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Cable Technology Feature Article

May 07, 2014

Cable TV plus Mobile Emerging as Europe Service Provider Strategy

By Gary Kim, Contributing Editor

Integration of mobile and fixed network infrastructure, in particular cable TV broadband networks, are emerging as a key strategic direction for Western European service providers.

Spain’s Telefonica (News - Alert) is offering 725 million euros ($1 billion) for a controlling stake in Spain's pay-per-view TV operator, Digital Plus—Telefonica already owns 22 percent of Digital Plus.

Telefonica wants to buy the 56 percent stake in Digital Plus in the hands of Promotora de Informaciones S.A., or PRISA, owner of Spain’s daily El Pais and the Cadena SER radio network.

Vodafone (News - Alert), meanwhile, recently purchased Grupo Corporativo Ono, the largest cable TV provider in Portugal.

That doesn’t mean cable TV or fixed network assets—an effort to gain scope efficiencies (selling more products to an existing customer base)—are the only moves service providers are making. In addition to gaining scope, traditional scale (more customers of the type a service provider already serves) also matters.

Separately, Telefonica had earlier purchased E-Plus, the German mobile services company, and now is attempting to win regulatory approval of the deal.

Telefonica Deutschland is offering to lease its mobile spectrum above 2 GHz to other service providers as a concession to win deal approval. That would, in principle, allow one or more additional mobile providers to enter the German market.

Cable TV firms are not the only fixed network assets service providers are buying. BSkyB (News - Alert), the United Kingdom satellite and fixed services provider, has bought Telefonica U.K. telco-based fixed network assets.

Other deals likely will happen. Vodafone, for example, has recently been mentioned as an eventual bidder for Liberty Global (News - Alert).

And some will forget that, at one point, AT&T in the United States bought all the assets of Tele-Communications Inc., at that point the largest U.S. cable TV provider, as the hoped-for underpinning of AT&T’s (News - Alert) local access strategy.

The reasons for the strategy are simple enough. Mobile service providers in Western Europe face declining revenues in the core business, so acquiring cable TV operators provides both scope opportunities and new product segments to drive revenue growth. Unlike mobile or fixed telecom services, video entertainment revenues still are growing.

Also, video entertainment has emerged as the second most-important fixed network service, after high speed Internet access. Also, cable TV operating costs, and the ability to upgrade Internet access speeds, are arguably lower than those of competing telco networks.

Also, in many markets, cable TV operations do not carry mandatory wholesale obligations imposed on telco access networks. So buying cable TV assets makes sense.

Edited by Maurice Nagle

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