Vodafone, Sky team up for TV offer

Vodafone delivered some news yesterday which Sky Network TV shareholders will probably relish at their annual meeting on Thursday.

Concern has been expressed by brokers about the future of Sky after its merger plans with Vodafone were scrapped by the Commerce Commission.

Forsyth Barr broker Suzanne Kinnaird said Sky would struggle to avoid the considerable disruptive forces affecting traditional media. She expected medium to long-term pressures from escalating competition for audiences and content.

Vodafone announced yesterday it would bring Sky, free-to-air and a range of popular online and app-based entertainment services, such as Netflix, together in one easy-to-use system.

Chief executive Russell Stanners said Vodafone TV would give viewers the option to switch seamlessly between their smartphone, tablet and television.

With some of the content, viewers had the ability to stop what they were watching on TV, pick up their smartphone and continue watching after they had left the house.

Vodafone TV delivered cloud-based 4K (one of the two resolutions of ultra-high-definition TV targeted at consumer TV) to New Zealanders over fibre and Vodafone's FibreX network.

Customers who signed up to a Vodafone TV package, which would bundle together unlimited broadband and Sky Basic - would have the option to add premium content choices like Sky Sport, SoHo and Sky Movies. They would not require a satellite dish, Mr Stanners said.

Also, the Vodafone TV package would include all free-to-air channels, premium subscription applications like Netflix, as well as easy-to-access on-demand services, YouTube, iHeartRadio and Love Nature 4K.

Vodafone consumer director Matt Williams said advances in technology created endless possibilities and made the future exciting.

Sky TV chief executive John Fellet said his company was thrilled to be partnering with Vodafone to enable Sky's range of premium entertainment and live sports to be viewed on the innovative digital service for Vodafone customers.

``This is an exciting next step in our long-standing commercial relationship with Vodafone.''

Craigs Investment Partners broker Peter McIntyre said the announcement pointed to the future of how New Zealanders would watch television.

``I suspect this is how they would have operated had the merger gone ahead.

``Mobile is the key here and it is all very new for Sky. John Fellet said he was moving on to plans B, C and D. This is part of plan B.''

Plenty was happening for both Sky and Vodafone, he said.

Sky shares had been among the best performers on a rolling month average, rising 11% ex-dividend and after the Commerce Commission turned down the merger.

There was talk in the market about Vodafone possibly listing on the NZX, he said.

Ms Kinnaird said Sky would provide 2018 financial-year guidance on Thursday.

``We see opposing risks to consensus expectations.''

Revenue and subscriber attrition could potentially be worst following the end of the British and Irish Lions tour, the America's Cup and Game of Thrones.

However, lower costs could be a positive surprise.

Forsyth Barr was forecasting 2018 operating expenditure by Sky to be $30million less year on year, of which programming and the absence of merger costs represented 65%, she said.

A further 13% reflected the annualised benefit of savings seen in the 2017 financial year. The balance included savings from decreased high costs to serve satellite customers.

Of those drivers, revenue would provide the best guide to how Sky was navigating the market and where investors should focus.

Unless investors gained comfort over Sky's ability to sustain its subscriber and revenue, concerns around the health of the company's long-term business model would continue to weigh on the stock, Ms Kinnaird said.

Sky shares last traded at $2.89, up 0.2c.


 

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