Annual and Sustainability Report 2011 - Teracom

The market
The competition primarily consists of satellite operators Canal Digital and Viasat, where
Viasat in particular has aggressively purchased exclusive sports rights, cable operator
Comhem and IPTV operator Telia. Telia has achieved strong growth in recent years
through IPTV as part of a Triple Play offering. The Group is strengthening its competitiveness
and responding to the growing competition by launching new services.
HDTV
During the year, HDTV broadcasts in MUX six and MUX seven, a total of eight
channels, continued to be expanded and reached over 93 percent of households
at year-end. The broadcasts were launched in November 2010 using broadcasting
standard DVB-T2 and MPEG4 compression technology.
The general trend is to introduce more HD channels since, as TV screens are
growing in size, HD is becoming the new image standard. The five largest Swedish
channels broadcast their HD channels alongside their regular channels. Broadcasting
HD and regular channels simultaneously over a transition period allows the
number of viewers with HD receivers to increase as households upgrade their TV
equipment. The long term aim is to replace standard channels with HD channels.
However, this transition should be done in conjunction with the broadcasters filling
their HD channels with almost exclusively »native HD«, which is not the case today.
The HD launch is successful; Boxer has sold many HD subscriptions and the
subscription price was reduced during the year from SEK 59 to SEK 19 per month.
At the same time, reactions in the local press in places where HD is being expanded
indicate a demand for SVT in HD resolution.
Newspaper clippings from the HD rollout.
HDTV broadcasts reached 93 percent of
households at year-end.
MIX
FRIA KANALER – GÅR ATT SE UTAN ABONNEMANG
Regionalization demonstrates the strength of the terrestrial network
SVT1, SVT2 and TV4 have been broadcasting various regional editions of their
channels for a long time. For these two broadcasters, regional editions provide an
opportunity to broadcast regional news, but TV4 takes advantage of this opportunity
to broadcast regional advertising. Consequently, TV4 can sell advertising to
a target group that previously could only turn to the local press. This local advertising
market is highly profitable, as demonstrated in the financial performance of
large local press groups.
During the year the Group signed agreements establishing regionalization of
SVT’s HD channels, TV4 HD, Sjuan, TV3 and Kanal 5. These channels will also be
able to compete in the regional advertising market, which means that the terrestrial
network has generated great value for the broadcasters. Roughly speaking,
the terrestrial network broadcasts about 160 different channel editions from these
four broadcasters. Since regionalization entails good business for all parties, the
aim is to sell the service to most broadcasters.
The flexibility and competitiveness of the terrestrial network can be illustrated
by a sample calculation that assumes that far more channels will buy regionalization
to take advantage of the regional and local advertising market. If half the
channels in the terrestrial network, about twenty-five, were to purchase regionalization
into 20 regions each, the terrestrial network would broadcast 500 regional
channels. The scalability and flexibility of the terrestrial network makes this manageable,
despite the enormous aggregate bandwidth required by 500 channels.
With satellite TV, for example, transponder capacity would need to be arranged
for all channels from one point. This advantage of the terrestrial network would
increase sharply over time as channels in the terrestrial network switch to HD
format; 500 HD channels would then require a huge aggregate bandwidth, which
can be handled through the decentralized structure of the terrestrial network.
Program package offering. The Boxer Mix
package costs SEK 179 per month and is
Sweden's most popular Pay-TV package
Boxer On Demand
With the launch of Boxer On Demand in November, the Group has now also started
to take advantage of the Internet as a distribution channel for some content. The
launch was carried out with a Boxer-branded, custom-designed HDTV and On
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