Credit: Steindy/Wikimedia

Sky's profits are soaring despite BT's onslaught

The media and telecoms giant is booming, but the war isn't over yet.

by Jack Torrance
Last Updated: 29 Oct 2015

Sky’s lawn is so covered with BT-branded tanks there's barely an inch of spare turf to be seen. After nabbing the TV rights to a tranche of Premier League games, the former state monopoly has also landed the entirety of the Champions League and even the next Ashes series, which was yet another big jewel in Sky's crown.

But If BT’s charge has harmed Sky, it certainly hasn't fed through to the broadcaster’s financials yet. In the three months to September 30 its revenues were up 6% to around £2.8bn and operating profit rose by 10% to £375m.  

‘This performance was driven by strong demand across the group,’ said Sky’s chief exec Jeremy Darroch. ‘We added over 130,000 new customers in the quarter, up 7% on the previous year, which means that we’ve added almost a million new customers over the past twelve months, up 51% year on year.’

Of particular note was Sky’s ‘churn’ rate, a measure of how many customers have cancelled their subscriptions with the company. That is down to 9.8% over the past 12 months, the lowest level in 11 years, despite Sky hiking its prices in June.

The low churn rate does reflect well on Sky’s brand and choice of content, which it has been investing lots of cash into of late. The tedious difficulty some customers have had when trying to cancel their subscription probably hasn’t hurt either.  

Of course, Sky is much more than a TV provider nowadays.  As well as broadband and landline packages, the telco is gearing up to offer mobile phone contracts next year through a deal with O2. The move will open a new front in Sky’s battle with BT, which is in the process of acquiring the mobile network EE.

Sky used its results announcement today to lay into its foe yet again, blaming BT (which owns the UK’s main broadband network Openreach) for ‘diminishing competition’, and ‘inadequate quality of service’ in Britain’s broadband market. It reiterated its previous calls for Ofcom to refer BT for an investigation by the Competition and Markets Authority.

Sky may be holding its own against BT for now, but the battle is far from over. The mind-boggling £4.2bn it agreed to shell out for Premier League TV rights shows that Sky is wary of the need to keep BT at bay, but throwing loads of money at the problem is not a sustainable way of dealing with it.

‘We still have concerns that Sky’s long-term profitability will never get to the heights to justify its valuation because of the pressures from increasing programming costs,’ Ian Whittaker, an analyst at Liberum, told the Guardian. This battle could well end in tears.

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