Telcos’ growing appetite for content

AT&T’s agreement to buy DirecTV is the latest in a wave of deals that highlight the growing appetite for content and pay-TV acquisitions among telecom operators, Fitch Ratings says.

In South Africa, the likes of Vodacom, Telkom, and MTN, have all admitted an interest in multi-media options, including mobile TV, as they look to diversify their portfolios.

All three operators have been linked to content-distribution deals over the past six months.

The ratings firm said that AT&Ts deal gives it the opportunity to capitalise on growth in mobile video and diversify its revenue stream, but deals in the more competitive European market are largely defensive to stabilise fixed and mobile market shares, rather than generating profits from TV services.

Fitch noted that telecom companies are using a variety of strategies to acquire this content.

Telefonica has offered to buy the struggling Spanish satellite operator Digital+, while Telecom Italia (TI) has agreed a content-distribution deal with Sky Italia and BT is going a more direct route by bidding aggressively for sports rights.

Under the agreement with Sky Italia, TI will distribute all Sky’s content over its fixed line and LTE mobile networks under a revenue-sharing model.

“This approach means that TI does not have to invest significant amounts of capital. The deal will help TI defend its market share by differentiating its offering from rivals Vodafone and Wind and could accelerate the take-up of fibre,” Fitch said.

However, TI’s fibre network footprint remains small with a relatively slow roll-out target. Combined with the low margins in content distribution for telcos and the potential for increased competition from free-to-air broadcaster Mediaset, this is likely to limit TI’s ability to improve profitability via its TV service, the ratings group said.

Telefonica’s offer to acquire control of Digital+ would allow TEF to access Digital+’s 1.6 million subscribers and its exclusive video content, including Spanish football rights.

“The deal would support the company’s key strengths of fibre-to-the-home and premium TV content, helping to defend it against competition from Vodafone/Ono, Jazztel and other regional cable operators,” Fitch said.

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Telcos’ growing appetite for content