May 2, 2012 / 7:11 AM / in 6 years

BSkyB uses record results to defend role in Britain

LONDON (Reuters) - Satellite broadcaster BSkyB sought to distance itself from the controversy over phone hacking at its biggest shareholder on Wednesday after British lawmakers suggested the ties to Rupert Murdoch’s News Corp might endanger its license.

Chief Executive Jeremy Darroch used the publication of record nine-month results to stress BSkyB’s importance to Britain’s economy, as the country’s media regulator investigates whether it should hold a broadcasting license in the light of the hacking scandal at Murdoch’s media empire.

“I would emphasize that it’s important to remember that Sky and News Corporation are separate companies,” he told reporters. “We believe that Sky’s track record as a broadcaster is the most important factor in determining our fitness to hold a license.”

A parliamentary report on Wednesday dropped a heavy hint to regulator Ofcom, which has stepped up its investigation into whether BSkyB is a ‘fit and proper’ owner of a license, by saying Murdoch was “not a fit person to exercise the stewardship of a major international company”.

Ofcom’s investigation centres on BSkyB’s owners and officers. Rupert’s son James Murdoch, a former Chief Executive of the satellite broadcaster, stepped down as chairman last month after he admitted mishandling the hacking scandal that has damaged the family name. He remains on the board.

“Sky employs around 19,000 people directly and the growth of our business generates a tax contribution of 1 billion pounds every year,” Darroch said. “We’re proud of our contribution, which I think is second to none.”

Shares in Britain’s dominant pay-TV provider, which is in 10.5 million homes, rose 2 percent in early trading after months in which the uncertainty surrounding the Murdochs weighed on the stock, overshadowing the group’s solid trading during tough economic conditions.

“Despite other distractions, Sky is powering ahead,” Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers, said. “The company continues its impressive progress even if the share price has not kept pace.”

The results also showed the cost of the hacking scandal to Murdoch, after public outrage at the hacking of phones at the News of the World tabloid forced the media tycoon to pull his bid to buy the 61 percent of Sky it did not already own.

BSkyB posted a 5 percent rise in nine-month revenue to 5.1 billion pounds ($8.3 billion), with earnings per share up 24 percent and adjusted operating profit up 15 percent in the period, during which Britain re-entered recession.

The strong nine-month financials were driven by solid demand for services such as broadband, telephony and high definition TV, which made up for the fact it has started to add fewer new customers to its main television service.

The strong trading also reflects the fact the group has adapted its approach in the last year to sell an increasing number of services to existing subscribers, rather than chasing new customers who are reluctant to sign up to new contracts in tough economic conditions.

It has also started to sell standalone broadband and telephony to customers after previously insisting that the communications services could only be sold to customers who also paid for the more expensive television package.

“We have made a very strong start to 2012, making good progress right across the board,” Darroch said. “We’re delivering good growth, not just in new households, but with our other products as well, despite the difficult economic backdrop.”

The group added 15,000 new customers to the TV service in its third quarter, broadly in line with expectations, compared with 51,000 added a year earlier.

The group also saw strong growth for its high-definition television service and said its new channel for Formula One was proving popular.

Its shares were up 2.6 percent in early trading.

($1 = 0.6165 pound)

Reporting by Kate Holton; Editing by Philippa Fletcher

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