Digital+, the Spanish pay-TV operator, has seen very slow subscriber growth in the last quarter, although it did reach an important milestone by surpassing 2 million subscribers.

Sogecable, the owners of the Digital+ platform, announced this week that Digital+ added only 16,000 customers in the company’s third quarter to finish with slightly more than 2 million customers. In the first nine months of 2006, the operator added 46,000 subscribers. The average revenue per user (ARPU) reached 41.3 euros ($51.78).

Mixed Reviews

Industry analysts were disappointed by the subscriber additions but generally pleased with the ARPU figures.

"Net adds have been disappointing," Matthew Walker, a media equity analyst at Lehman Brothers, said in a research note to investors. "We have cut from 157,000 to 110,000 [net adds], which implies 65,000 for [the fourth quarter]. The company said it was confident of at least delivering 45,000 and possibly more."

However, the ARPU figures were encouraging, given that Digital+ has introduced some lower cost packages throughout 2006.

"ARPU on subscriptions was 38.6 euros ($48.69) versus 38.4 euros ($48.43) for [the first half of the year], the first time it has been up since 2005," Walker said. "The company aim to put through a price rise in December to have a fuller impact in 2007 of 0.4 percent. Our 2007 ARPU is now flat as opposed to down 2 percent as a result. Change in mix is still to be determined. One-third of net adds are taking the 18.5 euros ($23.33) pack, but some are upgrading later."

Ian Whittaker, a media equity analyst at UBS, said Sogecable’s results were "mixed" but said some of Digital+’s numbers were ahead of expectations.

Third quarter subscribers "ended at 2,006,000, ahead of our 2,001,000 estimate: This implies that Sogecable added 6,000 subs in the last four to five days of September, which would suggest a strengthening trend if continued," Whittaker said in a research note. "Churn was also lower than expected at 11.7 percent vs UBS’s estimate of 12 percent, while ARPU was higher at 41.3 euros ($52.09) versus UBS’s estimate of 40 euros ($50.45) as the proportion of premium subs showed slight change."

Competition Increasing

The slow growth in subscribers could be attributed to increased competition in the Spanish digital TV market. In terms of IPTV, Telefonica is looking to be a particularly strong rival for subscribers, and digital terrestrial TV also proving a popular alternative to satellite pay-TV.

However, James McKenzie, a media equity analyst at Fidentis, believes the prospects for Digital+ are still strong. "Will Digital+ be strong? That is the eternal question," McKenzie told Satellite News. "They have finally bitten the bullet and have launched a low-price package. Previously, all the price packages have been up around the 40-to-60 euros ($50-76) mark. They have been gradually bringing that down, and they have finally launched a package under 20 euros ($25.23). At the same time, they have a better exclusivity over football and the two together create more favorable conditions for growth."

However, the threat from IPTV is growing with Telefonica, in particular, primed to attack the TV market more aggressively.

"Imagenio (Telefonica’s IPTV offer) only had 267,000 subscribers in [the second quarter]," Whittaker said. "This must be primed for a bigger increase we would argue than most other operators in the market. Imagenio has started to sell [pay-per-view soccer] matches for 5 to 6 euros ($7), lower than Sogecable. It has also launched a promotion of triple play for 20 euros ($25.23) per month, versus 43.90 euros ($55.37) usually, which looks attractive versus all other offerings."

— Mark Holmes