News Corp is to underwrite a €340 million refinancing of Sky Deutschland as the satcaster issued a profit warning. The new money will go towards an expansion of HD services, the accelerated deployment of Sky+ and enhanced customer service.
The rights offering is expected to take place in September/October 2010 using Sky Deutschland’s authorized capital. News Corp, through News Adelaide Holdings, has committed as a backstop to the rights issue in a move that could potentially increase its stake in Sky Deutschland up to 49.9% should other shareholders not choose to participate.
Sky Deutschland said it anticipated EBITDA for the full year would remain negative and would be significantly lower than previously indicated because of a lower than expected subscriber development. Full year 2011 is expected to be significantly better, but still remaining negative.
The pessimistic outlook came as Sky Deutschland reported subscription revenues up 18.7% year-on-year; ARPU also climbed to €28.62 from €25.20 in the second quarter of 2009. However, despite repackaging and a substantial marketing campaign, only 6,000 new subscribers were added, taking total subscribers to 2.476 million.
What has been achieved is the lowest annualized churn rate in four years, falling to 16.3% from 20.8% in Q2 2009. HD penetration increased to 14.9%, almost doubling over a 12-month period.
Brian Sullivan, CEO of Sky Deutschland AG, said while he was happy that the business was moving in the right direction, he was not satisfied with the pace of development. “In my time at Sky Deutschland, it has become clear to me that we must further invest now in those areas that fundamentally differentiate us for customers, and that will accelerate growth in subscribers and ARPU. We also need to shore up our financial position to enable us to focus on growth. I am confident this will allow us to achieve the necessary momentum to build a sustainable business for the future.”
The Sky+ PVR has been put at the centre of Sky Deutschland’s plans for future development, recognising that the product attracts new subscribers, who take more packages and services and churn at potentially lower levels. . Since November 2009, all Sky customers taking a box from Sky receive full warranty cover, backed by 24/7 customer support.
