Thai converged services operator True Corporations has unveiled ambitious expansion plans for its pay-TV business, including establishing operations in nearby Myanmar and Vietnam. BMI believes that, with a reported 60% share of the Thai TV market at the end of 2011 and strong adoption rates in provincial Thailand, True has a good chance of making a success of its international growth initiative. This strategy will also help the company reduce its dependence on the Thai market, which is increasingly competitive and owing to converged product bundling - is seeing margins weakening.
Details regarding expansion into Myanmar and Vietnam are scant, but the Bangkok Post cites True CEO, Suphachai Chearavanont, as saying that at least THB1bn has been earmarked for investment in a joint venture with local partners, most likely the state-owned national broadcasting authority. Reportedly, True will produce local language programming, but a reference to the popularity of Thai content in Myanmar - and other international markets - suggest it could quickly build a large and loyal customer base by leveraging its existing content portfolio.
|Sun Always Shines On TV|
|TrueVisions' Pay-TV Subscribers ('000) And ARPU (THB)|
In Thailand, the TrueVisions arm of the True group offers free-to-view and subscription TV services to 1.7mn registered subscribers via digital direct-to-home (DTH) satellite and digital hybrid fibre-coaxial (HFC) cable networks. The company has recently invested heavily in the implementation of DOCSIS 3.0 technology on its cable network, which passes approximately 800,000 homes in the Bangkok metropolitan areas, has subsidised the roll-out of satellite receivers in less affluent provincial areas of the country and is upgrading its set-top-boxes to support high-definition (HD) content. The latter also see the introduction of more secure MPEG-4 encryption systems, which should safeguard the company against piracy, asa key constraint to further growth in Thailand.
TrueVisions was significantly restructured in 2010, to better exploit business growth opportunities in the Thai pay-TV market, particularly in the advertising field. Advertising revenue increased by 46.7% to THB707mn in 2011, enabling TrueVisions to secure more attractive programming content and expand the range of channels it offers.
We expect similar strategies to be used in Myanmar and Vietnam, where satellite-based services are widely received by consumers. However, formal pay-TV service provision models run greater operational risks in these markets due to low household expenditure on intangible services, dependence on free-to-air and pirate broadcasts due to non-existent or poorly enforced regulatory systems, and risks that state-imposed censorship could dull the attractiveness of the new services.
Low returns on investment are the most immediate risk, in BMI's view. In Thailand, TrueVisions has had mixed success sustaining ARPU growth. Blended ARPU of THB825 (US$26.10) per subscriber each month in Q112 resulted in y-o-y and q-o-q growth of 9.7% and 5.1% respectively, but comes after considerable infrastructural and content-related investments and as (piracy notwithstanding) customers increasingly shun standalone premium services (down 8.5% y-o-y and 0.5% q-o-q) in favour of advertising-based free-to-air and 'Freeview' offerings.
As regards state intervention in the media, Myanmar and Vietnam have poor track records and True could easily find itself inadvertently breaching the countries' fluid and byzantine laws regarding broadcasting. It is likely that in both countries, True will have to partner with the local state-owned broadcasters, which presents potential difficulties in terms of managing the business' growth along profit-making lines, developing local content and distributing foreign made programmes. Premium services are also virtually unknown in both markets and convincing consumers to pay a monthly fee for a range of content they have already been able to, freely or cheaply, access through other means would be another obstacle for True.
Nevertheless, state attitudes towards the media are beginning to thaw, most notably in Myanmar, and by being at the forefront of liberalisation in these markets, True should be comfortably positioned for growth in the long term.