Sky PLC (LON:SKY) reported a 5% increase in quarterly like-for-like revenue ahead of an expected bidding war between 21st Century Fox (NASDAQ:FOXA) and Comcast Corp (NASDAQ:CMCSA) for the British broadcaster.
The company said revenue rose to £10.1bn in the nine months to March 31, compared to £9.7bn the same period a year ago, as it added 38,000 new customers.
Underlying earnings rose 10% to £1.7bn as growth in Italy and the UK and Ireland offset a decline in Germany and Austria where the group invested in expanding its products and services, broadening its content offering and improving its front-line customer service.
"It's been a good quarter for Sky,” said chief executive Jeremy Darroch.
He added: “Whilst we expect the consumer environment to remain challenging, the business is in good shape and we remain on track for the full year."
Fox vs Comcast
Rupert Murdoch’s Fox is awaiting a decision from UK regulators on its plan to buy the rest of Sky that it does not already own in a deal valued at £11.7bn.
Meanwhile, Walt Disney Co (NYSE:DIS) has agreed to buy Fox assets, including its 39% stake in Sky, in a separate deal, which is also subject to regulatory approval.
Last week, the UK takeover regulator ruled that Disney must make an offer for the whole of Sky if it succeeds in buying the Fox assets.
READ: Takeover regulator rules Walt Disney must make offer for whole of Sky if it succeeds in buying 21st Century Fox assets
Fox also has a possible contender for Sky with Comcast saying in February that it was considering making an offer. Comcast has proposed a bid at a 16% premium to Fox’s bid and is expected to formalise its offer soon.
Fox has had to make a series of concessions to soothe concerns raised by the UK Competition and Market Authority about the takeover of Sky, giving Rupert Murdoch too much influence over British media. Murdoch also owns The Times, The Sunday Times and The Sun in the UK.
Concessions include giving Sky News an independent editorial board and selling the channel to Disney.
Premier League rights worth the hefty price tag, says analyst
Sky is expected to expand its content to customers after extending its Premier League rights in February and agreeing a partnership with Netflix in March.
In February, Sky extended its rights to broadcast Premier League football through to 2022 for £1.19bn a year, representing a 16% reduction in cost per game with its current agreement.
Sky will show 128 matches per soccer season, compared to 126 matches currently.
“Premier League rights costs are notoriously expensive, but the value of the coverage to Sky is even greater," said George Salmon, equity analyst at Hargreaves Lansdown.
"As a result the group looks on course to deliver operating profits of £1.5bn this year, double what it earned 10 years ago.
"While protests in Germany show the public aren’t quite taking as well to Monday night football, in the longer term, we see no reason why the success of the UK model can’t be replicated in Germany and Italy."
Sky's partnership with Netflix will allow subscribers using the ultra HD Sky Q platform in the UK and Ireland to access to a new subscription pack containing full Netflix content in the coming year.