BSkyB strong profit from broadband successes

BSkyB has released its unaudited results for the nine months ending 31 March 2012, showing that revenue is up 5% to £5.1 billion.

Sky now boasts the largest base of triple play customers in Britain at 3.2 million, up 24% year-on-year. It also had its strongest ever quarter for home communications with 702,000 net broadband, telephony and line rental product additions.

Its strong performance with its broadband and telephony services made up for the fact that it is now adding fewer new customers to its main television service. In Q3, it added 15,000 new customers to the TV service, which although in line with expectations, is far below the 51,000 added a year earlier.

Developments in its TV service during the past quarter include the addition of the Sky Sports F1 HD channel, on demand content now being available to over five million Sky TV homes and NOW TV on track for launch in H1 2012, widening the availability of Sky content on broadband-connected devices.

Commenting on the financial report, Jeremy Darroch, chief executive of BSkyB, said: “We have made a good start to 2012. In what remains a tough economic environment, strong and consistent execution of our plan has delivered good growth across our product range. We have grown revenues by 5% while holding prices flat for customers and delivered a record nine-month operating profit of £908 million alongside 24% growth in earnings per share. The decision to focus our marketing on home communications has paid off with our fastest quarter of growth since launch and confirmation that Sky is now Britain’s favourite triple play provider.

“More households are choosing Sky and taking more products from us because we’re constantly looking to improve the quality and value that we offer. Already in 2012, we’ve launched an entirely new channel dedicated to Formula 1, given millions of households access to a huge choice of on demand TV and made our market-leading broadband service even better with the launch of our fibre products and free out-of-home WiFi. Looking ahead, we will continue to improve our service for all Sky customers as we believe this is the best way to build a larger business and continue to increase returns for shareholders.”

According to Bank of America Merrill Lynch, the Q3 customer additions of 78, 000 were below BofAML’s forecast of 110,000. Home communication products saw strong growth, with 212k broadband adds vs BofAML forecast of 175k; 220k voice vs BofAML’s forecast of 160k), supported by introductory discounts, while additions of HD at 159k were also ahead of forecast (106k), benefitting from the F1 channel launch.

Total churn of 10.1% was slightly above BofAML’s forecast of 9.9%. On a like for like basis, they estimate TV churn increased from 10.4% last year to c10.9%. ARPU grew 1.7%, or £9 year on year, to £546. However, BofAML estimate’s that ARPU should have increased by £34 given increased product penetration of the base, implying a spin down and discounting to attract/retain subscribers.

It has been a turbulent time within the Murdoch empire of late. The closure of the News of the World and a combination of the Leveson enquiry, Operation Weeting (police investigation into alleged phone-hacking at News of the World), Operation Elveden (police investigation into inappropriate payments to officers), Operation Tuleta (police investigation into allegations of computer hacking) and several civil actions by alleged hacking victims have shone a bright spotlight on the operations of News Corp, which owns a 39% stake in BSkyB. In early April, James Murdoch stepped down as BSkyB chairman and yesterday Rupert Murdoch faced harsh criticism of his and his company’s conduct by a UK parliamentary committee.