BSkyB tunes out recession to grow subscriber base

JEREMY Darroch, chief executive of BSkyB, will this week declare that the broadcasting giant has defied the recession to increase customers by almost 5 per cent last year.

Darroch, who took the reins from James Murdoch 18 months ago, is expected to announce on Thursday that Sky is now in more than 9.4 million British homes, bringing it closer to its goal of hitting ten million subscribers by 2010.

Sky has been one of the few beneficiaries of the consumer slowdown as Britons choose to spend more time at home. Recent growth has been boosted by particularly strong demand for its HD (High Definition) service after Sky slashed the cost of its HD box from 150 to 49.

Darroch is expected to announce customer numbers have grown by around 432,000 over the past 12 months when he posts full-year and fourth-quarter results on Thursday. The digital broadcaster is understood to have added around 94,000 subscribers in the last three months of its financial year.

However, investment in broadband, the company's marketing drive on HD and a slump in advertising revenues are thought to have restricted profit growth last year. Operating profits for the year are expected to come in at 789 million, up from 724m the year before.

The company is also facing a number of regulatory battles, with the fate of its 17.9 per cent stake in ITV still to be decided pending an ongoing appeal.

Darroch has also declared that he is prepared to go to war with Ofcom over the pay-TV market after the regulator recommended last month that Sky be forced to share some of its premium content with competitors, such as Virgin. Darroch has told the City he is prepared to use "all available legal avenues" to block the move, with 4bn committed to sport and TV rights over the next five years.

Conservative leader David Cameron has given Darroch some cause for optimism after he recently accused Ofcom of acting like a lobbying organisation. There are high hopes among Sky executives that a Conservative Government would rein in the regulator.

Darroch's comments on the year ahead will also be heavily scrutinised for any hints on how he expects the recent demise of Setanta in the UK to affect subscriber numbers.

Although Setanta's departure has allowed ESPN, the sports division of the Walt Disney company, to get a foothold in the UK football market, analysts do not view the American newcomer as a substantial threat.

Nick Bell, media analyst at Jefferies International, expects Sky to make significant inroads in Scotland in particular after its joint bid, with ESPN, for rights previously held by Setanta was accepted by the SPL earlier this month.

Bell said: "Sky has the rights to the four Old Firm derbies. This should position the company to make share gains against Virgin Media in Scotland."