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BSkyB Quarterly Earnings Drop, TV Subs Grow

BSkyB CEO Jeremy Darroch Headshot - P 2012
Courtesy of BSkyB
BSkyB CEO Jeremy Darroch

UPDATED: The U.K. pay TV giant, in which Rupert Murdoch's News Corp. owns 39 percent, added 37,000 new TV subscribers in the latest period.

LONDON – U.K. pay TV giant BSkyB on Thursday reported improved a slight drop in fiscal first-quarter earnings, but stronger TV subscriber gains than in the year-ago period.

Earnings were affected by higher sports programming costs, particularly from a new deal for rights to English Premier League soccer matches whose price tag increased by 40 percent, and investments in new services. However, subscriber growth remained solid despite increasing competition from telecom giant BT, which recently launched a portfolio of sports networks that have aggressively bid for sports rights.

The company, in which Rupert Murdoch's News Corp. owns a 39 percent stake, signed up 37,000 net new TV subscribers in the latest quarter, compared with 20,000 in the same period of 2012. The TV user figure for the latest quarter included traditional pay TV subs, as well as customers of its Now TV online-only video service. Now TV has been growing, but the firm didn't disclose whether traditional pay TV subs, where growth has been slowing amid a more mature market, were also up in the latest period.

The company hasn't broken out those figures since starting to include Now TV customers in its sub data.

BSkyB said it ended September with more than 10.459 million TV users.

Quarterly revenue rose 7 percent, but operating earnings dropped fell 8 percent, and earnings per share were down 3 percent.

“We have made a very good start to the year," BSkyB CEO Jeremy Darroch said. "Strong growth across the board drove a 7 percent increase in revenues, and we added 50 percent more new subscription products than last year as customers continued to respond to the quality and value we offer. Adjusted operating profit was in line with our expectations as we invest in new services and absorb higher Premier League costs."

He cautioned though that the U.K. consumer environment "remains challenging."

UBS analyst Polo Tang said the TV subscriber gains beat the consensus expectation of 30,000. "But almost all of this growth is likely to be from the…Now TV product," he said.

BSkyB on Thursday also reported that it added 111,000 broadband users in the quarter, up from 102,000 in the year-ago period. That meant that the firm's total broadband user base crossed the 5 million milestone.

"Surprisingly, broadband net adds remained robust at 111,000 (consensus 80,000 and normal run-rate was 100,000-150,000" despite the launch of BT's new sports networks, which are free for BT broadband subscribers, Tang noted.

BSkyB added a total of 800,000 new product subscriptions across its portfolio in the latest quarter. Triple-play subscribers, meaning people who take three products from BSkyB, now account for 36 percent of the firm's total customer base, according to the company.

Concluded Tang: "Fundamentally, we believe BSkyB will survive the increased competition from BT Sports and good [subscriber adds] should reassure even if there are no significant change to financials."

The company's adjusted quarterly operating profit amounted to $455 million (£285 million). Revenue rose to $2.94 billion (£1.84 billion).

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai