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4 May 2017

ZTE hopes to redeem itself in IPTV on back of Netgem deal

French set top software player Netgem has inked a significant deal this week to supply set top middleware running on ZTE hardware to Mexican ISP TotalPlay, to support its fiber to the home (FTTH) IPTV expansion plans.

The deal resonates as a significant one with Faultline Online Reporter for two reasons. Firstly, it looks suspiciously to us like ZTE creeping in through the back door to get its name on a product which might actually work – a smart move given its track record in IPTV, particularly in Latin America.

Secondly, the deployment is the first time that Netgem has licensed its software on third party set tops – a business transition that more and more traditional hardware manufacturers are embarking on. Some vendors are embracing this shift to software and services more willingly than others, and Netgem is one wisely putting its faith in this changing business model.

The two technology vendors will be supporting the delivery of TotalPlay’s IPTV system to 600,000 residential single or double play subscribers, via TotalPlay’s 50,000 km of fiber optic cable infrastructure in more than 20 cities in Mexico. Netgem’s internet TV platform integrates broadcast TV with IPTV and HTML 5.0 OTT content – providing users with access to services including Netflix, YouTube and AccuWeather. It is expected to roll out some time in Q2 this year.

TotalPlay has been a long term customer of Netgem, so on one hand the deal could be interpreted as ZTE stealing part of the contract away from Netgem, but on the other hand, it marks the start of a collaboration which could result in some major accounts for Netgem’s middleware in Latin America, and not necessarily on ZTE hardware.

ZTE has historically made a hash of set top deployments by trying to write its own software, and it has forever been attempting to break out of the shadow of its Chinese rival Huawei in IPTV in China. ZTE has not been able to replicate its IPTV successes outside of Asia Pacific, where we have heard some horror stories about ZTE in the TV market. A prime example is the $400 million contract ZTE was given with Venezuelan telco CanTV in 2008, which was abruptly aborted and replaced with a DTH service.

ZTE blamed the poor condition of the telco infrastructure in Venezuela at the time and we hope it has learned from its mistakes by now. The intelligent middleware platform from Netgem might just add the know-how that ZTE has been lacking in these deployments.

Netgem claims that TotalPlay is just the beginning of its software and services roll out in Latin America, and has also teased that it is eyeing up acquisition prospects in Latin America, in partnership with ZTE. If the joint deployment with TotalPlay is successful, then perhaps ZTE should be counting out the cash to acquire Netgem, before the prospect of additional Latin American accounts sends its share price through the roof. Netgem’s market cap currently sits at around $106 million, compared to ZTE’s $10.3 billion.

Back in 2013, Envivio announced a design win at TotalPlay, which was using the Envivio Muse platform for both live and on-demand video. Kit Digital, now Piksel, was involved with Netgem in the TotalPlay deployment in 2013, via its acquisition of Sezmi Corp, but we assume that Netgem now handles the account without the use of the Sezmi platform.

This was back when TotalPlay was part of Grupo Iusacell, one of Mexico’s leading pay TV companies, which was acquired by AT&T in 2014 for $2.5 billion and merged with Nextel Mexico to form AT&T Mexico. Grupo Salinas, owned by one of the richest men in Mexico, Ricardo Salinas Pliego, then bought Televisa’s 50% stake in Iusacell for $717 million, from which it inherited TotalPlay.

TotalPlay has a reach of 6 million homes via its fiber network, claiming speeds of up to 500Mbps – enough for the delivery of UHD TV content.

Alejandro Rodríguez, CFO of TotalPlay, commented, “we welcome ZTE as a long-term partner in TotalPlay and are very pleased to continue working with Netgem, whose innovative software experience over the years has been proven, with a cost of limited support ”

Netgem CEO, Joseph Haddad, added, “this agreement with ZTE creates an opportunity for Netgem to extend the distribution of its software platform to new territories and helps TotalPlay develop its fast growing business.”