Watching Sky Television

A continued drop in share price for SKT, in the face of an historically high Kiwi dollar,
doesn't bode well for the company when the NZ dollar loses value.


Sports, The Sopranos, Coronation Street and Late Night with Letterman, my personal Fav-we all watch too much TV but is it a good investment?

On first glance Sky Television Network [SKT.NZX] looks like a great blue chip, with excellent prospects and good cashflow. They announced an excellent profit of just over $NZ 51 million for the half year to Dec 31 2007 which was up roughly 40% on the same period last year.

I would argue though that Sky could face an uncertain future, for a number of reasons.

The technology needed to keep the company updated and competitive is very expensive and will require much shareholder cash to do so. Sky need to continually update technology, because they will face intense competition in the future, from cheaper and better services from foreign lands sending their content to customers in New Zealand, through broadband pipes that look set to get bigger from this year.

Another large problem Sky face is the cost of programming.

Currently the Kiwi exchange rate vs the US dollar, where the bulk of Sky programming is purchased, is at near post float highs and has been unusually high for a couple of years.

This is unlikely to continue, as historically the NZ dollar averages below 60c to the US dollar.

Like other shares listed on the NZX, the price of SKT has been hit badly, down to $4.90 currently but off from an all time high of above $6.50 just over 2 years ago.

The share price really should be doing alot better considering the historically high NZ/US dollar cross.

Further weakness in share price will clearly be the order of the day when the NZ dollar falls.

The company is in a dominant position at present in the pay TV market, it is the only player, but its customer satisfaction isn't good, as they use their monopoly position to excuse weak customer care.

Something that monopolies like Telecom NZ Ltd [TEL.NZX], and Auckland International Airport Ltd[AIA.NZX] also suffer from.

Sky Television management need to be a bit more savvy in their outlook to the competition that is out there.

With the internet and mobile technology playing an ever increasing influence in the war for consumers eyeballs, their attitude to that technology and a better attention to customer service and satisfaction will help them counter their competition.

The jury however, is still out over whether they can achieve that.

Disc: I own AIA shares in the Share Investor Portfolio


Sky Network Television @ Share Investor

Long Term View: Sky Network Television Ltd
Watching Sky Television
Market Quickie: Sky TV Worth Watching

Discuss SKT @ Share Investor Forum
Download SKT Company Reports


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