BSkyB's profits rise despite increase in churn rate

BSkyB reported a jump in the rate at which existing customers left the television service in the first three months of 2005, even though the company beat City expectations for the number of subscribers it added.

BSkyB reported a jump in the rate at which existing customers left the television service in the first three months of 2005, even though the company beat City expectations for the number of subscribers it added.

The pay-TV provider gained 308,000 subscribers in the January to March period, the third quarter of its financial year, but it lost 213,000 customers too. The net figure, of 95,000 additional customers, was well ahead of forecasts, taking the total subscriber base to 7.7 million.

Most of the figures in the results, which covered the third quarter and the first nine months of the financial year, were well received in the City. There was a 49 per cent rise in underlying pre-tax profits for the nine months to £381m.

There was some concern over a rise in the rate at which its subscribers left the service during Sky's third quarter, with some suggesting it may reflect a broader slowdown in consumer spending. Sky said there was no evidence of customers leaving for Freeview, the free digital television service.

In the January to March quarter, the annualised rate of churn - customers cancelling their subscriptions - rose to 11.1 per cent, up from a rate of 9.5 per cent during the previous three months. James Murdoch, the chief executive, said: "We're committed to the target of keeping [churn] at about 10 per cent."

The company said the churn rate fluctuated from quarter to quarter. It pointed out that for the first nine months of its financial year, the average churn rate was 10.2 per cent, close to its aim of 10 per cent or less.

Lorna Tilbian, at Numis Securities, said that even if the British consumer was suffering, Sky was a form of "cheap escapism" for the whole family. She said: "When times get tough, people are more likely to cancel their gym membership than their Sky subscription."

Sky said marketing costs for the first nine months of the year rose to £379m, up £80m in comparison with the previous year.