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Deutsche Telekom puts cable TV in an IPTV and satellite service squeeze

Telcos were once banned from broadcast and pay TV businesses, especially in Europe, and Deutsche Telekom only completed the sale of its dominant 15 mi


Published: 3 March, 2011


Telcos were once banned from broadcast and pay TV businesses, especially in Europe, and Deutsche Telekom only completed the sale of its dominant 15 million home cable business back in 2003. But today Deutsche Telekom is gearing up to enjoy similar dominance all over again, with results out last week that show its Entertain packages are now flourishing, a recent deal with Sky Germany to attack the localized tiny cable market with content, and this week it has doubled the reach of its pay TV offering, by opening up a new satellite DTH front.

This has been the pattern all over Europe, with BT launching its BT Vision hybrid IPTV package a few years ago, France Telecom at the head of the IPTV charts, but also with channel properties and sports rights on free to air broadcasts, but in Germany the incumbent has been used to complete control of TV markets and wants it back.

Overnight its Entertain packages, in offerings with as many as 300 TV channels, will beam down from an Astra satellite, and add 16 million homes into Deutsch Telekom’s reach, to add to the 20 million homes that 6 years of frantic broadband build out has brought to its DSL and IPTV reach.

Just a few weeks back Deutsche Telekom and Sky Deutschland targeting a basic 25 channel TV service – not the Entertain packages – in a wholesale deal for bottom tier cable operators – mostly around 1000 housing associations and last-mile cable operators. The deal will share out something like €10 a month per home between the local cable firm, DT and Sky.

This deal throws a long shadow over pay TV rivals and has the power to take revenues away from its old cable companies and will put a shadow on their stock market values, just as they become important, and so it could potentially damage negotiations to bring Kabel BW either to a public IPO or to a sale agreement with trade or financial investors (see separate story).

Previously Deutsche Telekom and Sky Deutschland have each struggled to dent German cable, but by adding Sky’s soccer rights to DT’s channel strengths, this cable wholesale deal may have the desired affect at the bottom end of the market. Having DT also compete as a Satellite operator with much greater reach will then apply the squeeze at the top end of the market, where it has bouquets from €10 to €50 a month and beyond, the sweet spot of the pay TV markets. Cable in Germany typically has Average Revenues Per User of around €10 to €15 a month, while Sky has managed closer to €30, but this price difference has kept it in a minority of homes.

The new DT satellite deal must also be a blow to Sky, knowing that its recently signed partner in one venture, is setting itself up with a rival satellite platform, in another.

The new DT package is a fully fledged hybrid service, complete with OTT and VoD over broadband offerings. It combines something like 130 paid Entertain channels with a free package of HD channels from SES Astra which it calls HD+.

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