BSkyB plots digital TV as profits soar to pounds 155m

MATHEW HORSMAN

BSkyB, the satellite television company 40 per cent-owned by Rupert Murdoch's News Corporation, yesterday laid claim to being Britain's most profitable commercial television operation, as pre-tax profits rose 67 per cent to pounds 155m.

The chief executive, Sam Chisolm, said the group was "in talks with everyone" to plot an aggressive entry into digital terrestrial television, following the Government's publication of a consultative document earlier this month.

"More importantly, everyone is talking to us," he said.

The satellite and cable broadcaster "has the programming that drives this kind of technology", Mr Chisolm said. BSkyB, through deals with Hollywood studios and acquisitions of rights to sporting events, has developed a portfolio of channels that are broadcast to 4.2 million UK homes, either by direct-to-home (DTH) satellite or via cable.

Fully-owned channels include Sky1, Sky Sports and Sky Movies. The company also distributes channels for third parties, including music network MTV and, starting in the autumn, the Disney Channel.

Mr Chisolm yesterday lauded the Government's approach to digital terrestrial television, which will usher in at least 18 new channels available in the majority of British homes. "There are no rules or restrictions," he said. "Everyone can pile in. And that suits a company like Sky down to the ground."

He added that BSkyB intended to introduced digital satellite television, capable of transmitting as many as 200 new channels, "sooner rather than later". While BSkyB would not subsidise the cost of set-top boxes required to receive digital signals, Mr Chisolm said there were "plenty of people who would be ready to do so, in order to get into this market".

BSkyB's traditional broadcasting business grew sharply in the year to the end of June, with revenues rising by 41 per cent to pounds 777.9m and pre- tax profits up by 67 per cent to pounds 155.3m from pounds 92.9m last time, in line with City forecasts. The shares gained slightly to close at 345p. Analysts said the high share price reflected expectations that the stock will be included in the FT-SE 100, attracting index-linked funds, once Pearson completes its sale of a 9.75 per cent stake. It is assumed the public holding of BSkyB would thereafter be wide enough to meet Stock Echange rules regarding eligibility for the index.

BSkyB added 686,000 more subscribers in the past year, advertising revenues grew by 18 per cent to pounds 92m, while income from installing dishes more than doubled to pounds 15.8m.

Costs rose by the same percentage as revenues, Richard Brooke, group finance director, conceded. He added that aggressive purchases of programming would continue to drive costs. The aim, he said, was to attract more subscribers.

Mr Chisolm said: "We will continue to be aggressive purchasers of software," adding that "digital will be a quantum leap. It will make the growth of our system relentless, giving people more programming and therefore more reasons to buy."

Some analysts warned that the transition to digital would be costly for BSkyB, running to tens of millions of pounds. "The costs will be immense, and profits will be a way off," said one analyst. There was also concern about the costs of extending programming deals with film producers and sporting organisations.

But other analysts were less worried. "Digital will come much more slowly than many people appear to think," Robert Jolliffe, media analyst at Hoare Govett, said. "The only downside for BSkyB is if Rupert Murdoch decides to give Sam Chisolm something else to do."

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