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Sky profits rise 16% despite pay-TV customer slump

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Sky has reported a 16% increase in adjusted operating profit to £295 million in the three months to the end of September, despite a slump in new television subscribers.

The satellite pay-TV giant, which was close to being taken over by Rupert Murdoch's News Corporation before the phone hacking scandal broke, increased its quarterly revenues by 9% to £1.6bn as its overall subscriber base grew by 77,000 households to 10.4m.

Non-adjusted operating profit was £327m in the third quarter, a 32% year-on-year increase, and boosted by a £39m payout by News Corp for breaking off the takeover bid, along with £7m in costs for advisory fees.

As economic conditions start to bite for UK households, Sky's number of new pay-TV customers was down over the three months. It added 26,000 new pay-TV customers, taking its total base to 10.2m, but the acquisitions figure was considerably less than the nearly 100,000 in the same period last year.

However, Sky managed to offset the decline by achieving gains across its broader product range, including 103,000 new customers signing up to its Sky+ HD TV service, bringing the base to 3.9m.

Broadband subscribers increased by 150,000 to 3.5m, while telephony customers rose by 147,000 to 3.2m. The number of Sky's triple-play subscribers, who take TV, broadband and telephony products from the firm, increased by 5% to account for 28% of the firm's total customers base.

Average revenue per user (ARPU) remained strong at £535, up £25 on the same time last year, while Sky's investment in customer service has helped keep "churn", the rate of customers leaving Sky, in-line with analyst expectations at 11.1%.

Sky chief executive Jeremy Darroch said: "We continue to deliver strong financial results and good growth in customers and products. In tough market conditions, our move to more broadly based growth and multiple products is serving us well.

"New customers are choosing Sky over other providers, existing customers are taking more from us and our financial performance is accelerating, with another quarter of double-digit growth in operating profit, EPS and free cash flow. Looking ahead, the environment is likely to remain challenging as a result of the pressures facing consumers in the UK and Ireland."

He added: "Our job is to give customers the quality and value they're looking for, with a better choice of programmes, more innovation and peace of mind with a price freeze for 12 months.

"In particular, customers can look forward to more outstanding TV as we step change our investment in new British comedy and drama, begin coverage of Formula 1 and continue to offer the best US shows like Glee, Terra Nova and Boardwalk Empire."

Sky also said that more than 1.6m customers have now signed up to Sky Go, the new multi-platform service enabling users to watch TV on multiple devices, since its launch three months ago.

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