Sky Deutschland: “Don’t panic”
April 2, 2014
On March 31st Inside Satellite wrote encouragingly about Sky Deutschland despite also reporting the dramatic fall in the broadcaster’s share price. On April 1st its share price recovered almost 6 per cent to €6.54, but still well down on the €8.13 price at the end of last year.
But more confidence came on April 2nd with a strong ‘Buy’ note to clients from investment bank Berenberg, saying that the recent price falls are “Much ado about nothing” as regards the anxieties over pressures on subscription growth at Sky Deutschland. “We believe that upcoming Q1 results will confirm the trend for solid gross additions, declining churn, and continued progress in ARPU growth. We reiterate our Buy rating and price target of €7.60,” stated Sarah Simon at the bank.
“As regards net additions, we expect year-on-year growth of 27 per cent to 54,000. Granted, this is a small quarter, so the absolute increase (12,000) is not big, but it has always been the case that Sky Deutschland’s net additions are weighted to the second half of the year. Indeed this year we expect them to be even more H2 weighted than usual, given that this is when the former LigaTotal customers are likely to switch to Sky Deutschland.”
The bank adds: “We continue to see Sky Deutschland as a rare example of structural growth in the European media sector. With low premium pay penetration in Germany, there is strong potential for growth, and, with the operational expertise and financial backing of 21st Century Fox, Sky Deutschland is well positioned to capitalise on this. We note also the benign competitive environment: a key difference versus other European pay-TV markets, which should render cost inflation in future rights less extreme.”