UPDATE 1-Sky Deutschland shares up on strong subscriber growth

Thu May 12, 2011 6:35am EDT

* Wins 73,000 new subscribers vs f'cast 55,000

* Q1 operating loss 55 mln eur, in line with estimates

* Shares up 4.3 pct, hit highest in 19 months

(Adds analyst comment, shares)

By Nicola Leske

BERLIN, May 12 (Reuters) - Loss-making pay-TV broadcaster Sky Deutschland AG (SKYDn.DE) won more subscribers than expected in the first quarter, bringing it closer to profitability and boosting its shares to a 19-month high.

The company formerly known as Premiere, in which News Corp (NWSA.O) owns a 49.9 percent stake and whose main draw is German premier league soccer, has suffered from sluggish growth because of Germans' reluctance to pay for premium TV content.

Chief Executive Brian Sullivan, who took the helm in April 2010, said on Thursday: "We are happy with the results but at the same time are aware that this is just the beginning and there is still plenty to do."

The stock rose as high as 3.437 euros, its highest since October 2009, and was up 4.5 percent at 3.344 euros by 1005 GMT, outpacing the STOXX Europe 600 media index .SXMP which was down 1 percent.

In the quarter, Sky Deutschland added 73,000 new subscribers, which put its total subscribers by end-March at 2.73 million and well above estimates of around 55,000.

Sullivan has said that the market's understanding that the company should break even at around 3 million subscribers or slightly fewer was broadly correct.

Analysts at UBS noted Sky had delivered another strong set of results and estimated net additions could reach 365,000 if the record low churn of 9.9 percent continues for the rest of the year.

"This is Sky's third consecutive quarter meeting or beating expectations. We believe a succession of solid quarters combined with credible long term guidance adds further support to the bull case on Sky," UBS analysts said.

Sky Deutschland, which also broadcasts Hollywood movies, documentaries, dramas and pornography, has said its core earnings will improve significantly in 2011 but will remain negative. It has also said it will give an update on its outlook in the second quarter of this year.

Sky Deutschland's first-quarter loss before interest, taxes, depreciation and amortisation reached 55 million euros ($79.2 million) compared with 64.5 million a year earlier and bang in line with the average analyst estimate.

Quarterly sales were 269.6 million euros, slightly more than the 265 million estimated.

The company is Germany's only pure play pay-TV broadcaster, a tricky business because consumers can choose from more than 30 free channels and are reluctant to pay extra.

In addition, cable companies and incumbent telecom group Deutsche Telekom (DTEGn.DE) are keen to have their fingers in the pie by offering their own TV services in an effort to tap new revenue streams. (Editing by David Holmes) ($1=.6948 Euro)

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