Video services

Sky Boasts Record Customer Growth

The UK's Sky appears to have overcome any shareholder concern about rising programming costs, signing up nearly a quarter of a million new customers across its five European markets during the first three months of the year.

The figure of 242,000 net additions was 70% higher than in the first three months of 2014 and fueled a 5% year-on-year increase in nine-month revenues at the pay-TV giant and broadband operator, to £8.45 billion ($12.6 billion).

Sky 's preliminary results also showed a 20% rise in operating profit, to £1.03 billion ($1.54 billion), which represented the first time the company has broken through the £1 billion ($1.49 billion) mark in a nine-month period.

Investors swooned over the figures, sending Sky's share price up by more than 5% in London during afternoon trading on Tuesday.

Success came across all of the company's markets, with the UK and Irish operations boasting the highest rate of customer growth in the January-to-March period for 11 years.

Having attracted 127,000 new customers during the quarter -- 41% more than in the first three months of 2014 -- Sky had around 11.88 million retail customers in the UK and Ireland by the end of March.

It also added 103,000 retail customers in Germany and Austria, 61% more than in the same part of 2013, to give it 4.23 million altogether.

In Italy, meanwhile, the company gained 12,000 customers, bringing its total to 4.75 million at the end of March and almost reversing the customer losses that took place between October 2013 and September 2014, when the customer base shrank from 4.76 million to 4.7 million.

Average monthly revenue per user increased slightly in the UK and Ireland from €46 ($49.40) in the first three months of 2014 to €47 ($50.47), but dipped in Germany and Austria from €36 ($38.66) to €35 ($37.59) over the same period. In Italy, the figure remained static at €43 ($46.18).

Want to know more about pay-TV subscriber trends? Check out our dedicated video services content channel here on Light Reading.

The results appeared to vindicate Sky's strategy of bidding heavily for rights to screen exclusive sports content, including soccer matches across Europe's top-flight domestic leagues.

The company attracted criticism in February after spending a whopping £4.176 billion ($6.23 billion at today's exchange rate) on rights to screen English Premier League matches between 2016 and 2019 -- 83% more than it paid for its existing contract. (See BT, Sky Splash £5.1B on Premier League Rights.)

Forced to see off rival bidding from telecom incumbent BT Group plc (NYSE: BT; London: BTA), Sky immediately indicated it would have to reduce other costs to help fund the rights acquisition.

In its latest results statement, Sky attributed the big improvement in operating profit partly to "good control over [the] cost base."

It also claimed to have grown its broadband share across the UK and Ireland, adding 100,000 customers to give it more than 5.5 million altogether.

Following its takeover of Telefónica UK Ltd. 's broadband business in 2013, Sky has established itself as the UK's second-biggest broadband business, behind BT but ahead of cable operator Virgin Media Inc. (Nasdaq: VMED).

BT, Virgin and number-four player TalkTalk have yet to report their own results for the January-to-March quarter.

Even so, there has been concern that Sky may find itself on the back foot in coming months with BT re-entering the mobile market and offering the full spectrum of communications services to British consumers.

Thanks to a deal it signed with Telefónica UK at the start of the year, Sky will be in a position to offer its own mobile services from next year, when BT hopes to complete a £12.5 billion ($18.66 billion at today's exchange rate) takeover of UK mobile operator EE . (See Eurobites: Sky Goes Mobile With O2 and BT Locks Down £12.5B EE Takeover Deal.)

Sky should also receive a boost from its recent tie-up with Telecom Italia (TIM) , under which the operator is offering Sky content over broadband connections.

In a joint statement, Sky Italia CEO Andrea Zappia said the deal would allow Sky to extend its service into homes that cannot receive a satellite service because of building restrictions. (See Telecom Italia Makes Quad-Play Move With Sky.)

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

Ariella 4/22/2015 | 4:06:02 PM
numbers Wow, 70% is a lot! I do hope they warn their shareholders not to expect that rate to continue indefinitely.
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