SKT Sky Network Television Limited.

[blackcap]

No way the government bail out SKY with a loan as being an essential service. Totally not now that we have Free to air TV anyway and there are so many other streaming possibilities.

Debt is still the huge problem for companies even in these times of zero interest. If you cannot pay back your debt when it is due... you are at the mercy of the creditor who can do anything you like with you.

SKY needs to make sure that they have the $100m when it falls due. Otherwise they are toast. Well not SKY per-se, but current equity holders will be.

[mistaTea]

I think everyone here is making some really solid points.

My reference earlier to debt (as part of an EV view...) is more to acknowledge that I needed to demand a much bigger margin of safety when I started to buy in. My hurdle rate for % return of Owner Earnings/EV should have been higher for a company like Sky. Lesson learned.

Though I am not sure I would necessarily view the current debt levels as a "positive" - and I wouldn't put too much hope in government assistance...

I think Ogg does make a fair point about debt being so cheap these days, and refinancing being a real possibility. Sky have been servicing $100M with a 6% coupon for 4 years no worries. They could get better terms with the banks I think.

My wife works at one of the big 4 banks and new lending has pretty well dried up. Not only that, but many homes and businesses are going on repayment holidays at the moment. Sure, interest still accrues...but their cashflows are going to be shot for the next 6 months or so.

In that light, it is entirely possible that a syndicate of banks could be more open now to helping Sky out with its current finance structure.

Or they may go ahead with a capital raise. But as I have said before, I would want that to be an absolute last resort with the SP being in the toilet. Especially if there are viable and relatively cheap lending facilities available to Sky now.

[macduffy]

In that light, it is entirely possible that a syndicate of banks could be more open now to helping Sky out with its current finance structure.

Perhaps, but banks don't just lend because they have the funds. Propositions need to stack up, to show that they have the ability to service the debt, however low the interest rate may be - and I would think that Sky would be considered to be higher risk and would need to pay a relatively high rate. Then there is the thorny question of ability to repay the loan. Would Sky stack up?

[winner69]

Fron F19 Annual Report SKT Free Cash Flow (operating less capex less investment) has total $737m over the last 5 years

Where has all that free cash gone ....seeing many are calling their demise in near future

[mistaTea]

Perhaps, but banks don't just lend because they have the funds. Propositions need to stack up, to show that they have the ability to service the debt, however low the interest rate may be - and I would think that Sky would be considered to be higher risk and would need to pay a relatively high rate. Then there is the thorny question of ability to repay the loan. Would Sky stack up?

Of course the banks need to be confident they will get their money back - that goes without saying. I am just suggesting that the banks may be prepared to take another look at Sky now (where before when everything else was booming Sky may have been a flat 'no').

We will never know because we aren't in the discussions that Blair Woodbury and co will be having with the various parties. We don't know what the banks are thinking now, and there may also be Sky developments that aid or detract from the Business Case for lending.

Some contributors have taken the position that there is no chance of refinancing and capital raise is their only viable option. It may well be that a capital raise I required in the next few months, but I don't believe that is a certainty. And refinancing could still be an option.

[mistaTea]

Fron F19 Annual Report SKT Free Cash Flow (operating less capex less investment) has total $737m over the last 5 years

Where has all that free cash gone ....seeing many are calling their demise in near future

Most of that would have been paid out as dividends to shareholders.

[mistaTea]

IOver paying for sporting rights or buying dud streaming platforms like Lightbox are mistakes. .

Agree they need to be careful not to overpay for Sporting rights...though that is easier said than done. Clearly they have to retain certain 'key sports' if they want to retain their branding as the Home of Sport. And with competition in the market now with Spark Sport (and soon DAZN) the price they need to pay to retain will go up.

I disagree with the notion that buying Lightbox was a mistake.

Lightbox is popular, most people I have spoken to who have used it have had positive things to say. As a platform it is far better than NEON.
They also have some decent content on there.

Buying Lightbox and merging it with NEON should work out well for Sky I believe. It will give them a beefed up SVOD service which should be more attractive to consumers. Plus a wholesale agreement with Spark which gives them hundreds of thousands of potential customers.

I just hope the 'new' platform they release is significantly better than NEON from a usability perspective. The new service needs to be slick...if it has any of the issues that plague NEON right now it would not be well received by the market.

NETFLIX has not only set the bar in this area...NETFLIX are the bar. So Sky will need to pull their socks up in a big way if they want the new service to be popular. Sky have the best content...they are just let down by the platform.

[winner69]

Most of that would have been paid out as dividends to shareholders.

So shareholders have bled the company dry with little left for a rainy day

[mistaTea]

So shareholders have bled the company dry with little left for a rainy day

It’s a legitimate criticism that Martin Stewart has made. He is now trying to make up for years of underinvestment.

Previous management kept paying huge dividends each year ($100M+) even after Netflix became a phenomenon back in 2014.

Sure would have been nice if management didn’t give almost all FCF as dividends and made some key investments earlier.

But I think they were afraid to go into streaming too quick a sit would cannibalise their satellite base. In the meantime they took a few more big paydays.

That turned out to be stupid imo. They refused to cannabilise themselves so others came in and started to eat them anyway.

Anyway, that’s all history now. This is why Martin has such a big task ahead of him. I am broadly supportive of the moves he has been making. He won’t get everything right, but I think his aim to transition to streaming is right.

Sky still need to keep to their core competency of being an excellent content aggregator. However they need to be able to offer cheaper and more convenient packages. And that requires streaming.

Even if you want a traditional Sky package - nobody wants to have to wait for a technician to come and do an install. Not when you can sign up to NETFLIX and start watching in 2 mins.

I wonder if COVID will cause much of a delay in terms of the new streaming services sky are going to release? I think in their last announcement they indicated they would release in April? At least the merger Lightbox-NEON service?

[Ogg]

SKT Free Cash Flow (operating less capex less investment) has total $737m over the last 5 years

This is all investors need to know. Over the past 5 years Sky has made loads of cash. The question is, what will happen in the next 5 years.

The market is pricing the stock as if it is the next "BlockBuster Video" that will collapse. If that was the case, why hasn't it happened already? BlockBuster filed for bankruptcy in 2010.

The reason Sky is still around and always will be is because Satellite Television has good latency, reliability and high bandwidth (when transferring one way data to large audiences). Different technology has different benefits and draw backs. There's no perfect system. Streaming has downsides too.

There's also a certain social aspect of watching direct TV as opposed to streaming content on demand. People like to watch what other people are watching at the same time. People also like it when someone else (like SKY) decided what to show and what not to show. People like to switch on the TV and not have to think - especially older audiences.

Furthermore, broadband speeds aren't getting any faster in New Zealand, and we're already at unlimited data plans. We've reached the peak in terms of penetration of streaming. The numbers are showing that satellite subscription cancellations are slowing, and will likely in my opinion, reverse and start to grow again.

Here's a good example. My sister got Disney+ a few months ago. She said it's great, but sometimes their modem plays up and it disconnects. She also had to buy a new TV because of the App. It does work on the kids tablets but sometimes that can be difficult for them to navigate on the computer. Sometimes it logs out etc or the wifi drops out. Where as with Sky you just flick on Cartoon Network and it goes. The point is, she has both Disney+ and Sky because they're both good value.