Satellite TV mania not over just yet in Eastern Europe

By Steve Wilson

Conventional wisdom runs that Eastern Europe already has a surfeit of direct-to-home (DTH) satellite TV operators. But recent launches show there are yet more players willing to enter the market and, at least in certain markets, there is still some room for growth in subscriber numbers.

The need for TV

Eastern European broadband and voice markets tend to be extremely competitive and so bundling with multichannel TV is becoming an essential strategy in order to increase the loyalty of subscribers. With average TV viewing times particularly high in the region multichannel TV is a key part of the bundle and even has potential as a standalone product. These reasons lie behind a number of launches in recent months.

Incumbents

Vivacom, the Bulgarian incumbent, launched a DTH platform last year partly in order to help reduce churn of high margin fixed line telephony subscribers. And whilst it is true that Deutsche Telekom backed incumbents in the region have launched IPTV platforms they have also moved into the DTH area. Again part of the rationale is to help reduce churn of fixed telephony subscribers, particularly in more rural areas where the copper network is incapable of delivering IPTV. This helps explain Croatian incumbent Hrvatski Telekom’s DTH launch at the back end of last year.

Alternative and mobile operators

Alternative operators have also been traditionally priced out of the DTH market because of the high costs of buying space on satellite transponders and the fact this makes more sense to operators active in more than one country. However, there has been increased competition in the market for supplying satellite capacity, bringing costs down.
New wholesale DTH models are also emerging. T-Mobile in the Czech Republic launched TV services in November last year using Skylink’s platform. The T Mobile case also shows what potential synergies exist between mobile and DTH operations. The operator is offering hefty discounts on purchasing DTH equipment to those that extend their mobile voice contracts. It is possible other mobile operators in the region may also launch DTH services as a customer retention tool for their mobile offerings.

Standalone DTH players

There have also been launches from standalone DTH players such as this year’s entry in the Russian market of the operator Scene. There are also rumours that other platforms will enter the Polish market. Standalone models will be more problematic given the lack of the ability to bundle with broadband access, although there are still markets which have low multichannel TV penetration, with Russia being a prime example.

DTT threat

DTH operators will look to take advantage of the slow transition to digital terrestrial television (DTT) and are trying to head off this potential threat by including DTT tuners in their set top boxes. Indeed the transition towards analogue switch off in countries such as the Czech Republic could actually be an opportunity for DTH players since households will need to buy a new set top box. This is a further reason behind T-Mobile’s DTH launch in the Czech Republic. The competition amongst DTH platforms in many countries is also spurring growth in the number of HD channels thereby improving product quality against DTT platforms.

Growth to continue for a while

There is still potential for more operator launches. Nevertheless the number of DTH operators and subscribers is beginning to reach its maximum potential level in many markets, and the example of Romania should serve as a warning. Standalone DTH player Boom TV entered administration in the first half of 2010 thanks to stiff competition from Romania’s four other DTH platforms and its subscriber base may be sold to incumbent Romtelecom. Indeed after years of explosive growth, in the first half of last year Romania’s DTH market contracted in terms of subscriber numbers. But it is more than possible that many markets are capable of supporting two or more DTH platforms in the long term.