Ziggo opts for Wi-Fi, local marketing to face fibre competition

Wednesday 1 May 2013 | 16:25 CET | Background

Ziggo lost 47,000 consumer TV customers or 1.7 percent of its base in the first quarter, after a decrease of 46,000 during the fourth quarter of 2012. At the same time, the cable operator was able to increase its digital TV customer base by 2,000, slightly better than the zero growth in the fourth quarter. Ziggo ended 2012 with 2.729 million TV customers, including 2.233 million with both digital and analogue TV and 496,000 with only analogue TV. In the analyst call on Q1 results, Ziggo's management pointed out that the operator is facing more competition from FTTH service providers, mainly KPN and its subsidiary Telfort, which are poaching Ziggo analogue TV customers with their triple-play offerings. Still there is enough opportunity for Ziggo to retain those customers by upselling customers to its own triple-play packages.

Third of Ziggo customers have no bundle

For the first time, Ziggo provided an overview of its customer base divided into single-play, dual-play (TV+internet, TV+telephony) and triple-play (TV+internet+telephony) subscribers, showing that apart from the analogue-only customers, another 406,000 customers only subscribe to digital (plus analogue) TV services, leading to a total of 902,000 or 33 percent of Ziggo’s total consumer customer base with just one of the three services. More than half (53%) of Ziggo customers have a triple-play package, up from 46 percent in the first quarter of 2012. Twelve percent have TV+internet packages (vs 13% in Q1 2012) and 2 percent have TV+telephony packages (stable year-on-year).

Graph 1: Ziggo customer base according to packages and digital TV conversion, in percentages

Digital conversion slightly better, still weak

The digital conversion rate (digital TV customers added divided by analogue customers lost) is another indicator of the difficult situation that Ziggo finds itself in. Although the digital conversion improved from zero in the fourth quarter 2012 to 4 percent in the first quarter of 2013, it’s deteriorated from 60 percent in the first quarter of 2012. 

FTTH penetration in Ziggo’s footprint grows

Telecompaper’s FTTH Monitor shows that at the end of March 2013, coverage of FTTH homes passed in Ziggo’s footprint had grown to 23 percent from 15 percent a year earlier. This indicates that Ziggo is facing more competition from FTTH service providers. During the analyst call, Ziggo said that it sees FTTH competition mostly for analogue TV customers who already subscribe to a broadband and/or telephony service from a DSL provider. They are being persuaded to subscribe to a triple-play package from the same provider over fibre, thus leaving Ziggo. To lower this churn, Ziggo launched marketing promotions offering a free interactive TV decoder or six-month discount on the monthly fee for its triple-play packages. The operator also launched local marketing in areas where FTTH has been rolled out or is planned, pointing out that cable already offers the same services as FTTH. An example of such local marketing is underway in The Hague where Reggefiber just started demand aggregation.

Customer retention strategy looks good

Ziggo unveiled its strategy to reduce churn in the Q1 2013 presentation and analyst call. In addition to the aforementioned marketing promotions, the operator is busy enhancing its services to entice existing customers to stay on. The first steps were already taken in 2012 with the roll-out of a cloud-based interactive TV service enabling selected digital TV receivers to record TV programmes without the need for new equipment. This will be expanded to more receivers during 2013. The second enhancement is opening Wi-Fi modems for other Ziggo customers, thus creating a local Wi-Fi network in Ziggo’s footprint. After a test period in the city of Groningen, which showed that the coverage was good and only a few customers opted out, Ziggo announced that the network will be rolled out in the rest of its footprint by September 2013. This will create a network of more than 1 million so-called Ziggo WiFiSpots. The third step in Ziggo’s customer retention strategy is an increase in broadband speeds, especially for its low-end services, to increase the speed difference with DSL.

Still work to be done

Ziggo still has some work to do to enable all Ziggo broadband customers to use the WiFiSpots. At the end of March, 896,000 broadband customers had a Wi-Fi modem, slightly more than 50 percent of all broadband customers, growing quickly from almost 34 percent in Q1 2012. Ziggo plans to accelerate the modem swap when it has a Wi-Fi modem that uses both the 2.4 GHz and 5.0 GHz bands, which is expected to be available during the course of this year, according to CFO Bert Groenewegen in the analyst call. He said that all Ziggo modems should be swapped for Wi-Fi-enabled devices by the end of 2014 or the beginning of 2015.

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