German DTH provider Sky Deutschland has announced plans to raise €300m (US$395m) before the end of September to drive content and product innovation as it surpasses three million subscribers.
Fully backstopped by 49% shareholder News Corp, the…
German DTH provider Sky Deutschland has announced plans to raise €300m (US$395m) before the end of September to drive content and product innovation as it surpasses three million subscribers.
Fully backstopped by 49% shareholder News Corp, the company is seeking to raise the financing in two parts.
Firstly, it expects to raise a minimum of €100m (US$132m) by the end of March through one or a combination of measures: a rights offering, a private placement or a shareholder loan. In any case, no more than 10% of registered shares will be placed, and the transaction(s) will be done in such a way as to ensure News Corp’s stake does not exceed 49.9%.
Sky will then seek to raise the remaining proceeds to reach its €300m target before the end of September, through any combination of the measures above, and/or a convertible bond offering.
However, the exact nature, terms and size of the proposed financial measures have yet to be decided by either Sky or News Corp.
The financing will be used to bolster Sky’s DTH offering, supporting its planned increase in the number of available HD channels from 42 to more than 60 this year, and bolstering its ability to bid for exclusive programming.
It will also help Sky build on a three-year strategic partnership it announced on 31 January with US-based media giant Warner Bros. This agreement gives Sky exclusive access to all new Warner Bros releases across its German platforms, including satellite, cable, IPTV, web and mobile.
Sky has struggled to gain a foothold in the German market, where the wide choice of free cable channels has meant potential subscribers are traditionally reluctant to pay for their TV services.
The regulatory landscape has also played a part in limiting Sky’s access exclusive content, because of conditions that prevent broadcasters from owning all the rights to its top football league. These rights are currently the subject of a tender that started before Christmas and is expected to conclude by 5 May.
Despite its competitive challenges, Sky’s extra financing announcement came as the company announced an important milestone of reaching 3,012,000 subscribers at the end of 2011, representing a net customer growth of 359,000 as churn reduced to 11% from 16.2% a year earlier. As well as this being the highest subscriber figure in the company’s history, industry spectators have previously estimated that the group needs around three million to hit a “critical mass” and break-even.
Posting full-year 2011 results on 2 February 2012, Sky said revenues had soared 17% on the year to €1.14bn (US$1.5bn), while EBITDA improved 42% to negative €155m (US$204m).
CEO Brian Sullivan said: “While we remain cautious in these uncertain economic times, we have a clear vision for continued growth: to serve existing customers and attract new ones by delivering great value, high-quality and exclusive content, new and exciting innovations and continued improvements to our customer service.
“To have over three million customers actively choosing Sky is a fantastic achievement but we expect more to come and there is still more to do. The additional funding announced [on 2 February] will support us to further drive these efforts, to continue building an exciting service for our customers and a valuable business for our shareholders.”
