Worst over for BSkyB?

BSkyB's subscriber numbers give Mr Murdoch something to smile about

Loss-making satellite TV company British Sky Broadcasting (BSkyB) saw its shares jump in early trading as its gamble on digital services showed signs of paying off.

The company is over the hump of digital investment

Simon Baker, analyst, SG Securities

The satellite broadcaster, which is 37.5% owned by Rupert Murdoch's News Corp, has invested heavily in building up its digital subscriber base.

But despite recording full year losses of £500m, investors saw signs that it was poised to turn the corner into profitability.

The broadcaster said it had acquired 5.453 million satellite subscribers, up about 940,000 - or 21% - on last year and 75,000 ahead of the previous quarter, which boosted revenues 25% to £2.3bn ($3.26bn).

Increasing lead

It also increased its commanding lead over terrestrial rival ITV Digital, with 5.3 million digital subscribers.

ITV Digital, by contrast, had 1,135,000 subscribers as of 30 June, an increase of 48,000 in the quarter.

The ITV service says its churn rate, customers who don't renew their subscription, is 23%, compared with about 10% for BSkyB, among the lowest in Europe.

Since launching its digital service in 1998, BSkyB has focused on achieving market share by subsidising its set-top digital decoders.

The tactic has given it a strong lead over ITV Digital and cable operators.

But investors have been holding out for a sign that the push into digital services is paying-off.

Simon Baker, analyst at SG Securities, said he thought the worst was over for BSkyB.

"The company is over the hump of digital investment, costs are flattening whilst revenue is marching ahead and the core pay-TV business posted another quarter of strong growth in profitability," he said.

Share jump

BSkyB shares, which have fallen about 40% since the start of the year, inched 0.15% higher to 677p by 0815 GMT after initially jumping 2%.

The company lost £514.5m in the year ended 30 June compared with £262.7m in the previous year.

It beat its target of £300 in average revenue per subscriber (ARPU) by £13 in the quarter to 30 June, as a result of price increases in January but the turnover, or churn, remained at 10%.

Britain's largest pay-TV operator said earnings before interest, tax, depreciation, amortisation (EBITDA) and exceptional items rose 67% to £224m from £134m, above analyst expectations.