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Sky TV forecasts drop in subscribers

NZN 5/05/2016 By Tina Morrison

Sky TV shares sank 13 per cent, making it the biggest decliner on the NZX benchmark index on Friday, after the pay-TV operator said subscriber numbers are expected to fall further this financial year, causing earnings next year to miss analyst estimates.

The company forecast it would have 830,000 subscribers at the end of its financial year on June 30.

Subscriber numbers dropped 1.5 per cent last financial year to 851,561.

It expects to lose 45,000 core residential pay-TV subscribers this year and gain about 25,000 subscribers for its online services such as Neon and FanPass.

Sky TV retained its forecast for 2016 earnings, which it said in February would see net profit at the lower end of its previously advised range of $153m-$158m, down from $172m last year.

However, it said the loss of subscribers would "adversely impact" its 2017 earnings compared to current analyst consensus estimates.

"It's been on the cards for quite some time that increased competition was going to have an effect on Sky TV and I think those numbers are now quite evident that has been the case and the company has lost a fair chunk of subscribers," said Grant Williamson, director at Hamilton Hindin Greene.

"Investors are pretty concerned about it and they have obviously knocked that share price down pretty significantly.

The company, facing increased competition from online rivals, didn't detail the estimates.

Analysts expect the company's net profit to fall to $155m in 2016, and decline further to $146m in 2017, according to the mean forecast in a Reuters survey.

Sky is losing its dominant hold on premium content with the introduction of online streaming video services such as Netflix and Spark New Zealand's Lightbox offering.

It retains rugby rights, which are seen as a linchpin in securing domestic viewers and the company attributed the forecast loss in subscribers for this year in part to churn following the Rugby World Cup in 2015.

Sky TV shares last traded at $5.49 and have gained 20 per cent this year.

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