As free-to-air channels battle for survival, pay television giant Sky TV is headed for what market analyst Sarndra Urlich calls "an embarrassment of riches".

Urlich of First New Zealand Capital says Sky is under-leveraged with an inefficient balance sheet.

Profits had boosted Sky's asset levels but there were no apparent acquisition targets and little prospect of a boost in dividends or a share buy-back.

Sky TV chief executive John Fellet played down the concern.

He said comments about Sky's low debt loading had been around in the past - disappearing during the global financial crisis - and their return was due to the renewed role of debt in the financial markets.

The financials are another indication of the strength of Sky in the New Zealand media market at a time the National Government is resisting regulation for its dominance of content.

Urlich says lack of debt on Sky's balance sheet is affecting its financial efficiency. She issued a note last week saying that Sky was under-leveraged.

Its controlling shareholder - Rupert Murdoch's News Corporation with 43.65 per cent - wanted to grow the asset rather than take bigger dividends. "That being the case Sky will soon be faced by an embarrassment of riches.

"As such we believe that something will need to be done to engineer a more efficient balance sheet," she said.

"In our view there are no value accretive merger and acquisition targets in the New Zealand market - or offshore for that matter."

Urlich says that leaves Sky with the "problem" of having substantial capacity and it could comfortably take on another $300 million to $400 million of debt. Current debt was $200 million and Sky could stretch it as far as $900 million.

Media companies Yellow Pages Group and MediaWorks are battling through capital restructuring to overcome over-leveraged balance sheets.

First New Zealand Capital sees no merger and acquisitions target but the pay television industry is going through big changes.

In Britain, Murdoch's News Corporation has been given Government clearance for a full takeover of BSkyB.

Across the Tasman the dominant pay TV company Foxtel has launched a bid for second player Austar.

News Corporation owns 25 per cent of Foxtel.