BSkyB reports 27,000 customers left last year
A sharper-than-expected rise in the number of BSkyB customers leaving the satellite broadcaster took the shine off figures from the British group today.
BSkyB chief executive James Murdoch admitted 27,000 customers quit after the group hiked its prices last year in a bid to refocus on customer retention.
The satellite broadcaster reported an inflated churn rate of 11.9% in its second quarter results to the end of December, up from 11.8% on the previous quarter and well above the company’s 10% target.
Mr Murdoch sought to allay concerns, claiming the spike in churn was only a short-term problem.
But the churn rate saw net new subscriber numbers fall to 183,000 in the traditionally strong Christmas period, down 15% on 2005 and lower than analyst expectations of at least 190,000.
Mr Murdoch said the group was switching its policy to reward “good behaviour”, cutting discounts to dissuade subscribers from leaving to return on a lower rate, which would reduce the churn in the long-term.
He added: “If you take away the 27,000 customers who left the platform when we changed our retention policy, the underlying rate is 10.6%.”
The churn levels significantly hit BSkyB’s total digital-to-home new customer figures, which were the highest for six years in the second quarter at 432,000.
News of the churn rate caused concern among analysts and shares in BSkyB were down 2p at 453p after the results announcement.
Collins Stewart analyst Simon Wallis said: “Shareholders had better hope this increase in churn proves temporary. The Christmas period – second quarter - should actually be a seasonally low period for churn and with Sky’s subscriber base reaching 8.4 million, it is an increasingly critical variable to Sky’s valuation.”
Profits before tax for the six month period also declined by 9% to £356m (€536m) on the previous year, although the drop was in line with analyst expectations, which suggested this would take account of the controversial 17.9% stake BSkyB bought in ITV last year, costing well above market price at nearly £1bn (€1.5bn).
The profits decline also reflected the costs involved in launching BSkyB’s broadband offering last year.
The broadband service is steaming ahead, with BSkyB today announcing it now aimed to achieve 70% coverage in UK households by the end of June, six months ahead of schedule.
BSkyB’s price increases last year show an increased focus on average revenues per user (ARPU) and the group today confirmed this was starting to pay off, with ARPU increasing by £9 (€13.5) to £394 (€594) quarter-on-quarter.
Mr Murdoch also denied reports he was due to leave the broadcaster in the summer to return to majority shareholder News Corp, saying he had “no plans to go anywhere right now”.
