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European pay TV giant Sky on Thursday reported improved financials for its first fiscal quarter and said it signed up more customers than in the year-ago period, helped by the latest season of HBO hit drama Game of Thrones.
Rupert Murdoch’s 21st Century Fox owns a 39-percent stake in Sky, led by CEO Jeremy Darroch, and in December struck a deal to take full control. The U.K. government has been reviewing the deal and recently asked the Competition and Markets Authority (CMA) to do a more in-depth review of the deal’s effects on media plurality and editorial standards.
Sky’s earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter that ended on Sept. 30 rose 11 percent to £582 million.
The company signed up 160,000 new customers in the latest quarter, compared with 134,000 in the year-ago period. The company said that improved performance was “helped by strong campaigns in all markets around Game of Thrones 7,” which airs on its Sky Atlantic channel.
“We grew well in Germany and Austria, adding 90,000 new customers, up 84 percent and added 70,000, up 100 percent, in the U.K. and Ireland,” Sky said. “In Italy, our customer base remained flat versus the fourth quarter.”
Darroch said: “We’ve had a strong start to our new financial year with good revenue growth and excellent profit growth as investments we’ve made come through.”
He continued: “Against the backdrop of pressure on consumer spending and lower spend on U.K. television advertising, we were particularly pleased with our own EBITDA growth of 15 percent in our established business. We continue to see good demand for our products and services with 51 percent more new customers joining Sky than a year ago; we surpassed the milestone of 60 million subscription products; and pay-as-you-go sports and entertainment buys grew by 12 percent to 9.6 million.”
The company didn’t comment much on the Fox deal, which Britain’s Competition and Markets Authority is reviewing. It highlighted though that the CMA “has a statutory deadline of March 6, 2018, to send its report to the U.K. Secretary of State for Digital, Culture, Media and Sport, following her decision to refer the offer for in-depth review.”
And Sky confirmed that with the deal not closing by the end of 2017, Fox will have to pay a special dividend of 10 pence per Sky share in February.
Darroch on Thursday also again touted Sky’s content spending. “Our investment onscreen to broaden our offering is delivering with viewing to Sky channels up 10 percent year on year,” he said. “Within this, the first series of our home-grown drama Riviera achieved 20 million downloads, becoming our highest-ever rated original commission, and Game of Thrones has become the most-watched series ever on Sky. In its eleventh season in Italy, X Factor has launched to record audiences and we’re pleased with the continued progress of Sky 1 in Germany and Austria, where the first episode of Masterchef series two achieved an audience of more than double last year.”
The Sky CEO called the company’s European production business “a key priority for growth.” He explained: “This year we are investing 25 percent more in Sky Originals programming [as previously unveiled] across our territories to continue to broaden our offering alongside showcasing the best of the U.S. These investments are delivering another strong performance with record viewing for both local and international productions and driving average customer viewing to Sky pay channels up by 10 percent.”
Liberum Capital analyst Ian Whittaker in a first reaction upgraded Sky’s stock to a “buy.” “First-quarter results look broadly healthy, and the shares have fallen back to a level, which we think do not reflect the likelihood of the Fox bid for Sky being cleared by the regulators,” he wrote. “Sky has delivered what looks like a strong operational performance with new customer growth of 70,000 in the U.K., double what they did last year.”
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