Inside telecommunications Issue 11

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EY - Portrait of Jonathan Dharmapalan

In this issue, we consider a number of industry themes, from operator smart home strategies to data center investments and cloud service provision to SMEs.

Jonathan Dharmapalan
Global Telecommunications Leader



The third quarter of 2013 has underlined a number of industry trends. The sector is now firmly back in megadeal territory, with deal value hitting a new high in the three months to September.

All eyes are now fixed on Europe for a number of reasons. Some European incumbents are trimming their footprints as they look to reduce debt burdens, while overseas players are attracted to the region’s low valuations. Much will hinge on regulators’ willingness to accept a narrowing of the competitive landscape if large-scale consolidation is to occur.

Along with in-market consolidation, a number of players are seeking to widen their service propositions, trusting in the opportunity to up-sell new services and create a stickier customer base. For operators serving residential customers, this means moving more aggressively into the provision of pay-TV services and associated content rights.

In November, UK incumbent BT announced the acquisition of exclusive rights to show UEFA Champions League and Europa League soccer for 3 years at a cost of £900m. This outlay follows the award of live Premier League soccer rights in 2012, and launch of the BT Sports channel in August.

Rising interest in premium content rights from incumbents and cable operators is evident in growing broadcast revenues emanating from Europe’s top five soccer leagues. The latest cycle of rights sales has fuelled a 25% uptick in revenues to US$6.7 billion per season.

As a result, competition in the triple-play market is scaling new heights. Players with a heritage in pay-TV are heavily discounting the broadband elements of their bundles, while newcomers in premium content provision are hoping to undercut legacy sports broadcasters.

As such, understanding and segmenting consumer needs has never been more important. Attitudes to bundle packages are shifting, with even home automation and monitoring services being featured in some high-end packages.

On the pivotal issue of consumer appetite for premium content, evidence suggests a complex interplay of attitudes and needs. Our August 2013 survey of 2,500 UK households found that existing triple-play customers are largely satisfied with their pay-TV services. However, some 50% of overall respondents strongly disagree that their households are willing to pay to watch sports on TV.

Therefore, the question remains whether lower price points can alter this antipathy to paying for premium sports content. Meanwhile, the role of mobile in residential bundles remains uncertain, as less than 1 in 20 UK households currently take a quad-play of broadband, TV, telephony and mobile.

EY - Adrian Baschnonga

Adrian Baschnonga
Lead Analyst
Global Telecommunications Center