Key metrics for Q4 2010 and FY 2010
Sky Deutschland delivers strong growth

All Q4 2010 key operating metrics moving in the right direction
• Net growth of 131,000 to 2.653m total subscribers – strong increase from 39,000 in
Q4 2009
• Gross additions of 208,000 subscribers (Q4 2009: 167,000), up 24% year-on-year
• 12-month rolling churn rate down to 16.2% (Q4 2009: 21.6%) and quarterly annualized churn rate down to 11.8% (Q4 2009: 21.0%) – the lowest levels in twenty-one quarters
• 133,000 new HD subscribers taking HD penetration to 22.4% (Q4 2009: 10.9%)
• ARPU for Q4 2010 expected to hit a record level of approximately €30

FY 2010 key metrics
• Net growth of 183,000 subscribers (FY 2009: 70,000), more than 2.5 times higher
• Addition of 325,000 HD subscribers (FY 2009: 268,000) to reach 593,000 total HD subscribers
• Full year 2010 EBITDA loss at the lower end of the previously communicated range (currently expected to be between €260m and €270m)

Proceeds from financing measures increased to build on momentum in the business
• Intention to increase total gross proceeds from financing measures to €400m, up from a minimum of €340m, fully backstopped by News Corp
• Outstanding amount of €223m to be raised through the issuance of a convertible bond to News Adelaide Holdings, an indirect 100% subsidiary of News Corp, followed by shareholder loans granted by News Adelaide Holdings

Full year 2011 EBITDA is expected to be significantly better than 2010, but will remain negative.

Munich, 12 January 2011. In the fourth quarter of 2010, the growth of Sky Deutschland AG accelerated due to strong consumer demand for Sky’s products and services. All operating key metrics showed good progress. Net subscriber growth of 131,000 was a significant increase on the Q4 2009 figure of 39,000. For full-year 2010, Sky Deutschland added a total of 183,000 subscribers which is more than 2.5 times above the 2009 net subscriber growth. Both the quarterly annualized churn rate (11.8% vs Q4 2009: 21.0%) and the 12-month rolling churn rate (16.2% vs Q4 2009: 21.6%) went down to the lowest levels in twenty-one quarters. Sky Deutschland expects an average revenue per user (ARPU) for Q4 of approximately €30 which would be at the highest level in the company’s history.

Sky HD continued its success. The company added 133,000 HD subscribers during Q4. The HD penetration amongst Sky subscribers was 22.4 percent at the end of Q4, double that of Q4 2009. For full-year 2010, Sky Deutschland added a total of 325,000 HD subscribers. With 12 True HD channels, Sky Deutschland is the market-leader in HD in Germany and Austria.

The EBITDA loss for full year 2010 is expected to be at the lower end of the previously communicated range (currently expected to be between €260 and €270 million).

Sky Deutschland believes the strong performance in Q4 was driven by an increasing awareness and understanding of its unique product and service proposition amongst new and existing customers. The company’s top quality content and innovative new products and services have increased demand, and with a now well-established new brand Sky Deutschland offers the best entertainment proposition in Germany and Austria. As the leading premium content broadcaster in pay-TV, sports, movies, HDTV and 3D, Sky is delivering the very things customers want most – both at home and on-the-go. And Sky does all this at great value.

Brian Sullivan, CEO of Sky Deutschland: “Building on our third quarter performance we have seen further, substantial improvements across all key metrics during the fourth quarter. Accelerated growth in net subscriber additions and shrinking churn rates, combined with what we expect to be a record-level ARPU, confirm that increasing numbers of German and Austrian customers see the quality and value of our product and service offering. While there is still much to do, we are encouraged that the initiatives we have introduced are building momentum in the business – as demonstrated both in these numbers and our current, highest ever satisfaction levels – and we remain committed to continue our unrelenting focus on content, innovation and service to deliver the best possible experience for our customers, accelerate growth and achieve sustainable profitability.”

Continued product and content innovation

Since December, the Sky+ PVR has been available for cable customers. Sky+ for satellite customers, which has been in the market since May 2010, already achieves the highest satisfaction rates among customers. Sky+ for cable can be used on the networks of KabelBW, Kabel Deutschland and many smaller German cable networks.

Sky Deutschland also announced in December it was extending its partnership with Formula One enabling motorsports fans to enjoy Sky’s unique, full coverage and advertising-free broadcast of all Formula One events. For the first time ever, the races will be available to German and Austrian subscribers in True (native) HD.

On 13 January, Sky Deutschland will launch its third new live sport format called “Mein Stadion – Die Sky Bundesliga Vorschau” (“My stadium – The Sky Bundesliga preview”). This new program will extend Sky’s Bundesliga coverage to the Thursdays before Bundesliga weekends covering all the important news about the upcoming match-days and hosted by Ulli Potofski. With last season’s introduction of the football follow-up debate “Sky90” on Sunday evenings and the launch of the Sky sports show “Samstag LIVE!” in September, Sky offers the most comprehensive preview and review of the league and sports weekend.

During the fourth quarter, Sky Deutschland reinforced its position as the innovation driver in the German and Austrian TV industry. In November, Sky Deutschland launched the first sports app for the iPad in high definition. This enables Sky subscribers to follow all the action on Sky Sport HD 1 and Sky Sport HD 2 on the iPad in fantastic HD quality. Since launch of the first “Sky Sport” app for iPad in June 2010 there have been more than 82,000 downloads.

Taking this experience one step further, the “Sky Sport Mobile” app was recently launched on the iPhone and the iPod Touch, and has been downloaded over 200,000 times to date. This enables customers to receive Sky Sport 1, Sky Sport 2 and Sky Sport Austria on these devices when they are on-the-go.

Sky Deutschland has also announced a number of co-operation agreements with leading technical manufacturers including Samsung, TechniSat and Humax to distribute the new CI Plus module. Buyers of devices from these manufacturers who decide to subscribe to Sky are entitled to sign up to Sky at a special introductory offer price and get the Sky CI Plus module without any extra cost. As announced in November, all new and existing Sky subscribers on Kabel Deutschland’s (KD) digital network can now receive the entire Sky programming via KD’s CI Plus module.

Funding increase to build on momentum

With the development of the business in Q4 2010 confirming the positive trends in the business seen earlier in the year, Sky Deutschland has agreed with News Corp to increase the gross proceeds from the financing measures announced on 2 August 2010 from a minimum of €340 million to €400 million. This improves Sky’s financial flexibility and provides for additional investment to build on the strong underlying momentum, particularly in HD. Subject to certain conditions, News Adelaide Holdings, an indirect 100% subsidiary of News Corp, has agreed to provide the additional financing to the amount of €60 million on or before 21 December 2011.

The financing measures to raise gross proceeds of €340 million – announced on 2 August 2010 and expanded to a total amount of €400m today – comprise a rights offering (which has been completed), the issuance of a convertible bond to and the grant of shareholder loans by News Adelaide Holdings.

At the end of September 2010, Sky completed the rights offering by placing a total of 169 million shares raising €177 million. The outstanding amount of €223 million (gross) will be raised through the issuance of a convertible bond with up to 53,916,185 underlying shares from contingent capital to News Adelaide Holdings (to be issued no later than 31 January 2011) followed by shareholder loans to be made available by News Adelaide Holdings by no later than 31 January 2011 (with regard to such amount to ensure gross proceeds of €340 million) and 21 December 2011, respectively (with regard to the additional €60 million (gross)).

As previously announced, the convertible bond will be unsecured and subordinated to the existing credit facilities. It will have a four-year maturity with an expected cash pay coupon between 5.50 and 6.50 percent and an initial conversion premium of 25 to 30 percent – subject to market conditions. The shareholder loans will be subordinated to Sky Deutschland’s credit facilities, have a maturity up to 31 March 2014 and carry an interest rate of 12 percent per annum which would accrue and be payable at maturity. The loans could be converted into equity by News Adelaide Holdings at a later stage, subject to the approval of Sky Deutschland and its shareholders.

Sky Deutschland’s two largest lenders from the bank syndicate have already consented to the increased funding and the company expects the formal consent of the full lender group in the next weeks prior to placement of the convertible bond at the end of January 2011.

Contact for press:
Wolfram Winter
Senior Vice President Communications
Tel.: +49 89/99 58-50 00  

Contact for investors and analysts:
Christine Scheil
 Vice President Investor Relations
Tel.: +49 89/99 58-10 10

Full year 2010 results will be published on 24 February 2011

This release contains statements regarding future developments that have been based on current evaluations and have been made to best of the knowledge of the management of Sky Deutschland AG. Such statements with regard to future developments are subject to known and unknown risks, uncertainties and other factors that could cause the profit situation, profitability, value development or the performance of Sky Deutschland AG or the success of the media industry to diverge from those profit situations, profitability, value development or performance results that are assumed expressly or implied or described in these statements regarding the future. Considering these risks, uncertainties and well as other factors, readers of these documents should not rely in an incommensurate manner on these statements dealing with future developments. Sky Deutschland AG has no obligation to behave in keeping with such statements regarding future developments or to alter its behavior to accommodate future events and developments.