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UPDATE 2-Sky Deutschland crawls towards break-even goal
August 12, 2011 / 6:25 AM / 6 years ago

UPDATE 2-Sky Deutschland crawls towards break-even goal

* Q2 EBITDA 23.4 mln eur vs 33.3 mln poll average

* Sees FY core loss between 145-175 mln eur

* Expects more customers, less churn in 2011, 2012

* Shares up 2.1 percent at 1054 GMT

(Adds more CEO comment, analyst comment, share price)

By Nicola Leske

FRANKFURT, Aug 12 (Reuters) - German pay-TV broadcaster Sky Deutschland SKYDn.DE won more customers than expected as it narrowed losses in the second quarter, slowly inching towards its target of about 3 million subscribers.

Sky Deutschland, formerly known as Premiere, in which News Corp holds a 49.9 percent stake, has struggled to find growth in a country where people are reluctant to pay extra for television amid a large choice of free channels.

But under its Chief Executive Brian Sullivan, who took the helm at the German company in April 2010, Sky Deutschland has slowly begun to show some improvement.

Sullivan, who spent 15 years at BSkyB before he joined Sky Deutschland, is credited for pushing innovation at BSkyB and attracting new customers. The British company was also loss-making in its early years but is highly profitable now.

Last month, BSkyB said it would hand out 1.6 billion pounds ($2.6 billion) to investors who lost out when a phone-hacking and police corruption scandal forced News Corp to drop its bid for remaining 61 percent of the satellite broadcaster it does not own.

Asked whether there was any indication that News Corp would increase its stake in Sky Deutschland after its BSkyB plans failed, the German company’s CEO said: “Absolutely not.”

However, Sullivan said News Corp management was supportive of his efforts to make Sky Deutschland profitable.

Like News Corp’s CEO Rupert Murdoch, Sullivan is confident that the German TV market offers plenty of growth potential.

“Germany is the last large untapped pay-TV market in Europe,” Sullivan said.

STEADY GROWTH

Sullivan said Sky Deutschland would break even when its subscriber base grew to between 3 million and 3.2 million from 2.759 million at end-June, without saying when that would be.

The company, which has managed to continuously trim its losses and reduce churn, added 33,000 subscribers in the second quarter compared with only 6,000 in the previous year.

Sky Deutschland’s main draw is the right to show German premier league soccer live. It also shows movies, documentaries, drama series and pornography.

Its quarterly annualised churn rate stood at 9.4 percent, down from 16.3 percent, and average revenue per user (ARPU) rose to 30.69 euros from 28.62 euros.

The company, based in the Munich suburb of Unterfoehring, expects to post a full-year core loss of between 145 million and 175 million euros ($204-247 million) and sees the positive trends seen so far this year continuing in 2012.

Commerzbank analyst Dirk Voigtlaender said he was less optimistic about the company’s net subscriber additions and ARPU for 2012 and beyond due to lower forecasts for German economic growth, which Commerzbank sees at 2 percent.

“Despite promising second-quarter figures, we lower our estimates to take into account Commerzbank’s new, more muted, macroeconomic outlook. Still, we are optimistic in terms of an EBITDA break-even in early 2013,” Voigtlaender said.

Sky Deutschland’s second-quarter loss before interest, taxes, depreciation and amortisation (EBITDA) was 23.4 million euros ($33 million) on sales of 276.7 million euros.

Net loss was 53.6 million, down from 81.9 million euros. (Editing by Mike Nesbit and Will Waterman) ($1=.6147 Pound) ($1=.7099 Euro)

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