Competing Scandinavian pay TV operators Canal Digital and Viasat are increasingly investing in content and multiscreen in an effort to stem satellite subscriber losses as both groups reported significant subscriber declines in their full year 2012 results. Viasat was hardest hit with a fall of 38,000 customers--more than five per cent of its customer base--in the year. It ended 2012 with 638,000 customers. Canal Digital experienced less of a decline, with the pan-Nordic operator reporting 945,000 DTH subscribers, down 20,000 from Q4 2011's figure. The difference lies mostly in the latter three quarters of 2012, which saw Canal Digital stabilise its quarter-on-quarter subscriber losses.
In its financials, Canal Digital DTH experienced a small decline in revenues for the full year 2012, with a decrease from Nkr4,478m (€573.9m) to Nkr4,428m (€567.5m), which partially owed to a weaker fourth quarter in comparison to 2011. This is further illustrated by its operating profit, which was lower for the fourth quarter of 2012 in comparison with the previous three quarters, at NKr102m (€13.1m). The operator has attributed this decrease in fourth quarter profit to reduced sales to housing associations in Denmark and higher costs for customer acquisition and retention, the results of which are illustrated by its improved level of churn. For the full year 2012, Canal Digital experienced an increase of 26 per cent in operating profit from NKr453m (€58m) to NKr570m (€73m). Telenor cited higher ARPU and increased hardware sales as the offsetting factor against subscriber losses which could have adversely impacted its profit levels.
For its own pay TV business, Modern Times Group (MTG) reported a 4.1 per cent rise in net sales for the full year, from SKr4,730m (€523.4m) to Skr4,925m (€545m). However, despite having more consistent levels of operating income quarterly than Canal Digital, Modern Times Group (MTG) reported a fall of 9.6 per cent in the metric from SKr923m (€102.1m) to SKr834m (€92.3m) for its Nordic pay TV business in FY 2012. This largely owes to increased expense from investment by MTG in sport and movie content, its OTT service Viaplay, and channel re-branding and launches, including HD channels. Most recently, MTG has particularly been active in channel investments in Denmark, such as the increase of its ownership in Danish sports group TV2 Sport and increasing the reach of its TV3 and TV3 PULS channels.
In tackling declining subscriber bases and defending themselves against the threat posed by online TV operators entering the Nordic markets, MTG appears to have been more active in its investment spending than Telenor, with a particular focus on content. These are investments which may pay off more for MTG in the long run, as competition becomes more focused on providing online content. Whilst subscriber figures for MTG's Viaplay are undisclosed, the operator states that its overall subscriber base would be up on 2011 if of Viaplay subscribers were included, implying growth in this area. Based on the continued downward trend for satellite subscribers, and the modest growth in third party premium subscribers from 421,000 to 427,000 over 2012, it is this OTT service that MTG will be betting on to increase its Nordic pay TV subscriber base in 2013. Its investments in content may help drive subscriber loyalty in the long run, despite the short term loss in profit from expenditure and the decline in traditional pay TV subscribers.
The year ahead for Canal Digital will see the launch of a next-generation service in partnership with NDS. Together with its already established Canal Digital GO service, this will potentially allow Telenor to retain customers and compete with MTG if Viaplay proves to be a popular service over 2013. It should also be noted that Telenor had a relatively strong year for its separate cable and IPTV services over 2012. For full year 2012, combined subscribers for cable and IPTV increased from 504,000 to 524,000 in Norway, and rose from 257,000 to 284,000 in Sweden. If Canal Digital's comparatively more customer retention based strategy continues to limit the churn of its traditional pay TV services, it will not be in a position where it finds itself relying on OTT services to limit subscriber losses.