Our Take

The surrender of ownership of KabelKiosk, which represented approximately 2% of Eutelsat’s full year total revenues at June 2013 at €25m, allows Eutelsat to shift its focus back towards its core business of satellite capacity, whilst retaining a strategic partnership with M7 across various distribution platforms.  M7 itself stands to gain from the acquisition. The pay TV group is still growing and expanding into new markets, and as a result is well positioned to reap the benefits of diversifying into cable and IPTV distribution. The group most recently announced its entry into Hungary on 19 March 2014 via another partnership with Eutelsat on its 9°E slot, suggesting that expansion is indeed at the forefront of the operator’s strategy this year. The KabelKiosk acquisition provides M7 with a means to expand into a significant market and increase the reach of its services, whilst not directly competing with pay TV services such as DTH peer Sky Deutschland and larger German cable companies. However, through the services provided by KabelKiosk, M7 may well seek to generate competition with Astra’s HD+ service, which similarly offers a number of largely free-to-air channels repackaged as pay TV. This would particularly constitute competition on lower-tiered pay TV services, which is where M7’s focus is directed in most of its other markets.

In April 2014, M7 launched M7 Platform Services. This service provides broadcasters with  infrastructure for channel distribution. This, together with M7’s partnerships with Eutelsat, suggests that part of M7’s strategy involves realising synergies from having interests in both the technical supply of channels and the distribution of pay TV further down the vertical supply chain. If the M7 Platform Services initiative is viewed alongside the KabelKiosk acquisition, an additional strategic move towards expansion via partnering with third parties is becoming apparent.