VTR betting $500 mil on service bundling

Company predicted to double customer base this year

SANTIAGO — Leading cabler VTR is forging ahead with plans to bundle cable, telephone and Internet services.

Backed by corporate parents United GlobalCom (UGC) and Stateside cabler Liberty Media, VTR is expected to fund $500 million in investments over the next three years.

Bundling, dubbed “triple-play,” paid off for VTR, if 2001 results are any guide.

While the Chilean cable industry grew just 8%, VTR saw its revenue rise 21%.

Fueling that increase was 80,000 new residential phone customers and an estimated 20,000 broadband Internet customers.

“When you start to grow and have penetration of 30%-40% as we do, the synergies are huge,” says Juan Antonio Etcheverry, VP of Marketing for VTR.

“From a base of $22 dollars per client, you jump to $70 dollars per client with the same fixed costs. Here in Chile, UGC is validating a business model. Triple Play works.”

Etcheverry predicts VTR will nearly double its broadband customer base in 2002, from 25,000 to 45,000. Telephone connections are also expected to surge from 200,000 to 280,000 customers, with VTR hooking up 500 lines a day.

But repeating Chile’s success may be difficult in other Latin American countries, given financial, economic and regulatory hurdles.

Penetration is still relatively low in big markets of Brazil and Mexico.

Brazilian MSOs will be allowed to offer telephony services this year, but execs are struggling with a difficult economy, flat subs growth and a falling local currency.

In Mexico, the bigger pay TV systems have begun to offer telephony and Internet access. However, in a country with many small cablers, even some of the bigger players don’t have the capital or credit to upgrade their infrastructure. And new taxes may necessitate higher subscription costs in an already price-sensitive market.

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