SAMPLE PAGES Quad-Play Strategies in Western Europe: Growth Drivers and Best Practices for Service Providers Stephanie Char Analyst Daniele Tricarico Senior Analyst This report is part of Pyramid Research s series of Western Europe Insider Reports January 2015 Edition 2015 Pyramid Research Quad-Play Strategies in Western Europe: Growth Drivers and Best Practices for Service Providers
Executive summary High fixed and mobile penetration rates in Western Europe, as well as increased competition, have led operators to look at new means of growth. Churn reduction and ARPS increases have been the key factors driving operators to quadruple-play. Across Western Europe, the most successful quad-play operators have combined strong experience in both the fixed and mobile sectors. They have also leveraged aggressive discounts on bundled services to build their quad-play base. Nonetheless, these operators have gone further than price reduction by offering enhanced quality of experience to retain customers and increase their value over time. France and Spain are two of the most developed quad-play markets in Western Europe. France has remarkable quad-play penetration (34.3% of households in 2014), underpinned by Free s entry in the market in 2012 as a converged operator, disrupting existing providers. In Spain, quad-play penetration grew to 4% of households at year-end 2014, driven by partnerships between Movistar s competitors (Vodafone with ONO and Orange with Jazztel) to improve their value propositions against the market leader. Elsewhere, quad-play is in its infancy. The most successful examples include Virgin in the UK, KPN in the Netherlands, and MEO in Portugal, all markets showing strong growth potential. In this report, we first describe the rationale for bundling in Western Europe. We then analyze operational motivations and opportunities for operators. We also investigate the key factors that have led to the success of quad-play initiatives and provide relevant case studies from Free in France, Movistar in Spain and KPN in the Netherlands. We compare their approaches to quad-play and highlight opportunities for other market players. We conclude with a set of key findings and recommendations. Stephanie Char is an Analyst for the Western European region, based in London. She is responsible for Pyramid s sizing and forecasting of Belgium, France, Spain and the UK and has worked on numerous reports covering telecoms and convergence trends in Europe. Prior to joining Pyramid, Stephanie worked in development economics for the OECD and other consulting companies. Stephanie Char Analyst 2015 Pyramid Research Quad-Play Strategies in Western Europe: Growth Drivers and Best Practices for Service Providers 2
Key findings Key findings of the report include: Western Europe is characterized by high fixed and mobile services penetration rates (79% and 141% respectively in 2014), fierce competition in these sectors and a high proportion of households having adopted triple-play services. While both segments are expected to continue growing, we expect quadruple-play to take on a larger share of the market to contribute to service revenue. Pyramid research expects quadruple-play to cover up to 60% of households in some Western European countries by 2019. Quadruple-play in Western Europe has been triggered by the success of French and Spanish operators that launched their packages as early as 2009 for France and in 2013 for Spain. The market leaders in these countries and in the Netherlands are the national incumbents, with strong know-how and expertise in both fixed and mobile segments. However, the competition is also building its converged offers through mergers and acquisitions like in Spain (Vodafone/ONO and Orange/Jazztel) and building up their networks (Free in France). Several operators have succeeded in this market, such as Free, SFR-Numericable and Bouygues in France, Jazztel in Spain, and Virgin in the UK. Elsewhere, quad play is still at an infancy stage with good perspectives of growth. In the UK, BT is looking to develop a mobile base, while Virgin UK launched quad play at the beginning of the year. In the Netherlands, T-Mobile represents a small share of the quadruple-play market, way behind KPN. Successful quad play operators have capitalised on their strong expertise of both fixed and mobile sectors, offered a single bill to its customers, merging their client customers services to provide a single point of contact, reduce prices for combined services, and offer value-added services (cloud storage, outdoor WiFi, multiscreen, etc.). We believe those are strong factors to succeed in quadruple-play and that operators interested in this market should follow a similar path to reduce churn and increase ARPS. 2015 Pyramid Research Quad-Play Strategies in Western Europe: Growth Drivers and Best Practices for Service Providers 3
Enhanced quality of experience as an enabler for quadruple-play To attract new customers and retain the existing ones, operators offer enhanced quality of experience with their quadruple-play packages. EXHIBIT 6: ELEMENTS THAT CONTRIBUTE TO A HIGHER QUALITY EXPERIENCE Element Service provided A single password Authentication allows access to all services offered on multiple screens (computer, tablet, smartphone). Customer service Unified in order to manage all services at once. Value-added services Multi-screens and online TV Additional mobile lines Quad-play offers may include, at no additional cost, a mix of cloud storage, additional email storage, synchronized email and mobile contacts and agenda on multi-screens, voicemail and/or SMS/MMS accessible on multi-screens, additional mobile data/higher speeds, Wi-Fi, etc., all depending on the operator. Quad-play allows users to enjoy their TV experience across multiple devices: TVs, tablets, computers and smartphones. Quad-play offers the possibility to add more mobile lines on top of the mobile lines in the combined offer (e.g., up to four other lines for Orange s family packages). Source: Pyramid Research 2015 Pyramid Research Quad-Play Strategies in Western Europe: Growth Drivers and Best Practices for Service Providers 4
Subscriptions (millions) Strong commitment to network development, aggressive pricing, and high quality of experience explain Free s success in quad-play Building upon its successful triple-play strategy, Free has entered the mobile market in an effort to outperform other operators for quad-play subscribers. In November 2002, Free launched its ADSL bundled offer at a very attractive price. In August 2003 it added unlimited calls to VoIP and in December 2003 added cable TV at no additional cost with its Freebox. Further, in December 2010, Free added calls to mobile phones and to select international destinations for the same monthly price ( XX). Free has offered FTTH-based broadband since 2006, and since December 2010, these triple-play services are included in a bundle for XX per month ($XX). In 2009, Free acquired the fourth 3G license for 5MHz of spectrum in the 2.1GHz band for XXm ($XXm). Free Mobile launched aggressive mobile tariffs in January 2012 with two offers: (1) the 'unlimited' tariff (unlimited national calls and SMS, and 3GB mobile data per month) for XX per month ($XX), (updated in 2013 to include unlimited 4G), and (2) the basic tariff (60 minutes and 60 SMS per month) for XX per month ($XX; updated in 2013 to include unlimited national calls and SMS and 50 Mbps of 4G). In 2012, Free reported XXm mobile subscribers in just one year while all of the other operators lost mobile customers that same year (-XX% for Orange and -XX% for SFR and Bouygues). In Q1 2012, Orange lost XX, SFR XX and Bouygues XX customers. EXHIBIT 9: TRIPLE AND QUADRUPLE-PLAY SUBSCRIPTIONS, FRANCE, 2013-2019 Quadruple-play (m) Triple-play (m) 2013 2014 2015 2016 2017 2018 2019 Source: Pyramid Research 2015 Pyramid Research Quad-Play Strategies in Western Europe: Growth Drivers and Best Practices for Service Providers 5
Table of contents SECTION PAGE Introduction: Factors driving quadruple-play migration in Western Europe 4 Enablers for quadruple-play offerings 8 Market detail: Case studies 12 France Spain Netherlands Key findings and recommendations 25 Appendix: Acronyms and definitions 28 2015 Pyramid Research Quad-Play Strategies in Western Europe: Growth Drivers and Best Practices for Service Providers 6
Reasons to buy This Insider offers a thorough, forward-looking analysis of Western Europe s quadruple-play market, with deep insights at three main players, analyzing key factors that enabled their quadruple-play uptakes and key opportunities for new comers on the market, in a concise format, to help executives build their growth strategies. Accompanying Pyramid Research s Forecast products, this insider examines the assumptions and drivers behind on-going and upcoming trends in Western Europe s quadruple-play market, including the different approaches of key players. This insider is designed for executive-level audience. The insider provides an easily digestible market assessment of quadruple-play in Western Europe for decision-makers, built around in-depth information gathered from local market players, which enables executives to quickly get up to speed with main factors that enabled quadruple-play offerings in the region and main challenges currently facing the market. The broad perspective of the report coupled with comprehensive, actionable details will help operators succeed in the quadruple-play market in Western Europe. 2015 Pyramid Research Quad-Play Strategies in Western Europe: Growth Drivers and Best Practices for Service Providers 7
Methodology The Quad-Play Strategies in Western Europe: Growth Drivers and Best Practices for Service Providers report comprises market sizing and demand analysis and trend analysis for quadruple-play services across Western Europe as well as detailed case studies. Insights and data are derived through a mix of desk-based secondary research, primary research as well as quantitative modeling for sizing market opportunity. Pyramid s methodology for quadruple-play market sizing and demand analysis combines secondary and primary research, with international benchmarking and quantitative modeling in order to present a complete picture of the socio-demographic, competitive and demand trends affecting the migration to quadruple-play services across Western Europe. Primary research involves in-depth interviews with market players, and the secondary research effort includes obtaining relevant data and intelligence through publicly available sources, regulatory authority publications, trade associations, specialist databases and company financial reports, presentations and press releases. 2015 Pyramid Research Quad-Play Strategies in Western Europe: Growth Drivers and Best Practices for Service Providers 8
Related research Multiplay Services Forecast (updated bi-annually) The Multiplay Services Forecast provides service demand and revenue trends for bundled and blended telecom and media products worldwide, enabling you to track the current performance of multiplay bundles at an operator level across key markets and prepare for upcoming opportunities and competitive threats across all regions of the world. This product is available at a global and regional level as well as for 24 countries across developed and emerging regions Portugal Intelligence Report; Fiber Broadband Presents the Most Attractive Opportunity for Telecom Operators This Country Intelligence Report offers a precise, incisive profile of Portugal's mobile and fixed telecommunications based on comprehensive proprietary data and insights from our research in the Portuguese market. Published annually, this presentation-quality, executive-level report provides detailed analysis of the near-term opportunities, competitive dynamics and evolution of demand by service type, technology and platform across the fixed telephony, broadband and mobile sectors, in addition to a review of key regulatory trends span FTTH/B Deployments in Asia Pacific: Keys to Enhancing Service Availability, Proposition and Uptake This Research Report analyzes last-mile technology adoption trends and network deployment strategies, investments, stakeholders and best practices in the Asia Pacific region. The report also explores FTTH/B service positioning and pricing strategies as well as adoption and revenue trends across the region's diverse market environment, taking into consideration the impact of LTE availability on FTTH/B network investments. The report includes case studies of Australia's NBN and its wholesale partners, China Telecom, Korean incumbent KT and Telekom Malaysia. Latin America Operators Turn to Multiplay Packages and Bundles as Market Intensifies This report takes a close look at the current status of multiplay offerings in Latin America and the future growth prospects of multiplay adoption and revenue. It also looks at the strategies being employed by different market participants, ranging from traditional DTH providers to integrated service providers and pure-play telcos. We look at the impact of value-added services, including mobility and OTT, on traditional bundles and packages. The report then concludes with case studies that depict the development of service bundling in the region, a summary of key highlights and a set of recommendations. Convergence in Developed Asia Pacific: Operator Strategies Move beyond Bundling to VAS Advanced broadband markets in parts of Asia-Pacific show high adoption of fiber, multiplay and 3G+, setting the stage for convergence. Operators are looking to take advantage of convergence to reduce churn and introduce new value-added services. This report presents case studies on Chunghwa, NTT, PCCW, SingTel, StarHub and Taiwan Mobile, and examines how these different operators are approaching convergent offers. We conclude with some recommendations 2015 Pyramid Research Quad-Play Strategies in Western Europe: Growth Drivers and Best Practices for Service Providers 9
About Pyramid Research ADVISING LEADERS IN THE GLOBAL COMMUNICATIONS INDUSTRIES ON EMERGING MARKETS AND SERVICES OPPORTUNITIES Pyramid Research (www.pyramidresearch.com) offers practical solutions to the complex demands our clients face in the global communications industry. Its analysis is uniquely positioned at the intersection of emerging markets, emerging technologies and emerging business models, powered by the bottom-up methodology of our market Forecasts for more than 100 countries a distinction that has remained unmatched for more than 25 years. HOW WE COVER COMMUNICATIONS MARKETS Our highly structured analysis closely examines the performance, technology trends, macroeconomic and regulatory environment, of service providers and equipment vendors in each of the more than 100 countries we cover. Using a bottom-up approach, we size market demand across services and countries, and conduct end-user surveys to validate adoption trends and anticipate shifts in demand. Our commitment to intensive, direct interviewing of regulatory authorities, service providers and manufacturers complemented with end-user data ensures the most reliable portrait of every market we examine. 2015 Pyramid Research Quad-Play Strategies in Western Europe: Growth Drivers and Best Practices for Service Providers 10
Meet us in person PLEASE CONTACT PYRAMID RESEARCH AT: Email: sales@pyr.com Email: press@pyr.com Telephone: +44 (0) 20 7406 6608 PLEASE ENGAGE WITH US VIA: @pyramidresearch OFFICE LOCATIONS: EMEA, Asia Pacific John Carpenter House 7 Carmelite Street London, EC4Y 0BS United Kingdom Tel: +44 (0)20 7936 6530 Latin America, North America 179 South St., Suite 200 Boston, MA 02111 USA Tel: +1 617 747 4100 Fax: +1 617 747 4133 To learn more about Pyramid Research s product offerings and how they can be of service to your company, please contact sales@pyr.com or visit us on the Web at www.pyramidresearch.com. 2015 Pyramid Research Quad-Play Strategies in Western Europe: Growth Drivers and Best Practices for Service Providers 11