Tuning In TV Equals Telcos Triple Value 1 1

Topics: Customer service, IPTV, Digital terrestrial television Pages: 6 (3135 words) Published: April 24, 2015
RECALL No 16 – Consumers, Convergence, Connectivity, and the Cloud Tuning in: TV equals telcos’ “triple value”

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08 Tuning in: TV equals telcos’ “triple value”

Once considered “yestertech” by the industry, television is now becoming the central element of many telco strategies. Operators in mature and emerging markets alike are benefiting from the revenues and new customers TV

attracts, making this a must-have element in any telco’s
product lineup.
Digital television is rewriting the rules of the game for
telecoms operators. Long considered marginal to their
business, successful players now view pay-TV as a critical element of their go-to-market strategies for the residential segment. Borrowing tactics from the attacker’s playbook, first movers in their field are finding they

have a critical advantage. The key is to reconceptualize
their business model, selecting the appropriate strategy
for their market context.

Myth and reality
Several commonly held beliefs related to telcos and TV
have proved a myth as full convergence gains momentum. The first is that TV is not a telco business. Actually, it is – or should be. A recent McKinsey survey in Europe
revealed that over 60 percent of consumers seek tripleplay offers (voice, data, and TV) and consider TV the prime element of the three. In some markets, TV is in
fact the key attribute on average, with around 2.5 times
the relative importance of the second most valued element (excluding price), and is indeed the one that best differentiates the offer. Research also shows that interest in pay-TV has exploded across all markets, both in developed and emerging economies. For example,

telco-driven TV-based bundles make up over 65 percent
of the revenue pool in one Latin American country, and

analysts expect these revenues to grow at a rate of over
9.5 percent annually through to 2014.
Another fallacy is that TV produces marginal revenues.
Again, this is untrue. While currently still small in
terms of revenues, bundles that prominently feature
TV attract a full half of all broadband customers and
are responsible for an outsized proportion of gross
subscriber additions (Exhibit 1). Experience shows that
adding TV to a bundle increases upselling opportunities and boosts customer retention. Industry forecasts seem to confirm this trend: TV and related IPTV service revenues are expected to see the fastest growth in the telecoms industry (20 to 40 percent CAGR versus

1.9 percent in traditional telecoms services). This has
provided a new tool for telcos to consolidate revenue
growth by leveraging their current client base to generate upsell and retention (with a combined upside of up to 35 percent in direct margin).
A further misconception is that TV’s only real use to
incumbent telcos is as a defensive strategy in cableheavy mature markets. In reality, non-cable players are aggressively offering television, including mobile operators and satellite companies. One satellite operator in the UK – Sky, using its traditional TV offering bundled

with fixed voice and broadband for the home – has succeeded in entering the triple-play game and claiming a growing share of the broadband market over the past
five years. Vodafone has also launched TV services over
IP since 2009 as a strategy to enhance its fixed value
proposition on top of ADSL. The compatibility of its
platform with the Xbox 360 (in selected countries) has
made this even more attractive over the last two years.

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01

Although small in stock, TV-driven bundles account for a large share of Although small in stock, TV-driven bundles account for a large share gross adds
of gross adds
Retail segment
Indexed

Small in stock …

Share of revenues

… relevant to customers …

Share of broadband
customers

… crucial for the future

Share of gross adds
(in bundles)

Other

5

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SOURCE: Analyst reports; McKinsey

Multiple strategies being applied
Players have...
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