Market Insight

M7 buys more Eastern European pay TV

October 03, 2011

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Luxembourg-based M7 Group has expanded its Eastern European pay TV footprint after buying Towercom-owned SkyLink, a pay satellite operator with businesses in the Czech and Slovak Republics. Buy follows recent acquisition of CS Link, another satellite platform active in the same countries. The cost of the deal was not disclosed, although local sources put the price at around CKr2bn (about €80m).

With Skylink's subscribers, M7 Group now controls over 2.1 million smart-cards registered in the Czech Republic and Slovakia; of which approximately 15 per cent subscribe to pay TV services. M7 Group also owns four other satellite players: Canaal Digital (Netherlands); TV Vlaanderen (Belgium); TeleSAT (Belgium and Luxembourg); and AustriaSAT (Austria, launched in 2010). The group's Western-European pay subscriber base now exceeds 900,000. Seller Towercom will now likely focus on its Slovakian DTT service, currently broadcasting five channels on two DTT multiplexes.

In the majority of Central and Eastern European there are multiple satellite pay TV players. In Slovakia and the Czech Republic there are five, although Magiosat in the Czech Republic is effectively a redistribution of SkyLink channels.  After the acquisition, CS Link and SkyLink will most likely merge into one entity. Both companies provide services on a similar business model, offering pre-paid services with pay TV packages on top of a freesat option (purchased smart-cards enable basic Czech and Slovak free to air channels). Integration of the services may, however, take some time due to significantly different packaging models. Since its launch in 2008 with 14 pay TV channels, SkyLink has extended its channel line-up to 47 pay TV channels, providing the richest HD channel offer on satellite in the Czech Republic and Slovak Republic (16 channels). It sources some of its HD channels from M7's Canaal Digital (Discovery HD Showcase, HDTV Bravia) and since 2009 (in cooperation with Astra) has been also offering satellite Internet. By contrast, CS Link makes virtually every single one of its 24 pay channels available on an a la carte basis.

Nonetheless, the two marketswhere SkyLink and CS Link are operating are quite similar in other aspects: both are near to saturation, with final analogue switch-off taking place in 2012. Also in both markets satellite TV became the largest platformin June 2011, reaching penetration over 40 per cent of homes in both Czech Republic and Slovakia, mostly due to efforts of these two players. Overall, however, SkyLink has been more successful than CS Link. In August 2011 it had about 1.5 million registered cards in total; at the same time CS Link had only about 600,000 active cards, the difference being mostly due to SkyLink's larger distribution network.

The two had previously been highly competitive. When SkyLink first entered the Czech market in 2008, it bought the major CS Link distributor, Trade and Technology, which gave it a strongedge over its competitor. Yet, we believe there is still a certain potential for growth of satellite TV in Slovakia, where multichannel penetration hasn't reached 90 per cent of homes, and in the Czech Republic (where multichannel penetration is about 95 per cent of homes), where satellite TV may yet grow at expense of DTT.

Further consolidation of satellite pay TV across the Eastern region seems certain, particularly in Poland where ITI has said it wants to sell TVN Group, owner of two satellite platforms, N and Telewizja Na Karte. One of the two companies with which ITI is negotiating is France's Vivendi, which has a long history in Poland and owns another Polish platform, Cyfra+. With the acquisition of SkyLink, M7 Group joins a group of companies owing satellite TV operations in more than one CEE country, which includes Liberty Global (UPC Direct recently re-branded to freeSAT), Modern Times Group (Viasat), RCS&RDS (Digi TV), Mid Europa Partners (Total TV), and Deutsche Telekom (T-Home, MagioSat, and partially Romtelecom). Given a high number of satellite TV players in Central and Eastern Europe, M7 Group may be interested in further satellite buys in the region, especially as the increasingly saturating markets begin to offer tougher competition and less profit prompting more operators to sell.

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