Sky Deutschland Makes Q3 Loss

Numbers improve but total subscriber base still small.

COLOGNE, Germany -- News Corp.’s German Sky isn’t falling but it is still far from sunny and clear. Pay-TV operation Sky Deutschland lost another 89 million Euros ($123 million) in the third quarter and its debt load -- now at 202 million Euros ($278 million) continues to grow. News Corp. holds 49.9% of Sky Deutschland.

Company CEO Brian Sullivan is taking a softly-softly approach to the struggling German pay broadcaster, eschewing grand profit and subscriber forecasts in favor of building on the fundamentals of customer satisfaction and revenue per subscriber. Judged by those metrics, Sky looks good. The company added another 45,000 subscribers in Q3, reduced the churn rate (the rate at which new customers cancel their subscriptions) to under 19% and boosted Sky’s average revenue per user to 29.45 Euros ($40.50), its highest ever.

“We have a good level of operating momentum which we intend to maintain going forward,” Sullivan said in a conference call with journalists.

But with just 2.5 million subscribers, Sky Deutschland is still a long way from break even, to say nothing of profitability. To compare, BSkyB in the U.K., a smaller market than Germany, just passed 10 million pay-TV subscribers.

News Corp. is offering 8 billion pounds ($13 billion) for the 61% stake in BSkyB it does not already control, a deal that is currently waiting approval from British telecom regulator Ofcom. In Germany, Sullivan expects Sky to book an operating loss of between 260-280 million Euros ($358-$386 million) this year. Don’t expect a takeover bid anytime soon.