Can Branson prevent Murdoch from reaching the sky?

Sky now ranks 7th amongst ISPs but could acquisition get them into the Big Five?

Chris Frost, Communications Expert at uSwitch.com, comments on Sky’s second quarter results, revealing a fall in profits from £390m to £356m a year: “With 259,000 activated broadband customers acquired over the last six months, Sky is now the UK’s 7th largest broadband provider. The launch of Sky Broadband incurred a loss of £73m, which played a strong contribution to the fall in profits that we have seen today.

“However, Sky has a long way to go to reach its goal of 700,000 broadband subscribers by June 2007. Despite the high profile launch of ‘free’ broadband six months ago and a continued generous marketing spend, they are less than half way towards reaching this ambitious target, and will have to fight even harder with the imminent arrival of Virgin Media’s bundled offering. We wouldn’t be surprised if they decide to follow the example set by some of their leading competitors such as The Carphone Warehouse and BT and hit the acquisition trail. We know of at least two ISP’s that may be prime targets for a takeover by a well-established global brand.”

Frost continues: “The recent free broadband revolution has sparked a growth in demand from consumers, but we have consistently seen companies unable to deliver adequate levels of customer service. In fact, satisfaction amongst broadband customers dropped by as much as 16% between March and October last year. Sky has been mindful of this since its broadband launch and, thanks to a well-orchestrated pre-registration process and regular contact with customers waiting for their service, it is pleasing to see that 90% of customers are connected within 15 working days.

“It is interesting to see that over two thirds of consumers are not just opting for the completely free service offered to all Sky TV subscribers. Instead, they are choosing to pay more for a higher value package with faster download speeds and higher caps. This is likely to be a result of the increased reliance consumers are placing on the internet as one of life’s ‘essentials’. They clearly want more than a ‘no-frills’ broadband service.”

Frost concludes: “The great news for customers is that the bundles war is well and truly underway, which will drive prices down and value up. The big question is – will Sky’s pre-emptive triple play strike be enough to withstand the expected Virgin Media marketing onslaught?”