Market Watch

Romania's Satellite TV Consolidation Continues


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Romtelecom, Romania's incumbent telco is to acquire Digital Cable Systems' (DCS) satellite TV operation, AKTA TV. The value of the deal has not been disclosed. Acquisition will be Romtelecom's second in the Romanian satellite market within a month - at the beginning of March it bought indebted Boom TV, taking over its 90,000 subscribers for €8 million to add to its own satellite TV platform, Dolce TV. With AKTA's 70,000 subscribers, Romtelecom will now have nearly 1.2 million satellite TV homes.

Since December 2009, Romtelecom has been also been providing IPTV services, by the end of 2010 reaching 30,000 subscribers. Furthermore, via its subsidiary NextGen, Romtelecom also has 200,000 cable TV subscribers. DCS is owned by a group of shareholders, with key shareholder being AIG Group. The company still has about 180,000 cable TV subscribers in Romania, which will not be included the deal. In 2009 DCS posted €23.9m in revenue, registering a €1.5m loss.

The majority of Romtelecom's shares are owned by Greek telco OTE, 30 per cent of which is owned by Deutsche Telekom. The Romanian government, owning the remaining block of Romtelecom's shares (49per cent) has recently asked OTE to buy the remainder for €1bn. OTE, which was initially reluctant to spend the €1b on Romtelecom the Romanian government was asking for, has now asked for an extension on the time-limit for the share purchase.

Analysis
With multichannel penetration standing at 90 per cent, the Romanian pay-TV market is close to saturation. Although DTT launch has been postponed, organic growth is becoming more and more difficult for pay platforms. With a substantial number of players - leading to very tough competition and low margins - acquisitions were very likely. Romtelecom's acquisitions will leave three big players in Romania's pay TV market: RCS&RDS, Romtelecom, and UPC. RCS&RDS and UPC hold sway in cable TV with a combined 75 per cent of the platform's subscribers (despite UPC losing a number of subscribers during the last few years); on satellite RCS&RDS and Romtelecom have altogether about 90 per cent of the platform's subscribers.

The incumbent telco continues strengthening its position in the market. Its satellite TV platform Dolce has been growing very well over the last few years; indeed for the last few quarters gaining the most subscribers of all the five satellite players in the country. Moreover, it has been investing in buying smaller cable players, and at the beginning of 2011 it is also ready to make its IPTV service available in new locations (outside the ten big cities where the service is now offered).

DCS may invest the money from selling its satellite operation into its cable TV services, and primarily into rolling-out digital TV, as well as potentially consolidating smaller cable players under its umbrella. Ultimately, however, it is very likely that it will also sell the cable part of its business (such investments will increase the attractiveness and price of the cable network). Consolidation of the Romanian pay TV market will continue on cable, and possibly also on satellite, although UPC's satellite operation - now the country's smallest satellite platform - has seen a slow but stable growth over the last few years (UPC is under pressure primarily on cable). The process may, however, take a long time as there are a great many small cable operators in Romania (circa 500), not to mention that not all of them are worth investment from a big player's perspective.

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