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Sky Deutschland Stock Jumps as Profit Exceeds Estimates

Sky Deutschland AG jumped to the highest in almost five years as additional customers helped profit beat estimates at the German pay-television provider controlled by Rupert Murdoch’s Twenty-First Century Fox Inc.

Second-quarter earnings before interest, taxes, depreciation and amortization climbed 60 percent to 36.8 million euros ($48.8 million), the Munich-based company said today. Profit exceeded the 32.6 million-euro average of 10 analyst estimates compiled by Bloomberg. The stock gained as much as 7.9 percent to 6.66 euros in Frankfurt trading, the highest intraday price since October 2008.

“The company is building up a positive track record,” Frankfurt-based DZ Bank analyst Harald Heider, who recommends buying Sky Deutschland shares, said in a note to clients. “We expect an acceleration of the growth in the second half.”

Sky Deutschland reiterated today that it expects to post its first positive Ebitda since Murdoch began investing almost six years ago. Trailing 12-month Ebitda was 9.3 million euros. Chief Executive Officer Brian Sullivan is trying to lure customers with higher-capacity hard-drive recorders and content that can be accessed via mobile devices. The number of customers increased by 47,900 subscriptions from the first three months of 2013 to 3.45 million, the company said today.

“We have done a pretty good job on improving the service so that it meets the standards that German subscribers expect,” Sullivan said on a conference call. “We want and need to be in more homes and we are constantly fighting inertia.”

Sky Deutschland was trading up 6.6 percent at 6.58 euros as of 4:35 p.m. The volume of trading was more than twice the three-month daily average. The stock has jumped 59 percent this year, valuing the company at about 5.8 billion euros.

Advertising Growth

The company, known as Premiere AG until its 2009 rebranding, plans to continue increasing the proportion of revenue from advertising, Chief Financial Officer Steven Tomsic said in a telephone interview. Advertising revenue climbed 45 percent to 8.7 million euros, or 2.3 percent of the total, in the second quarter.

Web-streaming film services such as Amazon Inc.’s LoveFilm aren’t yet affecting Sky’s business, according to Tomsic. “Our business hasn’t really seen the impact from the proliferation of over-the-top providers in terms of subscribers switching from Sky,” he said, adding that growth in revenue per customer will accelerate in 2014 from the 4.9 percent year-on-year increase to 33.74 euros last quarter.

“This should be seen as a moderate rather than dramatic increase in growth profile,” he said.

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