Sky profit, shares soar

Sky TV in New Zealand has exclusive rights to All Black test matches and the Super 15 rugby competition. Photo / Brett Phibbs

Pay TV operator's investors unfazed by Telecom's entry to internet television business.

Sky Network TV's share price has rallied sharply after the company produced a 22 per cent lift in its first-half net profit and investors appeared to shrug off any potential threat that Telecom might pose to its pay TV business.

The company reported an $82.1 million net profit, raised its earnings outlook for 2013/14, and increased its interim dividend payout to 14c from 12c.

Sky TV now expects to report earnings of $155 million to $160 million for the full year, up from last October's guidance of $145 million to $155 million.

The improved financial position was primarily due to the continued success of My Sky - a service that allows customers to record programmes - as well as a fall in programming costs, which were abnormally high in the previous comparable period because they included the costs of the Summer Olympics.

Sky shares jumped after the morning announcement and finished up 33c at $6.08.

"Essentially the result is a good one because they have lowered their programme costs, which is a key element," said Greg Fraser, of Mint Asset Management.

Fraser said Telecom had made it clear that it did not intend to compete with Sky TV.

"They [Telecom] are certainly not interested in chasing the key sporting content, which is the real basis on which Sky TV's business is built," he said.

As it stands, Sky has exclusive New Zealand rights to the Super 15 rugby competition and to All Black test matches.

"What they [Telecom] are looking at is a more expanded offering for the broadband and mobile phone customers. It's something to make their customers more sticky to Telecom, but not necessarily with internet TV as a core product," Fraser said.

The equivalent in Australia is Fetch TV, which some local telcos carry but which does not feature sport.

My Sky subscribers now represent 56.7 per cent of Sky's subscriber base compared with 50.1 per cent in the previous comparable period.

Sky's gross churn - the percentage of subscribers that discontinue their subscription over the period - was 13.3 per cent, down from 14.6 per cent in the previous period.

Programming costs - made up of the cost of buying programme rights plus programme operating costs - fell by $13.5 million.

Telecom, which plans to change its name to Spark, said last week that it intended to enter the internet television market.