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Daily ShareChat: Sky Network Television

By Jenny Ruth

Thursday 2nd December 2010

Text too small?
 Jenny Ruth

Sky Network Television's new online video streaming service, iSky.co.nz,due to be launched in early December, could add about $10 million a year to revenue, says Rob Mercer at Forsyth Barr.

That's based on more than 8,000 new movie subscribers, more than 20,000 new multi-room subscribers and an increase in pay-per-view content, Mercer says. The new service may also further reduce customer churn.

"However, in many respects these additional revenue streams are already embedded in our forecasts," he says.

"We see the launch of iSky as part of Sky TV's evolving business model, complementing its existing product and adding value to households through improved service and content offering," Mercer says.

However, trying to put a value on iSky is like trying to value each and every channel launched over the past decade.

"In reality, households expect more content, improved product (MYSKY HDi) and service every year to justify the monthly subscription," he says.

After three years of investing in its product, software and content, Sky's free cashflow generation is set to increase substantially and the board is currently reviewing the dividend payout policy with an expectation it will be increased, Mercer says.

His current valuation of the stock is $6.35.

 

Recommendation: Buy.



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