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Info BSkyB will beat UK recession - 04-May-2008, 11:40

BSkyB will beat UK recession

BSkyB released its Q3 numbers on April 30. The market had mixed views of its results, and whether Sky is wise to pursue Tiscalis assets. One May 1 report also says Sky will be very resilient to the UKs economic downturn.
By and large City analysts were positive despite the impact of Skys heavy investment in broadband, which by any measure is beginning to pay off. The broadband service now has 1.4m customers who tend to be long-term and not quick to churn. Investecs advice to its clients was to hold to its buy rating, saying BSkyB had achieved a decent result against tough comparatives. At the end of the day Skys shares had risen a fraction (4.5p) to 545p although during the day the share price had fluctuated to as high as 557p.

Well know in a week whether Skys interest in Tiscali is real, but meanwhile its own broadband and telephony plans continue apace. Morgan Stanley, in a May 1 note to clients, reminds readers that consumer advice site uSwitch has recently highlighted Sky as as the provider of the home phone service most highly rated by consumers and as the winner of the Best Deal for You and Joint Best Value for Money awards. This is good news for Sky, and in time will take them well beyond the description of simply being a pay-TV business. Broadband is also good business. While it is possible to have a wholly free broadband supply from Sky (for existing subscribers), the company says two-thirds of its 1.4m subs trade up to a paid-for package. Sky Talk (telephony) clients grew 180,000 in Q3 and now top 1.1 million connections.

Moreover, Morgan Stanley does not see Sky being too bothered by the current UK economic downturn. The environment for the UK consumer has already weakened but there are no signs of this yet in the Sky model. Total new product sales (taking each services as a separate product) at BSkyB have totaled 4 million year to date, up 40% yoy. Churn at 10.5% is low for a mass-consumer product. ARPU has steadily risen year on year. BSkyB reports no signs of changed consumer behaviour in response to economic hardship in terms of churn or spindown, a claim seemingly borne out by the numbers.
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