Analysts tip smooth transition after former chief’s sudden resignation

Sky TV caught analysts on the hop yesterday when it said chief executive Martin Stewart had quit after just 21 months. The pay-TV operator’s chief operating officer Sophie Moloney had taken over with immediate effect, although Stewart would take a consulting role for three months. There was no change to Sky’s recently upped guidance.

Forsyth Barr analyst Matt Henry had a two-word initial reaction: “I’m surprised.”

So what can we expect from the Moloney era?

For staff, an apparent end to the sort of upheaval that’s hit so many media companies as the pandemic squeezed a sector already under pressure.

“The concept I talked about this morning was kotahitanga, or unity,” she told the Herald, just a couple of hours after her official appointment.

“This was a very tough year. We had to say goodbye to a lot of Sky employees. But we’ve come through that process. Now is about bringing everyone together.”

There will be “no let-up” on Stewart’s strategy to push streaming and move into broadband.

“But I suppose what I would say is I’m a Kiwi, right? And I think that 2020 ... has challenged all of us. So my resolute focus over the next few weeks at least, is all about our Sky crew,” Moloney says.

“The initial challenge is making sure that all of our people feel supported, and that they know that this is a great place for them to work.”

Moloney was already first-drop to succeed Stewart in the event of his departure, under a succession plan put in place by the board, “Although I confess it’s been a bit accelerated.”

Moloney — who spent two years at King’s College in Auckland before completing a law degree, with honours, at Canterbury — arrived at Sky TV in January 2018 as general counsel.

Before that, she had trodden the same path through the Middle East as Stewart, serving as chief legal officer at Dubaibased pay-TV provider OSN, where Stewart was chief executive. In the 2000s, both were at Sky in the UK — Stewart as CFO and Moloney as a legal adviser.

At Sky TV, she was promoted to chief legal, people and partnerships officer in mid2019, then to chief commercial officer in July this year.

The announcement certainly came as a surprise, and given that Sky is only “midstream” through a number of major initiatives under Stewart. Also his reasons for exiting, considering that multiple vaccines are on the horizon, and the potential for border restrictions to loosen during 2021.

“Sophie’s recent achievements include securing the commercial agreement with Spark to secure Rugby World Cup rights for pubs and clubs around New Zealand, leading the team that secured New Zealand Rugby and Sanzaar rights, negotiating the new Optus satellite agreement and spearheading Sky’s purchase of entertainment streaming service Lightbox,” Sky chairman Philip Bowman said yesterday.

The new CEO says Sky is on track to delivering on Stewart’s plan for 2021, including the push into broadband.

But when pressed, she said there will be a few tweaks to her predecessor’s ambitions.

At Sky’s AGM in October, in response to an investor question about whether Sky would follow its broadband play with a move into the mobile market, Stewart replied. “It is just a matter of time. Just like broadband, we see this as a big opportunity.”

Yesterday, when the Herald put the same question to Moloney, she responded in far more cautious fashion, saying it would have to add value for customers. “[If] we can deliver more value alongside our content . . . then, yeah, absolutely, we’ll have a look at it. The regulatory environment, with mobile, is not as favourable as it is for going into broadband, so that’s something we’ll have to think about.”

Similarly, while Stewart has been all-guns-blazing about a new, Android-powered set-top box, which would offer 4K ultrahigh definition and allow Sky customers to install third-party apps from the likes of Netflix, Amazon and even Spark Sport, and appear in FY2021, Moloney is more reserved.

If the Android box is indeed put on hold, or modified, it will be a third change of tack after Stewart nixed his predecessor John Fellet’s plans for a similar Android box.

“That’s an important part of our road map,” she says. But no details are set in stone.

Stewart on his abrupt exit

Stewart cited the “likelihood of further Covid-19 border restrictions” for his decision to depart. He told the Herald it felt like a good time to depart after driving through two years of change, and a pause before his company’s push into broadband next year. But it was also a factor that in his first year in the job, he was able to travel back to the UK, where his varsity-age children live, a number of times. The pandemic put a stop to that in 2020.

He declined to give an exact timeline between his decision to leave and yesterday’s announcement but did offer “It was a short period of time. The reason why we’ve been able to move so quickly is because . . . Sophie’s an excellent replacement and was just sitting there

waiting to take over.” He did not have a new position lined up.

Among other factors, Stewart’s abrupt departure was a surprise in that he had recently bought more shares in Sky. A September 11 filing disclosed he had raised his stake from 1,036,000 to 1,286,000 shares as he picked up 250,000 shares worth around $37,500. (A spokeswoman confirmed it was an on-market purchase, not part of any bonus or other compensation scheme.) The pay-TV broadcaster recently upped its profit guidance, and flagged the likely return of its dividend. And analysts have generally given Stewart high marks for his digital-first makeover, and quick moves to replace nearly every senior manager employed by his predecessor Fellet.

But the Englishman was unable to reverse Sky’s long-term share slide. He secured a new five-year deal for top-tier rugby, only to see the sport upended by Covid and South Africa’s Super Rugby rebellion. Spark Sport continued its incursion, grabbing domestic cricket rights. And although Stewart expanded streaming service Neon, the challenges of overthe-top content were illustrated when Disney pulled its Sky channels to make way for the direct-to-consumer Disney+.

Sky shares closed 3.6 per cent down at 16.2c yesterday. The stock is down 65 per cent for the year.

How analysts see it

The new CEO won’t be drawn on Sky’s share price, saying only that she’s focused on meeting the pay-TV provider’s revised-upwards guidance.

Fat Prophets’ Greg Smith, as one of the few Sky bulls, recently told the Herald he saw potential for Sky shares to more than double to 38c (before Covid he saw the stock moving as high as $2 within a year.)

Yesterday, Smith said, “The announcement certainly came as a surprise, given that Sky is only mid-stream through a number of major initiatives under Martin Stewart.

“In any event, I think Martin has set Sky TV on a much better path. Sophie has worked alongside Martin for some time so I imagine the transition will be fairly smooth.”

Jarden’s Arie Dekker said, “With Sky having repositioned it’s OTT [over-the-top or streaming] platforms but still struggling with core satellite subscriber decline it will be interesting to see how hard the new CEO drives the pending broadband play. There’s plenty still to do as Sky struggles to stem profit decline.” Dekker has a neutral rating and a 12-month price target of 18c.

Forsyth Barr’s Matt Henry has a neutral rating and a target price of 16c.