British Sky Broadcasting Plc (BSY), the U.K.’s biggest pay-television provider, said high-definition subscriber additions increased 76 percent in the last quarter after it cut installation prices.
BSkyB rose as much as 6 percent in London trading. The number of additional high-definition TV subscribers in the third fiscal quarter climbed to 428,000 from 243,000 in the same period a year earlier, BSkyB said today in a statement. Analysts had predicted 336,000, according to a consensus supplied by the Isleworth, England-based company.
“HD has exceeded everybody’s expectations,” Chief Executive Officer Jeremy Darroch said on a conference call with reporters. “It’s a long-term trend. The potential for growth is very good.”
BSkyB, controlled by Rupert Murdoch’s News Corp., has cut the cost of set-top box installation to attract customers and compete with cable-TV provider Virgin Media Inc. and BT Group Plc. (BT/A) The company, which has 9.77 million customers, is aiming for 10 million by the end of 2010.
The shares rose as much as 35.5 pence to 631.5 pence, and traded 3.6 percent higher at 617.5 pence as of 10:20 a.m. The stock has gained 9.9 percent this year, giving the company a market value of 10.8 billion pounds ($16.4 billion).
“They clearly set a pricing structure which really helped drive the HD subscriptions,” Nick Bell, an analyst at Jefferies International, said. “They had a very strong Christmas quarter in HD and built on that.”
BSkyB doesn’t expect the rate of high-definition subscriber growth to continue at the same pace in the short term, Darroch said on a call with analysts today.
The pay-TV provider said nine-month adjusted operating profit rose 5 percent. Earnings before interest, taxes and exceptional items in the nine months to March 31 climbed to 618 million pounds from 589 million pounds a year earlier.
The company’s broadband Internet sales may have offset the costs associated with discounting high-definition services, Jefferies’s Bell said. The company started selling broadband in 2006 and added 101,000 customers in the third quarter.
BSkyB is preparing to appeal a ruling by the U.K. regulator Ofcom that it must offer its two premium sports channels at a discount to competitors including Virgin Media Inc. The broadcaster should offer its package of sports channels to cable operators at prices that are 10.5 percent lower than the current wholesale price, Ofcom said last month.
“The analysis they have conducted is flawed, we disagree with the direction and outcome of the review,” Darroch said.
Virgin Media and BT Group Plc filed a complaint in January 2007 saying BSkyB’s control of film and TV rights creates a “vicious circle” that hurts competition and keeps prices high. BSkyB is seeking to halt the implementation of Ofcom’s ruling until a full appeal can be heard.
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