Sky update adds pressure on Murdoch to raise offer
Friday 29 April 2011
BSkyB showed once again yesterday why Rupert Murdoch covets the company so highly, as it added more customers and lifted profits despite a "challenging consumer environment".
Mr Murdoch's News Corporation is waiting for Government approval to push ahead with the plan to increase its 39 per cent holding in Sky to full ownership. A decision could come as early as next week.
Sky bosses declined to discuss the bid yesterday, but delivered another solid set of quarterly results, with operating profits up almost 5 per cent to £261m. Analysts said yesterday that News Corp will have to pay close to 850p to secure a deal for the FTSE 100 broadcaster.
Jeremy Darroch, Sky's chief executive, said: "The business has delivered another good performance in what has clearly been a tough consumer environment and we are benefiting from the transition to more broadly based growth."
Nicla Di Palma, an analyst at Brewin Dolphin, said the results were "solid", but added that "people aren't really paying attention to the numbers, it is all about the bid; when it will be completed and how much News Corp will end up paying".
The companies are waiting for the go-ahead from Jeremy Hunt, the Culture Secretary, which could come "any day now", according to a spokesman for BSkyB – before proceeding with negotiations. News Corp initially approached Sky with a bid worth 700p per share, a sum that was rebuffed by the independent board. In an unorthodox negotiating move, however, the board said they could support a bid of over 800p per share.
Steve Liechti, an analyst at Investec, said that the deal would be sealed by September at a price close to 840p per share. He said approval from the Culture Secretary was a "foregone conclusion".
Pre-tax profits fell 39 per cent to £238m in the third quarter, but the sum a year earlier had been bolstered by the forced sale of part of its stake in ITV. Adjusted free cash flow, a figure closely watched by News Corp, rose 60 per cent in the first nine months of its financial year.
Sky's customer gains slowed, but it did add a further 51,000 in the quarter, bringing subscribers to 10.1 million. The demand for high definition continued, and the number of customers on its HD package is 47 per cent higher than a year earlier at 3.7 million. It is increasingly trying to sign up existing customers to more services. Those taking all three services of television, broadband and landline phone make up a quarter of total subscribers.
The company was also delighted by the performance of the Sky Atlantic drama channel, which it launched in February. It has found 10 million viewers in its first two months on air.
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