Satellite Pay-TV Operators Have Solid 2003

Satellite pay-TV operators around the globe saw some healthy growth in subscriber numbers during 2003. In this survey, Satellite News analyzed the performance of some key operators in Europe and the Americas. In Europe, the signs look good for pay-TV operators. During the last two years, there has been consolidation of satellite pay-TV platforms in Italy and Spain. In most major markets in Europe, there is only one pay-TV satellite operator. The only countries that buck the trend are France, where Canal Satellite and TPS compete, and in the Nordics where Canal Digital and Viasat [VSAT] battle. However, in both Italy and Spain, the markets were not able to sustain two operators, and consolidation took place.

In Europe, three of the largest satellite pay-TV operators, BSkyB [BSY] in the UK, Canal Satellite in France and Premiere in Germany, added close to 1.2 million new subscribers in 2003. BSkyB, the dominant force within European pay-TV, reached the 7-million-subscriber milestone in September 2003, ending the year with in excess of 7.2 million subscribers. Canal Satellite had an impressive year in France by adding more than 230,000 subscribers in 2003, outperforming its rival TPS. Its year-on-year growth rate was the weakest of the three European operators in the survey, but was still a respectable 8 percent.

All three European operators performed particularly strongly in the quarter ended Dec. 30, 2003. BSkyB added close to 200,000 subscribers in that quarter; Premiere added more than 140,000 subscribers; and Canal Satellite added more than 120,000 customers. The three operators collectively grew by close to 500,000 subscribers in the fourth quarter. Overall, the three had a combined year-on-year percentage increase in subscribers of 9.4 percent. While not quite double-digit growth, it still represents an impressive performance. Out of the three companies, the performance of Premiere in Germany was perhaps the biggest surprise, especially because it has had financial issues in the past. However, under the stewardship of CEO Georg Kofler, the operator has enjoyed a remarkable turnaround.

So how do Europe’s biggest satellite pay-TV operators compare to the top pay-TV operators in the Americas? Certainly, the two U.S. DTH operators, EchoStar [DISH] and DirecTV, are on course to add more than 2.5 million new subscribers in 2003. EchoStar won’t report its fourth-quarter results until the middle of March. However, between January 2003 and September 2003, EchoStar had added around 900,000 new subscribers. With the last quarter of the year traditionally the strongest one for pay-TV operators, it is likely to end the quarter with around 9.5 million subscribers, translating into subscriber growth of around 1.3 million for the year.

DirecTV reached a key milestone in 2003 by passing the 10-million-subscriber mark in the middle of 2003. DirecTV had an impressive year-on-year growth rate of 11.2 percent. With News Corp [NWS] now on board, the competition in the US pay-TV market would be turned up another notch. EchoStar, however, has proved itself a formidable competitor. In the first half of 2003, it outperformed DirecTV in gaining new subscribers.

In Latin America, the market conditions have been tough. Economies in the region have been under pressure, thus selling pay-TV services in this environment is that much harder than in the advanced countries of Western Europe and the United States. DirecTV Latin America had a particularly tough year, losing 80,000 subscribers during the course of the year.

The company had a particularly turbulent year. It entered Chapter 11 bankruptcy protection in March 2003, and it emerged from that condition through a restructuring completed just last week. It remains unclear whether it can build a long-term profitable business from the 28 countries it serves in the region.

Also in Latin America, Sky Brasil, which offers DTH services in that country, had a solid year. It added over 50,000 subscribers last year, with a year-on-year growth rate of more than 6 percent. Brazil is potentially an attractive pay-TV market due to the sheer size of the country, which has a population of around 175 million.

Overall, the growth in the United States appears to have outpaced the best Europe has to offer. However, the population of around 60 million in the UK, compared with the population of around 292 million in the United States, suggests that BSkyB’s performance is impressive in many ways. While BSkyB has fewer subscribers than its U.S. competitors, it has really set the standard for satellite pay-TV operators in recent years.

In the year ahead, all the operators will look to consolidate their gains in 2003. It will be interesting to see what influence News Corp will have in the United States with its ownership of DirecTV, as well as in Italy with Sky Italia. The question is whether News Corp will dramatically increase subscriber numbers and ARPUs in those markets. It also will be interesting to see whether cable operators in Europe, which have had balance-sheet issues, will be able to bounce back in the digital television markets to pose more of a threat to the satellite pay-TV operators.