The company is simply performing too well. Churn – the amount of customers that left during the period – has fallen to a decade low of 9.5 per cent while the company has beaten expectations on just about every measure. This firm is recession proof: it won’t come cheap.
It already looks as though News Corp will have to stump up much more than the 700p-a-share it tabled back in June if it wants to get its hands on the rest of BSkyB. As Lorna Tilbian of Numis points out, the market has added around a thousand points since then. She thinks big institutions are unlikely to sell up for less than 825p a share.
And if Murdoch has to wait for a lengthy competition investigation, he will end up paying even more.
That’s because BSkyB’s costs exploded during the period. The firm spent £354 on acquiring each new subscriber, compared to just £34 a year earlier, after the firm upgraded the box it gives away for free to an HD model. Marketing spend was also up by £75m to £613m.
This should come as no surprise to shareholders: BSkyB always said it would need to invest heavily to push past the 10m subscriber mark, and it was right to do so.
But these costs will start to ease from 2012, meaning analysts are likely to upgrade the stock in expectation of higher earnings. Murdoch is a man in a hurry.