Sky Grows Subscribers, Earnings

Courtesy of Sky

The pan-European pay TV giant, in which Rupert Murdoch's 21st Century Fox owns a 39 percent stake, posts its latest results.

Pan-European pay TV giant Sky on Thursday reported its fiscal third-quarter subscriber and nine-month financial results.

The company, in which Rupert Murdoch's 21st Century Fox owns a 39 percent stake, posted nine-month operating earnings of $1.64 billion (£1.14 billion), up 12 percent. Revenue rose 5 percent.

The company, led by CEO Jeremy Darroch, signed up 177,000 new customers in the latest quarter, its fiscal third quarter, ending it with 21.7 million, up from nearly 21.5 million at the end of 2015. In the U.K. and Ireland, it added 70,000 customers and passed the milestone of 40 million products in U.K. and Irish households. In Germany and Austria, Sky added 73,000 customers, while in Italy, it added 34,000.

Sky ended its fiscal third quarter, which ran through March, with 12.35 million customers in U.K. and Ireland, 8.63 million in Italy and 7.91 million in Germany and Austria.

UBS analyst Polo Tang had said in a preview report that the fiscal third quarter is "a seasonally quieter quarter versus the second quarter." For the U.K., he had forecast 65,000 customer net adds, including 40,000 TV net adds. For Germany and Austria, he had predicted 75,000 customer net adds, while for Italy, he had estimated a 15,000 drop. 

One negative analysts highlighted was increased subscriber churn, especially in the U.K., where the firm cited less discounting, and Italy. "Interestingly, churn has seen a significant pickup in the quarter," said Liberum Capital analyst Ian Whittaker, adding that Sky in Italy felt "the impact of the loss of Champions League [soccer] rights."

He predicted that a recent Vivendi deal that gives the company a foothold in southern Europe could lead this trend to continue: "Following the Vivendi/Mediaset deal, we believe Vivendi are going to become a more significant competitor in Europe and we could see these higher churn rates persist as competition intensifies," Whittaker said.

"It's been another strong quarter for Sky," said Darroch. "Our strategy to broaden our business, expanding into new markets and customer segments, has delivered further excellent financial results."

He added: "We want to offer customers the very best TV experience, whenever and however they want to watch. With the launch of Sky Q in February, we now have three outstanding products to meet all our customers' needs. We are pleased with the early response to Sky Q, as we focus on establishing this premium product in its first market. Our approach to the connected home continues to engage customers; almost 11 million Sky households have now connected to enjoy our on-demand services including Sky Box Sets, which recently launched in both Germany and Italy."

Darroch also discussed the importance of content. "Our content offering is getting bigger and better," he said. "With Sky originals, we are creating unique and high-quality shows such as Stan Lee's Lucky Man, which drew record audiences. We have many more exciting original productions to look forward to with our first production in Germany, Babylon Berlin, shortly to begin filming, and we have just announced our most ambitious production slate in the U.K., featuring world-class talent such as Idris Elba, Tim Roth and Christina Hendricks in six major new shows."

And the CEO touted a recently struck new deal with one of the Hollywood majors. "Strengthening our movies offer, we secured our first group-wide movie deal with Sony this quarter, and for families we launched our new Sky Kids App, which will be rolled out in all territories."