Sky profit rises 3% on subscriber growth, bigger market share

Reported profit of $122.8 million on sales of $852.3 million is forecast.

BUSINESSDESK: Sky Network Television, the pay-TV company controlled by Rupert Murdoch's News Corp, reports a 3% lift in annual profit as it adds subscribers and increases its share to TV viewing in New Zealand.

Profit rose to $123.7 million in the 12 months ended June 30, from 120 million a year earlier, the Auckland-based company says. Sales increased to $843 million from $797 million.

Reported profit of $122.8 million on sales of $852.3 million was forecast, based on the consensus of analysts.

Sky TV's share of total television viewing in New Zealand has risen to 29.8% from 27.9% and it lifted total subscribers by 17,510 to 846,931 in the latest year. The churn rate, which measures the percentage of subscribers who depart, edged up to an annual 14.2% from 14%.

The company's shares fell 3.2% to $5.08 and have dropped 1.5% this year. The stock is rated "outperform" based on the consensus of 10 recommendations compiled by Reuters, with a price target of $5.58.

Sky TV has wholesale partnerships with Telecom, Vodafone, TelstraClear and Slingshot, which aids the pay-TV company because it gets the benefit of their marketing efforts for bundled services.

In May, the Commerce Commission began an investigation into Sky TV's content contracts with internet service providers to check whether such deals tied up the market and prevented competition.

Figures from the company show the free-to-air channel Prime that Sky TV acquired in 2006 increased its share of audience over the age of five to 5.8% at June 30 from 4.9% a year earlier. The channel's advertising sales fell to $23.3 million in the latest year from $23.7 million.

Of those subscribing to Sky's pay-TV services, the biggest percentage, at 40%, take the Basic + Sport package, up from 38% in the previous year. Those just taking Basic fell to 32% from 33%.

The company's installation costs have been declining, which partly reflects the fact that 1.3 million homes in New Zealand already have a Sky satellite dish. That means decoder-only installs in 2012 amounted to 87%  of total installs, up from 75% in 2011.

Subscribers who have upgraded to the company's Multiroom service rose to 171,901 from 151,509.

In the latest year, programming costs rose 7% to $273.7 million, while costs of broadcasting and infrastructure rose 16% to $84.5 million. Sales and marketing fell 3.7% to $39.4 million and advertising costs rose 2.6% to $19.9 million.

Unlike exporters, Sky TV benefits from a higher New Zealand dollar as most of its programming and equipment costs are in US dollars.