Europe Telecom Insider / Vol. 1, No 8, Edition 10 - Discount Dilemma: Multiplay Pricing Puts Europe's Operators in a Revenue Bind - Market Research Reports

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Europe Telecom Insider / Vol. 1, No 8, Edition 10 - Discount Dilemma: Multiplay Pricing Puts Europe's Operators in a Revenue Bind

Description:

The past two years have seen remarkable growth in the adoption of multiplay services in Europe. To help drive the uptake of bundled services, operators have discounted their multiplay fees by up to 50% compared with baskets of stand-alone products. The economic crisis has played a major role in driving consumers to seek out competitive offers for their voice, broadband and pay-TV needs. As a result, multiplay subscriptions across Europe are expected to grow by 11% in 2009. As the multiplay market reaches saturation, however, the rate of subscription growth will decrease by more than half: we forecast a CAGR of only 4% for 2010-2014. The combination of dwindling subscriber growth rates and a secular decline in ARPS threatens to erode multiplay service revenue.

In 2008 multiplay revenues across the Czech Republic, France, Germany, Italy, the Netherlands, Romania, Russia, Spain and the UK totaled €31bn (US$46bn) and are expected to reach an estimated €37bn ($49bn) in 2009, representing euro-denominated growth of 18% in 2009. As subscription growth begins to subside, multiplay service revenue will slow to a modest CAGR of 7% between 2010 and 2014. With the growth in multiplay subscribers forecast to slow while market competition increases, operators must focus on increasing ARPS and securing subscribers to ensure continued revenue growth in the medium term.

The author believes that the rapid growth in multiplay adoption over the past two years, fueled primarily by promotional campaigns and cut-throat pricing, is no longer sustainable. 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.

Published monthly for each of the world’s most dynamic regions, Telecom Insiders are packed with trend analysis, industry best practices, market sizing and forecasting, competitor analysis, and case studies, providing you information you can leverage to make better business decisions

Contents:

Introduction
Reversing the trend: High-value bundles take priority
A. Multiplay subscriber growth forecast to slow
B. Switching strategies: Focus on ARPS
C. Quad-play bundles and exclusive content will reduce churn
Market detail
Case study: Comstar (Russia)
Case study: Free (France)
Case study: Sky (UK)
Case study: UPC (Czech Republic)
Conclusions
Key findings
Recommendations
Related resources

Table of exhibits
Exhibit 1: Multiplay subscribers versus ARPS in the Czech Republic, France, Germany, Italy, the Netherlands, Romania, Russia, Spain and the UK, 2008-2014
Exhibit 2: Levels of household broadband and pay-TV penetration in the Czech Republic, France, Germany, Italy, Netherlands, Russia, Romania, Spain and the UK, 2009
Exhibit 3: France Telecom’s Orange quad-play offer: Internet, TV, telephone and mobile
Exhibit 4: Vodafone Casa TV: Television, Internet and mobile telephony for €20 per month
Exhibit 5: Relative decline in multiplays and broadband ARPS in France, Germany, Italy, the Netherlands, Spain and the UK, 2008-2014
Exhibit 4: Average monthly prices of 12-month and 24-month Vectra packages, with Telekomunikacja Polska (TP) comparison
Exhibit 7: Number of multiplay subscriptions and multiplay penetration of households in Russia, 2008-2014
Exhibit 8: Comstar broadband, telephony, pay-TV and mobile services
Exhibit 9: Triple-play penetration of households in France, 2008-2014
Exhibit 10: Availability of bundled offerings by operator in the UK, September 2009
Exhibit 11: Sky UK’s HD offerings — Sky Starter, Sky Sports and Sky World
Exhibit 12: Multiplay penetration of households by offering in the Czech Republic, 2008-2014

Summary:

The policy of discounting multiplays in Europe in order to drive adoption and subscriber additions will prove unsustainable as subscriber growth slows, according to the latest report.

Discount Dilemma: Multiplay Pricing Puts Europe's Operators in a Revenue Bind is a new Telecom Insider Report that 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 U.K.

Multiplay operators have benefited from tremendous subscriber growth levels in the past two years, thanks to a combination of low penetration and competitive pricing. The global economic crisis helped spur the growth in offers promoting multiplay at significant discounts to stand-alone products. With subscriber additions driving revenue, operators were comfortable with declining ARPS. However, the policy of discounting multiplays in order to drive adoption and subscriber additions will prove unsustainable as subscriber growth slows, putting operators in a revenue bind.

"As the multiplay market reaches saturation, the rate of subscription growth will decrease by more than half with a CAGR of only 4 percent for 2010 to 2014," according to the report. "In 2008 multiplay revenues across the Czech Republic, France, Germany, Italy, the Netherlands, Romania, Russia, Spain, and the U.K. totaled €31 billion (US$46 billion) and are expected to reach an estimated €37 billion (US$49 billion) in 2009, representing euro-denominated growth of 18 percent in 2009. As subscription growth begins to subside, multiplay service revenue will slow to a modest CAGR of 7 percent between 2010 and 2014," the report shows. Meanwhile, existing broadband and pay-TV households will be tempted by their current providers to migrate to multiplays, significantly increasing competition among operators for existing customers.

The report finds that operators must bolster their ARPS as a means of ensuring revenue growth. With competition restricting their ability to raise prices, operators across both Western and Eastern Europe must develop their value-added offerings, focusing primarily on HD and VoD services, as well as broadband top-up services. Likewise, as mobile operators enter the multiplay market, fixed operators should consider joint ventures with MNOs or even launch their own MVNOs in order to remain competitive.

Companies Mentioned

- Akado - Boom TV - BT - Carphone Warehouse Group - Chiligaming - Comstar - Corbina Telecom (VimpelCom) - Era - France Telecom - Free - Iliad - Liberty Global - Numericable - Orange France - Orange UK - Qwerty - SFR - Sky UK - TalkTalk - Telefónica O2 Czech Republic - Telefónica O2 UK - Telekomunikacja Polska - Tesco - Tiscali - UEFA Champions League - Unity Media - UPC Austria - UPC Czech Republic - UPC Romania - Vectra - Virgin Media - Vodafone - Vodafone Portugal - Vodafone UK - Volia

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