Romania Cable Systems (RCS), the media company which launched direct-to-home (DTH) services in Romania in 2005, is looking to launch new DTH platforms in other countries and build an Eastern-European footprint.

"We have plans to go beyond Hungary and Slovakia," Alexandru Oprea, RCS’s president, told Satellite News, in an exclusive interview. "We are looking at a number of countries in the region. We have not decided yet if and where to start. We will be looking at other territories in Eastern Europe. Currently, we are looking at four to five countries and we will make a decision soon."

A new DTH platform in the Czech Republic would seem to be very much in the company’s plans. "I think we will look to launch a DTH service in the Czech Republic very soon," Oprea said. "We hope to do this within the next month."

Customer Numbers

RCS offers about 60 channels of primarily European and North American programming. The company’s main market remains its home territory of Romania. "At the end of June, our DTH platform reached 280,000 subscribers [in Romania]," Oprea said. "It is still hard to evaluate the potential of the market in our opinion. With a rough estimation, we think the numbers of subscribers which might be reached by audio operators or DTH operators in the next two to three years is somewhere around 800,000 to 1 million subscribers. It is a rough estimation and depends on a lot of factors. We want to be the number one player in the market."

In terms of the business model, the operator is using in Romania. Oprea commented, "Step by step, we offered a number of channels where the content is comparable to what is being offered by the cable operators. The monthly tariffs are also very close to what cable offers. These are the main features of our offer. There is a very strong direct comparison with cable."

Earlier this year, RCS signed a new deal with Intelsat for additional capacity on the IS 10-02 satellite in order to expand RCS’ business outside Romania in Hungary and Slovakia. "When we started the platform, the partner we chose was Intelsat," Oprea said. "So we think it is a very good partner. We started with lower capacity, but then step-by- step, due to the development of the Romanian platform, we have increased our capacity needs. I think Intelsat as a company is a good partner, and then the satellite they offer to us has very good coverage. It is a good service offer for the time being."

Competition Growing

In terms of competition, Oprea believes Romania is a very competitive market. "In Romania, there are four competitors," he said. "One is Focusat, which was acquired by UPC. UPC is the biggest cable operator in Europe, so they have a lot of potential. I definitely think they have the potential to be a very tough competitor. There are two other platforms. One started last year, and has succeeded to have a pretty good market share. The last one Boom TV, has only just recently started. The fact there are four competitors means this is a very competitive market." In Hungary, the shadow of UPC also stalks RCS. Oprea said, "In Hungary, we will compete against UPC. It will be difficult there as UPC started their operations in Hungary four to five years ago. So, we are the newcomers in that market. But, I think we have done a pretty good job there. The commercial offer we made has given us a good number of subscribers so far."

Paul Erickson, a media analyst at IMS Research, believes there will be consolidation in the Romanian pay-TV market. He said, "I think that consolidation is a consistent trend in Europe’s mature pay-TV markets. I would similarly expect that as dust settles in the DTH sector in Romania that there will be one or two dominant players. Beyond that, over the long run the need to move to triple play is almost inherent, and thus it is not likely that any entity other than a large conglomerated player will have the financial resources needed to make that transition."

However, despite the competition, Oprea predicts a bright future for pay-TV and DTH in Eastern Europe. "The landscape is changing even today," he said. "The interest in pay-TV has increased in Romania, and we expect this to happen in other countries in Eastern Europe. The most important thing for us is to be a key player in the market."

Intelsat Stands To Gain

If RCS continues to find success in the region, it will be a major boost to Intelsat, which signed the multi-million dollar contract with RCS, for additional capacity on the IS 10-02 satellite in February. Jean-Philippe Gillet, Intelsat’s regional vice president for Media for EMEA, told Satellite News that Eastern Europe could be a strong growth vehicle for the company. "We see Eastern Europe as a very dynamic market where there are many new entrants get into the market," he said. " In Romania, there are multiple players, but that is also the case in other countries like Serbia, Bulgaria and other surrounding countries. We think there are many interesting opportunities for Intelsat here."

Gillet also believes the collaboration with RCS came at a good time for the operator. RCS "came at the right time for us, as we had just launched a new satellite that had a very powerful beam over the region," he said. "What we wanted to do was find the right partner, and we think we have found that with RCS. They have good know-how in managing subscribers. They were the perfect partner. That is where we identified the opportunity. We worked with RCS to firstly grow into Romania and then with some of the channels that can be distributed into multiple countries."

One of the interesting things emerging in Eastern Europe is cable operators such as RCS are turning to DTH to cover more of the population. Earlier this year, Serbia Broadband (SBB), Serbia’s leading cable player, announced it was launching a DTH operation in Serbia, so this seems to be a popular strategy among cable operators in the region. "Because of the infrastructure in these territories, you will never be able to cover 100 percent of the country," Gillet said. "In Western Europe, ADSL can cover 100 percent of the country, but in a country like Romania, there are always going to be gaps. The beauty of the RCS model is that they can use DTH to gain new subscribers in new areas. The costs of working with a local cable operator would be quite high. But if they use DTH as a complement, they can cover a large percentage of the population without having to make huge investments. It is a natural complement."

Moving to DTH for a cable operator such as RCS is a relatively simple proposition. Gillet said "If you take RCS, they already have the agreements with content providers, which is based on a price per sub for the content," he said. "RCS says, ‘What if we put your signal on satellite?’ RCS has the infrastructure in place to manage the subscribers. They have the expertise for a quick time to market.’"

While Intelsat is delighted to be working with RCS, it also hopes to pick up other partners up in the region. "Our goal is to expand with RCS and to help them grow," Gillet said. ".At the same time, they are the driver. They will pick the countries where they want to go. We are open to other opportunities using the same type of model in other countries. We think there will be other players active in the region. We want to partner them and show them we are a good partner, the way we are with RCS."

–Mark Holmes

Contact, Alexandru Oprea, Romania Cable Systems, Tel: 00 40 1 301 0800

Paul Erickson, IMS Research, e-mail, [email protected]

Jodi Katz, Intelsat, e-mail, [email protected]