Pay TV saturation driving CEE players to consolidation and strategic partnerships

With pay TV closing in on saturation point in a number of CEE markets, consolidation and strategic partnerships between players are likely to be a key trend over the coming couple of years, according to Anna Putts, director of marketing at Polish DTH provider ‘n’.

Speaking at Informa’s Digital TV CEE conference in Prague today, Putts said that markets reaching pay TV saturation are likely to see attempts by larger players to build growth through consolidation. With the additional factor of more realistic valuations of companies in the wake of the financial crisis, there are likely to be opportunities for consolidators to make acquisitions, said Putts.

The other major trend is towards strategic partnerships, for example between DTH players and telcos. Putts cited the example of its Polish competitor Cyfrowy Polsat’s merger with telco Polkomtel. Cyfrowy Polsat, which has 3.5 million subscribers, merged with a company with 14 million customers giving it the opportunity to cross sell products to a much wider base.

UPC Poland acquired Aster, allowing it to extend its reach to further cable homes in Poland. ‘n’ meanwhile entered into a strategic partnership with Orange allowing ‘n’, with 1.2 million subscribers, the opportunity to target its services at Orange’s customer base.

Putts said the agreement with Orange was based on reciprocity, allowing each to sell their products under the other’s brand. “From the customer’s point of view it’s almost the same product,” she said.

Putts said mergers between large companies took a certain amount of time to bed in, while the partnership model allowed both parties to proceed quickly. She admitted however that Cyfrowy Polsat would have a strong presence in the market. “It’s going to be strong competition for us,” she said. While Polsat was now targeting the high ARPU customers also targeted by ‘n’, Putts said that the value proposition of ‘n’ and a growing emphasis on customer satisfaction and keeping customers would be a key factor going forwards.

“The market is going to go through changes over the next few years,” said Putts.

Over the next five years, some 96% of homes in CEE will switch to digital, which provides a strong opportunity for pay TV providers, said Putts. Pay TV penetration in Poland is about 72%, with Romania and Hungary also reaching saturation point. Russia on the other hand offers strong potential for further pay TV growth, along with Ukraine, she said.