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SKY TV issues profit warning, shares fall 8%

Wednesday 14th December 2016

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Sky Network Television, which is awaiting a decision from the Commerce Commission on a proposed merger with Vodafone New Zealand, cut its 2017 earnings guidance citing rising content costs, and falling revenue and subscribers. Sky's shares tumbled 8.3 percent.

Earnings before interest, tax, depreciation and amortisation for the year ending June 30, 2017, is expected to be 5 percent to 7 percent below the $296 million forecast it gave in June, the Auckland-based pay-TV company said in a statement. Ebitda was $325 million last year.

"Based on Sky’s trading results to 30 November, forecast revenues are down slightly due to a reduction in subscriber numbers and a change in customer mix," chief financial officer Jason Hollingworth said. 

The decline in ebitda is also due to increased content costs, including the acquisition of rights to broadcast the 2017 America’s Cup, Lions Tour to NZ and PGA golf, he said. "These investments are expected to generate incremental revenue opportunities over time but are not sufficient to offset the cost increase in the current financial year."

The regulator has delayed its ruling on the tie-up with Vodafone until Feb. 23. The deal also requires the approval of the Overseas Investment Office. 

Spark New Zealand and Two Degrees Mobile have formally opposed the merger, saying the deal would adversely impact consumers as a result of creating a company willing and able to use premium live sports content to stifle competition.

Sky TV's shares fell 40 cents to $4.40 and have gained 4.6 percent this year.

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