position with further content renewals (cricket, European Rugby, Warner Bros ) and product innovation (Catch up TV, a new 2TB Sky+ box and now 2.8 million SkyGo users as well as the introduction of Now TV. With TV adds still growing it looks well set in a period when IPTV competition will increase.
One other highlight additional to all the above: BSkyB is now the UK’s third-largest broadband provider, overtaking rival TalkTalk’s (4.04m) subscribers. Sky has 4.1 million. British Telecom stands at 6.3 million, while Virgin Media has 4.2 million. In other words unless Virgin enjoys a remarkable growth of the next few quarter-years Sky is on track to pass Virgin and move into the UK’s Number 2 broadband slot. Not bad for a satellite operator!