Sky's share price falls as churn rate picks up despite adding 177,000 new customers as it reports revenue growth

James Nickerson
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Darroch said it's been another strong quarter for Sky (Source: Getty)

Sky has reported strong growth for the third quarter as it experiences "good trading" across all its markets but its churn rate picked up, pushing its share price down over 4.4 per cent.

The figures

Sky reported revenues to have risen five per cent to £8.72bn over the nine months to the end of March.

Operating profit increased 12 per cent year-on-year to £1.1bn during the nine month period.

The media group reported that it added 177,000 new customers in the last quarter, taking total customers to 21.7m.

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Why it's interesting

Sky has grown its customer base handsomely during the last quarter. That includes 46,000 broadband users in the UK and Ireland.

That helped revenues increase by five per cent, adding to a consistent run of form from the media company in growing revenues.

That's despite competition from the likes of BT and online services such as Netflix and Amazon Prime.

Read more: Sky Sports strikes five year deal to become the 'exclusive' home of Formula 1

It faces a significant increase in the cost of its deal for the Premier League, but is also expected to face competition when bidding for games in the Bundesliga, Germany's national football league.

Still, Jeremy Darroch, group chief executive, is excited that, in sport, Sky is to become the exclusive home of Formula 1 in the UK and Ireland from 2019 whilst showing UEFA Euro 2016 this summer in Italy.

And he's happy about the launch of Sky Q in February, and was encouraged by the launch of Sky Box Sets in Germany and Italy.

However, Sky has seen a churn rate of 10.7 per cent in the UK and Ireland, 9.8 per cent in Germany and Austria and 11 per cent in Italy.

Read more: Sky's got a new UK chief executive

That's led analysts at Liberum to reiterate the case for sell. "Following the Vivendi/Mediaset deal we believe Vivendi are going to become a more significant competitor in Europe and we could see these higher churn rates persist as competition intensifies," it said.

"Our main concern is with Sky's long term profitability, we believe it will never reach the heights to justify the valuation as we believe there will be continuing pressures from programming cost inflation."

Last month Sky announced that Stephen van Rooyen would take over as boss in UK and Ireland.

What Sky said

Jeremy Darroch, chief executive, said:

It's been another strong quarter for Sky. Our strategy to broaden our business, expanding into new markets and customer segments, has delivered further excellent financial results with revenue up five per cent and a double digit growth in profit.

Our promise of world class content, commitment to innovation and brilliant service is persuading more customers to join and stay with Sky, in every market. As we pass the major milestone of 40m products in UK and Irish households, we will continue to execute this successful approach across the group.

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