The Week Ahead: All eyes on BSkyB and its new subscribers

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The Independent Online

BSkyB's quarterly results will be scrutinised very closely to see if the trends evident in the Christmas quarter continued into this year.

BSkyB's quarterly results will be scrutinised very closely to see if the trends evident in the Christmas quarter continued into this year.

In September, under its new chief executive, James Murdoch, the satellite television company started a massive marketing effort to present itself anew to the public. The idea was to appeal to the sort of customers who have resisted the allure of pay-TV, as Sky acknowledged that it had already exhausted the pool of more susceptible consumers.

At Christmas (Sky's second quarter)there was an impressive jump in subscribers - 192,000 net new customers were added, showing that the new strategy was beginning to work. But the City focused more on a corresponding jump in the cost of adding these subscribers.

So while the net subscribers added in the third quarter (January to March) will be an important number to watch for tomorrow, to see if growth was maintained, at least as much attention will go on subscriber acquisition costs (SAC in the jargon).

The City forecasts net customer additions of between 60,000 and 90,000 (compared with 66,000 for the period in 2004), taking the total subscriber base to 7.7 million. The quarter after Christmas has never been a strong one for Sky.

SAC has jumped from £201 for the third financial quarter of 2004 to £230 by the Christmas period last year (Q2). This time it is forecast to accelerate further, to £240.

Sky will again need to justify its strategy of sacrificing average revenue per user (Arpu) for customer growth. The company will no doubt point out it is adding profitable customers and say it is all worth it, because, by 2010, it should be able to boast of 10 million subscribers. We may get details of initiatives to keep the subscribers coming - packages, special offers and so on.

TODAY: Results: Interims - Aberdeen Asset. Quarterly - Friends Provident. Trading update - Alliance & Leicester; National Express.

TOMORROW: British American Tobacco, the maker of the Dunhill, Lucky Strike and Kent cigarette brands, is expected to report a small rise in profits, cost savings benefits and an improvement in organic volume growth.

The company's first quarter should show pre-tax profits of £585m, up from £575m. The company will have gained from the integration of ETI in Italy and Reynolds in the US. Attention will be given to sales figures in Malaysia and Canada, where recent tax rises have hit demand for premium range products, as smokers traded down.

BAT is forecast to improve on last year's weak organic growth of just 0.4 per cent with a figure of between 1 and 1.5 per cent.

The state of the British consumer should become clearer from retail results this week, including figures from Matalan. The discount clothing chain had a respectable Christmas after a period of poor performance, but how has it fared in this year's high-street slowdown?

The full-year results should meet expectations of pre-tax profits of £84m before goodwill. But current trading will be the interesting point, and here the City's expectations are not high.

Evolution Securities would be happy with nothing more than flat like-for-like performance. The spring/summer collection was launched earlier than usual and investors will be looking to see if the company is getting the ranges right.

Results: Full-year - Matalan. Interims - De Vere; Lonmin. Quarterly - BAT; BSkyB.

THURSDAY: Expectations are high for first-quarter results from the medical devices group Smith & Nephew. Its US competitors in the field of orthopaedics have already reported growth comfortably in double digits, so Smith & Nephew should have benefited from the same positive trends, with sales of its artificial knees showing particular improvements among its peers.

Results: Quarterly - CSR; Smith & Nephew; Signet. Trading update: Lloyds TSB; Prudential; Standard Chartered. Traffic figures: British Airways.

FRIDAY: A fall in earnings is the low expectation for the consumer products giant Unilever. The company's first quarter has been hit by difficult trading in Europe and adverse currency movement (the dollar).

Advertising and promotion costs will have wiped out the sales growth that it should have seen in its leading brands - of between 1 and 1.5 per cent - and this will lead to margin contraction. The apparent weakening of the consumer market and a ramp up in the competitive landscape are likely to be talking points.

Analysts point out that little guidance has been given for the Q1 results, so surprises are possible.

Results: Quarterly - Cookson, Unilever. Trading update - Forth Ports.

Economics Diary

TODAY: UK - Manufacturing PMI (Apr); CBI retail sales survey (Apr). Japan - Public holiday. Eurozone - Producer price inflation (Mar); Unemployment (Mar). US - Factory orders (Mar); interest rate decision.

TOMORROW: Japan - Public holiday. Australia - Interest rate decision. Eurozone - Services PMI (Apr); retail trade (Mar); ECB interest rate decision. US - ISM non-manufacturing index (Apr).

THURSDAY: UK - general election; services PMI (Apr). Japan - Public holiday. US - Non-farm productivity (prel) Q1; Unit labour costs (prel) Q1; Weekly jobless claims; Alan Greenspan speaks to Chicago conference.

FRIDAY: Germany - Manufacturing new orders: prel (Mar). Spain - Industrial production (Mar). US - Non-farm payrolls (Apr); Unemployment rate (Apr); Average earnings (Apr).