[Satellite News 10-06-08] Serbia Broadband is the largest pay-TV operator in Serbia and one of a growing number of operators offerings services on multiple infrastructures. The operator started life as a cable provider and launched pay-TV services via satellite within the last year.
    “We saw many synergies between cable and satellite,” said Serbia Broadband CEO Dragan Solak. “There were less and less regions in Serbia, which were viable for cable investment. We saw some regional markets that are really difficult to be cabled. We realized actually that we could develop a very good satellite offer that could help us cover the rest of the Serbian market in an efficient way and then can be used as a base for the development of our regional plans. Additionally, we saw this as a great synergy as more and more people were coming to us with ideas to produce channels for our cable platform, and at that point, we had limited access to intercity optical lines, and it was not easy to connect all the headends or the cable systems we or our competitors controlled all over Serbia. Satellite seemed as a great feeding capacity to deliver new channels to cable systems all over former Yugoslavia.”
    Solak discussed the satellite component of Serbia Broadband’s offerings as well as the growth opportunities in Serbia and beyond.

Satellite News: Are you happy with the development of your DTH operations?

Solak: Total TV is doing very well. We believe we made good choices in terms of coding, software and middleware. The hardware is working properly, and the content proposition has developed in the right manner. As a result we now have six figures in terms of subscribers. We are very happy with the progress we have made. It is important to understand that our business model is not as aggressive as certain business models we have seen in the region recently. That is why we are even more happy with the subscriber numbers because they are based on some solid [average revenue per user] that we gain from our subscribers. The value of the product and the content is something clients respect and we believe that in the next two years, DTH will be the fastest growing part of our business.

Satellite News: Are you looking to launch DTH services in any other markets in Eastern Europe?

Solak: Total TV is being developed as a regional platform. It is now available in Serbia, Montenegro and Slovenia. We expect to be able to offer Total T’ very soon to Bosnian and Croatian subscribers. Our team is very positive about our regional prospects, and we are putting a lot of effort in further developing the project.

Satellite News: When will you launch services in these markets?

Solak: It is difficult to say, because it is not entirely in our hands. I can say for both Bosnia and Croatia, Serbia Broadband is ready to start almost immediately but there are some licensing issues and some regulatory issues to be resolved, so I cannot give you an exact timeline.

Satellite News: Is the satellite operation profitable?

Solak: Our satellite pay-TV service became profitable towards the end of the first year of operation. Total TV has entered into two new markets, Slovenia and Montenegro, and both of them are profitable even if treated as independent profit centers. Our‘Total TV has been producing positive EBITDA for quite some time now. This is why we invest so much in expansion, because we believe in the service.

Satellite News: Do you have any plans yet to launch HDTV services in Serbia or any of the other markets?

Solak: To be honest, I don’t see a huge demand currently for HD services in Serbia. It is not on a scale that would provide the economics to be profitable. Although we are moving into the digitalization of our services and we are talking to our partners about HD services, we will probably do it next year.

Satellite News: How will the service develop over the next year?

Solak: I would say that we see a lot of digitalization coming in. We see a lot of regional consolidation on various levels such as services and structure. Basically, companies joining together. We need to create more robust structures so we can invest more money, and basically get on the top of new technologies. Europe-wide, we have a very interesting situation. At some point, everyone said Internet was the name of the game, or even voice. What we see is that Internet and voice are becoming commodity businesses. What is the differentiating factor? It is video. Suddenly video is back and it is riding high and becoming big in technology companies. Now they see their video departments are the ones that will provide their customers with the decisive services to withstand the competition. Content players are suddenly very important people. If you have double play operators, there will not be that many differences in terms or price. However, the way you package your content is a key differentiating factor now for players. It is a way to attract customers. We are back in the video business and content will be very important in years to come. I don’t think you can survive without supplying triple-play services. Any single-play operator will fade away, and even a double-play operator faces some tough choices. I think the triple-play operators will survive, and a lot of their success will be down to content, and less so price. We have to find more creative ways to compete, and I think that is on the content and video side.

Satellite News: Would you look to acquire other assets?

Solak: I would say definitely yes. There are some limitations to that. We all know about the turmoil in the debt markets. We all know that gaining fresh capital is becoming increasingly difficult. The banks are now pretty hostile. Any acquisition would have to be a really viable prospect. A year ago, you could get money to buy almost anything. If you made a proposition that looked semi-realistic you would get support, but today, the banks are looking much deeper. I have to say it is a much more complicated game than it was a year ago, but it is definitely something we are looking into.

Satellite News: Do you expect to have partnerships with telecoms operators?

Solak: It is difficult to say because first of all, they think very differently from us. Their background is state-driven monopoly. Some of the companies have managed to come out of that background, but some are still very much in that mindset, so sharing is not their concept. I hope they will learn that it might be possible and even good for them to do something with an alternative operator. I think we can both learn from each other and that cooperation is not impossible. We need to get to that state of  mind. In more developed markets, you can find more and more people who are talking to us in terms of how we can work together.

Satellite News: How do you view the threat of IPTV in the region?

Solak: IPTV is a rich people’s toy at the moment. I am not saying this with rich people being the subscribers. I am saying this with the rich people being the telcos and the investors toying with it. If you see how IPTV is structured, they are providing very expensive boxes and then trying to make this very expensive box work by providing a lot of fancy features. I think IPTV is something that has viable future prospects. I think they will be our competitors for years to come. I don’t think they are yet there. I think they are in a growing phase, and they are struggling. But they have enough money to overcome this struggle. We will deal with that.
    We have a full IPTV capability within our headend. We are constantly looking as to what we can do on the IPTV side. Obviously, we have our own networks where we can provide television in a much cheaper and efficient way, but in some cases, IPTV might be the only solution, and we might be one of the providers in the region as well. It is something that will definitely happen. They are not there yet, but they will get there.

Satellite News: How do you see the digital television landscape changing in Eastern Europe over the next 12 months?

Solak: We have two issues with digital television. Big screen LCDs are becoming cheaper, so more and more people will buy them and appreciate digital quality pictures. Analog signals do not work well on these TV sets, so there will be a natural demand for these services. The problem we have with digital is that our subscribers are averaging two to three TV sets per household. The challenge is to digitalize the household. There are many models in terms of offering multi-room services. On the satellite side, there are many parts in the equation. Could there be a piracy issue, for example? Once we are able to produce a home networking solution that will address this issue properly and the costs of the boxes will be proper, we can then think about what is the investment we can make to fully digital and forget analogue. Until that time, you have to see this coexistence of providing digital services, but people will still use analog for their second or third TV set in the household.