Market Insight

Finnish PlusTV acquisition

April 28, 2013

Martyn Hannant Martyn Hannant Manager – Research and Analysis, Service Providers & Platforms
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Finland's largest cable operator DNA has agreed to purchase Teracom Group's PlusTV pay DTT operation for an undisclosed sum. Teracom, which also has pay DTT businesses under the Boxer brand in Sweden and Denmark, is claiming the divestment is part of a strategy to streamline its focus on its other markets. Teracom also said it wants to shift its attention to the markets in which it can integrate its pay TV and DTT network services, namely Denmark and Sweden. Teracom does not operate the free DTT network in Finland. The transaction is subject to approval from the Finnish Competition and Consumer Authority and is expected to complete in the latter half of 2013. DNA reports that the acquisition will not have a direct impact on PlusTV customers.

PlusTV, officially known as Digi TV Plus Oy, has historically been a volatile business for Teracom, due to the seasonality of pay TV viewing in Finland, characterised by consumers taking short term subscriptions typically driven by sporting events. As a result, PlusTV has been unable to consistently grow its subscriber base since the end of 2007, and most recently reported a subscriber reach of 219,000 at the end of the first quarter 2013. Sweden and Denmark represent much bigger markets for Teracom. In the first quarter 2013, Boxer Sweden reported 586,000 subscribers, whilst Boxer Denmark reached 352,000. While Teracom has experienced some decline in Sweden, and a period of significant growth in Denmark has subsided, IHS believes that digital terrestrial television may find a niche in the coming years as a complementary service to newly arrived OTT platforms in these markets. The Finnish market, being comparatively weaker for pay TV, may not follow a similar pattern. In this respect, the focus on Sweden and Denmark makes sense for Teracom, due to its combined operation of pay and free DTT services.

The pay DTT market in Finland is a market that has been ripe for consolidation lately, as the presence of three pay DTT operators in the form of PlusTV, DNA's current DTT proposition and Telenor owned Canal Digital brand attests. The crowding of the pay DTT market was further illustrated by the exit of TV Viihde in early 2012 after less than a year of operation. The purchase of Plus TV will realise this increase in concentration expected by IHS by reducing the number of pay DTT operators to two.

Whilst growth in pay DTT in Finland has been somewhat stifled by seasonal trends, which DNA's cable service has not been completely immune to, the pay TV operator still has a cable TV subscriber base of 594,000 to fall back on if it cannot grow its DTT market share. Additionally, the cable operator has already had a head-start in the DTT market from the launch of its DNA Welho terrestrial packages in August 2011. Furthermore, DNA has recently announced the launch of a cloud-based TV service known as DNA Welho MatkaTV, enabling viewing and remote recording on second screen devices.  Evidently, DNA is well positioned to consolidate its position as Finland's largest pay TV provider. The fact that Finland is not as saturated by pay TV as other Nordic territories further shows that DNA has space to grow.

Currently, if the PlusTV deal is approved by Finland's competition authorities, DNA's total penetration of TV households will equal around 35 per cent. Whilst this does potentially suggest a dominant position in the pay TV space, DNA still faces competition from fellow cable operators Elisa, which has 265,200 TV subscribers, and Sonera, which has 410,000 TV homes. Both operators have experienced subscriber growth in recent quarters and have scope to continue this. Furthermore, if OTT services are considered within the same market definition as traditional pay TV, the deal will be likely to complete without being blocked by Finland's competition authorities. 

Organization
DNA Plus TV Teracom
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