1 / 21

Broadband Bulls, Digital Dilemmas: KOREAN CABLE’S FUTURE

Broadband Bulls, Digital Dilemmas: KOREAN CABLE’S FUTURE. KCTA Cable Convention & Exhibition Jeju June 13, 2006. KOREAN CABLE: AN ANALOG + BB INTERNET STORY TODAY. Subscriber Composition (CYE Dec. 06 forecast). Cable SO Industry Revenue (CYE Dec. 06 forecast).

nolen
Download Presentation

Broadband Bulls, Digital Dilemmas: KOREAN CABLE’S FUTURE

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Broadband Bulls, Digital Dilemmas: KOREAN CABLE’S FUTURE KCTA Cable Convention & Exhibition Jeju June 13, 2006

  2. KOREAN CABLE: AN ANALOG + BB INTERNET STORY TODAY Subscriber Composition (CYE Dec. 06 forecast) Cable SO Industry Revenue (CYE Dec. 06 forecast) Source: MPA research estimates; KCTA; MIC; KBC

  3. CABLE’S SHARE OF DIRECT BB SUBS GROWING RAPIDLY AT THE EXPENSE OF KT, HANARO Cable SO’s Share of Direct BB Subs 12.4% 10.3% 7.9% 5.4% 3.3% Source: MPA research estimates; KCTA; MIC; KBC

  4. CABLE’S BROADBAND ADVANTAGE… vs RIVAL TECHNOLOGIES

  5. CABLE’S BROADBAND ADVANTAGE… BUSINESS IMPACT

  6. KOREAN CABLE IS CONSOLIDATING RAPIDLY AND WILL CONTINUE TO DO SO WITH MORE DEREGULATION Cable TV Market Share (CYE Dec. 06 forecast) Cable Broadband Market Share (CYE Dec. 06 forecast) Source: MPA estimates

  7. DIGITAL DILEMMAS • CapEx vs ARPU • Open cable-standard STBs @ US$200-US$250 with scalable rollout (i.e. 1 mil. +) bring cost down to US$150 • ARPU for cable TV however only @ US$5-6/mo.; analog pricing capped at US$15/mo; digital @ US$18-US$25 • Solutions • Bolster analog pricing ahead of digital rollout with migration of US$3-US$7/mo. subs to US$10-US$15 • MIC may bring relief to technology issues with easing of standards • Offer more flexible digital and analog pricing - cable TV is not a utility • • • • •

  8. DIGITAL DILEMMAS • Content differentiators • Limited differentiation between analog + digital • Ad supported basic channels do not want to migrate solely to digital • Lack of HD content • Continued restrictions on foreign retransmission channels and ownership of local PPs (49%) • Solutions • Ramp up HD terrestrial content output and leverage cable retransmission to boost digital [i.e. Japan scenario] • Differentiate digital product with bundled IP telephony • Accelerate investment in local PPs exclusive to cable • Lift restrictions on foreign retransmission channels and FDI in local PPs • • • • • • •

  9. TODAY’S DIGTAL & BROADBAND REALITIES • • Analog cable + BB is a high margin biz. • Why go digital when upgrade costs are high • Content is lacking and pricing flexibility is restricted • Facilities-based regulation on cable SOs may limit ability to compete on price • Impact margins/costs with mandatory QoS, interconnection, backbone fees • • • •

  10. THE POTENTIAL REGULATORY FRAMEWORK? • Timing • PM Task Force recommendations ready by Q4 06 • IPTV licensing by March 07 • Convergence framework (Ofcom or FCC Model) is uncertain • IPTV Licenses • KT • Hanaro • Powercomm/Dacom • Will nationwide transmission be allowed? • Yes, as this will be KT’s key differentiator and the cap for Sos will re revised to 1/3 of all subs - 33% approx. as in Taiwan currently • • • • • •

  11. THE POTENTIAL REGULATORY FRAMEWORK? • Bundling • Regulation may limit the ability of KT, in particular, in its provisioning of IPTV video packaged with Internet, phone and other services • Price restrictions on IPTV • W18K - W24K as in digital CATV; will not pressure or distort the market again by competing with analog cable pricing • Terrestrial retransmission • KBC/MIC taking the view that retransmission of digital terrestrial and HD terrestrial must be allowed over all networks - cable, satellite and IP - in order to achieve the digital goal (as in Japan) and accelerate HD broadcasting after 2008 • Programming and Program Access • Potential regulation of vertically integrated cable media (CJ, On Media, T broad, C&M) • Potential enforcement of program access rules (a la FCC in the U.S. - vertically integrated cable media groups have to make their content available to cable’s competitors with non-discriminatory terms) • •

  12. KT’S IPTV PLANS Infrastructure CapEx • • FY 06: W300 bil. invested with FTTH @ W250 bil. and IPTV @ W50 bil. FY 06: Digital content fund ~ W95 bil. FTTH will be avail. only to only 200K sub HH with 06, implying inflated capEX costs of approx. US$ 1,250/sub for FTTH with all B&W Nationwide expansion is expected to take 5 years and will prove problematic in terms of capEx burden KT hoping to leverage full fibre optic network to offer high quality BB, WiBro, IPTV and BcN • • • •

  13. KT’S IPTV PLANS Infrastructure Equipment • • VDSL/LAN ready for IPTV ~ 25% of KT’s BB sub base (base case ~ 900K subs) • FYE Dec. 2006 – 40% of its BB sub base at 4 Mbps • MPA: KT will launch in 2007 to 40% at 2 – 4 Mbps: SDTV channels + VOD in Seoul • Gradual migration to 8-10 Mbps, more capEx [By way of comparison, 95% of PCCW’s network in HK is upgraded to 6 Mbps and 60% to 8 Mbps – upgrade to 25 Mbps is planned in the next 2 yrs] • IPTV equipment at US$180 – US$200 with STBs at US$150 – US$170; CA+M/W+EPG+ SMART CARD = US$25 ~US$28 • 350K – 400K STBs order for Q1 07 with capEx at approx. US$50-US$60 mil. • In consideration: Sky Life STB (MDU, dev. By Thomson) with IP tuner (US$100…allows retransmission of SkyLife content) • • • • • •

  14. KT’S IPTV PLANS: CONTENT REMAINS THE KEY ISSUE Infrastructure Content Plans • • W30 bil. invested in Sidus FNH • W95 bil. for digital content investment • Terrestrial retransmission and HD terrestrial (will get, but HD terrestrial production in Korea is really low at pres.) • Acquiring content from studios/ libraries to program its own channels but lacks expertise in programming plus is unwilling to sign output deals with studios or MG agreements • PPs – has been in talks with On Media and CJ Media but can’t get anything signed because of cable affiliation plus KT will not offer attractive MG agreements than could persuade it to share content • Foreign retransmission and foreign invested local PPs [Turner, Sony, News Corp./Fox] are just eyeing local ad-driven cable PP JVs or straight per sub agreements with cable • • • • •

  15. HANARO’S IPTV PLANS • • Hanaro is increasingly the subject of M&A talk (SKT, LG Gp. Etc) • Low cost strategy for IPTV and its decision to go ahead with a portal launch in 06 is all part of a sale strategy though, at the same time, it may help neutralize cable’s BB advantage. • Key focus is on a service it calls TV portal [Hanaro Media] – to launch in July 06 using a Celrun IP STB solution (in which Hanaro has invested W6 bil. in equity – total at W18 bil), dedicated to VOD services with content ranging from movies, dramas etc • 2 Mbps speed (transmitted online via Celrun HDD STB) • Will also provide terrestrial channels (real time) by installing antenna into consumer STBs. • Negotiating with 30-40 media owners for content and says it has signed up CJ, SBS, EBS, BBC, YTN, MBN, NGC etc. • Service will cost W9K/mo. plus STB rental fees @ W3K with 30% discount to existing BB subs. Looking to lower BB churn through the service and recover BB mkt share plus boost overall BB ARPU. • Revenue targeted at W5 bil. in 06; W70-W80 bil. in 07 and W200 bil. in 2008 when it expects to launch a full IPTV service. • • • • • • •

  16. APPENDIX

  17. CABLE COMPANIES, SUPPORTED BY STRONG REGULATORY AND COMMERCIAL DYNAMICS, HAVE TRANSFORMED INTO MAJOR BROADBAND TELECOM PROVIDERS Selected Leading Broadband Cable Operators (Subscriber data in mil.) Y/E Dec. 2005 - Q1 2006 (Source: Company Data, MPA research estimates)

  18. GLOBALLY, DSL IS A DRIVER OF BROADBAND BUT IN MARKETS WHERE CABLE TV HAS A CRITICAL MASS, CABLE IS A MAJOR BROADBAND CONTRIBUTOR Global Broadband Breakdown by Technology Y/E Dec. 2005 (Source: MPA research estimates) Leading Cable TV/Cable Broadband Markets by Penetration Cable/DSL & Other Composition in Leading Broadband Markets by Penetration Y/E Dec. 2005 (Source: Point Topic, Morgan Stanley, MPA research estimates) Y/E Dec. 2005 (Source: Point Topic, Morgan Stanley, MPA research estimates)

  19. BROADBAND IS BECOMING A MAJOR DRIVER OF GLOBAL ECONOMIES AND KOREA IS LEADING THE WAY Broadband Sector as a % of GDP Y/E Dec. 2005 (Source: MPA research estimates)

  20. KOREA STILL HAS BROADBAND LEADERSHIP Global Broadband Penetration - Total Subscribers Broadband Penetration - Density Per 100 Inhabitants Total Subscribers (mil.) Density Per 100 Inhabitants Y/E Dec. 2005 (Source: MPA research estimates) Y/E Dec. 2005 (Source: MPA research estimates)

  21. THANK YOU

More Related