October 20, 2009
Multiplay services have racked up some big success in Western Europe, thanks in part to aggressive pricing by operators looking to secure market share in the midst of an economic downturn. With price discounts of as much as 45% compared with stand-alone services, consumers in the Czech Republic, France, Germany, Italy, the Netherlands, Romania, Russia, Spain and the UK are expected to spend €37bn ($49bn) on multiservice offers in 2009, according to Pyramid Research’s Multiplay Services Forecasts. That success is driving operators in Central and Eastern Europe to move aggressively to include multiplay bundles and advanced services products in their portfolios.
Central and Eastern Europe’s multiplay penetration is much lower than that of Western Europe — 9% versus 48%, respectively, according to Pyramid’s data. But several operators in CEE have begun employing similar strategies to drive uptake of value-added services and to build their cache of exclusive content rights, thus luring customers and stabilizing ARPS in an increasingly competitive market. These strategies have so far paid off in several cases: Poland’s Canal+ Cyfrowy estimates its level of HD usage is around 11%, which compares roughly to Sky UK’s HD uptake. In Russia, operators offering VoD report that the number of subscribers regularly using VoD will reach 30-35% of total pay-TV customers by the end of 2009.
As operators invest in upgrading their networks to support higher data capacity, Pyramid Research expects that the uptake of HD and VoD will accelerate, given the robust level of demand in spite of the economic crisis. In Russia, we expect that the upgrade of existing networks will result in double-play subscriptions growth, mainly broadband and pay-TV, from 5.2m in 2009 to 8.3m in 2014.
For operators throughout Europe, however, the increases in multiplay and advanced services subscribers will not be matched by revenue increases, mainly because of aggressive pricing. In fact, operators are now having to shift their focus away from adding subscribers and toward increasing the revenues generated from those subscribers. Pyramid Research’s latest Insider, Discount Dilemma: Multiplay Pricing Puts Europe's Operators in a Revenue Bind, found that operators must embrace and expand their selection of VAS and add-ons to existing tariffs to help reverse the imminent decline in ARPS during a slowdown in subscription levels, thus helping maintain revenue growth levels. Across these European markets, subscriber growth will reach 11% in 2008 to 2009, but we predict a slowdown to a 4% CAGR between 2010 and 2014 (see exhibit).
Exhibit 1: Multiplay subscribers in the Czech Republic, France, Germany, Italy, the Netherlands, Romania, Russia, Spain and the UK, 2008-2014
Source: Pyramid Research Multiplay Forecasts
— Andrei Tchadliev, Analyst, EMEA
Discount Dilemma: Multiplay Pricing Puts Europe’s Operators in a Revenue Bind
Telecom Insider published October 2009
Pyramid Research believes that the rapid growth in multiplay adoption in Europe over the past two years, fueled primarily by promotional campaigns and cut-throat pricing, is no longer sustainable. The combination of dwindling subscriber growth rates and a secular decline in ARPS threatens to erode multiplay service revenue. This Telecom Insider analyzes how operators can use value-added services, content exclusivity and long-term contracts to slow the decline in ARPS, while drawing on the experiences of UPC in the Czech Republic, Free (Iliad) in France, Comstar in Russia and Sky in the UK.
Central and Eastern Europe Multiplay Forecasts
Forecasts updated twice yearly
Our Multiplay Services Forecasts provide service demand and revenue trends for bundled and blended telecom and media products in Central and Eastern Europe. They track operator-level performance and include historical and projected data on household adoption of and service revenue from double, triple and quadruple plays as well as fixed-mobile convergence (FMC) offerings, such as femtocell- and UMA-based applications.
Western Europe Multiplay Forecasts
Forecasts updated twice yearly
Our Multiplay Services Forecasts provide service demand and revenue trends for bundled and blended telecom and media products in Western Europe. They track operator-level performance and include historical and projected data on household adoption of and service revenue from double, triple and quadruple plays as well as fixed-mobile convergence (FMC) offerings, such as femtocell- and UMA-based applications.