Sky Germany: The only way is up
By Chris Forrester

A 22-page report from noted media analyst Sarah Simon at investment bank Berenberg gives a glowing rating for Sky Deutschland. Simon has compared and contrasted Sky Deutschland (Sky-D) with Europe’s other pay-TV operations, notably News Corp’s other ventures with BSkyB and Sky Italia, as well as Digital+ in Spain and MTG in Scandinavia. Simon stresses that it is a tough task and she has tried to compare each of the players on a strict ‘apples to apples’ basis.

In her study, she explains that Sky-D is only just beginning its turn-around after some years struggling in the doldrums. “With a strong set of Q4 2010 and Q1 2011 operating metrics under its belt, the company must continue to deliver momentum in subscriber growth and ARPU if it is to convince the market that it offers medium- and long-term prospects,” she states, and comes to the conclusion that that by measuring ARPU, subscriber acquisition costs, churn, as well as programming strategy and EBITDA margins, Sky-D is shaping up extremely well.

Simon says that Sky-D’s ARPU is below average (for the rest of Europe) and represents an opportunity for growth helped by increased HD offerings, multi-room and multi-platform (the SkyGo package) pricing options. “However, we do not assume any price increase until Q1 2013, as we expect management to focus on gaining customer traction in the next couple of years,” she adds. One huge benefit that Sky-D has is in the very low penetration of its Sky+ PVR box. This can only improve, hints Simon, and thinks that BSkyB’s 35 per cent penetration levels is a guide as to what might well happen in Germany.

The bank’s report concludes by saying Sky-D could be in a position to “generate margins that are broadly in line with BSkyB’s on an adjusted basis (i.e. pay-TV only, and before the expensing of installation and set-top box costs). Our 2015 forecast is for an EBITDA margin for Sky Deutschland of 30 per cent.”