Event Brief of Q1 2006 British Sky Broadcasting Group plc Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

PARTICIPANTS

. Jeremy Darroch, British Sky Broadcasting, CFO . James Murdoch, British Sky Broadcasting, CEO . Philip Guest, Exane BNP Paribas, Analyst . Marc Sugarman, Citigroup, Analyst . Bridie Barrett, ABN Amro, Analyst . Paul Reynolds, Deutsche Bank, Analyst . Guy Lamming, Cazenove, Analyst . Julian Rock, Merrill Lynch, Analyst . Chris Collett, Goldman Sachs, Analyst . Matthew Walker, Lehman Brothers, Analyst . Kuldep Shaloff, Shevra, Analyst . Jonathan Barrett, Williams De Broe, Analyst . Mikael Garachi, High International, Analyst

OVERVIEW

BSY.L reported that total revenues for the nine months ended 03/31/06 grew by 9% to 3.1b pounds. EPS for the nine months ended 03/31/06 increased by 16% to 23.2 pence. EBITDA for the nine months ended 03/31/06 was 756m pounds.

FINANCIAL DATA

A. Key Data From Call 1. Total revenues for the nine months ended 03/31/06 = 3.1b pounds. 2. EPS for the nine months ended 03/31/06 = 23.2 pence. 3. EBITDA for the nine months ended 03/31/06 = 756m pounds. 4. Operating profit for the nine months ended 03/31/06 = 660m pounds.

PRESENTATION SUMMARY

S1. Operational Overview (J.M.) 1. Overview: 1. The qtr. was in line with BSY.L's customer target and delivering: 1. Record operating profit. 2. Improving margins. 3. A very strong improvement in customer mix. 2. Overall, it was a good qtr. and one that signals the strong underlying competitiveness of the business. 2. Focus & Progress: 1. BSY.L's focus since 1H of this calendar year would be on three major operational projects that would support and position the business for future growth.

1. The Co. is pleased with the progress it made in the qtr.

2. BSY.L completed implementation of its new customer management

systems. 1. These systems represent a commitment to improve already industry-leading customer service at BSY.L, but they will

allow it to continue to raise the bar in service, which the Co. thinks is a critical differentiator against its competitors.

2. They will allow BSY.L to bring new products to market faster and more effectively. 3. They will allow the Co. to improve sales, increase marketing effectiveness, and decrease churn through the use of state-of-the-art customer management systems and initiatives

and its robust prospect database. 4. BSY.L has announced plans to expand its customer service infrastructure in anticipation of growth in the rest of the year. 5. This is creating 600 new jobs in the Co.'s field engineering operations. 6. These new positions will support continued of the business, as well as the launch of new products and services for the customers. 3. BSY.L has gotten ready for the national launch of high-definition television in the UK, which will redefine the mid-to-high end of TV services in the UK and Ireland. 1. The Co. is very pleased with the early demand and it thinks desire to subscribe to HD will build strongly through the calendar year. 4. BSY.L's broadband plans are well on track. 1. The Co. expects to launch residential broadband services this summer. 5. The Co. business continued to grow and is performing very well, in line with the plans BSY.L laid out for 2006. 3. Financial Highlights: 1. Total revenue was up 9% to 3.1b pounds. 2. Operating profit increased by 15% to 660m pounds. 3. EPS increased by 16% to 23.2 pence. 4. BSY.L expects subscriber growth to be about 100,000 for 1H of calendar 2006 and net additions of 40,000 for the qtr. is line with those plans. 4. Customers: 1. Customers continue to demonstrate a strong appetite for additional products and services. 1. 20% now take more than one service from BSY.L and subscriber profit is coming very well. 2. The Co. added 149,000 Sky+ customers in the qtr. 3. BSY.L has exceeded more than 1m Multiroom customers.

S2. Nine-Month Results Ended 03/31/06 (J.D.) 1. Financial Summary:

1. Total revenues grew by 9% to 3.1b pounds. 1. Mainly driven by an 8% increase in DTH revenues following 5% growth in DTH subscribers and a 3% increase in ARPU. 2. Advertising revenue continued to grow strongly. 1. It was up 6% against the market that was down 0.6% YonY. 3. Other revenues increased by 43%. 1. Mainly due to the first time consolidation of the Easynet business. 4. Strong growth in revenues combined with a programming cost

base that reduced by 3m pounds in absolute terms led to 4 percentage point increase in GM to 61% of sales. 5. Marketing costs and other expenses increased by 182m pounds and that was mainly behind higher acquisition and upgrade volumes and the inclusion of two first time items: 1. Consolidation of Easynet expenses, which totaled 49m pounds. 2. An additional depression charge of 26m pounds mainly relating to the first six months depreciation of BSY.L's new customer management systems. 6. Operating profit increased by 15% to a record 660m pounds, generating an operating profit margin of 21%. 7. EBITDA was 756m pounds. 8. After a working capital outflow of 60m pounds, which mainly related to the phasing of rights payments in sports and Sky One, the Group generated a cash inflow from operations of 696m pounds.

9. After adjusting for cash outflows, which principally comprised

taxation, net interest payable, CapEx, the purchase of Easynet

and shareholder returns, which totaled 405m pounds, net debt

increased to 667m pounds. 2. FA Premier League Rights: 1. The bidding process for the FA Premier League rights is ongoing. 2. On 04/28/06, the FA Premier League announced that three out of the six packages of live television rights had been awarded to BSY.L and that there will be a second round of bidding for the remaining three packages.

QUESTION AND ANSWER SUMMARY

OPERATOR: [OPERATOR INSTRUCTIONS]

The first question today is from the line of Philip Guest. Please go ahead and please announce your affiliation.

PHILIP GUEST, ANALYST, EXANE BNP PARIBAS: Good morning. Hi. Yes. It's Philip Guest calling from Exane BNP Paribas in London. A couple of questions, if I may, gentlemen. Firstly, the easy one. Churn is up versus the comparable quarter last year at 11.4% versus 11.1%. Could you elaborate a little bit on what you think has caused this and what's going to change to bring it down? In particular, have you seen any shift in churn patterns between customers on the old CRM system and the new CRM system, which I think you said went live during the period? I'll come back for the second question.

JAMES MURDOCH, CEO, BRITISH SKY BROADCASTING: Okay, Philip, it's James. Thanks for your question. Look, I think that the story on churn is pretty straight forward. Year-to-date our average churn rate is 11.3%. We would expect the full year churn rate to be around 11%, so we continue to focus a lot on that and to make sure we get there.

And I think over the medium term we think we can get back down to around 10%. There are a lot of factors that drive that. Earlier in the year, when we sort of raised that number and said we thought it would be around 11%, there were a number of reasons for that. But I think the basic point here is that there are a lot of tools that we have, the new CRM system being one of them, that we can use to improve churn.

Now, in terms of differences that we've seen so far on CRM, it's really too early to tell. It was very much at the end of the quarter when we kind of pulled back from a lot of our pushing for growth to make some room around the implementation of what was a very major kind of systems implementation project, so it is really too early to tell and to sort of say this is before CRM and after CRM. But we certainly think that it gives us a number of benefits in terms of managing churn going forward.

The first thing about it is that it's fully flexible and scalable, so it allows us to launch new products to do much more dynamic campaign management, both in terms of customer acquisition, but also in retention marketing, win back, things like that. And it also allows us to really have a single view of …