Ovum sees telcos becoming established players in the pay-TV market

Telecoms operators now provide around one-fifth of the world’s pay-TV subscriptions. Operations owned or controlled by telcos accounted for 140 million retail pay-TV customer connections globally at the end of 2014 and this total soared to 177 million during 2015 – equivalent to 19% of the total pay-TV subscriber base (up from 14% year-on-year), according to global analyst firm Ovum.

According to Ovum’s latest research, the Telco TV subscriber base is projected to grow at a compound annual growth rate (CAGR) of 4% to 2020 (compared with 2% across the wider pay-TV market), reaching 210.4 million. While IPTV will remain the dominant means of delivering Telco TV, traditional cable and satellite platforms will also continue to play a big role.

Ovum defines Telco TV as any subscription-based pay-TV operation provided directly by an operator whose core business is the provision of voice telecoms and/or broadband access services. As such, the Telco TV universe includes a large proportion of cable and satellite as well as IPTV customers.

Jonathan Doran, Principal Analyst, Consumer Telecoms, at Ovum and author of the report says: “The growing share of ‘traditional’ TV platforms within the Telco TV base reflects a recent shift towards a global consolidation of pay-TV operations, in which telcos are playing a significant part. The jump in subscriptions during 2015 is comprised mostly of direct-to-home (DTH) satellite subscriber additions resulting from M&A initiatives. These include the acquisition by AT&T of DirecTV (US and Latin America) and Telefonica’s purchases of Digital Plus in Spain and GVT in Brazil.”

Ovum anticipates that this trend – which was spearheaded by Vodafone’s earlier acquisitions in Europe – will slow down, with the telcos’ share of the overall pay-TV market stalling at 19–20%. Throughout the forecast period, around half of Telco TV subscriptions will be delivered via IPTV networks, with cable and satellite serving a projected 12% and 37% of connections, respectively, by 2020.

Doran comments: “While the flurry of M&A activity has boosted numbers of Telco TV connections over cable and satellite, IPTV is also still growing, both organically and via gradual migration from traditional platforms. The choice of delivery technologies is a strategic decision that will vary according to each operator’s position within a given market.”

Ultimately, we expect to see a continuation of today’s Telco TV platform mix, at least for the foreseeable future. Operators will exploit a combination of technologies that includes traditional cable, satellite, and IPTV, as well as the rapidly evolving mobile OTT and hybrid delivery channels.

With its share of the pay-TV customer base now substantial and expected to remain stable going forward, Telco TV is here to stay. “The recent spate of telco acquisitions of established pay-TV operations in Europe, the US, and Latin America has firmly cemented the telcos’ presence within the wider pay-TV market and we expect this to continue growing steadily,” concludes Doran.