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Europe's Operators Need More Revenue from Multiplay Offers

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The policy of discounting multiplays in Europe in order to drive adoption and subscriber additions will prove unsustainable as subscriber growth slows, according to a new report by Pyramid Research.

Multiplay operators have benefited from tremendous subscriber growth levels in the past two years, thanks to a combination of low penetration and competitive pricing. The global economic crisis helped spur the growth in offers promoting multiplay at significant discounts to stand-alone products. With subscriber additions driving revenue, operators were comfortable with declining ARPS. However, the policy of discounting multiplays in order to drive adoption and subscriber additions will prove unsustainable as subscriber growth slows, putting operators in a revenue bind.

"As the multiplay market reaches saturation, the rate of subscription growth will decrease by more than half with a CAGR of only 4 percent for 2010 to 2014," according to the report.

"In 2008 multiplay revenues across the Czech Republic, France, Germany, Italy, the Netherlands, Romania, Russia, Spain, and the U.K. totaled euro 31 billion (USD46 billion) and are expected to reach an estimated euro 37 billion (USD49 billion) in 2009, representing euro-denominated growth of 18 percent in 2009. As subscription growth begins to subside, multiplay service revenue will slow to a modest CAGR of 7 percent between 2010 and 2014," the report shows.

Meanwhile, existing broadband and pay-TV households will be tempted by their current providers to migrate to multiplays, significantly increasing competition among operators for existing customers.

The report finds that operators must bolster their ARPS as a means of ensuring revenue growth. With competition restricting their ability to raise prices, operators across both Western and Eastern Europe must develop their value-added offerings, focusing primarily on HD and VoD services, as well as broadband top-up services. Likewise, as mobile operators enter the multiplay market, fixed operators should consider joint ventures with MNOs or even launch their own MVNOs in order to remain competitive.

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Tags: broadband  top-up  europe  cagr