Satellite pay-TV operators in Europe reported mixed results for the first quarter of 2005. In the post-holiday market, the rate of growth is traditionally slower and the numbers reflect that shift. Some operators, however, can be pleased with their performance.

In the first quarter of 2005, there were some significant events in some of Europe’s major digital television markets. Digital Terrestrial Television (DTT) finally launched in France and already the numbers buying these set top boxes (STBs) are high, mirroring the success that Freeview had in the United Kingdom. The other significant event was the German pay-TV operator Premiere successfully launching an IPO.

In terms of the actual numbers, the U.K.’s BSkyB and Sky Italia in Italy continued to lead the way, adding more than nearly 200,000 subscribers between them during the first quarter, which ended March 31.

United Kingdom

BSkyB had another surprisingly strong first quarter, adding nearly 100,000 subscribers to bring its total subscribers to 7.7 million. The operator could reach its target of 8 million subscribers by the end of 2005.

There also were a couple of other significant numbers in BskyB’s quarterly results. In particular the churn figure, an area where BSkyB traditionally has been strong, has been on the move northward. For the quarter, churn was 11.1 percent.

“We are not overly concerned by a one quarter up-tick in the churn number nor do we believe that a U.K. consumer slowdown would particularly impact churn,” Patrick Wellington, a media equity analyst at Morgan Stanley, said in a research note. “We are more concerned about what a rising churn figure might do for BSkyB’s confidence in pushing through further price increases and whether throughout time it tells us anything about the perceived attractiveness of Sky’s offering relative to cable, ADSL offerings like Homechoice or Freeview.”

The other significant aspect in the results is that BSkyB’s personal video recorder (PVR) offering Sky+ finally broke through the 10 percent penetration barrier. It ended the quarter with 770,000 Sky+ users. While this is an important milestone, the fact is it has taken considerable time for Sky to reach 10 percent of its subscriber base with PVR despite the universal acclaim the PVR service has received indicates there is still a ways to go before it is considered a must-have service. While Sky will point to the fact that it beat its targets, the number was not exactly high. BSkyB also announced that it was on track to launch its high-definition television (HDTV) service in 2006. It selected Thomson as the initial STB manufacturer.

France

Neither satellite pay-TV platform, CanalSat–the operator changed its name from CanalSatellite to CanalSat last week–nor TPS, announced their March 31 subscriber figures. Both operators now tend to release figures every six months so there is little to report. Canal+, the operator of the CanalSat platform, however, did reveal that CanalSat surpassed the 3 million-subscriber mark early in 2005.

The major story in the French digital television market was the launch of DTT. Around 300,000 boxes were sold in the first few weeks, and it looks as though it will beat its initial sales targets with plenty to spare.

“Looking at the U.K. and Italian examples, we could expect 1 million STBs sold in year one,” Arnaud Decker, head of research and one of the key decision makers about DTT at the CSA (Conseil Supérieur de LAudiovisuel), the French broadcasting regulator, told Satellite News’ sister publication Inside Digital TV earlier this year. “We may not have the same key factors for growth as in the U.K. The U.K. had a line-up of new digital public sector channels, as well as strong levels of promotion and low cost STBs. These are key factors, which we will not be able to gather straight away.”

Canal+ also is getting ready to unveil its HD plans. “We have started putting together the infrastructure in March, planning everything and starting demonstrations,” Joseph Guégan, vice president in charge of technology for the Canal+ Group, said. “We will have a demonstration channel in June.”

Germany

Satellite pay-TV operator Premiere had a very strong quarter, ending with just a shade fewer than 3.3 million subscribers. The operator also had a successful IPO and is a potential target for investors who are looking at the pay-TV sector for profits.

During the booking phase of the IPO, from Feb. 23 to March 8, investors ordered 525 million shares with a total value of 14.5 billion euros ($1.82 billion). The issue price for shares of Premiere was 28 euros ($35.05) per share. The stock closed at 29.25 euros ($36.66) May 26.

Sarah Simon, a media equity analyst at Morgan Stanley believes Premiere remains a long-term bet for investors. “The upside case for Premiere relies on two factors: Investors becoming comfortable with the operating performance of the company and therefore in its ability to meet 2006 and 2007 forecasts, and the company’s ability to retain the Bundesliga (German soccer) rights on reasonable terms, potentially on better terms (balancing price with exclusivity),” that it currently has, Simon said in a research note. With the football rights issue unlikely to be decided until early 2006, Simon believes the stock will not offer “fair value” in the short-term, but believes there could be “significant upside” after 12 months.

The operator also made a key move in boosting its sports coverage to viewers in Germany. Next week, its subscribers will be able to view Premiere’s complete sports schedule on one portal page. The Premiere Sport portal will have a picture-in-picture format, which gives viewers an overview of all current sports coverage. Premiere will be able to report on up to 15 sporting events in parallel, the company said.

Spain

Digital+, the Spanish direct-to-home (DTH) platform continues its slow progress, ending the quarter with more than 1.7 million subscribers, an increase of 50,000 compared to the previous quarter. This is encouraging as pay-TV has yet to reach the height it has in other major European territories.

In terms of potential milestones, the operator could reach 2 million-subscribers by the end of the year, particularly if it has a strong performance in the pre-holiday market.

“The numbers are in line with our expectations. I think it is very positive to see that this is the second quarter where net digital additions are close to 50,000, especially when you consider the migration from analog to digital has had no impact in the quarter. Gaining 2 million subscribers is possible through the combination of organic growth and converting analog subscribers,” Javier Marin, a media equity analyst at Morgan Stanley recently told Satellite News (SN, May 2).

Italy

One of the surprising aspects of the first quarter results was the relative slowdown in subscriber growth for Sky Italia, whichhas been the strongest performer in terms of subscriber additions in recent months.

In the 12-month period ended March 31, Sky Italia added 600,000 subscribers, which was well ahead of other European satellite television operators. But, in the three months ended March 31, the company added only 100,000 subscribers. For other providers, that might be a good number, but Sky Italia added about 200,000 in the same period a year ago.

Portugal

TV Cabo, the Portuguese pay-TV operator had a very slow quarter. The operator added only 7,000 new DTH subscribers in Portugal, although it did reach the 400,000-subscriber milestone. TV Cabo also offers services via cable and dominates the pay-TV landscape in Portugal, with the majority of its subscribers coming from cable.

However, a new threat could potentially be emerging. Sonaecom, a Portuguese telco, is preparing to launch IPTV services in Portugal this year. Whether the service will emerge as a competitive threat to TV Cabo remains to be seen.

In terms of TV Cabo’s DTH numbers, Tiago Veiga Anjos, a media equity analyst told Satellite News, “The DTH figures were a little below expectations. TV Cabo stated that DTH would be its major focus in 2005. They said the cable penetration was aleady good and so they are now building up the DTH service. It is expected that satellite subscribers would grow more than in prior years. I would say that the satellite figures are below expectations.”

According to TV Cabo, the sales team was still being put together during the first quarter, and the company expects an acceleration in DTH subscribers by the end of year, Anjos said

Nordics

Canal Digital and Viasat, the two DTH platforms in the Nordic region continued their battle for subscribers, with Canal Digital gaining the edge. Canal Digital ended the quarter with 851,000 subscribers, where Viasat ended the quarter with 693,000 subscribers. Throughout the last 12 months, the two operators added just fewer than 130,000 subscribers between them, with Canal Digital claiming the majority. It is worth noting that, a small proportion of Viasat’s digital subscribers come from the Baltic region.

But things may be looking up for Viasat. Throughout the last two quarters, it has gained more new subscribers than Canal Digital. The impact of its new conditional access (CA) system could be one of the reasons.

Daniel Ek, a media equity analyst at Carnegie told Satellite News, “Since Viasat switched to the new CA system in the third quarter of 2004, they have had a good take-up of subscribers for the premium subscriber base. They have seen people who previously accessed the service illegally become legitimate subscribers. The new CA system is secure and has reduced churn. So they have had a strong intake of new subscribers.”

Viasat announced during the quarter that it was teaming up with NDS as it gets set to launch PVR services to its subscribers. The operator hopes to launch these services later this year and it will become the latest satellite pay-TV operator to go down this route. Canal Digital’s owner, Telenor, also has been busy in the last month. It announced that its Telenor Broadcast subsidiary reported an interest to the Ministry of Transport and Communications in building and operating a digital terrestrial television network in Norway. Telenor also is strengthening its broadband position by reaching agreements to acquire two leading broadband providers, Bredbandsbolaget (B2) in Sweden and Cybercity in Denmark. B2 is already a player within the pay-TV space in Sweden so it will be interesting to see what synergies Canal Digital can potentially derive.

–Mark Holmes