Oodles of cash: no wonder Murdoch wanted to buy
SO that’s what all the fuss was about. Anyone wondering why Rupert Murdoch wanted to buy BSkyB outright, and why he will not sell down his 39 per cent stake without a fight, need only look at the satellite broadcaster’s third quarter results.
Although the 15,000 new TV subscribers added in the quarter is nothing compared to its glory days, it has found a way of growing profits and cash flow even as the pay-TV market approaches saturation point. Its strategy of getting more cash out of existing customers is paying off.
Sky sold 904,000 net new products in the quarter, mostly to existing customers, thanks in large part to strong take-up of its broadband and high-definition TV offerings. The average customer paid £546 in the quarter, £9 more than they did a year ago and £90 more than in 2009.
There is plenty more where it came from. Sky has 3.2m so-called “triple-play” customers, subscribers who take a broadband, telephone and TV service. That is more than any of its rivals, but it still represents just 31 per cent of its total subscriber base, leaving room for lots of potential converts.
So far, it has achieved good results by matching specialised content with premium products. Many of the 159,000 subscribers who signed up for high-definition TV did so because of the new Formula 1 HD channel.
Most importantly, for Murdoch at least, is that the company is running off oodles of cash now that an era of big investments has drawn to a close. It generated £1.2bn of cash in the nine months to the end of March, a sum that would be very useful for a media behemoth like News Corp.
BSkyB shares added 1.5 per cent yesterday to close at 701.5p, but that is still around £1 less than the 800p or more that most analysts think the company is worth. That chiefly reflects the chance that News Corp could become a forced seller, leaving an overhang of stock.
There are other worries too. Although it is Ofcom’s “fit and proper” investigation that is dominating the headlines, it is also investigating whether Sky is too dominant in the premium movie market, having already loosened its grip on premium sports.
Sky might be used to such regulatory wrangling, but there are testing times ahead even so.
david.crow@cityam.com
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