Heavy investment in broadband continued to weigh on BSKyB’s operating profits in the first half of the year, but the satellite broadcaster has said that it is now past the peak of spending and firmly on track to secure 10 million customers by 2010.
BSkyB has been spending heavily to turn itself rapidly from a subscription television service into a provider of television, broadband and telephony.
The cost of BSkyB’s new Barclays Premier League contract and the loss of advertising revenues because of a dispute with Virgin Media also contributed to the drag on operating profits, which were slightly higher than expectations at £295 million, but 25 per cent lower than the same period last year.
However revenue at BSkyB increased by 11 per cent to £2.45 billion, as net customer growth reached 167,000 in the second quarter, taking the total number of customers to 8.8 million. Churn, the number of subscribers leaving the service, was also reduced to 10 per cent.
Shares in the company, which is 39.1 per cent owned by News Corporation, parent company of The Times and Times Online, climbed 6p in early trading to 545p.
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The satellite broadcaster incurred a £343 million charge in the half year to 31 December, relating to its ITV stake, resulting in first half loss of £112 million.
BSkyB is considering whether to appeal the Competition Commission’s December ruling that it must reduce its 17.9 per cent stake in ITV down to 7.5 per cent.
Jeremy Darroch, the chief executive of BSkyB, said that the company had three weeks to decide whether it would appeal and would make an announcement in due course. The holding is now worth about two thirds of the £940 million originally paid in November 2006.
Mr Darroch, who took over from James Murdoch as chief executive of the broadcaster in December when Mr Murdoch moved up to chairman of the company and was put in charge of News Corp’s European and Asian holdings, said that the company had traded well in the second quarter and was beginning to see the benefits of signing up a high quality customer base.
It has reduced the number of discounts it offers for customers taking a package of channels and has seen take-up of Sky+ increase by a record 16 per cent to 3.1 million subscribers.
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Average revenue per user, a key industry metric, was up £10 in the quarter at £42, compared with £394 this time last year, and the company revealed that one in two customers now take an additional product from the broadcaster.
Mr Darroch said that he was confident that Sky would prove resilient if there was a significant downturn in the economy. “If people are starting to rein in their bills, they will be more focused on their home, and home entertainment becomes more important to people,” Mr Darroch said.
He added that the company had not seen any significant slowdown in advertising revenue.
The dividend was raised by 8 per cent to 7.1p per share.