Greece TV update TV International

Greece TV update – TV International 17 septembre 2010 • • • • • • DTH platform Nova remains the leading pay TV operator, but new players are expected...
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Greece TV update – TV International 17 septembre 2010 • • • • • •

DTH platform Nova remains the leading pay TV operator, but new players are expected to challenge its dominance There are four IPTV services, including two platform launches in 1Q09 Incumbent telco OTE is set to challenge Nova on two fronts, as it plans to distribute its IPTV service Conn-x TV via DTH from 2H10 DTT coverage went national in November 2008. Analog switch-off is targeted for end-2012, with a new joint venture (DIGEA) hoping to drive the process Mega Channel has consolidated its audience lead since overtaking Antenna in 2006 Greece has been hit particularly hard by the global economic recession and this continues to impact the advertising sector.

TV overview Only around 10% of the 3.7 million TV households opt for a pay TV service (see fig.1). However, the pay TV market has changed significantly since early 2007. While Multichoice Hellas continues to dominate through its three analog terrestrial pay channels and its digital DTH platform Nova, several platforms have emerged to challenge it. On Telecoms and Vivodi (which was acquired by On Telecoms in September 2009) both launched IPTV services in early 2007, offering enhanced options, such as on-demand TV, to Greek viewers for the first time. Two more IPTV platforms launched in 1Q09, from Hellas Online - which became the first operator to offer HD content - and incumbent telco OTE. In addition to its IPTV ambitions, OTE will deliver its Conn-x pay TV service via DTH from 2H10, in direct competition to Nova. HDTV will be a major focus of the service, as OTE will cover major sporting events and produce local programming in HD. Nova's response to this increasing competition will come from its new owner, local telco Forthnet. It completed its acquisition of Multichoice Hellas's parent company NetMed in 2008, in a deal worth €490 million. More competition comes from DTT. A three-channel service from ERT launched in 2006, but coverage was not extended nationwide until November 2008. In mid-2009, the seven leading commercial channels launched a commercial DTT platform, run as a new jointventure operation called DIGEA. Analog switch-off is ambitiously targeted for end-2012. Pay TV platforms and operators Satellite Nova Greece is the sole pay DTH provider, but its monopoly will be broken in 2H10 when incumbent telco OTE will begin distributing its Conn-x pay TV service via satellite. Conn-x has been available via IPTV since February 2009. OTE applied for a broadcasting license through its Hellas Sat subsidiary - which owns a pan-European satellite at 39° East - in 2008, and this was granted in August 2009. The move follows OTE's success in Romanian DTH provision via the Dolce service, which it controls through a 54% stake in Romtelecom. OTE's DTH packages will - to a large extent - mirror its medium-priced IPTV offering, which undercuts Nova. Rates will be influenced by the amount of soccer and basketball

rights the operator can secure. Nova already has exclusive rights to many events. Conn-x's DTH launch will highlight the benefits of HDTV. OTE will film local productions and broadcast major sporting events in HD, following government pressure. Other value added services - including VOD and DVR functionality - will be introduced soon after launch. In June 2008, Greek telco Forthnet purchased all of the shares in NetMed, Nova's parent, from South African pay TV and publishing group Naspers (87.5%) and Greek media company Teletypos (12.5%) for €490 million. NetMed is also the parent company of the Nova Cyprus DTH platform. According to Forthnet, the Greek operation reached an all time high of 353,877 pay TV subscribers at end-March 2010. However, by June 2010 the number had declined to 331,136 (93% of them digital) - which it put down to "the deterioration of the Greek Economy (which) affected the discretionary spending of the average household in Greece." NetMed's Greek and Cypriot operations generated revenues of €200 million in 2009, down 1.7% from €203 million in 2008. EBITDA increased by 14.4% to €46 million. In 1H10 it reported revenues of €98.7 million, down from €99.5 million in 1H10. EBITDA fell from €28.3 million to €22.6 million. The Nova bouquet includes 60 channels, many of which are Greek language or foreign channels dubbed or subtitled in Greek. Subscribers can also access more than 250 other European channels, which are available via the same satellite as the Nova bouquet. In 2008, Multichoice Hellas took a fifth transponder on Eutelsat's Hotbird satellite and renewed its existing capacity until 2020. The additional capacity is being used to support the expansion of pay TV services including HDTV. In March 2009, NetMed again secured the pay TV rights to European Champions League soccer, in a deal valid until 2012. Free-to-air rights were retained by ERT and Mega. Following this deal, NetMed stated that it would reduce its dependence on Greek soccer. However, Champions League ratings are still somewhat dependent on the participation of Greek teams, whose performances tend to be erratic. NetMed holds domestic broadcast rights to 13 of the 16 leading soccer teams, with state broadcaster ERT owning the rights to the other three. NetMed introduced a push-VOD service in 2007. Nova On-demand offers 20 hours of preselected FilmNet movies and series. It is available to DVR subscribers, which includes a settop with a 250GB hard drive for €7.50 per month. In addition to analog terrestrial and digital DTH delivery, SuperSport events have been streamed over the Internet since 2007. NetMed's analog service consists of three channels - FilmNet, SuperSport and Jetix Kids - which are transmitted via two analog frequencies. IPTV Broadband subscriptions stood at 2.2 million at end-March 2010, up 33.4% year-on-year. Penetration stood at 20% of the population and 58% of households. Incumbent telco OTE accounted for 50.7% of subscribers, reaching 1.1 million subs. OTE is part-owned by Deutsche Telekom, which acquired a 30% stake in the company between 2007 and 2009 for €3.9 billion. The Greek government has retained a 20% stake.

The licensing process for the construction and operation of a fiber-to-the-home/business (FTTH/B) network has been delayed until mid-2011, with rollout now scheduled to begin in late 2011. Once built, the network will cover 2 million homes and businesses in the 52 largest cities. The project was first announced in February 2008. Meanwhile, OTE will commence rollout of its own VDSL network in selected areas in 2H10. The EUR90 million three-year plan will target 150,000-200,000 homes in Athens's prosperous suburbs. It remains to be seen whether OTE will also participate in the FTTH/B network. It is also not decided whether OTE's rivals will be able to use its VDSL network - there is nothing in the current regulations about VDSL wholesale, but OTE expects the regulator to create an applicable framework once it has submitted its tariff proposals. IPTV launched in early 2007. The sector is developing quickly, with four offerings now available. Cumulative subscribers totaled around 143,500 by end-March 2010 - although not all are pay TV customers. This number is expected to increase markedly over the next few years. The sector received a boost when incumbent OTE launched its Conn-x platform in February 2009. OTE's deep pockets resulted in a technically robust service that has the buying power to secure good-quality content. Coverage was limited to 17 cities at launch but has since been extended to the capitals of all 52 prefectures. The service had attracted 23,400 subscribers by end-March 2010, although OTE is yet to market it hard; its big TV push will likely come when it launches its DTH platform. OTE has said that it may explore the possibility of launching a hybrid DTH and IPTV service, but will first gauge the success of its stand-alone DTH platform. The IPTV service offers s single subscription package for EUR15 per month, which includes 45 linear channels and free access to its 1,500-title video-on-demand library for one year. The monthly subscription fee includes a settop box and an ADSL router. VOD services are provided by UK-based VOD content acquisition and management specialist On Demand Group. The FilmExpress VOD service allows subscribers to rent movies for 24 hours, enabling DVD-style control. The FilmClub SVOD service includes TV series - such as Sex and the City, The Sopranos and ER - and library movies from HBO, Disney-ABC, Paramount, Warner Bros. and Lions Gate. Music videos are also available. Interactive games are delivered by Accedo Broadband. In March 2009, third-placed broadband provider Hellas Online launched its Hol TV platform. It offers up to 38 channels, VOD and - for the first time in Greece - HDTV. There is also a DVR service, which allows up to 80 hours of program storage. Subscriber numbers remain low, with the operator still seeking content deals to boost the platform's appeal. The first IPTV operator was On Telecoms, which began supplying On TV over its fiber network in Athens in January 2007. Its last-mile connections are all via local-loop unbundling. On Telecoms reports that around 80% of its broadband subscribers take IPTV. It had around 101,000 IPTV subscribers at end-March 2010 according to Informa Telecoms & Media. However, it does not report how many of these pay for TV services, as opposed to accessing only free channels. The company provides On Rec (catch-up), On Cinema (on-demand movies) and On Multiplex (SVOD movies). There is also the interactive On TV Games service. On Telecoms resells the pay TV packages offered by DTH operator Nova, with subscriptions managed by Nova's NetMed.

On's pricing is competitive. It offers a triple-play service with up to 24Mbps broadband for €35 a month. Triple-play from OTE costs €43.90 per month, while second-placed ISP Forthnet's dual-play offering is priced at €39.90 per month. In addition to On TV, On Telecoms controls a second IPTV platform. In September 2009, it fully acquired rival Vivodi, which operates its (confusingly branded) Cable TV service outside the Attica region around Athens. Cable TV has attracted around 14,000 IPTV subscribers since launching in early 2007. It is provided as part of a multi-play bundle, offering exclusive international channels and VOD content from the likes of Warner Bros. and Disney. On Telecoms has said that Vivodi will continue operating as a subsidiary for the time being, spearheading its expansion drive outside Attica. The acquisition of Vivodi was accompanied by another takeover, with On Telecoms also buying Cyta Hellas. The two deals have increased On Telecoms broadband market share from 5% to 9%. On's prospects have further improved now that it has secured new financial backing, from Mediterranean Telecom & Technology Investments (MT&T). The company acquired a 16% stake in the telco for €25 million in October 2009. The need to find a new source of funding had been pressing after a €35 million loan from Proton Bank fell through as a result of the economic downturn. DTT DTT started in 2006 in the Athens, Salonika and Volos regions, with national transmission commencing in November 2008. National DTT broadcasts operate under a frequency plan devised by the National Technical University of Athens. State broadcaster ERT was the first to offer a national service. In summer 2009, the seven leading commercial broadcasters - Alpha, Alter, Antenna, Makedonia TV, Mega, Star and Skai - launched a new commercial DTT platform. The broadcasters set up a new operator DIGEA to manage the service. It provides broadcast network and multiplexing services. DIGEA is aiming to expand its offering to 60% of the population in the short-term. The commercial broadcasters are using the MPEG-4 AVC compression format, which will likely encourage ERT to upgrade from MPEG-2. ERT has launched several DTT channels, beginning in 2006 with Prisma+, aimed at people with special needs. It subsequently added Cine+ and Sport+. The ERT multiplex also carries RIK Sat from the Cypriot state broadcaster. ERT's analog channels (ET1, NET and ET3) are yet to be added to the DTT multiplex, but new channels are expected to launch in the "near future". DTT settops are available from around EUR50, but are distributed free to disadvantaged sectors of society. There are two decoders available; a basic ‘Zapper' settop and MHP interactive box. ERT targets end-2012 for analog switch-off, though previous delays may make this date ambitious. There remains a lack of compelling content, with even the new commercial platform offering only a handful of channels not available via analog. Nonetheless, national coverage and new channel additions should boost uptake, and the addition of a pay option is possible before the switch-off date.

Fig. 1: Greece, split of TV households by platform, 2003-2009

Television households (000s) Analog terrestrial Analog satellite Analog cable Digital cable IPTV Pay digital satellite Free digital satellite Digital terrestrial Television households (%) Analog terrestrial-only Analog satellite Analog cable Digital cable IPTV Pay digital satellite Free digital satellite Digital terrestrial Source: Informa Telecoms & Media

2003 3 586 3 359 45 0 0 0 165 16 0

2004 3 613 3 340 40 0 0 0 205 27 0

2005 3 680 3 374 35 0 0 0 232 39 0

2006 3 691 3 266 25 0 0 0 259 49 92

2007 3 702 3 174 18 0 0 11 292 59 148

2008 3 713 3 049 12 0 0 26 305 71 251

2009 3 724 2 781 5 0 0 50 319 85 484

94% 1% 0% 0% 0% 5% 0% 0%

92% 1% 0% 0% 0% 6% 1% 0%

92% 1% 0% 0% 0% 6% 1% 0%

88% 1% 0% 0% 0% 7% 1% 3%

86% 0% 0% 0% 0% 8% 2% 4%

82% 0% 0% 0% 1% 8% 2% 7%

75% 0% 0% 0% 1% 9% 2% 13%