Sky says customer demand picking up after slow summer

Workers remove the advertising of Sky TV provider after the German Bundesliga second leg relegation playoff soccer match between Karlsruhe SC and Hamburg SV in Karlsruhe, Germany June 1, 2015. REUTERS/Ralph Orlowski

By Paul Sandle

LONDON (Reuters) - European pay-TV group Sky reported a 5 percent rise in underlying revenue in its first quarter, in line with its expectations in a year when it is paying substantially more for the premium soccer and entertainment content it offer viewers.

The broadcaster, which had its most successful drama series debut ever this month with "Westworld" and started Friday night Premier League football this season, said its full-year target, for 5-7 percent underlying revenue growth, was on track.

Sky added 106,000 customers in the three months through September, less than 134,000 acquired in the same month last year. Customer additions were slow in July and August, reflecting in part a delay in the start of the German and Italian football leagues, but had picked up in September, it said.

"We added customers at a good rate, albeit the quarter got off to a slow start due to the tail end of Euro 2016 and the Rio Olympics, both big free-to-air events," Chief Executive Jeremy Darroch told reporters.

"But since then you've seen demand build across the quarter and September was strong."

Sky, which operates in Britain and Ireland, Germany and Austria and Italy, reported group revenue rose 7 percent to 3.1 billion pounds, with like-for-like revenue up 5 percent, in line with its forecasts.

It has cut costs to help absorb a 600 million pound increase in its bill for English Premier League rights this year.

Darroch said the group had made a good start by cutting operating costs by 2 percent in the quarter.

Shares in Sky have fallen 19 percent in the last 12 months on concerns that the operator will be squeezed by telecoms companies and over-the-top operators like Netflex - which offer content over the Internet - while paying more for sports rights.

They were trading flat at 864 pence at 0824 GMT as analysts at Morgan Stanley said the positives of a 5 percent rise in underlying revenue and reiteration of guidance was countered by disappointing customer growth in Germany and Britain.

Investors are awaiting the launch of Sky's mobile phone service by the end of the year, the final service needed for it to offer "quad play" bundles of TV, broadband, fixed-line and mobile telecoms to customers.

Darroch did not give a date for the launch beyond saying it was close, with final testing taking place. The company would focus on getting the service right from day one, and then build it up in the long term, he said.

(Editing by Sarah Young and Susan Fenton)