[Satellite News – 9-13-07] It is not every day a major European pay-TV operator enters into a new market with a population of close to 50 million people, but that is what happened this week when the Modern Times Group (MTG) announced it was going to launch a digital premium Direct-To-Home (DTH) satellite TV operator in Ukraine.

This is a significant move for a number of reasons. Ukraine, in terms of population, is up there with some of the major western European pay-TV markets. MTG is going into the market alongside Strong Media Group (SMG).

MTG is going into the market through its subsidiary, Viasat. The new platform will be called ‘Viasat Ukraine’. Andrew Barron, MTG’s COO told Satellite News that the operator is a "big believer" in Ukraine. He said, “You only have to go to Kiev (the capital of Ukraine) a number of times to appreciate how fast the urban areas are developing economically. So, when you look at our overall strategy, which is to be active in structurally higher growth markets, specifically in Eastern Europe, this again is a very logical next step. Ukraine is one of the more attractive, larger eastern European overall markets. It does not have an indigenous DTH pay platform. We have the only licence for DTH services in Ukraine.”

Analyst View

Rasmus Engberg, a media equity analyst at Handelsbanken Securities told Satellite News that he was "surprised" that the operator had decided to enter this market. He said, "I have waited for them to launch satellite pay-TV services in other markets in Eastern Europe. However, I thought maybe they were more likely go into markets such as Hungary and the Czech Republic, which have more developed economies. With satellite you need to subsidize the box. You need to have a certain GDP per capita. And I thought the Ukraine was slightly lagging in that relative to the most of Eastern Europe, even Russia. So, we were surprised they decided to launch in Ukraine over other markets. However, I think it is very interesting project.”

A second media analyst who requested anonymity said, "The risk reward for this JV [joint venture] looks quite interesting for them. I like the fact they have a first mover advantage here in terms of launching a platform.”

Competition

Despite what he sees as potentially strong competition in the market, Barron says the market has huge growth potential. He says, "NTV-Plus (Russian satellite pay-TV operator) is present. Poverkhnost is selling some channels on W4. It will have more. I am sure over time DTT will arrive. In that sense, it is no different from any western European market. However, the growth potential given where they are today, economically and in terms of pay-TV, compared to where we think they will be in a few years is structurally higher than it is in many other European markets. From that point of view, it is a good place to be near the beginning. We think if we can offer a compelling product and service, we will do well..”

Barron would not reveal when Viasat would commercially launch the platform although it is likely to still be a little time away. Ironically, Viasat could be impacted by the delay of the launch of the Sirius 4 satellite, which was due to be launched on a Proton rocket next month. Barron said, “We have announced all the technical components for the technical platform. We can also confirm that we are on Sirius as well. Sirius 4 will also go up imminently. We will be probably going up on Sirius 4. That tells you we will go up soon. We intend to launch on Sirius 4 when it’s operational. The platform offers us a triple LNB [low-noise blocker] meaning it allows our customers to see three satellites and a selection of local and international channels.”

One of the key components of MTG’s strategy here is that it won’t be going alone into market. Barron was keen to emphasize the JV with SMG. He said, “We are delighted to be in partnership with SMG. Samer Mourad and his Vision TV team have done an excellent job to date. By adding the advantages of Viasat as a scale platform will take it to the next level. We think in the near term SMG also bring the distribution, they are the biggest STB vendor active in the market. They have nine years of success in that market. It takes care of a lot of the downstream stuff.”

While Viasat offers advanced services in its home Nordic markets such as High-Definition TV (HDTV) and Personal Video Recorder (PVR) services, Barron would not be drawn on when these services would see the light of day in Ukraine. He said, "The first priority is to get the platform launched, to get the standard definition offer full and understood by the market. We are launching into a severely under developed pay-TV environment. We have got a lot of communicating to do before we can layer on the stuff that is the common currency for other platforms.”

However, the operator could move quickly to these services if needed. Barron added, “We have been very aggressive about innovation in the platform because certainly in the Scandinavian market, we see it as something that is important, particularly for the higher-end customers. There is a timing issue. We think the same thing will apply in the Baltics, and will be gradually rolling out extra services into the Baltics. We will continue to enrich the services. I don’t see why Ukraine will be different. We are committed to HD, PVR, multiroom, IP extensions etc as you have seen in other markets, but they will get there. You will see the services develop as that is what it will take to develop and compete in this market.”

Pricing Policy

The operator will also adopt a market specific pricing policy. Barron commented, “If you look at our pricing in Scandinavia and you compare that with pricing in the Baltics, you will see structural differences. The offer we are putting in for Ukraine, we think is priced appropriately for Ukraine. But, this is a dedicated Ukraine platform. The channels will be a mix of local, Russian and some international channels. It will be priced specifically for the competitive environment in which it is launching.”

Overall, MTG has high hopes for the market and sees this move as a “logical next step” for the company. Barron added, “We started in Scandinavia in terms of the platform business. We extended the platform into the Baltics. To go into Ukraine is a logical extension of what we have done in Scandinavia and the Baltic region. We have the channel business, which has more than 20 million subscriptions. For some time, we have distributed four Viasat satellite channels successfully in Ukraine. We have been active in the Ukraine TV market for some time with certain channels. This is very much the next seamless step and moving into the platform business in Ukraine.”