Telcos snapping at heels of established pay TV operators

Telcos Snapping at the Heels of the Established Pay-TV Operators: Futuresource Consulting

• Traditional operators will need to keep a close eye on telcos rising interest in the TV space as operators’ make their mark both in Western Europe and other key regions

Following a number of false starts in Western Europe, IPTV homes are now a viable platform, hitting 27 million in 2014, 15% of all TV households. With growth of 30% expected between now and 2019, IPTV subscribers will outperform both cable and satellite which will see a decline in subscribers of 9% and growth of 6% respectively. In the US, IPTV households reached over 12 million at year end 2014 – 13% of Pay-TV households with an expected rise to over 15% by 2019.

Most significant in Europe has been the rise of Altice and Vodafone which at year-end 2014 had a combined footprint in Europe of 14 million TV homes; in part created by continued aggressive acquisitions of several key operators. The USD $58 billion spent by Altice spans Portugal (Meo) and France (Numericable-SFR) in Europe and further afield Israel (Hot), USA (Suddenlink) and the newest edition in the USA, Cablevision. With Vodafone’s USD $20 billion spend securing significant share in both Spain (Ono) and Germany (Kabel Deutschland).

Their acquisitions now raise these two telcos ranking in the share of Western Europe’s Pay-TV households placing both in the top five with Sky, Liberty Global and France Telecom. In the US, with the combined footprint of Suddenlink and Cablevision, Altice now has over 3.7 million TV subscribers ranking it in the top five US cable operators and securely in the top 10 of overall MSOs.

The flurry of M&A activity is unlikely to be over, as rumours circulate of Altice’s potential acquisition of US mobile giant Verizon’s wireline (FIOS) division in addition to KPN (Netherlands) and Liberty Global continues to be on the radar of Vodafone. The recent acquisition of Turkish satellite operator Digiturk by Al Jazeera could also see the Middle East based media group making further moves west into the higher value markets.

The battle for multi-play service deployment has played a significant role in the rise in ‘telco TV’ as operators utilise TV service bundles to attract and retain broadband subscribers; in some instances offsetting the cost of TV against higher margin broadband services. This has taken a further leap forward with the introduction of Netflix on several Pay-TV platforms across Europe. The imminent introduction of the service on Vodafone in Spain will be its 13th key European partnership across nine countries, reaching over 20 million homes.

Though such a strategy does limit differentiation it has enabled a low-cost, low-risk entry point for operators to offer video services. Despite this, rising investment in premium and exclusive content is anticipated, as major operators continue to utilise content to drive revenue and act as a differentiator to their service, a strategy telcos in established markets are likely to have to follow to retain subscribers.

Futuresource recently completed its annual audit of the Western European and US Pay-TV Landscape, assessing the current and future outlook at individual country level. The report comprises a detailed database and accompanying management report incorporating analyst trends and insights relating to traditional pay-TV and the wider home entertainment landscape.