BSkyB profits surge amid takeover battle

BSkyB, the pay-TV giant being courted by Rupert Murdoch's News Corp., on Friday reported a surge in quarterly net profits as the British group edged closer to its target of 10 million customers.

BSkyB said profit after tax jumped to £228 million ($359 million) in the three months to September 30 -- the group's first quarter -- compared with performance a year earlier.

The company, which in June rejected a full takeover offer from its largest shareholder News Corp. worth £7.8 billion, saw a 39-per cent jump in the number of customers who subsribed to BSkyB's TV, phone and Internet services.

"BSkyB goes from strength to strength as it reported a solid set of first quarter numbers," said ETX Capital trader Manoj Ladwa.

"The broadcaster is also reaping the benefits of a strategy shift as it increasingly cross-sells to its expanding customer base. Both are factors that are likely to see News Corp. either raise its offer quite significantly or walk away."

BSkyB said it added 96,000 customers in its first quarter, taking its total number of subscribers to 9.95 million.

"Today's results show that our consistent strategy is delivering an excellent performance in a challenging environment," chief executive Jeremy Darroch said in the group's earnings statement.

"These results are underpinned by continued investment in content and innovation, which is bringing more value to customers and growing returns for shareholders," he added.

BSkyB began its second quarter by launching Europe's first channel dedicated to showing programmes in 3D, while the group on Friday said it planned to create 500 jobs to support the company's growth.

The 10-million customer target was set six years ago by then chief executive of BSkyB James Murdoch, son of Rupert, when the subscriber level stood at 7.4 million.

"The company has remained at the vanguard of home entertainment, with its High Definition (picture) product now being supplemented by 3D," said Richard J Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers.

"There is some uncertainty overhanging following on from the News Corporation bid, whilst competition from the likes of (British communications group) BT remains a threat.

"The forthcoming age of austerity could also provide a headwind, although until now Sky has drawn some benefit from the consumer's decision to spend more leisure time at home."

Britain's government this week unveiled the harshest spending cuts for decades, slashing budgets by around a fifth and taking the axe to the country's comprehensive welfare system, as it bids to slash a record deficit.

The coalition government has meanwhile come under pressure from BSkyB's rivals to block a full takeover by News Corp.

In a joint letter sent to Business Secretary Vince Cable earlier this month, they argued that a takeover "could have serious and far-reaching consequences for media plurality."

News Corp. bid £7.8 billion for full control of British BSkyB in June, but the television giant, which screens live English Premier League football and has a 24-hour news channel, demanded £8.9 billion.

News Corp., which controls such top media outlets as Fox television and The Wall Street Journal, currently owns about 39 per cent of BSkyB, making it the group's largest shareholder.

Following Friday's results, the share price of BSkyB rose 0.83 per cent to 700.5 pence in midday trade on London's falling FTSE 100 index. News Corp.'s bid was pitched at 700 pence a share.

"Sky continues to make strong progress, as has been reflected in a share price hike of some 22 per cent over the last year, double the gain over the same period of the wider FTSE 100," said analyst Hunter.

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