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But uptick in U.K. and Ireland churn, plus slower broadband net adds could be a cause for concern.
Sky on Thursday reported healthy top line growth across its European footprint in fiscal 2016, but rising churn in its biggest market could be a cause for concern going forward.
The U.K.-based triple-play provider saw group revenue grow 7% to £11.97 billion (€14.19 billion) on a constant currency basis in the 12 months to 30 June, while operating profit jumped 12% to £1.56 billion.
The U.K. and Ireland operation generated revenue of £8.37 billion compared to £7.82 billion in fiscal 2015; revenue in Germany and Austria grew 12% to €1.51 billion, while Italy reported revenue of £2.08 billion, up 2% on last year.
"It’s been another excellent year for Sky," declared Sky CEO Jeremy Darroch, in a statement. "We have broadened our business and expanded into new consumer segments, applying our proven strategy across the group."
Sky ended the year with 21.81 million retail customers, up from 21.01 million last year.
The growth was driven primarily by the UK and Ireland, which increased its retail customer base to 12.45 million from 12 million. Germany and Austria’s retail base grew to 4.63 million from 4.28 million, while Italy’s edged up to 4.74 million from 4.73 million.
However, it is worth noting that churn increased across the board.
The U.K. and Ireland business saw churn jump to 11.2% from 9.8% last year. The rolling 12-month churn rate in Germany and Austria increased to 9.9% from 8.6%, and in Italy, churn increased to 11.1% from 9.6%.
Sky said the uptick in churn in the U.K. and Ireland was caused by its decision to ease up on retention discounts, coupled with a 4%-5% rise in TV prices, and a larger proportion of broadband-only customers, who have a higher propensity to switch providers.
Furthermore, Sky’s U.K. and Ireland broadband net additions have slowed significantly in recent quarters.
In the three months to 30 June, the company added 24,000 new broadband connections. In the previous quarter, broadband net additions were 46,000, and in the three months to 30 June 2015, that figure stood at 96,000.
Sky does not disclose its U.K. and Ireland broadband customer base, but it did say the division added 347,000 connections in fiscal 2016. Based on our calculations, that would give Sky a broadband customer base in the U.K. and Ireland of approximately 6 million.
Looking ahead to fiscal 2017, Sky said it aims to grow annual revenues by 5%-7%.
"Our ambition is to be the best customer-led entertainment and communications company in the world, delivering long term benefits for all our shareholders," Darroch said.
