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Shares in satcaster British Sky Broadcasting soared Wednesday to their highest level since 2004 as CEO James Murdoch unveiled subscriber rates ahead of expectations at 8.5 million and average revenue per subscriber that was up to £406 ($807) per household from £394 at the same stage a year ago.
Despite a dip in pretax profit to £388 million ($771.6 million), from £425 million last year, and an increase in churn rates from 11.1% to an all-time high of 13.7%, the markets welcomed the results by sending shares up 7.8% to £6.30 ($12.53), the first time the stock has traded above the £6 level since 2004.
“We believe results show decisive evidence of the benefits of the business transformation realized over the past three years,” Daniel Kirwen of UBS Securities said.
Revenue for the nine-month period ending March 31 stood at £3.4 billion ($6.8 billion), compared with £3.1 billion, while earnings before interest, tax, depreciation and amortization — including a one-off £56 million ($111.5 million) exceptional item — were down at £750 million ($1.5 billion) when compared with £756 million at the nine-month stage last year.
The satcaster announced 340,000 gross additions and 51,000 net additions, well ahead of analyst predictions, with the net figure representing a year-over-year increase of 28%.
During the three-month period since December, an additional 199,000 homes took the SkyPlus personal video recording service, which now has 2.2 million subscribers, and 60,000 customers added high definition services, taking the total to 244,000.
The number of Sky Broadband customers more than doubled from 193,000 in the previous quarter to 457,000.
Speaking during a conference call with investors, Murdoch said that the results vindicated Sky’s strategic decision to shed low-rate customers and focus on higher-income subscriber homes, despite the increased churn rates. He cautioned that churn rates will continue to be high during the next one or two quarters.
BSkyB said it has increased spending on marketing during the period and spent £9 million ($17.9 million) fighting a legal case with cable rival Virgin Media.
Murdoch said there were “no new developments” in the case against Virgin, which resulted in Sky’s basic channels being dropped by 3.5 million Virgin Media homes.
“We continue to believe that a negotiated settlement is the best outcome for consumers,” he said.
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