Sky profit puts pressure on Murdoch to raise bid

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The Independent Online

BSkyB kept up the pressure on Rupert Murdoch yesterday with a surge in profits that strengthens its hand in demanding that the media mogul raises his bid price.

Sky's first-quarter pre-tax profit increased 24 per cent to £230m as the pay-TV group sold a record number of services and piled on customers to get near its target of 10 million users by the end of 2010. The company beat analysts' expectations by attracting 96,000 net new customers and taking the total to 9.956 million. Mr Murdoch's News Corp offered £7.8bn in June to buy the 61 per cent of Sky that it does not own but the broadcaster's board rejected the approach. Sky wants Mr Murdoch to pay at least an extra £1 a share to take the price above 800p a share.

Investec analysts said the strong results meant that to buy Sky, Mr Murdoch would have to move closer to the board's demands.

"The clear message is Sky is a company delivering operationally and growing sales and profit accordingly. This makes an 800p exit price a minimum, in our view," the analysts said.

The companies have put talks about a new offer on hold while News Corp prepares its case for regulatory clearance in a process that could take many months. The deal faces fierce opposition from Mr Murdoch's UK rivals, who argue Sky would give Mr Murdoch anti-competitive dominance of the British media.

Jeremy Darroch, Sky's chief executive, said the company was concentrating on "business as usual" and that it had not been distracted by News Corp's looming offer.

"As you can see today, the business continues to perform very strongly, and we're going to stay focused on that," he said.

Sky set a record for net new products sold in the three months from June to September and beat forecasts with strong growth in broadband. The company has also increased revenue per customer by selling more products such as high-definition TV and broadband.

It said 2.3 million customers now subscribed to all three of its main products after a marketing shift from HDTV sales to increasing take-up of telephone and internet services.

Sky was launched by Mr Murdoch in 1989 and sold shares to the public in 1994. After a slow start, it drove expansion by signing an exclusive contract to show the new English Premier League in 1992.

In recent years, it has increased its non-sport output with series such as An Idiot Abroad, featuring Ricky Gervais and Karl Pilkington, and the new detective series Thorne, starring David Morrissey.

In 2004, the company said it hoped to achieve its target of 10 million customers by the end of this year. Sky said yesterday that it would create 500 jobs by opening a new customer service centre next year.