Pay TV Riding High: Pace Ups Forecast, BSkyB Upgraded

image Pay TV is shaping up to be a digital content business you really can trust to keep growing in a downturn: the theory goes – more people are staying in watching the box, which means more subscriptions. And it’s exactly that trend that is improving the fortunes of digital set-top box (STB) maker Pace, which has upgraded its earnings forecast for 2009 for the second time in five weeks and one of its biggest clients BSkyB (NYSE: BSY) which is today upgraded by City analysts Moodys.

Keeping up Pace: In a trading update, Pace says it expects a “very significant upgrade” on its 2009 performance. Accordingly, Altium Securities has raised its own forecast on Pace and now expects it to make profits of £76 million on revenues of £1.1 billion — which would be some improvement on the £13.8 million in profits and £745 million in revenue the company made last year. Pace, a major supplier to BSkyB, became the world’s third largest STB maker in 2007 when it took over its Dutch rival Phillips’ STB business in a £68.5 million deal. The company’s shares rose 56 percent Wednesday to a seven-year high of £1.54.

Sky rating boost: TV companies must have secretly rubbed their hands with joy at the prospect of a long recession: rating agency Moodys bumped up BSkyB’s rating and declared its outlook “stable”, reflecting “strong operating and financial performance and its solid outlook”. Moodys is impressed by Sky’s customer growth, conservative debt levels and ARPU of £444. Moodys points out that as the country’s main pay TV provider Sky is more exposed to the downturn than its rivals, but it hasn’t felt the effects so far partly because of its slim exposure to the advertising market.

Ofcom on Monday reported UK pay TV penetration grew from 48.6 percent in Q308 to 49.5 percent in Q408. Thanks to some heavy price cutting on its Sky+HD box, Sky added 171,000 subscribers in the quarter, taking its UK and Ireland customer base to 9.2 million, while Virgin Media (NSDQ: VMED) grew its cable TV subscriptions by 44,500 to 521,000.

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