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Triple play transforms Sky while regulator decisions loom

by David Mercer | 7月 11, 2007

Sky gave its latest trading statement in a presentation this morning in advance of full year results in a couple of weeks. The results illustrate how Sky has become much more than a pay TV company over the past couple of years. The multi-play strategy is now well and truly embedded, and growth is as much about winning broadband and telephony customers as pay television. The company is now playing across the entire entertainment and communications sector, which creates greater scale opportunities but also more competition. From the evidence so far it appears that BT, Virgin and CarphoneWarehouse need to be more concerned than Sky. There was better news on the churn front, which fell to 12.1% from the previous quarter's 13.7%, although this is still higher than the historic level. The company is also heavily focused on addressing the customer satisfaction and retention issues I have touched on previously. I will be particularly interested to hear specifics on the company's plans for "tenure-based" pricing, ie rewarding long-term customers with better deals for new services. HD will be the first to receive the treatment in a couple of months. As usual, Sky has done a terrific job in getting its message across. The "see speak surf" campaign has continued the company's brand transformation of the last 3-4 years, and 76% of UK adults are now aware of Sky's triple play capability. James Murdoch also cited data suggesting Sky is beating BT and Virgin in terms of "trust to bring together your in-home entertainment and broadband requirements". On this question, Sky now achieves an 81% rating (up from 67% in Jan 06), compared to Virgin 62%, BT 52%, BBC 41%, Sony 24% (June 07 survey). Companies' own surveys should always be treated with caution, but this appears to be evidence of a significant lead over its main rivals in terms of customer confidence. Sky appears to have struck a careful balance between cautious broadband rollout and the need to win new customers and increase ARPU as quickly as possible. The company achieved the highest share of net broadband additions in Q107, with 32% according to its own data (our own figures suggest it may have been even higher). Sky broadband now reaches 70% of UK with its unbundled network. It will offer wholesale line rental shortly, but will leave the customer to decide if they want to drop BT's line. The company's objective over the coming 12 months is to grow new revenue streams resulting from the broadband investment, in particular new portal services and online advertising. Sky is cautious on demand for quadruple play services, but is keeping an open mind towards the possibility of offering mobile telephony services in the future. Another possible strategic move would be for Sky to add new territories, presumably in Europe, and although it has no plans in this direction it again remains open to the possibility while recognising the likely managment challenges. Sky's Brian Sullivan commented that "customer experience is now something we will concentrate on to give us a significant competitive advantage in years to come." Sky has invested heavily in customer database and CRM systems over the past couple of years, and now operates a database covering 25m homes, with 400 variables including demographics, property details, etc. It believes this information gives it a significant advantage over competitors. Sky is recognised around the world as one of, if not the, leading service provider using innovative technology to offer entertainment services backed up by first-class customer service. And that's not just their own opinion - few competitors in the UK or peers elsewhere in the world would deny it. Its broadband market entry has clearly been successful and it will surely go on to achieve its growth targets in this sector. The company's main strategic challenges now appear to lie in managing its relationships with regulators, where the threat of imposed sanctions is never far away. Add to Technorati Favorites
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