European cable operators expect CAGR of 5% on average this year, with broadband driving most of the growth, according a survey of European cable operators carried out by Solon Management Consulting.
Average margin from cable’s services is expected to grow to 48% by 2014, while operating cash flow margin is expected to rise to 29%, Matthias Hamel, principal, head of technology and innovation, Solon Management Consulting, told CTAM Europe EuroSummit attendees this morning.
Cable operators believe premium pay TV will continue to grow, according to the survey, while broadband penetration is expected to grow to 70% of the cable base by 2014. About 69% of survey respondents selected multiscreen delivery as the innovation that would be their major area of focus, ahead of the launch of next-generation set-top boxes and HD services. Some 45% of cable subscribers took only one service in 2011, but bundling products could reduce churn by a factor of five, according to Solon’s survey.
Solon surveyed 14 leading European cable operators in partnership with CTAM Europe.
Speaking on a panel session following Solon’s presentation, Marcel Nijhoff, chief commercial officer, Ziggo, said that broadband growth was primarily seen as part of a bundle from Ziggo’s perspective. “Growth is in bundling and convergence,” he said. “In [Liberty Global’s Horizon box] you also see convergence of broadband and TV services.” Nijhoff said that cable operators could withstand competition from ADSL providers, but were also seeing competition from fibre providers in the Netherlands. Cable therefore needed to differentiate its offering through services and content, he said.
Nijhoff said that cable operators’ ARPU growth was offsetting a long-term decline in analogue subscribers. Referring to the threat from OTT providers, he said that cable had the advantage of being able to support local content. He said that linear TV was still important for most people and represented a challenge for OTT providers.
Char Beales, president of the CTAM US, also speaking on the panel, said that although video customers may be in decline, there were many ways to garner additional revenue from video. Beales said that US cable operators had also seen business-to-business services emerge as a real growth engine.
Andrei Torriani, CEO of Malta’s Melita, said TV was relatively stagnant as a revenue stream, while Melita was experiencing strong growth in mobile, which now accounted for about 30% of its business. Despite the cultural and organisational challenges, mobile was a compelling strategic offering, he said, given that content costs were increasing and margins declining. “Consumers can access content from any type of device, legally or illegally,” he said. People were increasingly also demanding the ability to view content on other devices, both inside and outside the home, meaning that a mobile play was even more essential for cable, said Torriani.
Diederik Karsten, executive vice-president, European broadband operations, Liberty Global, said cable’s advantage in broadband speed would continue to help it in its competitive battle with telcos. Karsten said Liberty Global’s Horizon box offered new opportunities for content providers to create new revenue streams.
Liberty Global’s new Horizon box was “a lot of small steps in different directions” that could help drive new business models, rather than a single step change, he said.
Referring to the mobile opportunity, Karsten said that operators should only enter into the market if they were prepared to invest for the long haul, starting with zero revenue and building a business from scratch. Operators could also look to a partnership model in certain cases rather than building their own network. “You can’t say you have to do the same in all markets,” he said.
John Rossiter, managing director, Sony Pictures Television Networks CE, said content providers could partner with cable operators to deliver TV everywhere services. Channel providers had to deliver the content, while cable operators would deliver the platform, he said.
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