Market Insight

Broadband helps keep growth steady for Sweden’s largest cable operator

February 09, 2016

Martyn Hannant Martyn Hannant Manager – Research and Analysis, Service Providers & Platforms

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Broadband internet helped Swedish cable operator Com Hem achieve a year of steady growth in 2015, despite a decline in fixed telephony. Total revenue generating units (RGUs) for Swedish cable operator increased 3.2% year-on-year, reaching 1,615,928 at the end of 2015, with the bulk of this driven by the addition of 46,656 internet RGUs over the year. Com Hem also turned in stable growth in its digital TV subscriber base, which increased 2.9% over the year to 635,319 RGUs. This continues to be assisted by the operator’s investment in TiVo, which at the end of 2015 represented 35% of Com Hem’s digital base.

Com Hem’s success in internet, and to a lesser extent digital TV, more than offset a decline in fixed telephony, in which Com Hem lost 14,901 RGUs over 2015. Despite this, churn appears to be declining and unique subscribers are continuing to grow. Over the year, the company gained 35,041 net unique subscribers, whereas unique customer churn was successfully held down at 12.9% over the second half of 2015 – the operator’s lowest ever level of customer attrition.

Com Hem’s consumer revenue growth was up 6.1% on 2014, at Skr 3,755.2 million ($455 million), again boosted by internet, which increased 14% year-on-year to Skr 1,666.1 million. However, annual consumer ARPU for the year exhibited a fairly flat trend in comparison, increasing from Skr 360 ($43) to Skr 361. While Com Hem states there was evidence of increased uptake for TiVo and higher speed broadband services, any uplifting effect on blended ARPU may have been dampened somewhat by the decline in telephony.

The coming year for Com Hem will see strategic price increases and elimination of discounts across its broadband and TV offerings, as well as continued investments into these areas. The operator has also stated its intention to increase its footprint via expanding into Sweden’s SDU (single dwelling unit) market.

Our analysis

Com Hem’s RGU growth slowed in 2015 in comparison to 2014, with RGUs increasing by 3.2% in 2015, versus 5.7% growth over 2014. The operator has acknowledged the decline in telephony, and as a result has geared its strategy further towards its dual play offerings. In TV, this resulted in the launch of Com Hem Play in September, a rebrand of its TV Everywhere service TiVoToGo, of which the operator claimed a 7% growth in usage during Q4. So far for Com Hem its investments in TiVo have seen steady growth in digital TV.  Com Hem was also one of the first operators to integrate Netflix into its offering, which has additionally helped promote digital growth. For an in-depth analysis of Netflix's relationship with pay TV, please see our recently published report here

While Com Hem has been successful in staving off the decline in digital TV subscribers it faced over 2012 – 2013, the operator’s next challenge lies in expanding this growth and increasing digital TV ARPU. Year-on-year net additions in digital TV were 17,721 in 2015, falling just short of the 21,073 RGUs added in 2014. TiVo penetration of Com Hem’s digital TV base also appears to be slowing. Following an initial spurt in 2014, which saw TiVo penetration increase from 6% to 27% over the year, the proportion of digital subscribers taking TiVo now stands at 35%. Annual digital TV revenue for Com Hem increased 2.7% in 2015, compared to 2.9% digital RGU growth, suggesting a flat ARPU trend over the year.  

Broadband is a clear growth driver for Sweden’s largest cable company, with the past few years seeing the operator continue to invest in increasing its broadband speeds. According to Com Hem, the average speed for its consumer base is now 115 Mbit/s, as a result of a higher proportion of its customers migrating to higher tiered offerings. The 14% year-on-year revenue growth from internet services in 2015 suggests that these investments are paying off. Furthermore, the contribution of internet to Com Hem’s total revenue has continued to increase over recent years. At 2015, digital TV continued to contribute the most to annual consumer revenue, at 48%, however internet and telephony represented 44% and 8% respectively.  

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