When competition heats up, business plans are modified. Such is the case in Portugal. TV Cabo dominates the pay-TV landscape in Portugal, with about 1.6 million subscribers in a country of about 10 million people. Only about 400,000 of those subscribers receive their service via satellite, however, and the company plans a strong push for its direct-to- home (DTH) satellite television services during the coming months, a company official said.

“With regard to the digitalization of the installed set-top box base, we expect to reach 1 million by the end of 2006,” said Zeinal Bava, chairman of TV Cabo parent PT Multimedia “We have 600,000 digital set-top boxes in the market. In the long term, we would expect 80 percent of the TV households to have some form of pay-TV service, and as such, there is a potential to grow this market at least by an additional 500,000 to 800,000 subscribers.”

Taigo Viega Anjos, a media equity analyst at BPI, said there is an opportunity for TV Cabo to grow in the DTH market. “The DTH market is clearly under-developed relative to the cable market,” Anjos said “That was one of the reasons why TV Cabo is so optimistic that it could reach a further 1 million households. They are trying to create demand for DTH that would go through the less urban areas of the country where entertainment is a lot more limited than major urban areas. Basically, they want to try and sell people DTH. These are regions where it is expensive to lay cable and where it is not profitable. I think from now on there will be a focus on TV Cabo on the DTH side of the business.”

Competition

The Portuguese pay-TV market also is beginning to see more competition, in particular from Internet protocol television (IPTV). Sonaecom, a leading alternative telecoms operator, is planning to offer 100 channels of IPTV services in the near future.

“There is much more Internet penetration in Portugal than television,” Paulo Bicudo, the television-over-DSL project leader at Sonaecom, told Satellite News‘ sister publication Inside Digital TV earlier this year. “We prefer to focus on TV where we think we can go into the market with a significant offer, because we think we will have a better variety of channels than TV Cabo.”

The Portuguese market also could see a digital terrestrial television (DTT) alternative in the near future; although Bava questions what impact this might have in the market. “DTT will change the [free-to-air] market but is likely to face strong competition from pay-TV, especially if you take into account the small size of our addressable market, the high cost of premium content and the existing level of pay-TV penetration,” he said.

No matter how many options appear on the market, Bava is confident that TV Cabo will capture a strong share of the pay-TV money in Portugal. “We compete everyday for the share of wallet of the Portuguese consumer,” he said. “We also have very strong competition in broadband and also cable in some regions of Portugal. So my team and I have been used to operating in a very competitive environment.”

Improving Content

To grow its market share, TV Cabo is working to improve its content and has added a number of channels to its offering in 2005. “We have recently launched 20 more channels on a new layer above our basic 40-channel offering,” Bava said. “We expect to roll our new thematic and specialized channels and further develop our offer with more ethnic channels targeting certain immigrant communities in Portugal. We have also recently announced a new localized sports channels called Sportv2, and I would expect us to roll our more channels and, in particular, services over the next few quarters.”

The content improvement requires a significant investment by TV Cabo, in particular in local programming, which accounts for around 25 percent of total programming costs, Bava said, “We are going through an investment phase in terms of new programming, improvement in quality of service with new billing, provisioning and customer relationship management systems and digitalization. Cost discipline across the company is high, as we want to maintain margins well above 30 percent,” he said.

TV Cabo, like a number of pay-TV operators, will also look to generate revenues from other areas. PT Multimedia is part of Portugal Telecom, so having content across multiple platforms will be important to TV Cabo in order to compete against the new entertainment alternatives. “We are already doing one thing, and that is to make [content] available on a broadband portal some of the channel offerings we have,” Bava said. “Our customers can watch the premium channels and news channels on our broadband portal; so not necessarily watching the TV, but using the PC. We are also making available some of our content available as part of the 3G offering of our mobile subsidiary here in Portugal.”

Bava was noncommittal on when TV Cabo may launch other revenue-generating products such as personal video recorders (PVR) and high-definition TV (HDTV). “PVR services are part of the new services roadmap” but that the operator is not divulging when the device would be made available to the public.

Bava expects the Portuguese television landscape to continue to change radically in the future with TV over ADSL joining the fray, but said TV Cabo will continue “to lead from the front. …Broadband Internet and digital TV will be our focus,” he said. “We will switch off our analog premium channels offer, which will only be available digitally, swap all our analog decoders and promote the take up our digital package Funtastic Life with 60 channels and services such as electronic programming guides and .”

–Mark Holmes

(Tiago Veija Anjos, BPI, tiago.veiga.anjos@bpi.pt; Zeinal Bava, PT Multimedia, 00 351 21 782 47 00; Luisa Duarte Ferreira, Sonaecom, e-mail, luisa.ferreira@sonae.com)