Market Watch

Romania's Satellite Platform to Consolidate


Display Driver IC Forecast


Romania's incumbent telco and second-largest satellite TV provider, Romtelecom, is to buy competing satellite provider, Boom TV. According to local sources, the price of the deal is approximately €8m. The acquisition is subject to approval from the Competition Agency. Since May 2010 Boom TV - owned by DTH Television Group - has been in insolvency, burdened with a €100m debt. According to the Transylvania Insolvency Agency, which is dealing with Boom TV's case, the operator, once it found itself in financial difficulties, lost a number of subscribers, ending 2010 with 90,000 customers, down from over 200,000 at the end of 2009, compounding its problems.

The majority of Romtelecom's shares are owned by Greek operator OTE (which Deutsche Telekom holds a 30 per cent stake in); the remaining shares are held by the Romanian state. Recently, the Romanian government announced its intention to sell its Romtelecom shares (49% of the company's share capital) for €1 billion. DT has been asked to bid, however the company is unlikely to buy the shares at the price set by the government. In the event that no investor decides to buy the state-owned shares, the government intends to float the shares on the stock market.

Alongside its satellite TV service, Romtelecom also operates an IPTV service, Dolce Interactive, and via its subsidiary NextGen owns a cable TV network with about 200,000 RGUs (TV, internet and telephony). Romtelecom ended 2010 with over 1 million subscribers to its satellite platform Dolce TV.

Analysis
With multichannel penetration reaching about 90 per cent of homes in Romania, the Romanian pay-TV market is close to saturation. The market remains fragmented (with five satellite players and over 500 cable TV operators, not to mention Romtelecom's IPTV service) and the competition is extremely tough. Moreover, price remains the major driver, putting ARPU figures amongst the lowest in the CEE region. Although pay satellite TV grew very quickly between 2006 and 2008, reaching penetration of about 30 per cent of homes, the growth was primarily led by Digi TV and Romtelecom's platform Dolce, other players still trying to find a market niche. In the case of Boom TV, the niche it aimed at was high-end content, the company operating its own premium channels, obtaining rights for some sporting events (including the UEFA Champions League). In spite of good growth in pay-TV, due to low ARPUs, the market could not sustain five satellite platforms long-term, as IHS Screen Digest predicted in 2006. Still as satellite competed well against cable, providing all the satellite players continued to grow their subscriber bases, investment was forthcoming and the providers could continue their business operations. The decisive moment came however with the financial crisis in 2009, with operational costs growing and profits shrinking, which was particularly hard for high-end operators with high content costs to recoup. Selling the sports rights was not enough to get Boom TV out of financial trouble and may well have triggered the subscriber collapse.

Entering financial protection procedures in 2010, Boom TV started to look for an investor to help it with its difficulties. Regardless of the interest of some investors new to the market, local operators were most likely buyers. Any new investor would have had to provide Boom TV's creditors good financial conditions and with the considerable debt Boom TV had incurred, a short term ROI would have been unlikely. For a local player such as Romtelecom, acquisition of Boom TV meant primarily strengthening its market position, an important factor in the saturated market. Despite the postponed DTT launch, getting new subscribers will become increasingly difficult.

There are many countries in the CEE region with multiplayer satellite markets (e.g. Russia with seven operators, Poland and Slovakia with five, Ukraine, Hungary and Czech Republic with four). Although mergers happen very rarely (the last at the end of 2009 with NTV+ buying TriColor in Russia) more are expected in the future, as more players are unable to find their niche in a crowded environment.

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