This page is quite old hence its rather spartan appearance.
Why not check out our Latest Stories page for our newest articles or search our site for anything.
By
This morning BSkyB delivered its results for the first quarter that showed impressive growth in subscriber numbers. In fact it expects to hit its target of 5m Direct to Home (DTH) customers two months early. As of yesterday it had 4.95m. If you add Sky's other viewers via cable and in Eire the grand total is over 9.2m.
Useless numbers
BSkyB is currently valued at £19.5b, or £2,100 for each subscriber. That's an awful lot of money for a company that had revenues of less than £2b last year and is currently making significant losses. But looking at BSkyB's financials is missing the point at the moment. Profits have been wiped out by the cost of subsidising the roll out of its digital services. Has this strategy worked? Over 85% of BSkyB's DTH customers, that's over 4m, are now hooked up to digital. By way of comparison ONdigital is yet to hit 1m. So it looks like a fairly successful strategy to me.
The revenue numbers are more important at the moment. About 80% of revenues come from subscribers. Most of the rest comes from advertising. That means that the company has a much more stable revenue base than many media companies. Currently average monthly subscriptions for DTH customers are around £24. That's likely to increase as monthly subscriptions have been held back to draw people towards digital. In fact a price rise has already announced which will be effective from January 2001. BSkyB hopes that this monthly figure can rise to £33 in the next three to four years.
BSkyB also expects to hit 7m DTH customers by the end of 2003. That means it needs to add 170,000 customers per quarter over the next three years. In the last three months it managed to add 210,000 so this doesn't seem too outlandish. This was also the largest quarterly increase in customers since 1993 so this shows that the saturation point hasn't been reached yet. There was also a significant shift in viewing numbers away from ITV and towards BSkyB in the last three months.
There are another couple of numbers in BSkyB's results that are worth keeping an eye on as well. The company currently has net debt of £1.4b. That looks comfortable. The customer churn rates are also important. The annual churn rate is just under 10% although the switch to digital has distorted this recently.
And there's more
It's easy to forget the little extras that Sky has. It has a 22% stake in KirchPayTV. This is worth about £1b based upon the prices paid for some minority stakes in the business by the likes of Lehman Brothers. KirchPayTV is the leading pay TV business in Germany and Austria. But I think the decision to up its stake to 80% in Open, the interactive TV shopping service or t-commerce as BSkyB calls it, was a particularly shrewd move. Based on this recent deal Open was valued at around £1.1b.
No doubt many investors are put off by BSkyB's valuation despite the fact the shares have fallen 50% since March. I'm one of them and I think I'll continue to keep my powder dry for the moment. The fact that some of its major shareholders like Vivendi have been, or are threatening to offload shares to fund investments elsewhere hasn't helped sentiment recently either. There is also the uncertainty surrounding the situation of Sky Global. This is the company that combines all of Rupert Murdoch's satellite interests. It has a 37% in BSkyB and it is looking to list in the US in the next few months.
Where Next?
• BSkyB discussion board
• BSkyB and the regulators
ONdigital takes off
• Duelling Fools