[Via Satellite 10-09-13] GVT, a Vivendi subsidiary, and EchoStar Technologies’ plans to form a joint venture in the Brazilian pay-TV market makes sense for both companies. This is the thought of two key analysts who cover the Latin America pay-TV market.

“GVT remains a small player in Brazil, with an estimated 11.6 percent of the fixed broadband Internet market and 3 percent of the pay-TV market as of the end of 2013,” Eulalia Marin-Sorribes, research analyst, Latin America, Pyramid Research told Via Satellite. “Satellite has proven particularly effective in recent years as a tool to increase market share, and this partnership could work for both companies to better capitalize on the growth opportunities that will be generated by the FIFA World Cup in 2014 and the Olympic Games in 2016. If the deal goes through, the joint venture will help GVT create economies by increasing its scale in the pay-TV market, as it gives it both satellite and IPTV platforms.”

Despite the impending joint venture, Marin-Sorribes does not expect the new platform to challenge the market dominance of the two main players in the region. “The pay-TV market has been evolving from an atomized market dominated by country-level competition to a more consolidated market increasingly influenced by a handful of pan-regional players. The largest two pay-TV players in the region (and effectively in Brazil) are DirecTV (Sky) and América Móvil, and we expect their combined share of the market to increase going forward. In Brazil, we do expect GVT to gain market share over the next five years, but we don’t see it challenging the dominance of the two leaders,” she said.

Carolina Teixeira, senior consultant, Latin America – ICT, Frost & Sullivan, believes GVT is already a strong competitor in the pay-TV and broadband in Brazil and says this joint venture could be a good opportunity for the company “to strengthen commercial actions and focus.”

“With GVT’s recent expansion in one of the largest markets in the country, the city of Sao Paulo, which will require heavy infrastructure investments, the company will benefit by partnering with a robust group like EchoStar,” Teixeira said. “In addition, EchoStar’s will to install a factory in Brazil for building setup-boxes and antennas will be a great opportunity to increase productivity and scale. The company is a dominant participant in the U.S. market and has the know-how and structure to help GVT to explore more technological features and applications aggregating value on its TV products. On top of that, the partnership allows GVT a strong leveraging power of broadband subscribers with bundled offers.”

Teixeira believes GVT’s reputation for good customer service could be critical as it takes on the industry giants such as DirecTV in Brazil. “DirecTV is already a dominant DTH participant in the Brazilian market and is the second largest Pay-TV service provider, with 5.2 million subscribers. GVT is still a small competitor, with 510,000 subscribers, but with excellent customer perception. By obtaining a nationwide coverage with EchoStar 15 and a possible new satellite on the way, GVT will be able to explore a larger consumer base and to compete for a higher market share. It is important to highlight that GVT’s customer perception of quality is an excellent instrument to leverage and it must continue like this,” she said.

Marin-Sorribes says the total number of pay-TV subscribers in Brazil has almost doubled in the last three years, reaching 16.2 million subscribers at the end of 2012. For 2013, she says Pyramid Research are projecting 10 percent growth (17.9 million subscribers at the end of 2013). She says the economic momentum of the Brazilian economy over recent years and the popularization of DTH/satellite subscriptions as a result of a shift in operator strategies have mainly underpinned this boom.

In terms of how Frost & Sullivan sees the potential growth of the market, Teixeira adds, “Brazilian pay-TV market growth rates are still in two digit figures, but we expect smaller rates than the last two years, when we experienced euphoria in the market: from a 30 percent-25 percent growth rates, we’re expecting an 18 percent growth in 2013. This potential is still huge, since pay-TV household penetration in Brazil is around 30 percent, still behind the Latin America average and countries such as Chile and Argentina.”
With two major sporting events (the FIFA World Cup in 2014 and the Summer Olympics in 2016) to be held in Brazil over the next three years, the pay-TV market could likely see a significant upsurge. Marin-Sorribes says Pyramid Research expects 8 million new pay-TV subscribers between 2013 and 2016 in Brazil.