The Consumer Electronics Show in Las Vegas revealed the ‘next big thing’ for consumers to be products embodying the Internet of Things (IoT), controlled from the smartphone or the vehicle Wearables like fitness bracelets are already selling well in the UK, amongst the largest per capita markets for consumer electronics, and next up is the launch of Apple’s smartwatch Building out the smart home is the focus of the current wave of devices imbedded with sensors on show at CES 2015, with apps developed on platforms supplied by Samsung, Google and Apple
Sky plc, the coming together of BSkyB, Sky Deutschland and Sky Italia, has enjoyed an excellent start, as adjusted H1 2015 figures delivered a 5% increase in revenues versus a 3% increase in costs, resulting in EBITDA growth of 7% and with free cash flow up by 25%
The strong financial results were accompanied by strong subscriber growth figures, especially in the operations covering Austria, Germany, Ireland and the UK, while all markets showed large reductions in churn, reinforcing confidence in the strategic approach of Sky plc
It is too early to assess Sky’s delivery of its target group synergies. Individually, the former BSkyB and Sky Deutschland markets may be showing much stronger subscriber and product growth, but they also look to be more exposed to risk over football rights, while Sky Italia has more going for it than may appear at first sight
Speculation has arisen about a possible acquisition by Sky of Mediaset Premium, the DTT competitor to Sky Italia. The unprofitable platform faces a 50% cost increase this summer due to the start of new football broadcast contracts
Getting rid of competition would allow Sky to raise prices, but also burden it with the new contracts. At best, if it kept the Premium subscribers on DTT to limit churn, Sky would have a small revenue upside
But the regulatory risk looks substantial, including mandated third-party access to the platform and wholesale of content. On balance, we believe that it would be better for Sky to let the situation play out