Triple-play Uptake Growing at the Expense of Telco Margins

Global triple-play subscriptions are projected to grow by a whopping 52% in 2007, to over 34 million, according to a new report from Pyramid Research. However, triple play will not improve telco margins in the short term.

"Multi-play offerings have enhanced the competitiveness of broadband and cable providers' core services, but we doubt their effectiveness in pushing PSTN voice," says Dan Locke, coauthor of the report and an analyst with Pyramid Research. "For telcos, bundled services do not slow the deterioration of fixed margins, and perhaps even exacerbate it," adds Locke.

The report points out that telcos realize fewer multi-play efficiencies when compared with cable players operating a single network. For telcos, the addition of a TV offering increases operating and capital expenditures and dilutes margins. "A review of several triple-play telcos indicates flat revenue growth from disconnections and price pressure, increased Opex and Capex tied to offering video services, and margins that are declining or flat at best," comments Locke.

To be sure, it is still early to draw a full picture of the bottom-line impact of multi-play for telcos, with most IPTV-driven bundled offerings available for less than two years. Moreover, content strategies crucially affect margins; telcos that acquire unique content to differentiate their services will unsurprisingly have higher costs than those with a lighter, more partnership-oriented content approach.

Posted to the site on 2nd October 2007