Sky TV expecting subscriber fall

Sky Network Television, the pay-TV operator facing increased competition from online rivals, said subscriber numbers are expected to decline further this financial year, causing earnings next year to miss analysts' expectations.

The Auckland-based company forecast it would have 830,000 subscribers at the end of its financial year on June 30. Subscriber numbers dropped 1.5% last financial year to 851,561. It expects to lose 45,000 core residential pay-TV subscribers this year and gain about 25,000 subscribers for its online services such as Neon and FanPass.

Sky TV retained its forecast for 2016 earnings, which it said in February would see net profit at the lower end of its previously advised range of $153 million to $158 million, down from $172 million last year.

However, it said the loss of subscribers would "adversely impact" its 2017 earnings compared to current analyst consensus estimates.

The company didn't detail the estimates.

Analysts expect the company's net profit to fall to $155 million in 2016, and decline further to $146 million in 2017, according to the mean forecast in a Reuters survey.

Sky is losing its dominant hold on premium content with the introduction of online streaming video services such as Netflix and Spark New Zealand's Lightbox offering. Still, it retains rugby rights, which are seen as a linchpin in securing domestic viewers. The company attributed the forecast loss in subscribers for this year in part to the roll-off of subscriber contracts following the Rugby World Cup in 2015.

"We do not expect the FY16 rate of subscriber loss to continue in FY17 given that churn is reducing, due to the diminishing impact of post Rugby World Cup churn, and the expected positive impact on subscriber numbers from upcoming major sport events, including the Rio Summer Olympics in August 2016 and the Lions Tour in June 2017," Sky said in its statement.

It expects to provide an update on capital management and growth initiatives by June 30, after appointing investment bank Citigroup to provide advice, it said. The company has previously said it is looking at capital management as it ends a period of investment, which it expects will deliver strong free cash flow in the future and at the same time, it's considering several investment opportunities.

Sky TV shares last traded at $5.49 and have gained 20% this year. The stock is rated an average 'hold' according to the mean estimate of seven analysts compiled by Reuters.

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