There’s only one thing New Zealanders love more than playing sport – and that’s watching it.
Netball, cricket and particularly rugby are almost national obsessions. That’s understandable – watching the All Blacks crush all-comers must make for satisfying viewing.
Good for them. And good for Sky Network Television, too. It holds the rights for any major sporting event a New Zealander might care to watch. As a result, it enjoys very high penetration.
Sky dominates pay-TV in New Zealand. Unlike the UK, however, where it must fend off Virgin Media and BT, the competitive environment is benign. Its sports rights represent a formidable barrier to entry.
A second attraction is that set-top technology in New Zealand lags behind the UK. At present, not many viewers own the high-tech boxes that offer video-on-demand. As customers migrate to these ‘Sky Plus’-type services, their subscription prices will increase. The cost of making these upgrades is modest, but customers seem happy to pay significantly more. That should lead to earnings upgrades.
Crucially, Sky generates a dividend yield of 6 per cent. And, because it is under-leveraged and can take on more debt, that may grow. Recently, shares fell on familiar macroeconomic concerns. However, the combination of a healthy dividend and defensive earnings still make for compelling viewing.
Jacob de Tusch-Lec is manager of the Artemis Global Income fund
