Investment analysts at Morgan Stanley Dean Witter say they expect BSkyB to achieve total digital sales of 2.4 million by the end of December. BSkyB’s net additions in the last quarter were 122,000 and this number "should be even better in the second quarter" (three months to December 31) according to Morgan Stanley’s analyst Vighnesh Padiachy.
But in an otherwise favourable report Morgan Stanley exercised some reservations about BSkyB’s possible involvement in Leo Kirch’s Premiere World digital platform. Morgan’s reservations centre on the strength of the free TV market in Germany and the disadvantages of the mooted BSkyB 25 per cent minority stake, leading to limited influence. "We think there is also a risk that management’s time and resources are diverted," said the report. The report also says that News Corp’s involvement in Deutsche Telekom’s cable sell-off "further complicates the picture."
Nevertheless, BSkyB remains an "outperform" stock for Morgan Stanley, priced at Pounds 6.90 (against current price of Pounds 6.51) and which sees continued subscriber growth as well as Open… and other new media activities "creating further momentum."
As to hard numbers by the end of the year, Morgan Stanley predicts an overall improvement in BSkyB’s DTH position, growing from 3.582 million (at the end of September), less churn estimated at 9 per cent (46,000), and some 345,000 analogue-to-digital subscribers, plus new and migrated digital subs of 584,000, taking the overall DTH total to 3.775 million.
On the question of digital churn, Morgan Stanley said that current rates are running less than 1 per cent, "although we expect a rise to about 5 per cent in the second quarter." The report says that so far the quality of digital subscribers provides us with comfort on BSkyB recouping its heavy investment.
