France Telecom Considers Satellite Options
[Satellite News – 1-30-08] France Telecom (FT) is set to be the first major telco in Europe to launch satellite-based television services alongside an IPTV service. A report, originally in the French newspaper Les Echos, said the operator plans to launch a Direct To Home (DTH) service, and that the operator was talking to both SES Astra and Eutelsat as it looks to launch a satellite based pay-TV service alongside its IPTV service. FT, which uses the Orange brand, already has close to one million IPTV subscribers in France, but would like to extend its reach into other areas where it is not possible to offer IPTV. Satellite News understands that FT is studying a number of technical solutions to expand its IPTV coverage, including satellite, but as yet, no definite decision has been made.
Any satellite pay-TV service is likely to be complement its IPTV offer, rather than go like-for-like with Canalsat. Mathieu Robilliard, a telecoms equity analyst at Exane BNP Paribas said in a research note that a more cautious approach would make more sense.
“There are two possible scenarios: (i) France Telecom just wants to expand its existing Orange pay-TV offer to customers who cannot receive its ADSL-based IPTV offer, which is only accessible to half of the French population; (ii) FT wants to create a ‘TPS-like’ competition to Canal Plus i.e. go for the whole pay-TV market in France," he said. "We believe the first scenario is more likely.”
“In the first scenario, it could be positive for FT, as it could enable it to better leverage its existing content at a relatively low cost, and go for a progressive ramp-up of its ambitions – i.e. a low-risk approach,” Robilliard said. “In the second scenario, it could be very negative, because launching a full alternative to Canal Plus could require investments in the range of up to two billion euros ($2.93 billion) over five years with a very uncertain return. The investments would include a large part of the football rights, more movies from majors and large commercial expenses to promote this offer competing with Canal Plus. This situation would remind us of TPS, which invested for 10 years and was almost never profitable.”
The operator looks set to be more aggressive in the TV market. It has been reported to be one of the bidders for blue chip soccer rights in France. A launch of a DTH service would seem to signal its intention to try and become an even stronger player in the TV market, and ultimately be more of a rival than a partner to Canal Plus, which runs the Canalsat DTH platform. Roland Montagne, manager, broadband & satellite practice at French consultancy IDATE believes having a combined IP and satellite strategy could make sense for a player like FT.
“We have looked at the business model of Fiber-To-The-Home (FTTH) in France,” Montagne said. “When you are going out of the urban centers and suburban areas with many Multi-Dwelling Units (MDUs), not necessarily rural areas, but places where there are isolated houses, it will take time to deploy. A solution for a national operator like France Telecom can be to mix the technologies. We know that for FTTH, the main driver is TV and in particular HDTV. If you deploy a fiber network in urban and suburban areas, and maybe a mixed offer with copper and satellite elsewhere for HDTV, you can cover the whole country.”
With FT now looking to bid for blue chip sports rights, having this extended coverage and going beyond the telecoms network could be vital. “This is quite important when you want to negotiate the sports rights,” Montagne said. “France Telecom is looking more and more closely at sports rights. They launched last year the Orange Sports channel. If they want to negotiate with the national leagues, and the content holders, they need to present a large potential customer base. Satellite for them would be a good tool. If they are launching live sports channels, they will be competing against Canalsat directly.”
It may also have to improve its brand recognition, with Canal Plus still seen as the main pay-TV brand in France. “The challenge here is the brand name,” Montagne said. “Canalsat has a strong brand in France. The challenge for Orange will be too be as a recognized brand as Canalsat. They are not coming from zero as they already have a successful IPTV offer over ADSL. People know that Orange is a new brand for TV, but Canalsat is a more recognized brand.”
Sarah Simon, a media equity analyst at Morgan Stanley said FT’s potential launch of a DTH service was “positive news for the satellite industry” in a research note.
“Firstly, whichever capacity provider were selected by FT would benefit from increased revenue from transponder rentals (c 3.5- 4.0 million euros ($51.3 – 5.86 million) per transponder per year),” she said. “Incremental revenue would drop to the bottom line and would be additional to our current forecasts. Secondly, the fact that FT, which has placed much store by IPTV, is considering using satellite technology for pay-TV is a resounding endorsement, in our view, of this type of infrastructure. As we have always argued, we believe that, even in a world of ever higher broadband speeds, satellite is very well positioned in the TV marketplace given the exceptionally low cost of bandwidth. Moreover, the increasing capacity requirements necessitated by the onset of HD, and the requirement to feed multiple TV sets in the home, both play further into the hands of satellite versus terrestrial infrastructure.”
The news could be a blow for Canalsat if FT decides it no longer wants to be a partner, but more of a rival going forward, although FT seems unlikely to compete head-to-head in the DTH arena. Maxime Saada, Canalsat’s managing director exclusively told Satellite News in September the importance of relationships with the telcos such as FT.
“I still see us partnering with the DSL players in terms of providing bouquets of content,” he said. “The partnership strategy is something different we have compared to other markets. We see it as a key to our growth. The DSL players are competitors in a way, but at the same time, they are essential contributors of growth for us. They provide customers to us, and we provide content to them.”
France has also seen broadcaster AB Groupe launch a satellite pay-TV service, BIS, which has the unique selling point of offering its basic package of channels for less than five euros ($7.32) a month. With FT potentially entering the market, and BIS, France has suddenly become one of the most dynamic satellite markets in Europe.