British Sky Broadcasting (BSY) finished its fiscal year off strong. Revenue increased 16% for the year, substantially above our 10% projection. We had expected growth to slow in the second half as government-mandated austerity measures kicked in, but customer demand for television and other services has continued marching higher. Subscriber gains continued in all areas, but were particularly strong in home communications (broadband, telephony, and line rentals). The firm also has started to sell home communication services without mandating a television subscription. By unbundling the home communications products from television, this market is now available for BSkyB to attack. Revenues also benefited from increases in the average revenue per user (ARPU). However, with subscribers joining without television and no price increases planned for existing subscribers for the next year, ARPU growth may not continue.
The additional subscriber growth also added costs, which kept BSkyB's EBITDA margin improvement slightly below our expectations.
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