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Subscriber slowdown hits BSkyB UK satellite TV company BSkyB has seen a dip in the number of customers added to its service as a result of an increase in those choosing not to renew their subscriptions. While the company is still on course to reach its target of eight million subscribers by the end of the year, its first-quarter results, out today, reflected what chief executive James Murdoch called "a challenging competitive environment." Sky saw a 14% increase in operating profit for the quarter, to £215m, with revenue up 8% to £1.02bn, and pre-tax profit up 14%, to £200m, compared with the same period last year, but the number of new subscribers was down on analysts' expectations. While 286,000 new customers came on board this was offset by a higher rate of 'churn' - the proportion of existing customers choosing not to renew their contracts. This figure rose to 11.7%, up from 10.5% in the previous quarter and straying from the company's proud track record of recent years, when the figure stood at about 10%. As a result, Sky's net gain between July and September was only 57,000 households, rather lower than the 86,000 industry observers had anticipated. In Q1 last year, the company saw 62,000 net additions. The latest results show that Sky has 7,844,000 subscribers in the UK and Ireland. Murdoch said the company remained on track to hit its 2005 targets as well as those for 2010, when it aims to reach 10 million households. "Sky increased sales to new customers and achieved strong profit growth this quarter despite facing a challenging competitive environment and continued economic pressure on consumers," said Murdoch. "The team has met or over-achieved core performance measures including sales, operating profit and earnings per share, notwithstanding an increase in churn." During the quarter the number of subscribers to the Sky+ personal video recorder (PVR) passed the one million mark – a success Murdoch heralded as an "important milestone." The company is placing great store in its PVR's ability to draw in new customers, and 32% of those signing up to Sky+ during the quarter were indeed entirely new to satellite TV. Sky's recent announcement of its plans to move into video-on-demand and broadband internet services, with the £211m acquisition of network provider Easynet, illustrated just how "challenging" the company is finding the market. The satellite company has decided to come down from the stratosphere and get its hands dirty in the telephone network business, as the likes of BT, Video Networks and merging cable companies NTL and Telewest all scramble to dominate the triple-play market, supplying consumers with a combined package of TV, internet and telephone. "Real change is upon us, not only in the genuine ways that entertainment and communications services are coming together, but also in how the internet has brought about changes in consumers' lives," said Sky chairman, Rupert Murdoch, at the company's annual general meeting today. "The proposed acquisition of Easynet Group plc is an important step in ensuring that we continue to deliver the services that our customers want in the future. It will give us the tools to reinvent our business yet again and to stay at the forefront of innovation." Jonathan Webdale 4 Nov 2005 © C21 Media 2005 
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