Record subscibers for Austar pay TV

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SYDNEY – A year of double digital growth to reach a record 601,126 subscribers for Australian pay TV operator Austar United Communications resulted from a drop in entry level pricing, more flexible programming packages, stronger investment in sales and marketing, and the addition of key sports properties, CEO John Porter said as he announced the company's annual financial results Wednesday.

Porter said the growth in subscribers had fuelled an 11% increase in revenues and a 31% increase in profits, with earnings growth expected to continue to accelerate in 2007.

But that growth doesn't seem to be attracting suitors to the company as the Australian media sector consolidates ahead of changes to media ownership laws this year.

Austar, which operates in regional and rural Australia with a footprint of 2.4 million homes, reported an increase in profit before interest and tax to AUS$84.2 million ($64.8 million) while revenues grew to AUS$502 million ($400 million) for the year to Dec. 31.

Operating expenses increased 18% to AUS$134.5 million ($103 million), as a result of increased marketing and more aggressive subscriber acquisitions but the company's gross margin grew 14% to AUS$276 million ($212 million).

"The flow through from our subscriber growth initiatives should see an acceleration of earnings growth through 2007," Porter predicted.

Austar also grew its "share of wallet" with average revenue per subscriber (ARPU) increasing from AUS$72.20 ($55.60) per subscriber per month in 2005 to $76.08 ($58.58) at the end of 2006.

New subscriptions have also flowed from a deal signed last month with Foxtel and the Seven and Ten networks to share broadcast rights to Australia's largest football competition, the Australian Football League.. That deal gives Austar up to six live games a week in some of its markets, adding marketing impetus. In the two weeks since the deal was signed, Austar sales have risen from 2,500 a week up to 3,800.

Pay TV viewership and ratings have also increased 10% last year across the sector, while free-to-air viewing remained flat.

"2006 was the transition to being a true mass market product and a time to get critical mass (of subscribers). We have moved from being a luxury item to a discretionary one and now a utility in the home".

Porter has previously said the company is targeting 30% penetration, with analysts saying they believe that can be reached by 2010.

He said that 2007 will see a refocused emphasis on cost management and the "opportunity to harvest investments made during 2006."

That includes the launch of its personal digital recorder (PDR) its branding MyStar, which Austar has set for the first half of the year.

Despite a successful twelve months Austar has not been part of the current flurry of mergers and acquisitions in the Australian media taking place ahead of a loosening of ownership laws this year.

While the company is 53.4%owned by Denver-based Liberty Global Inc., Porter said he had not discussed a possible sale of Austar with Liberty Global chairman John Malone. However he said that if an offer was made that was a "massive accretive transaction I think they'd take a look at it."

"I've been amazed at how Austar has flown under the radar. We see the next three years as extremely well positioned for growth but no one's that interested. I don't get it but we're happy and our shareholders are happy," Porter said.
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