Sky Broadband UK Growth Slows to Reach 5.247m Customers

Media and Internet giant Sky Broadband (BSkyB), which has just this morning gobbled Sky Italia and Sky Deutschland (here), has announced that their total home broadband base grew by only +50,000 during Q2-2014 to total 5,247,000 Internet access customers (down sharply from the +70k added in Q1-2014 and +110k in Q4-2013).

In fairness the results for Q2 are often lower due to students returning home and cancelling their contracts early, although Sky tends not to suffer as badly from this as other providers like Virgin Media and still their quarterly growth is now around half of what it was at the same time last year (excluding the fixed broadband additions from O2 and BE Broadband).

According to Sky the lower broadband growth “reflects our decision, in a highly promotional environment, to focus on growing TV products and responding to strong customer demand for our connected TV services“, which is at least partly true as Sky seem to have cut back their broadband related TV promotions. But equally the pain of having to fend off against BT’s free BTSport TV and broadband offer might be starting to bite.

Elsewhere Sky added +93,000 Line Rental customers in the quarter to total 4,882,000 (down sharply from +113k added in Q1-2014 and +151k in Q4-2013), which isn’t surprising as most new broadband subscribers take Sky’s Line Rental. Sadly Sky doesn’t publish their uptake figures for Sky Fibre Unlimited (FTTC) lines and the results also make no mention of their new 950Mbps FTTP trial in Basingstoke (here) or the similar joint deployment plans for the city of York with TalkTalk and CityFibre (here).

On the broadband front we can at least say that 4,185,000 of their broadband and phone customers now connect via fully unbundled LLU (MPF) lines (83% of total broadband subs – up from 77% last quarter), which gives Sky much more control from BT. By comparison the rest are composed of 848,000 shared unbundled lines [SMPF] (17% – down from 23% last quarter) and interestingly those on BT based lines grew slightly to 214,000 (up from 205,000 last quarter). Overall 37% of Sky’s UK customers take all three of TV, broadband and phone.

Sky also increased their total for unbundled telephone exchanges (i.e. those they have taken away from BT’s control) to 2,367, which is an increase from 2,355 where it has been stuck for the previous 6 months.

Jeremy Darroch, CEO of BSkyB, said:

“We have delivered an excellent year of growth as customers responded in record numbers to the combination of high-quality TV and innovative new services. This has resulted in the addition of 23% more products than last year and the highest rate of customer growth for three years.

“Strong demand across the board has translated to a 7% increase in revenues. Combined with a continued focus on operating efficiency, this means we have matched last year’s record level of earnings per share. This is an excellent result in a year in which we have had a one-off step up in Premier League costs and invested to accelerate take-up and usage of connected TV services. As we anticipated, we are starting to see the returns from our investment come through, leading us to increase the dividend for the tenth consecutive year.

…

Looking ahead, we see a broader opportunity for growth than ever before as we bring our core products to more customers, and open up new revenue opportunities. After a successful year of investment, we are well placed to exploit these opportunities and continue to deliver growth and returns for shareholders.”

On the overall financial front Sky’s annual Average Revenue Per Use (ARPU) reached £576 (up from £571 in Q1) and their churn fell from 10.9% to 10.7% in the quarter and their total profit for the year came to £865 million (down from £969m last year).

As a side note Sky has recently made their NOW TV service available to PlayStation 4 owners, with Xbox One users seemingly being left to wait.