Sky TV boosts annual profit 6.4%, reaps more revenue from fewer subscribers

UPDATED: Sky TV boosts annual profit 6.4%, reaps more revenue from fewer subscribers

EARLIER: Sky Network Television [NZX: SKT], New Zealand's dominant pay-TV company, boosted annual profit 6.4% as it reaped more revenue from fewer customers.

Net profit rose to $171.8 million, or 44.09 cents a share, in the year ended June 30, from $161.4 million, or 42.61 cents, in the year earlier period, the Auckland-based company said in a statement. Revenue increased 2% to $927.5 million.

Sky, which is present in almost half of New Zealand households, increased its average revenue per residential user to a record $79.54 monthly, from $77.52 a year earlier, as it increased the number of subscribers using its higher value My Sky service by 9% to 549,906. Still, its overall customer numbers dropped 1.6% to 851,561, which saw its share of the nation's households drop to 47.1% from 48.7%, as the number of subscribers to its legacy digital service slipped 20% to 258,311.

"The challenge we are now seeing is in attracting new customers," said chief executive John Fellet. "The biggest source of churn comes from our customers who use our 'digital boxes'."

Sky is spending $120 million over three years to replace its old digital decoder boxes with new My Sky decoders for about a third of the price it paid for its original digital boxes in 1997. As well as enabling internet access to 'video on demand' services, the new boxes will be able to compress more information, allowing the company to access double the satellite bandwidth for no extra cost.

To drive future growth, Sky is also investing in other models, such as short-term sports subscription service FanPass, low-cost pay-TV service Igloo and subscription video-on-demand service Neon.

Fellet said the company is focused on securing the most important content to lure customers, and has recently secured SANZAR rugby, as well as cricket and netball. It also offers HBO, which it calls "the gold standard of premium entertainment" and Disney.

That saw its programming costs increase 5.9% to $296.6 million, taking it to 32% of revenue from 30.8% of revenue the year earlier.

The company will pay a final dividend of 15c a share on September 11, unchanged from the year earlier. That takes the total annual dividend to 30c, up from 29c the previous year.

(BusinessDesk)