Vodafone likely to make grab for legacy TV customers as the agreement between Telecom and Sky comes to an end

Wednesday 5th February 2014

Vodafone New Zealand is likely to target Telecom Corp's remaining Sky Network Television customers to increase its market share as the agreement between Telecom and Sky comes to an end in the next few months.

The decade-long agreement for Telecom to resell Sky's pay TV service will end May 31, the Auckland-based companies said today. Telecommunication providers sell products such as pay-TV in a bundle with other phone services at a discount in an attempt to attract customers to their higher-value services.

Telecom, the nation's largest phone company, hasn't added new Sky TV customers since 2008 amid waning demand and as it investigates other ways to provide the service through its network or in the cloud. Vodafone is likely to try to lure over Telecom's remaining 30,000 TV subscribers to add to the 100,000 it has acquired since it began selling TV services as a bundle, investors said.

"In the next few months as they migrate these clients off, you would expect Vodafone to be in a heavy marketing campaign coming up to rugby season about a bundled offering to try to attract those 30,000 across to them," said Rickey Ward, who helps manage about $400 million in equities at Tyndall Investment Management.

Telecom's remaining TV subscribers represent about 5 percent of its broadband base.

The end of the agreement with Sky increases the probability that Telecom may look to provide its own content, which is a higher-risk strategy than partnering with a content provider, Tyndall's Ward said.

Telecom dipped its toe in the water last year when it partnered with Coliseum Sports Media's premierLeaguePass.com website to offer online access to English Premier League football.

Still, Telecom is likely to struggle to compete without access to Sky's high value rugby content, Ward said.

"We are not ruling anything out," said Telecom spokesman Richard Llewellyn. "This is a reflection of a product we think has run its course. We see the future of television as being increasingly delivered over networks or the cloud. At this stage it is still very much about investigating possibilities."

Sky TV has wholesale partnerships with phone providers as it benefits from their marketing efforts for bundled services. In 2012, the Commerce Commission began an investigation into Sky TV's content contracts with internet service providers to check whether such deals tied up the market and prevented competition.

Shares in Telecom advanced 0.6 percent to $2.35 while Sky TV was unchanged at $5.74.

BusinessDesk.co.nz

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