More on BSkyB
BSkyB
BSkyB’s revenues were up 10% year on year in the first half of the current financial year (to June 2005). Revenue growth has been driven by both an increase in subscriber numbers (+6%) and higher ARPU (+5%) from driect home subscribers. Although this has sufficient momentum to make the short term outlook much brighter, the key uncertainty about Sky remains the limits of market penetration the company can expect.
The company cites the high proportion of Sky+ customers who are first time Sky customers as evidence that Sky+ is significantly helping in gaining customers who are resistant to pay-TV. We are not altogether convinced as this may merely show that Sky+ is an easy sell to new subscribers.
Sales of multi-room boxes seems to be a more solid with growth early as strong as Sky+ from a lower base. The potential market is considerable as 76% of UK households have more than one TV - and the proportion among Sky subscribers is likely to be higher.
The results for the half year are very encouraging with margin improvement at all levels, while the broad spread of drivers of turnover growth suggests that it is sustainable in (at least) the medium term.
Sustaining current levels of growth will be sufficient to bring the PE down to 19× on next year’s earnings, which is not unreasonable given the renewed growth and the company’s strong market position, provided that one assumes that Sky can sustain current growth levels for a few years beyond that.
Given the company’s competitive position and growth momentum the valuations look reasonable, but its market penetration is already very high at 28% and room for continued subscriber growth at there levels must be a matter of doubt.
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