British Sky Broadcasting Group Plc is feeling the effects of its push into the residential broadband and telephony market, after first quarter profits at the UK satellite broadcaster fell slightly.
For the three months ending September 30, the broadcaster posted net income of 116m pounds ($220.5m), down from 140m pounds ($266m) in the year-ago period. While the profit decline can be blamed on the costs associated with its move into broadband and telephony, the sales side is benefiting from the additional services Sky now has on offer as revenues rose 11% to 1.07bn pounds ($2.03bn) from 966m pounds ($1.84bn) a year earlier.
We are building on our leadership in pay television and are becoming an increasingly well positioned challenger in the 20bn pounds ($38bn) combined industry for pay television, broadband and telephone services, said chief executive James Murdoch.
Unlike rival, the Carphone Warehouse Plc, which is struggling to cope with demand for its free broadband service, Sky is adopting a much more cautious approach and is instead slowly building market share instead of adopting Carphone’s land-grab strategy.
Sky now has approximately one million registrations for its broadband service, and it says that it is successfully using pre-registration to proactively manage demand. When compared to Carphone, Sky is by far the smaller player with only 74,000 customers actually connected, but it is receiving over 20,000 orders every week and it does not seem to be promising customers what it cannot deliver. Indeed, unlike Carphone, the vast majority of its broadband customers were activated within 15 working days of their booking date.
Like Carphone, Sky is heavily involved in the local loop unbundling (LLU) process thanks to its 211m pound ($373m) acquisition of UK broadband service provider Easynet Group Plc in 2005. It currently has 540 unbundled exchanges and is unbundling on average 25 exchanges every week. Earlier this year it was only unbundling approximately 30 exchanges every month.
It aims to reach 70% of the UK population by the end of 2007 with a total of 1,200 exchanges unbundled.
On the telephony side, it has signed up 49,000 customers for its Sky Talk package, which costs 5 pounds ($9.50) per month, allowing unlimited calls at any time of day, to another UK landline. The record number of customers signed up for this is the highest subscriber growth Sky has experienced for two years, and has taken the total Sky Talk customer base to 204,000.
Shares in the company rose 1.36% to 557.5 pence ($10.59) on Friday.