Continued, Profitable Growth for European Cable Operators

MUNICH, Germany -

- Key Findings of the SOLON European Cable Survey 2009

European cable operators are successfully mastering the current economic crisis. They expect continued, profitable growth for 2009 and beyond thanks to their leapfrogging of DSL operators by offering unmatched broadband speed levels. The European cable operators project revenues to grow by almost 7% annually until 2012 and the average profit margins (EBITDA) is expected to reach 42.9%.

CEOs of 17 European cable operators with more than 22 million customers participated in the 2009 edition of the biannual SOLON European Cable Survey published by Solon Management Consulting. It presents an in-depth look at the opportunities and challenges cable operators in Europe are facing today. The results show a dramatic change in the competition for broadband markets.

“Cable broadband has been able to escape the ruinous price competition with DSL,” comments Dorothea von Wichert-Nick, Managing Director at Solon Management Consulting. “By offering unmatched speed levels of up to 100 Mbit/s, cable companies can finally outperform DSL operators.” Participating cable operators assume that by 2012 every second cable broadband customer will use speed levels of more than 20 Mbit/s, and one-fifth of subscribers of more than 50 Mbit/s. As of today, DSL can only offer a maximum speed level of 16 Mbit/s.

Cable TV shows a strong shift towards interactive TV services instead of enlarging channel line-ups. “Video on demand, catch-up TV,- the future of television is much more interactive,” explains von Wichert-Nick. “IPTV offered by telcos or video-over-the-top by sites such as Hulu are increasing the pressure.” Before 2009, only one fifth of all European operators had launched video on demand offers. By the end of 2010, the share is expected to surge to 90%.

So far, the economic crisis have only had a limited impact on the cable industry. Operators expect a slight decrease in their TV subscriber base. Growth in the broadband market will, however, more than compensate. “CEOs believe broadband sales may actually profit from the current downturn,” according to Wichert-Nick. Overall, the participating cable companies expect revenues to grow by 6.6% annually from 2008 until 2012, with EBITDA gains of 8.6% per annum. Highly leveraged cable operators, however, feel the pressure of the financial market crisis. “These firms might have to stretch planned network investments and revise their ambitious growth strategies,” says von Wichert-Nick.

To maintain their strong growth and to defend healthy margins, cable CEOs have set an agenda with three strategic directions:

- Take the position as leading Next Generation Access provider for high-speed broadband - Protect and further leverage subscriber base by focusing on retention and cross-selling - Balance improved quality of service with cost efficiency

“Strong growth in recent years has taken its toll on service quality,” says von Wichert-Nick. “Excellent customer service is key to customer value optimization and to reduce churn rates.” For the next growth driver, cable operators might have to look at business-to-business services, as well as to new mobile offerings. “In the US, B2B services already account for up to 20% of revenues,” Philipp Leutiger, Head of the Solon Telecom Practice, adds. “In Europe, however, cable companies are just about to test the waters with smaller operations.”

The Cable Survey 2009 can be downloaded from www.solonstrategy.com or is available on request.

Solon Management Consulting is a strategic consulting firm that focuses exclusively on the cable, media, and telecommunication sectors. With offices in Munich, Budapest and London, Solon realises projects spanning the entire European continent.

Contact: Margret Steinle, Solon Management Consulting, Tel: +49-89210388-0, E-Mail: margret.steinle@solonstrategy.com

Source: Solon Management Constulting GmbH

Contact: Margret Steinle, Solon Management Consulting, Tel: +49-89210388-0, E-Mail: margret.steinle at solonstrategy.com