Sky high profits add to pressure on Murdoch's News Corp to raise bid

Published on Wednesday 26 January 2011 21:45

Pressure mounted yesterday on Rupert Murdoch to raise his offer to secure control of BSkyB as the satellite broadcaster delivered an "outstanding" first-half performance.

The media tycoon's News Corp has offered to buy the 61 per cent of BSkyB it does not own but faces a lengthy competition inquiry if it cannot allay fears such a move will give it too much control of the UK press and airwaves.

BSkyB, which trades as Sky, has already rejected a 700p-a-share bid proposal and analysts say consistently strong results from the broadcaster add to pressure on News Corp to up its offer.

Yesterday's interim results highlighted a 26 per cent jump in operating profits to 520 million, while customer numbers broke through the ten million mark in the six months to December. Sky is adding subscribers at a heady rate and selling them an increasing number of products, while benefits of an investment cycle and cost-saving programme have kicked in.

Evolution Securities analyst Steve Malcolm said: "Today's results will increase the pressure on News Corp to raise its offer above BSkyB's requested 800p (per share]."

Shares in the satellite group, whose half-year turnover rose 15 per cent to 3.2 billion, closed up 5p at 762.5p.

Malcolm said the revenue growth and 26 per cent rise in operating profit represented an excellent performance in a challenging consumer environment.

Earlier this week, Culture Secretary Jeremy Hunt said he was "minded" to refer News Corp's bid to the Competition Commission but gave the group more time to deliver undertakings.

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said: "Despite the inevitable distractions of the News Corp bid, Sky continues to power ahead regardless. Its recent growth trajectory has been maintained.

"The News Corp situation could drag on for a while yet, but in the meantime Sky is firing on all cylinders."

In the three months to the end of December - the firm's second quarter - Sky added a net 140,000 subscribers, towards the lower end of forecasts. It sold 343,000 high-definition TV and 204,000 broadband packages - the group's strongest broadband growth for more than two years.

Solid demand meant customers were on average paying a record 541 per year. Only 9.5 per cent of them left on an annualised basis, which was also better than expected.

Almost one in four customers now take a package comprising TV, broadband and telephone provision, the company said.

The group also announced plans to create 1,500 jobs by opening further contact centres, with a site in Sheffield the next to open. It already has Scottish operations in Dunfermline, Livingston and Uddingston.

A new service, Sky Anywhere, will launch later in the year to allow customers to access programmes on their computers when they are away from home.The service will be supported by the acquisition of public wi-fi operator The Cloud.

Next week, the Sky Atlantic channel will be launched to screen new series from American channel HBO, as well as the fifth season of award-winning drama Mad Men which was recently poached from the BBC.

Sky also said it has so far incurred costs of 7m on administration fees for News Corp's takeover bid.