Sky Broadband UK Grows to 5.127 Million Subscribers Despite BT Pressure

It’s been a difficult few months for BSkyB (Sky Broadband) but the operators latest Q4 2013 results have revealed that their broadband ISP subscriber base continued to grow by +110,000 in Q4 to total 5,127,000 (stable from +111k added in Q3). Churn also fell and ARPU grew but their unbundled (LLU) network expansion stopped.

Sky is perceived to have come under significant pressure from the launch of BT’s rival free BTSport TV service and yet they’ve still continued to increase some of their underlying prices (e.g. line rental), even going so far as to withdraw the not insignificant Line Rental Saver discount (here). But so far none of these changes appear to be causing them too much pain.. yet.

In fact Sky managed to produce customer growth across the board during Q4 2013. The operator added +151k Line Rental customers in Q3 to total 4,676,000 (down slightly from +161k in Q3) and +140k Telephony (voice) subscribers for a total of 4,792,000 (down slightly from +151k in Q3). But sadly they still refuse to publish how many superfast Sky Broadband Fibre (FTTC) subscribers they have.

Sky also notes that 3,659,000 of their broadband and phone subscribers now connect via their cheaper fully LLU unbundled (MPF) lines, which represent 74% of their network (up from 73% in Q3). The remaining customers use their shared unbundled (SMPF) lines (1,262,000) or BT-based services (206,000).

It’s especially interesting to note that the operator has now managed to unbundle 2,355 telephone exchanges from BT’s control, which represents an increase of just 1 exchange over Q3 (i.e. LLU network expansion appears to have stopped). Sky’s unbundled network is now capable of serving 90% of UK homes, which meets their original goal from a couple of years back.

Jeremy Darroch, CEO of BSkyB, said:

“We had a very good first six months of the year as we reaped the benefits of our broader-based approach to growth. In a consumer environment that remains challenging, customers continued to choose to take Sky products in ever greater numbers in the run-up to Christmas, with Q2 growth up by over 40% on last year. In the last 12 months, we have added 3.8 million paid-for subscription products, the fastest rate of annual growth in three years.

Our financial performance was strong in the first half and we remain on track for the full year. Good operating momentum led to an 8% increase in revenues for the period, excluding revenues from the discontinued retailing of ESPN. We are moving through a year of investment in which we are absorbing the one-off step up in Premier League costs well, with adjusted EBITDA flat thanks to a continued focus on operating efficiency. The 9% increase in the interim dividend to 12.0 pence, the tenth consecutive year of growth, reflects our confidence in the strength of our business and the progress we are making.”

On the financial front Sky saw its quarterly Churn fall by -0.2% (total) and their ARPU grow by an impressive +£11 (annual total £570). Elsewhere total half-year revenue climbed to £3,751m (+7.6%) but operating profit declined by -8% to £595m.

Suffice to say that Q4 could have been much worse but Sky seem to be holding steady, although it’s still early days for BT’s venture into Sport content and Sky knows that it might have to adapt how it does business and this is one of the reasons why they appear to be mooting a collaboration with Vodafone (here). But for now the pressure is back on BT to show that their sporting gamble can pay its way to success.

As a side note, included within Sky’s direct networks costs (up 16% to £404 million annually) is a credit of £32 million in relation to a credit note received from BT following an Ofcom determination which requires BT to repay monies to Sky for overcharged-for Ethernet services (backhaul) between 2006/07 and 2009/10. Sky, BT and others have appealed Ofcom’s determination in the CAT. On top of that the costs also include a one-off step-up as Sky integrate the O2 consumer fixed line and broadband business.