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General

Ziggo takes new step in turnaround

Thursday 27 August 2015 | 16:22 CET | Market Commentary

Ziggo is reportedly planning to launch its own free sports channel, Ziggo Sport. It's thought to be working with the channel Sport1, which will contribute rights (Champions League, Formula 1, Spanish football) and the presenter Jack van Gelder. Ziggo customers would not pay any extra for access to the channel. The new channel appears promising and could help Ziggo turnaround its results after recent difficulties.

Turnaround

The channel appears attractive from a commercial perspective and could be an important weapon for Ziggo. The cable operator has had a couple of poor quarters, and now that it's completed the integration with UPC, the company is focused on turning around results. Ziggo Sport can play a role in this, as will likely the new Docsis 3.1 standard, which will start rolling out in 2016 and offer gigabit speeds. Ziggo's parent company Liberty Global is also still in talks about a possible merger or asset swap with Vodafone. Ziggo is making use of its own infrastructure, the parent company's recent investments in content and the need for growth. Liberty Global has a highly leveraged balance sheet and needs growth in order to sustain the debt. The company is clearly driven to make up the lost ground in the Dutch market.

Ziggo is unable to increase prices in order to grow revenues, not even to cover the costs for Ziggo Sport. At its Q2 presentation, the company admitted that its last price increase had led to customer losses. Given Liberty Global's scale, it's able to deal with the pressure on margins.

KPN

KPN's focus at the moment is mainly on mobile (LTE, LTE-Advanced) and the upgrade of its VDSL network. With Docsis 3.1, Ziggo can easily exceed the KPN VDSL network in terms of speed. KPN is also taking smaller steps on the content market, compared with Liberty's scale. KPN expects to have its first original content in 2016, including a 10-episode series starring Leon de Winter. It's doubtful whether this will prove as beneficial for KPN as Ziggo Sport. In the autumn KPN will launch its OTT video service KPN Play. This is a more promising endeavour, which can be seen as an answer both to Ziggo and Netflix. Whether KPN  stands to earn much from Play is another question, given the broadband-only target group is still small. It does contribute to an important part of KPN's strategy though, as an enabler of OTT services. In addition to KPN Play, it works with Spotify, HBO and Fon.

In reaction Ziggo could integrate Netflix in its Horizon platform, as operators in other countries have done. This could complement Ziggo's owns MyPrime service, which offers new films on demand.

Media strategy

All in all, the leapfrogging between KPN and Ziggo that we've been witnessing for some time now on the Dutch market is far from at an end. KPN is profiting lately from the integration problems at Ziggo, its OTT strategy and the LTE network, but Ziggo's not sitting still. In mobile, Ziggo's MVNO will soon gain access to Vodafone's 4G network and in the longer term could even merge with Vodafone. Furthermore, the fight is shifting increasingly from the telecom to the media sector, which could lean to a certain concentration of market power at Liberty. Broadband, the access market, is still the most important, but a solid media strategy is needed to win this game. 



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