CEE 2011 > Pay-TV platforms
Digital TV Europe June 2011
‘n’ has been successful in marketing pre- mium and HD services.
what more stripped down IPTV service via its Iskon subsidiary. “The Iskon feature set is quite substantially different,” he says. “Iskon is one of the oldest internet providers in Croatia, with quite a loyal subscriber base.” The Iskon TV service was launched to provide a complete portfolio of services to this base, in order to secure its loyalty to the brand and prevent Iskon customers from being tempted by alternative TV offerings.
A second goal of the MAXtv satellite plat- form, however, is to build a business that could be exported to markets outside Croatia. “The Croatian market is not the only one where we can exploit our platform,” says Breskovi´c. The plan would be to build a ‘white label’ offering where T-Hrvatski Telekom could provide the technical infrastructure (including encryption) that could then be used by content partners to reach adjacent markets in the region.
Other future strategic priorities for T- Hrvatski Telekom include the build-out of a fibre infrastructure (progress towards which has been slowed down somewhat by regulato- ry restrictions), which would, among other things, enable it more easily to deliver multi- ple simultaneous video streams to each household. Breskovi´c also believes that there will be some consolidation to reduce fragmen- tation in the TV distribution market, with smaller players that may lack watertight rights to redistribute content being squeezed out.
Pan-regional distributor
Consolidation within individual territories has long been anticipated, but is only now begin- ning to happen in Romania (where Romtelecom has acquired rivals Boom TV and Akta) and has yet to occur in Poland.
However mergers and acquisitions across national boundaries have also occurred. Liberty Global, with operations in five coun- tries attracting a total of 4.1 million sub- scribers, has long been the premier pan- regional distributor in central and eastern Europe. Its strength in the region is likely to increase with the acquisition of Polish cable operator Aster from investment group Mid Europa Partners (itself a significant interna- tional player through its ownership of the SBB/Total TV and Telemach operations in the western Balkans and Invitel and Fibernet in Hungary). Once it passes regulatory hurdles, the Aster deal will be worth €600 million, representing one of the biggest CEE equity exits of the past 12 months. Poland is one the most developed, and therefore competitive pay TV markets in cen- tral and eastern Europe, and the deal indicates that Liberty Global, which already operates under the UPC brand in Poland wants to take it on. For Mid Europa Partners partner Robert Knorr, the decision to sell Aster was down to normal investment cycles, rather than a response to pay TV market conditions. “On the contrary, we are solely committed to the region and are actively looking for invest- ments including in the pay TV space,” he says. “We get into investments and stay with them for three-to-five years. Aster we were hitting the fifth year and it was the right time to exit.” Mid Europa itself is continuing to build a noticeable presence in the former Yugoslavian countries, where it operates under the SBB cable brand in Serbia (which in turn operates the Total TV DTH platform) and Telemach in Slovenia. Most recently, Mid Europa acquired three regional players in Bosnia, BH cable Net, Elob and KT Global, which it will com- bine with Telemach and SBB into a new Telemach-branded entity. It also has a pres-
ence in the Hungarian pay TV market where its fixed line telco Invitel recently acquired cable and pay TV operator Fibernet. According to Knorr, the economic crisis, which he said had a much greater affect on some markets than others, has in fact led to a slowing down of mergers and acquisitions in the region. Growth for Mid Europa has in any case tended to be organic rather than through major acquisitions: “The last 12 months have been more dynamic than the year before, but aside from Aster the rest of our deals have been about add-on acquisitions and boosting our existing presence to expand our footprint in the region.” From an investment point of view, there are some markets best avoided in the short- to mid-term, says Knorr pointing to Romania as a particularly difficult market to crack. “It has lots of operators and an incumbent that is very active in the market. Competition is very high,” he explains. Hungary is tough too. “There are some markets that seem easier than others,” says Knorr. In the next 18 months he predicts that some existing investors will decide to abandon some territo- ries. “It will either provoke consolidation, which will create a more stable situation in those markets, or may prompt new investors to that market to attempt to drive different business models,” he says.
Investing in DTH operators has proved riskier than for cable. According to Knorr, CEE DTH operators have in general been hit hard- er by recent economic conditions: “We have been doing very well with DTH but there have been some sad stories. Some people started DTH platforms, invested heavily in them and when the crisis hit they were left over-exposed. They were paying a lot of money for quality content but their ARPU or subscriber base went down. We would not shy away from looking at DTH but it’s a riskier business model than cable.” Knorr says that consumers are starting to show a preference for taking multiple services from operators, which means bundling DTH with fixed line services is a safer bet than offering TV services alone. “You are better off entering commercial agree- ments with people who own fixed line servic- es with whom you can offer DTH as a video service to prevent them from putting video over their network,” he says. ●
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