Sky broadens its horizons

An impressive 100,000 new households were added to BSkyB 's customers base in the final quarter of 2011, taking the broadcaster's reach to a total 10.47m households. And the UK's largest satellite broadcaster now has set its sights on monetising the 13m households that do not currently subscribe to its satellite services by launching an internet-based pay TV service in the first half of this year.

The new service will initially offer Sky Movies on a cheap, pay-per-view basis and places Sky in direct competition with LoveFilm and Netflix. The plan is to expand the offering to include sport and entertainment. It also provides Sky with a decent chance of grabbing some more market share in the traditional pay TV market - currently a sluggish segment. Indeed, just 40,000 new customers took up Sky's TV service in the second quarter of the financial year - the same quarter last year saw 140,000 new TV customers added.

Broadband growth, on the other hand, remains firm, with 166,000 new customers added in the six-month trading period - a 21 per cent year-on-year increase. Moreover, over three million customers, or 29 per cent of the total, are now subscribing to 'triple-play' services of broadband, television and telephone services, up from 24 per cent at this stage last year. This has helped drive average revenues per user (ARPU) up from £536 to £544.

Other new initiatives to drive growth this year include a new channel dedicated to Formula 1 motor racing and the addition of BBC iPlayer and ITV Player to Sky's Anytime+ service, which currently has 1.2m customers. In April, Sky will launch a free WiFi service to its Broadband Unlimited customers and will add a new fibre optic broadband service offering download speeds of 40Mb.

Analysts at Peel Hunt are expecting full-year adjusted pre-tax profits of £1.36bn and EPS of 47.6p (£1.16bn and 41.1p in 2011), rising to £1.49bn and 53p, respectively, in the year to June 2013.

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