BSkyB Shares Hit By Broker Worries
Shares in BSkyB tumbled yesterday after a Banc Of America Securities analyst warned that the satellite broadcaster’s customers are increasingly downgrading their subscriptions to cheaper packages.
Analyst Sean Eddie questioned whether Sky would be able to achieve its revenue and subscriber targets for the year, causing shares to close yesterday down by 12p at 580p – the worst performer in the MediaTelINSIGHT Sharewatch media sector.
The analysts also questioned whether consumers are as impervious to price increase as has been thought, particularly in the light of the anticipated consumer spend slow-down. If not, Sky could be facing a long-term structural change in its subscriber base which would threaten targets (which are based on historical trends and behaviour), as well as the group’s high market capitalisation.
Whilst customers may be downgrading their packages, Sky’s overall churn rate – the proportion of customers leaving the service altogether – dropped to a record low in the quarter to September 2002, at just 9.4% (see BSkyB Back In The Black Following Strong Subscriber Growth). As a result, Sky is largely considered to be well on target to hit seven million subscribers by the end of 2003.
Analysts at Merrill Lynch have a Strong Buy rating on the group. They note that whilst Sky will show a 6.6% decline in subscribers for FY 2002 (due to the removal of 1.2 million ITV Digital wholesale subs), along with an 8% decline in cable wholesale subs, its core direct-to-home satellite customer base will rise by 14% year on year.
On Tuesday Standard & Poor’s raised its outlook for the group from Stable to Positive.
Shares in BSkyB were down by 1.5p just before lunch-time today at 578.5p.
