Telcos were once banned from broadcast and pay TV businesses, especially in Europe, and Deutsche Telekom only completed the sale of its dominant 15 million home cable business back in 2003. But today Deutsche Telekom is gearing up to enjoy similar dominance all over again, with results out last week that show its Entertain packages are now flourishing, a recent deal with Sky Germany to attack the localized tiny cable market with content, and this week it has doubled the reach of its pay TV offering, by opening up a new satellite DTH front.
This has been the pattern all over Europe, with BT launching its BT Vision hybrid IPTV package a few years ago, France Telecom at the head of the IPTV charts, but also with channel properties and sports rights on free to air broadcasts, but in Germany the incumbent has been used to complete control of TV markets and wants it back.
Overnight its Entertain packages, in offerings with as many as 300 TV channels, will beam down from an Astra satellite, and add 16 million homes into Deutsch Telekom’s reach, to add to the 20 million homes that 6 years of frantic broadband build out has brought to its DSL and IPTV reach.
Just a few weeks back Deutsche Telekom and Sky Deutschland targeting a basic 25 channel TV service ‘ not the Entertain packages ‘ in a wholesale deal for bottom tier cable operators ‘ mostly around 1000 housing associations and last-mile cable operators. The deal will share out something like €10 a month per home between the local cable firm, DT and Sky.
This deal throws a long shadow over pay TV rivals and has the power to take revenues away from its old cable companies and will put a shadow on their stock market values, just as they become important, and so it could potentially damage negotiations to bring Kabel BW either to a public IPO or to a sale agreement with trade or financial investors (see separate story).
Previously Deutsche Telekom and Sky Deutschland have each struggled to dent German cable, but by adding Sky’s soccer rights to DT’s channel strengths, this cable wholesale deal may have the desired affect at the bottom end of the market. Having DT also compete as a Satellite operator with much greater reach will then apply the squeeze at the top end of the market, where it has bouquets from €10 to €50 a month and beyond, the sweet spot of the pay TV markets. Cable in Germany typically has Average Revenues Per User of around €10 to €15 a month, while Sky has managed closer to €30, but this price difference has kept it in a minority of homes.
The new DT satellite deal must also be a blow to Sky, knowing that its recently signed partner in one venture, is setting itself up with a rival satellite platform, in another.
The new DT package is a fully fledged hybrid service, complete with OTT and VoD over broadband offerings. It combines something like 130 paid Entertain channels with a free package of HD channels from SES Astra which it calls HD+.
DT will sell it in packages with broadband connectivity, telephony and it will come with a 500GB DVR, which will no doubt also be set to offer push VoD, where the operator can mandate certain popular content to be broadcast to the disk, just in case you want to view it later.
The service also puts DT right up against the recently launched Vodafone TV service which bundles basic satellite viewing with some paid OTT channels. The new DT OTT channels require a 3 Mbps DSL or other broadband line or 8 Mbps for HD options, and this offering will be a ‘no brainer’ to anyone who already has a satellite dish, which are widely installed for ‘free’ satellite services across all of
Europe, and also at Sky homes.
While a deal of this type might not stop cable in its tracks, which is focused almost entirely on selling triple play to existing homes, it can be dressed as a similar triple play package and for homes where cable doesn’t pass, it’s another way of buying what will be perceived as a cable class pay TV product. A huge number of radio channels are also part of the Entertain Sat offering.
Last week Deutsche Telekom reported its annual figures with IPTV homes growing by 114,000 homes in a single quarter, now up to 1.16 million homes, selling a total of 1.6 million Entertain packages. DT added 350,000 IPTV homes in the entire year. Its overall financial figures were roughly flat, with profit up slightly, with problems in its US T-Mobile subsidiary, but growth across the board in its TV services, both in Germany and with 2.3 million TV customers outside Germany. TV is seen as one of the key ways to prevent fixed line losses in Germany, which still fell 374,000 during the quarter and were down 1.5 million on the year to 24.65 million lines.
It’s other key TV services are strewn across central and eastern Europe, especially in Romania, Hungary, Slovakia, Croatia and Greece ‘ which all featured similar TV growth to the German market. In fact DT sees TV as a way to fix most of the damaged incumbents across Europe and has bought wisely into many of these entities and then invested to upgrade DSL capability, add satellite delivery and improve the scale and program quality of their TV services, much as it has done in Germany.
‘Currently we provide Entertain to some 20 million households in Germany’, says Christian P. Illek, Head of Marketing at Telekom Deutschland GmbH. ‘With our Sat offering we want to reach new customer groups and enable even more people to experience our convincing TV service. Potential customers are the 16 million households throughout the country that rely on satellite television. Another key factor will be the discontinuation of the analog satellite signal in early 2012.’
Entertain Sat will offer 330 TV and 260 radio channels, using the HD+ smart card delivered which will bring RTL HD, Sat.1 HD and Pro7 HD. Time-shift functions and EPG are included in the package along with a personal video recorder with 14 day EPG view. Programming can also be delivered to the PC, Tablet or smart phone and the online video store and TV archive works in a ‘download and play’ mode.