Sky adds 365,000 new customers in H1, plans more streaming, IP services

Thursday 25 January 2018 | 09:46 CET | News

The Sky Group reported a solid first half to end December driven by pay-as-you-go products and helped by record viewing of Sky Originals. As a result, the company said it will boost investment in original content and OTT services and up its interim dividend by 4 percent year-on-year to 13.06 pence. 

The dividend comes on top of the special dividend of 10 pence per share the company promised if its acquisition by 21st Century Fox did not go through by end December. The UK's Competition and Markets Authority did not give its green light to the deal, stating concerns about media plurality. The full UK review of the transaction is not expected to be completed until May at the earliest.

Following this setback, the company said that its strategic priorities remain unchanged and that it had ambitious plans for 2018. 

Sky added 365,000 new customers in H1, for a total of 22.865 million retail customers. The company lost some wholesale customers, taking its total customer base to 26.405 million. Customer growth was strong in Germany & Austria, as well as in the UK & Ireland with the addition of 200,000 and 180,000, respectively. Italy lost 15,000 customers

The pay-TV and broadband operator sold over 2 million products in the half, reaching the 61.7 million mark. There were 20 million pay-as-you-go sports and entertainment buys, up 8 percent from the year earlier.  

Revenues lifted 5 percent from the year earlier to GBP 6.737 billion. Growth was recorded in each territory, with the UK and Ireland up 4 percent to GBP 4.438 billion, Germany and Austria rising 8 percent to GBP 1.015 billion and Italy rising 4 percent to GBP 1.284 billion. 

Content revenue jumped 16 percent to GBP 412 million, with Sky monetizing its growing investment in original programming. Advertising revenue also grew, up 10 percent to GBP 444 million, with each territory significantly outperforming the market, with particular standout performances in Germany and Italy. In the UK, the market fell 2 percent.  

Established Business EBITDA advanced 15 percent to GBP 1.182 billion. EBITDA went 10 percent higher after including the net costs of investing in Sky Mobile and the launch of the Sky TV service in Spain. The operating profit rose 24 percent to GBP 573 million, and adjusted earnings per share rose 11 percent to 31.3 pence. 

Sky continued its drive to reduce operating costs as percentage of revenue in order to offset costs incurred in the UK to increase penetration of fibre and scale growth in Sky Mobile and Sky Q. Programming costs went up 4 percent, including a step up in Bundesliga costs in Germany, greater investment in original drama and the UK launch of newly-branded Sky One. Direct network costs increased by 19 percent as Sky scaled growth in Sky Mobile, grew the number of broadband customers and increased fibre penetration to 33 percent of the total broadband customer base.

More streaming, no satellite dishes

Looking ahead, CEO Jeremy Darroch said the company expects the consumer environment to remain challenging, but the company is confident in its own plans. Sky has a myriad of plans in the works, saying it wants to enhance its coverage of sports in each of its territories, enhance the Sky Cinema proposition and also maximise the return on content investment through broader distribution. 

The pay-TV provider announced plans to migrate all its countries to a single OTT platform for streaming services, in order to speed up product innovation. It will also work to expand its audience with the launch of its new streaming stick across its European markets. This will be supported by the establishment of a new European digital centre to lead the technology updates.

In addition, Sky confimed plans to make its pay-TV service more widely available without the need for a satellite dish, with all channels and on-demand content streamed over IP. This will expand the potential audience in existing markets and make it easier to launch in new countries. The new service will launch first in Italy before going to Austria and ultimately deploying across all Sky's key markets.

Since launch in the UK, the premium TV box Sky Q, which is available without a dish, has attracted a total of 2 million customers. The company announced plans to expand the service in other markets. After launching in Italy last year, it will be rolling out to Germany & Austria as "part of a comprehensive upgrade of the whole service". It will also roll out new loyalty programmes in Germany and Austria.

Finally, the company wants to expand in new markets, after launching in Spain and Switzerland last uear. To this end, it plans new partnerships in Spain and will also extend its device range and launch original programming, including Helen Mirren in the just announced Catherine the Great. In Switzerland, the company will launch new entertainment and kids apps, while also extending the existing sports app to more devices and across more telco partners.

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