Sky is set for a tough period in early 2021 as higher costs and disruption to sports continue to hinder growth at the European broadcasting and broadband group, its owner Comcast has warned.
The UK-based business, which Comcast acquired for £30.6bn in 2018, returned to growth in the last quarter of 2020 after adding 244,000 subscribers during the period.
However its adjusted earnings before interest, taxes, depreciation and amortisation plunged 80 per cent to $139m as marketing and production costs jumped in the period because of new channel launches and a higher number of sporting events around the Christmas period following delays caused by Covid-19.
Mike Cavanagh, chief financial officer at Comcast, said that 2021 would be “a tale of two halves” for Sky with revenue expected to decline in the first quarter because of higher costs before rebounding in the second half as the effect of the pandemic eases.
Comcast’s acquisition of Sky gave the US cable company an international arm but the Philadelphia-headquartered group has been under pressure to develop its strategy in Europe. It recently named Dana Strong as the new chief executive of the pay-TV and broadband business, replacing Jeremy Darroch who has led it for 13 years.
The US cable company said overall revenue in the three months to the end of 2020 dipped 2.4 per cent to $27.7bn while net income grew 7 per cent to $3.4bn.
Growth was driven by its Xfinity broadband operations which attracted 455,000 new customers in the quarter and increased revenue 13 per cent. Revenue at the group’s wireless arm, which piggybacks on Verizon’s network, grew 36 per cent and Comcast expects the unit to become profitable this year.
The strength of the group’s telecoms business helped to offset an 18 per cent drop in revenue at its NBCUniversal media unit which was hit by cancelled or delayed sports events and the closure of theme parks and cinemas.
Peacock, the streaming service launched by NBCUniversal in April last year, has 33m subscribers which the company said had exceeded expectations. Mr Cavanagh said Italian broadband and Sky Q, a premium entertainment service, as well as Peacock and mobile division Xfinity Mobile, were growth areas for the group.
Comcast said it would raise its dividend by 9 per cent in 2021, its 13th consecutive annual increase. The group also plans to resume share buybacks this year after its net debt fell to $90bn at the end of 2020.
Shares in Comcast rose 4.2 per cent to $50.45 in early trading.