Broadband

Sky, or to be precise British Sky Broadcasting Group plc, recently announced their first quarter results to September 30th. Sky broadband continues to grow with 1.792 million users but as this is only 20% of Sky homes there would appear to be a considerable opportunity for further growth.

One wonders why the figure is so low when broadband takeup across the population as a whole is around 60% of households - perhaps the late arrival of the product and the lower coverage of the better value LLU service is part of the story, or maybe the Sky customer base demographic is skewed towards households with no landline or lower computer use.

Sky’s phone service Sky Talk is slightly less popular with 15% of Sky homes taking it, so perhaps it is inevitable that the rumoured March 2009 broadband price increases of £5/month across all the LLU product range won’t apply to customers also taking Sky Talk.

Broadband makes a loss for Sky, in part because the basic service in LLU areas is a zero cost add-on for Sky customers. The accounts report an increase in costs of over £24m (~£100m per year) attributable to “variable network costs associated with the additional 853,000 new broadband customers and 682,000 new telephony customers year on year”. Clearly the rumoured price rises are needed to address this cost of providing the service for potentially no extra revenue.

The bottom line for Sky is that the first quarter adjusted operating profit of £182 million includes losses attributable to Sky Broadband and Talk of £34 million (2008: loss of £51 million) and a £10 million loss from Easynet (2008: loss of £6 million).

Another recent announcement from Sky suggests that the online Sky Player will in the coming months start to offer a pay-TV service to computer users without the need for a satellite TV service, in other words the broadband replaces the dish as the delivery mechanism.

Tags: Sky