You will be redirected back to your article in seconds

Pay TV Bundling Helps Drive Telefonica Growth in Core Market Spain

2016 results show Telefonica bundled service revenues-per-client, mostly involving TV, rising a notable 11.5% over 2015

MADRID – Telefonica, a test case for telecom diversification into TV, has consolidated growth in 2016, posting operating profits of €15.118 billion ($15.95 billion), up 14.3% on 2015.

Part of that growth, moreover, has come from TV as Telefonica’s quad-play Fusion offer of fixed telephony, TV, mobile and Internet proves a growth driver in Spain, one of Telefonica’s big core markets.

Acquiring Spain’s biggest – but stagnating – premium pay-TV operator Digital Plus in 2014, Telefonica’s drive into TV continues to show results, at least when TV is bundled in larger offers, especially involving fiber-optic broadband.

By Dec. 31, 2.9 million of Telefonica’s 4.3 million Fusion clients subscribed to TV, up from 2.6 million a year earlier, according to an IHS Technology analysis.

Average revenue per customer for Fusion clients stood at €81.6 ($86.1), 11.5% higher than in 2015, Angel Vila, Telefonica’s chief financial officer, said on Thursday during a conference call with analysts.

60% of the 2016 Fusion client revenue uptick came from rate upgrades, 40% from up-selling customers, Vila added.

Fusion’s total revenue numbers are up 80% year-on-year. One third of the rise is due to an increased Fusion subscriber base, two thirds to the 11.5% increase in average revenues per client.

“Increased penetration of TV is the next move,” Vila added, looking forward to 2017, saying that increased penetration of TV, fiber optic delivery, data transfer and more-than-one mobile lines per Fusion contract were “the features we are using to drive our revenues in Spain.”

Given such figures, TV is most certainly a growth driver for Telefonica in Spain. But its success comes from a few caveats.

“Premium priced pay TV has not been successful in Spain in a country where piracy is very high,” said Maria Rua Aguete at IHS Technology, pointing out that Fusion’s average revenue per customer of $86 is not just television but bundled services.

“With Telefonica in Spain, you are getting a very good deal. TV is being bundled almost for free,” she added, pointing out that the subscribers to Digital Plus, a true standalone TV service hit a wall for many years.

“Bundling TV with fiber and mobile works in Spain. Offering premium TV at premium prices has never worked, Rua Aguete added.

Another question is just how exportable Telefonica’s telco-TV business model may be. In the U.K., with a far more competitive pay TV market thanks to Sky, Vodafone has come late to the party and still has to offer a quad-play offer.  Although owned by Telefonica, U.K. telco O2 does not offer TV.

Telefonica’s 2016 full year results come as Telefonica’s pay TV division Movistar Plus is readying its first original drama series, to launch from this fall in Spain. So another key question will be how they may contribute to a new wave of both pay TV subscribers and up-selling at Telefonica.

Spain represents 44% of Telefonica’s global operating cash flow, Brazil 21%, the rest of Latin America 15%, and Germany and the U.K. 10% each. Energized by pre-payment mobile take-up and higher-speed broadband, Latin America outside Brazil proved another 2016 growth driver, Vila said.

One of the main market concerns about Telefonica continues, however, to be its imposing debt mountain. This had been pared down to €48.595 billion ($51.3 billion) at the end of last year. Telefonica sold 40% of its Telxius towers and cables business this month to private equity firm KKR in a deal valued at €1.27 billion ($1.34 billion). It offloaded Argentine broadcaster Telefe onto Viacom for $345 million in late 2015.

But, while Telefonica executive chairman Jose Maria Alvarez Pallete argued on Thursday that organic growth, twinned with cheaper financing costs, will help reduce debt going forward, analysts will continue to ask if Telefonica will dispose of further assets this year.

Dented by the costs of a voluntary retirement scheme in Spain, net profit at Telefonica for 2016 came in at €2.369 billion ($2.5 billion).

Buoyed by lower costs than expected in Spain, Telefonica stock rose 3.2% in morning trading to €9.6 ($10.1).

More Digital

  • Oath - Yahoo - AOL -

    Verizon Is Officially Killing the 'Oath' Name

    Oath, we hardly knew ye. Less than two years after Verizon unveiled Oath as the name for the merged AOL-Yahoo internet group, the telco announced that the name will be discontinued, with Oath to be renamed the “Verizon Media Group” as of Jan. 8, 2019. Oath has been a disappointment for Verizon: The telco spent nearly $10 [...]

  • Quibi - Tim Connolly - Jim

    Jeffrey Katzenberg's Quibi Adds Ex-Hulu Execs Tim Connolly, Jim O'Gorman to Management Team

    Quibi, the mobile-TV startup led by Jeffrey Katzenberg and CEO Meg Whitman, has tapped several Hulu alums among its latest hires. Tim Connolly, formerly senior VP of partnerships and distribution at Hulu, has joined Quibi as head of partnerships and advertising. Jim O’Gorman, previously Hulu’s SVP of talent and organization, is now head of talent and [...]

  • European Union Placeholder

    Europe, Hollywood Hail Landmark E.U. Territorial Licensing Agreement

    Industry organizations and major companies in Europe and Hollywood welcomed Tuesday a high-level European Union agreement that in large part preserves producers’ ability to sell movies and TV shows on an exclusive territory-by-territory basis. Territorial licensing is a financial backbone of the film and TV business in Europe. Recognition of such licensing came last Thursday in [...]

  • Crunchyroll Kun Gao - Joanne Waage

    Crunchyroll Co-Founder Kun Gao Moves Into Advisory Role, Joanne Waage Heads Anime Service as GM

    Kun Gao, co-founder and former general manager of Crunchyroll, has stepped aside from day-to-day management of the anime-streaming service, which is now led by general manager Joanne Waage. According to a Crunchyroll statement, Gao remains “very much involved” with the service as an adviser and is “continuing to work on several projects.” In addition, Gao [...]

  • Charter Communications logo

    Charter Reaches $174 Million Settlement on Internet-Throttling Fraud Suit

    Charter Communications agreed to a settlement valued at $174.2 million to resolve a lawsuit alleging the U.S.’s second-biggest cable operator defrauded broadband customers by failing to deliver promised internet speeds. According to the terms of the settlement with the New York Attorney General’s Office, Charter will pay $62.5 million in direct refunds to 700,000 active broadband [...]

  • Facebook Logo

    #LogOutFacebook: NAACP Calls for Boycott, Civil Rights Groups Demand Board Changes

    The NAACP is calling on Facebook users to take part in a one-day boycott of the social network this Tuesday to pressure the company to do more against disinformation and racial discrimination. Separately, a coalition of about three dozen social justice groups called on Facebook to remove key executives from its board of directors. Facebook [...]

More From Our Brands

Access exclusive content