Latin America has a vibrant Direct-to-Home (DTH) market with services recently launched or rolling out in several countries in the next few months. The largest and most mature DTH market in the region is that of Brazil, which has the largest population and most extensive land area in South America.
DTH Market Trends in Brazil
There are currently four major players in the Brazilian DTH market. The most dominant is SKY, which was formed with the merger of SKY Brasil and DirecTV, with 87% market share. The Spanish company Telefonica DTH launched services last year and two new operators have joined the fray with VIA Embratel (owned by Telmex that also controls NET, the largest cable TV operator) and OI-DTH, also owned by a fixed and wireless phone company.
Alexandre Annenberg, President of the Brazilian TelecommunicationsAsso-ciation, said that "Pay-TV service in Brazil is still being developed and there is room for improvement. The sector’s companies will keep on investing in improvements, such as high definition and other technologies, while trying to raise the quality of their services for their clients," Annenberg stated.
According to the Brazilian National Telecommunications Agency, as of January 2009, the total number of Pay-TV users in Brazil reached 6.37 million, which accounted for a 0.8% increase as compared to December 2008. Of that number, cable TV holds 60 % share of the market (a 2% decrease as compared with 2008); DTH is 33 % and MMDS is 6.0 % (from 4% the year before).
The Brazilian Pay TV Association and the Pay TV Companies Union estimates that Pay-TV subscriber base grew 19% in 2008 and will close the year with 6.2 million subscribers. In comparison, 2.6 million broadband Internet users were recorded by end of 2008, which represented a 48% increase as compared to December 2007. The Brazilian Pay-TV industry’s revenues reached US$ 1.238 Billion over the first quarter of 2009, which accounted for a 27% increase as compared to the same period 2008.
SKY launched during the middle of 2009 High Definition (HD) pro-gramming. Net Servicios is preparing the launch of its low cost HD set top box (STB) without Digital Video Recorder (DVR) while TVA/Telefónica is launching an STB with recording functionality. According to a study conducted by Ericsson, Brazilian users’ demand of new services is much more discriminating than in other Latin American countries. For example, 94% those surveyed were interested in seeing their digital photographs on TV, while 93% expressed interest in the capacity of blocking specific TV channels to protect their children.
OI-DTH a new comer in the Brazil DTH business has recorded an average daily addition of 1.5 thousand subscribers to its recently launched service pay TV via satellite that started July 2009. The performance is above expectations and the company is expecting 400 sales per day, said the director of finance and investor relations of OI-DTH, Alex Zornig.
The OI-DTH began offering the service in São Gonçalo and Baixada Fluminense, in Rio de Janeiro State, with a focus on class C income families. Minas Gerais State will be the next state to have the service available.
The OI-DTH will be included in a package of quadruple play voice, broadband and mobile offered by OI Telecom Carrier as part of the overall strategy starting 2010, said Zornig.
The Brazilian operator Embratel signed up over 100.000 DTH subscribers after only eight months of operations. On the other hand, according to independent market analysts, Embratel, Oi and Telefónica increased their market share as a result of Sky’s declining market share. According to the National Tele-communications Agency, Sky’s market share decreased from 87.2% to 80.24%. It is worth mentioning that the central and southern Brazilian CLEC, GVT will launch joint services with Sky. Sky announced during the first week of August that it will start offering joint services to their clients with GVT.
Both companies announced annual savings of up to US$ 274.00 per subscriber thanks to discounts. According to GVT, at present, half of its clients are planning to get Pay-TV services.
New clients or current ones subscribed to GVT’s Unique 600 or Smart Maxx packages statring at 10 Mbps speed, will be able to get the three-services package at a US$10.00 monthly discount to be applied in GVT’s invoice and an additional US$10.00 discount to be applied in Sky’s invoice, for a 12 months period.
Likewise, the service installation will be free. Alcides Troller Pinto, GVT’s Marketing and Sales VP, stated that "this partnership accounts for the first step that might generate new joint measures in a future. This partnership addresses both organizations’ strategic objectives aimed at providing their clients with an advanced communication services offer. GVT and Sky are innovating companies, with high quality products and a high level client service," Troller Pinto stated.
The operator DTHi (former AstralSat), which had an agreement to offer triple play services jointly with Telefónica in Brazil, decided to become independent and launched a new business model aimed at replacing for free satellite antennas for their own DTH system with decoders that will enable users to view the current 40 free TV channels with the option to add 16 Pay TV channels, either under a pre-paid or post-paid model, for only U$S 7 on a weekly basis or U$S 20 on a monthly basis.
Between the 55% to the 60% of Embratel’s subscribers are new Pay-TV clients who had not contracted any other DTH service before. At present, the Brazilian DTH market counts a total of 2.09 million subscribers.
DTH in Peru
Telefónica’s affiliate in Peru launched a pre-paid DTH service and expects to reach 50.000 users before year end. Since November 2008, the company has been offering the same service in Venezuela, where 50.000 subscribers have signed up. Initially, the service will be available in Lima and later, it will be expanded to interior provinces.
Telefónica’s executives expalined that the idea was to replicate IPTV or cable combined DTH offerings in other Latin American countries. In order to have access to the service, the client has to acquire an antenna and a set-top-box sold at the electronic retail chains Carsa, Electra and La Curacao. They are specifically targetting the low-income sectors.
The service is offered at a US$ 8.14 monthly fee; likewise, it can be obtained at a US$ 2.28 weekly fee. "Clients who acquire their satellite kit will have access to open channels with the best available quality and a pre-paid programming package at no cost for a whole month so that they can enjoy the advantages of this new service," said Gonzalo Carriquiry Fry, Telefónica’s Pay-TV Commercial Manager.
DTH in Chile
Visiontel is the new 70-channel DTH service from Chile to Latin America. It is currently in trial stage. The launch would be expected for the coming weeks or months, before the end of 2009, although no definite date has been announced. The head of the project is Konrad Burchadt, who was the brain behind the international expansion of Entel Chile during the 1990s, and subsequently was Vice-President of VTR MSO in 2006. The DVB-S2 platform integrator would be Argentine company Network Broadcast.
The first stage of the project will be focused in Southern Cone countries (Chile, Bolivia, Paraguay, Argentina, Uruguay). They are planning a second stage expansion to all Latin America. Most of the management team worked with Burchadt in Entel Chile (Luis Ahumada, Rafael Cristi and Francisco Ubilla). But Visiontel also includes Marcelo Salinas, who was in charge of installations in DTH operator Zap TV (now Telmex TV), the first Chilean competitor against DirecTV. Erika Tapia, former VTR Telefónica and Fernando Pavez, who headed the satellite division of Chilean international carrier Entel from 1974 until 2006, are both part of the team.
Visiontel will be the fourth DTH operator in Chile, following DirecTV, Telmex and Telefonica. The Chilean Pay-TV market reached 1.5 million subscribers by end 2008, and DTH had 40 % market share. Market analyst forecast estimate that half of Pay-TV households will be reached by satellite between 2010 and 2011. Chile will be the first key Latin America market where DTH will surpass the number of cable subscribers.
DTH in Mexico
The Mexican Federal Competition Commission (FCC) determined that the participation of Carlos Slim’s company as Dish’ billing company (the alliance among MVS, EchoStar and Telmex) does not assume any type of concentration or monopoly behavior. The resolution resulted from a claim submitted by the National Cable Telecommunications Industry Chamber against Telmex.
The Mexican FCC’s answer points out that there were no signs showing that Telmex or Dish produced concentration, merger, acquisition or any other type of act and urged cable operators to submit evidence if Telmex breached the Federal Economic Competition Law.
Dish’ positive results, which accounted for 530.000 subscribers, will encourage Telmex to acquire MVS. According to the weekly magazine, the acquisition is a possibility that would become effective if Telmex were authorized to offer video services.
Dish, Telmex, Echostar and MVS partnership that offers DTH services in Mexico, recorded 530.000 subscribers in the 10 cities the service is offered, including Distrito Federal, Guadalajara, Monterrey, Cuernavaca, Toluca and Puebla. "This (the service) sets a historical Pay-TV record in our country", the company pointed out in a press release. Its DTH service will be launched in 10 new cities within the next weeks.
"Dish Mexico has encouraged healthy and strong competition, thus forcing other companies to lower prices and to offer new options, which accounts for a benefit for Mexican consumers," Dish stated. BBVA Bancomer forecasted that Dish’ growth would impact negatively on Grupo Televisa’s telecom-munications and video segment’s second quarte figures.
DTH in Venezuela
According to Jesse Chacón, Minister of Science, Technology and Intermediate Industries, the Venezuelan Cantv will start offering DTH December 2009. ZTE and Ericsson were said to be interested in being granted the project. Whether the selection will be carried out through bidding or close process has not been defined.
The state-owned company will offer about 30 channels (12 channels will be assigned to national signal broadcasting and 18 channels would be assigned to international signals). At the beginning, the service will be launched in the South area of the country for 5.000 subscribers and HD inclusion has not been planed yet. As a result of this initiative, Cantv will compete with DirecTV and Movistar.
A 29% Pay-TV penetration is estimated in the country, which accounts for almost 2 million users. Cantv’s satellite offer will be completed with an IPTV offer whose platform end-to-end integrator will be ZTE.
DTH in Nicaragua
América Móvil’s affiliate in Nicaragua, Claro TV, will offer pre-paid DTH services. The company is planning to provide set top boxes which will require cards to activate. The cards are loaded with money to pay for the service and can be topped-up. "The satellite TV service will amount to U$S 1.50 on a daily basis, and will benefit all Nicaraguans located all across the national territory,",the operator’s General Manager, Roberto Sanson stated. At present, the company offers three types of paid TV services: Claro TV Básico, Digital y Satelital.
Recently the executive announced that América Móvil had concentrated its fixed and mobile telephony, Internet and Pay-TV operations in Nicaragua under Claro brand: it is made up of the main Pay-TV operator of the country, Estaciones Terrenas de Satélites (Estesa), the Nicaraguan Tele-communications Company (Enitel), and the Internet providers Cablenet and Turbonett.
Sanson stated that in the last four years, the company has invested U$S 420 millions and that in 2009 about U$S 80 million would be invested to complete the network’s’ expansion. In 2004, América Móvil acquired Enitel’s total shares. At present, the company has an extensive network of fiber optic, 3G and broadband in over 100 municipalities of the country.
Slower Growth for Telefónica Pay-TV Service
This year’s second quarter results show that Telefónica has slowed down its growth of Pay TV subscribers in Latin America. By end-June, the company recorded 1.68 million subscribers in Brazil, Chile, Peru, Colombia and Venezuela. Only 64,000 subscribers were added in the second quarter as compared to the 75,000 subscribers added over the first quarter. Growth stagnated in Colombia, while Brazil and Peru recorded decreases in subscriber growth.
In Brazil, 12,000 subscribers were added, half the previous quarter, thus reaching 514,000 subscribers. In Chile, the company managed to reverse such trend. The company had closed March 2009 recording less subscribers than those recorded as of December 2008, but, in the second quarter of 2009, 4,000 subscribers were gained for a total of 267,000 subscribers. Peru shows sustained growth: 26,000 subscribers were recorded in the first quarter ‘09 and 22.000 in the second quarter ‘09, thus reaching 703,000 subscribers.
The company slipped up in Colombia. 2,000 subscribers were lost in the second quarter thus falling to 144,000 subscribers. On the other hand, in Venezuela, greater growth was recorded. By end-2008, only 8,000 subscribers have signed up for the service. In March 2009, 23.000 subscribers were gained and June closed with over 50,000 subscribers.
Conclusion
Northern Sky Research is relatively optimistic that 2009 should be a reasonably successful year for DTH services. Recent and soon-to-occur satellite launches are all satellites with substantial pre-launch contracts, often for video distribution or DTH services, will contribute to growth in the coming year. This certainly is true for the Latin American market.
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B.H. Schneiderman is the contributing editor for Latin America of Satellite Markets and Research and is a consultant to satellite and telecom-munication companies. He can be reached at: bhstbc@gmail.com
