The deep Spanish recession is pulling leading Telco Telefonica down with it, as the group reports a 19-percent year-on-year decline in pay-TV customers in its home market in the first quarter of 2013.
The group’s Spanish pay-TV total fell to 659,900 customers, compared with 710,700 in the last quarter of 2012 and 812,900 a year earlier. Telefonica put a brave face on it by suggesting that the rate of losses is easing, although that has yet to be reflected in any figures and the company has taken drastic measures to halt the decline by introducing a promotional offer called “Imagenio Familiar” for €10 per month instead of €29.9, running until the end of August. The Telco is hoping that such measures to shore up its customer base will only be temporary or else it will run into significant losses, but prospects for the Spanish economy in the short-to-medium term do not look good. Unemployment is around 5 million, or 25 percent of the population, with just temporary relief provided by the holiday season as restaurants and hotels hire short term staff.
As it happens, Telefonica has done even worse in Germany, whose economy is still relatively healthy. However, it is only a fledgling operation with subs dipping year on year to 51,300. In Europe, it is only in the Czech Republic that Telefonica has gained ground over the year with pay-TV subs up 2 percent at 140,900; but even that is a small decline on the previous quarter. Telefonica now has 852,200 pay-TV customers across Europe as a whole, down 17.2 percent year-on-year.
Fortunately, European losses have been more than made up for by gains in Latin America, where Telefonica has a strong base and is doing particularly well in many of the Spanish speaking countries; in other words, almost everywhere except Brazil. Telefonica reported a total 6.9-percent year-on-year increase in pay-TV customers across Latin America to reach 2.452 million in the last quarter, with strong gains recorded in Chile, Peru, Colombia and Venezuela. There was a decline in Brazil, where the market is dominated by DirecTV and America Movil.
Telefonica is creating a common worldwide platform for all its pay-TV services, primarily IPTV and increasingly OTT, called Global Video Platform (GVP). Already delivering both managed IPTV and OTT TV in Brazil, GVP is based on Microsoft’s Mediaroom middleware for the IPTV and OTT Networks’ MiB technology for OTT delivery. This enables GVP to provide two service types, managed pay TV delivered either via IPTV or sometimes a hybrid using satellite for some linear channels, and a pure OTT service called "PLAY."
Telefonica is betting on GVP’s economies of scale enabling it to continue growing in the increasingly competitive and saturated Latin American markets, while reviving fortunes in Spain and increasing penetration elsewhere in Europe.