BSkyB adds another 428,000 HD customers in 1Q10

British Sky Broadcasting Group Plc (LSE:BSY) has announced results for the nine months ended 31 March 2010.

Operational Review

In the three months to 31 March 2010 (“the quarter”), we saw continued customer growth and strong take up of additional products.

Net additions for the quarter were 62,000 taking our total base to 9.770 million. Within this, gross customer additions were 304,000 and churn improved by 70 basis points on the prior year to 9.9%.

We are seeing good success in our multi-product strategy, with net product sales of almost 900,000 in the quarter. Each of our products saw good growth, with a standout performance in HD as penetration exceeded 25%. Take-up of communication services continues apace, with 19% of customers now taking all three of TV, broadband and telephony. And as customers reward us with more of their business, ARPU reached £503, up 11% year on year.

Sky+HD

Customers responded strongly to a further reduction in the headline price of the Sky+HD box. We added 428,000 HD customers in the quarter, a similar level to the Christmas quarter and 76% higher than the prior year.

We extended our HD channel line-up further this quarter, building even more value into the £10 monthly subscription. We announced the launch of four new channels including Five HD, ITV1 HD, Sky Sports HD 4 and Hallmark Channel HD. Together with Sky News HD, this means we will have 42 HD channels and are progressing well with plans to reach 50 channels by the end of this calendar year.

Our plans to standardise around the HD box platform, announced in January 2010, have now been fully implemented. All new and upgrading customers receive a Sky+HD box and, those subscribing to the £10 a month HD channel pack for the first time, receive their HD box for free. The Sky+HD box not only provides access to Europe’s most comprehensive HD service and our enhanced electronic programme guide (EPG), but later this year it will also offer customers access to a full broadband-enabled video-on-demand service and Sky 3D, Europe’s first 3D TV channel. Importantly, getting more of our best boxes into customers’ homes today allows us to grow more efficiently, making it easy for customers to upgrade to our HD channel pack in the future with no need for a box swap or engineer visit.

Innovation

We continue to innovate for our customers. We launched Sky 3D to commercial customers and will now broadcast one live Premier League game every week for the remainder of the 2009/10 season. Over 1,000 venues across the country have already signed up to the service.

Later this year we will launch Sky 3D to residential customers, as well as our full video-on-demand service, Sky Anytime+. Both of these services will use our existing Sky+HD platform and will be accessible to all customers with an HD box.

Following agreements with Cello, 3View and Humax, Sky Player will be accessible via a number of new devices and platforms including internet connected LCD TV’s and other hybrid DTT/IPTV set-top boxes. This is in addition to existing access via Xbox, Fetch TV and Windows Media Center. This is a great way to put more value into our subscription service for customers.

Customer Metrics (unaudited):

                                           Quarterly Net Additions
                                          ------------------------  Closing Base
'000s                                       31-Mar-10    31-Mar-09     31-Mar-10
                                          -----------  -----------  ------------
Net Customer Additions                             62           80         9,770
Additional products
  Sky+HD                                          428          243         2,510
  Multiroom                                        63           46         2,062
  Broadband                                       101          130         2,505
  Telephony                                       118          195         2,230
  Line rental                                     168          270         1,472
Other metrics
  Gross additions for the quarter (000)           304          327
  Churn for the quarter (annualised %)           9.9%        10.6%
  ARPU (£)                                       £503         £452

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