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[Satellite TODAY Insider 05-18-11] Sky Deutschland, Germany’s largest satellite pay-TV operator, could reach the breakeven point by 2012. Morgan Stanley equity analyst Patrick Wellington issued a new report on the operator May 17.
“Strong Q1 subscriber numbers lead us to raise our forecasts and bring the breakeven point forward to 2012,” Wellington says in the report.
Sky Deutschland could be one of the turnaround success stories in European pay-TV. In its latest results, the pay-TV operator announced that it had more than 2.7 million pay-TV subscribers, with the numbers of customers taking the premium HD package reaching 664,000 — more than double compared with the same stage last year.
The German pay-TV market still represents a lucrative opportunity for satellite considering it is one of Europe’s biggest markets, but the digital TV market has been slow to takeoff compared with others. In terms of Sky Deutschland’s potential for growth, Wellington says, “Our core assumption is that Sky Deutschland can reach a net subscriber base of 3.5 million by 2013. This represents just 9 percent of German TV households and
0.07 million fewer subscribers than Premiere claimed at its peak in 2005. We assume no increases in Sky’s tariffs until Q3 2012 and then just a price increase of 2 percent.”
Certainly, Sky Deutschland seems to be going in the right direction, and its first quarter results were ahead of expectations. “Q1 numbers were good: Sky Deutschland exceeded market expectations with 73,000 net adds (MS 50,000). The company continues to show encouraging trends in gross adds, driven by HD take-up, in churn (down to 9.9 percent on a quarterly annualised basis), in ARPU (up another 1.2 percent in sequential quarters) and in HD adds (74,000),” says Wellington.
“Sky has delivered another strong set of results with +73,000 net adds (UBS estimate/consensus +59,000). Revenues were 270 million euros ($381.58 million) versus consensus estimates of 265 million euros ($374.51 million). This is Sky’s third consecutive quarter meeting or beating expectations. We believe a succession of solid quarters combined with credible long term guidance (expected at Q2) adds further support to the bull case on Sky,” UBS analyst Polo Tang said in a research report issued last week.
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