Important Irish Times Article on NTL and Chorus

Victor

This is not necessarily good news, but Eircom might now get their thumb out ....

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NTL and Chorus may face more pressure as rights expire
By Jamie Smyth

NTL and Chorus, the two main Irish cable companies, will lose the exclusive right to broadcast in their franchise areas from March 1st and could face extra competition from market entrants.

There is also growing speculation that both firms have been put up for sale by their parent organisations to reduce billions of dollars of debt built up during the internet boom.

US cable firm NTL, which has cable operations throughout Europe and the Republic, has $17 billion (€14.7 billion) debt and is expected to unveil a restructuring plan next week. This will include cutbacks in its capital expenditure programme that could undermine the company's ability to upgrade its network and introduce new services for Irish consumers.

Mr Aizaz Shaikh, senior telecoms analyst with BNP Paribas, believes NTL's 2002 and 2003 capital expenditure will be lowered to £600 million (€762 million) annually, from £925 million forecast.

This could delay NTL's revenue growth by one year and reduce the firm's subscriber targets, according to Mr Shaikh, who is based in BNP's London office.

NTL has already defaulted on its plan to upgrade its Dublin, Galway and Waterford networks to offer so-called "triple play" services - digital TV, telecoms and high-speed internet. It spent £70 million on this capital infrastructure during 2000 before halting its upgrade programme. It is estimated it would cost up to £300 million to complete this programme.

Plans by NTL to introduce voice-over-internet protocol technology to offer telephony services here may also have to be dropped due to the current cash crisis.

The difficulties faced by NTL are not unique in the cable sector and several other operators, such as UPC, will also have to undertake restructuring plans, according to Ms Susan Richardson, analyst with Gartner Dataquest.

"Cable firms got caught up in all the rush of the telecoms stocks at that time and overestimated the potential of digital TV, internet and telephony," she says.

But the huge cost of upgrading networks and making acquisitions has hobbled the sector. Cable firms are desperately seeking to increase their average revenue per subscriber, but many cannot afford to continue expensive network builds to offer the required "triple play" services.

Most international analysts think NTL is seeking a new investor to convert its debt into equity. It may also end up being acquired by a major international player such as AOL Time Warner, Liberty Media or Microsoft.

It could also decide to sell off its non-core assets such as its Irish and Swiss cable operations, although it is not clear this would satisfy its bankers.

"Both firms [NTL and Chorus] are up for sale and I don't think any reasonable offer would be refused," says Irish telecoms consultant, Mr Enda Hardiman.

"NTL overpaid considerably for Cablelink by a factor of two... There would be a paper loss if it sold," Mr Hardiman said

Potential bidders for NTL's Irish operations would include a range of US or UK private equity firms such as Apax Partners. In a similar fashion to the recent sale of Eircom, a successful bidder would probably hold onto the cable asset until valuations in the sector improved. But NTL would be forced to sell at a bargain price due to the current crisis in the cable sector and increasing competitive threats in the market.

Satellite provider BSkyB's recent entry into the Irish market has been dramatic and could hurt its own valuation. Sky already has 193,000 subscribers and is estimated to be claiming 10,000 cable and microwave TV customers every quarter.

A decision by the telecoms regulator to remove the cable firm's exclusive right to broadcast digital television services in the cable firm's franchise areas from March 1st is another blow. It opens the way for a number of regional TV deflector firms to enter the digital TV market. One of these companies, Southcoast,said recently it planned to offer services to 100,000 customers in the Cork area. The regulator's decision may also enable telecoms firms such as Eircom and Esat to provide TV over their own networks.

This may hit Chorus, the cable and microwave TV provider owned jointly by Independent News and Media and Liberty Media, because of its relatively dispersed subscriber base. It has significant customer relations issues and has failed to deliver on its proposed network upgrade due to cashflow difficulties.

Uncertainty over the intentions of its shareholders is also affecting Chorus. Independent News and Media has signalled that it would like to sell Chorus, and Liberty Media - which seems more interested in expanding in Germany.

But whoever owns the State's cable firms, Irish consumers can only hope that a potential bidder for NTL Ireland or Chorus is willing to invest millions to supply innovative services.

NTL and Chorus may face more pressure as rights expire
By Jamie Smyth



NTL and Chorus, the two main Irish cable companies, will lose the exclusive right to broadcast in their franchise areas from March 1st and could face extra competition from market entrants.

There is also growing speculation that both firms have been put up for sale by their parent organisations to reduce billions of dollars of debt built up during the internet boom.

US cable firm NTL, which has cable operations throughout Europe and the Republic, has $17 billion (€14.7 billion) debt and is expected to unveil a restructuring plan next week. This will include cutbacks in its capital expenditure programme that could undermine the company's ability to upgrade its network and introduce new services for Irish consumers.

Mr Aizaz Shaikh, senior telecoms analyst with BNP Paribas, believes NTL's 2002 and 2003 capital expenditure will be lowered to £600 million (€762 million) annually, from £925 million forecast.

This could delay NTL's revenue growth by one year and reduce the firm's subscriber targets, according to Mr Shaikh, who is based in BNP's London office.

NTL has already defaulted on its plan to upgrade its Dublin, Galway and Waterford networks to offer so-called "triple play" services - digital TV, telecoms and high-speed internet. It spent £70 million on this capital infrastructure during 2000 before halting its upgrade programme. It is estimated it would cost up to £300 million to complete this programme.

Plans by NTL to introduce voice-over-internet protocol technology to offer telephony services here may also have to be dropped due to the current cash crisis.

The difficulties faced by NTL are not unique in the cable sector and several other operators, such as UPC, will also have to undertake restructuring plans, according to Ms Susan Richardson, analyst with Gartner Dataquest.

"Cable firms got caught up in all the rush of the telecoms stocks at that time and overestimated the potential of digital TV, internet and telephony," she says.

But the huge cost of upgrading networks and making acquisitions has hobbled the sector. Cable firms are desperately seeking to increase their average revenue per subscriber, but many cannot afford to continue expensive network builds to offer the required "triple play" services.

Most international analysts think NTL is seeking a new investor to convert its debt into equity. It may also end up being acquired by a major international player such as AOL Time Warner, Liberty Media or Microsoft.

It could also decide to sell off its non-core assets such as its Irish and Swiss cable operations, although it is not clear this would satisfy its bankers.

"Both firms [NTL and Chorus] are up for sale and I don't think any reasonable offer would be refused," says Irish telecoms consultant, Mr Enda Hardiman.

"NTL overpaid considerably for Cablelink by a factor of two... There would be a paper loss if it sold," Mr Hardiman said

Potential bidders for NTL's Irish operations would include a range of US or UK private equity firms such as Apax Partners. In a similar fashion to the recent sale of Eircom, a successful bidder would probably hold onto the cable asset until valuations in the sector improved. But NTL would be forced to sell at a bargain price due to the current crisis in the cable sector and increasing competitive threats in the market.

Satellite provider BSkyB's recent entry into the Irish market has been dramatic and could hurt its own valuation. Sky already has 193,000 subscribers and is estimated to be claiming 10,000 cable and microwave TV customers every quarter.

A decision by the telecoms regulator to remove the cable firm's exclusive right to broadcast digital television services in the cable firm's franchise areas from March 1st is another blow. It opens the way for a number of regional TV deflector firms to enter the digital TV market. One of these companies, Southcoast,said recently it planned to offer services to 100,000 customers in the Cork area. The regulator's decision may also enable telecoms firms such as Eircom and Esat to provide TV over their own networks.

This may hit Chorus, the cable and microwave TV provider owned jointly by Independent News and Media and Liberty Media, because of its relatively dispersed subscriber base. It has significant customer relations issues and has failed to deliver on its proposed network upgrade due to cashflow difficulties.

Uncertainty over the intentions of its shareholders is also affecting Chorus. Independent News and Media has signalled that it would like to sell Chorus, and Liberty Media - which seems more interested in expanding in Germany.

But whoever owns the State's cable firms, Irish consumers can only hope that a potential bidder for NTL Ireland or Chorus is willing to invest millions to supply innovative services.

Victor

That article is at:
http://www.ireland.com/newspaper/finance/2002/0126/2623328810BZNTLCHORUS.html

Dustaz

Originally posted by Victor
The regulator's decision may also enable telecoms firms such as Eircom and Esat to provide TV over their own networks.

ROFLMAO

1. What network? The one that has the 70% 'line test failed' rate?:)

2. TV over internet is ****. period. Eircom had to make a lot of people redundant to discover this.

Boston

well about feicing time, ive been callign for this for ages. if you cant do the job, move over and let someone else do it. i allways though state protected monoploy's were an extremely bad idea.

while i doubt that anybody will be stupid enough to start layign cable, some people will be extremely interested in this.

jmcc

Originally posted by Dustaz

2. TV over internet is ****. period. Eircom had to make a lot of people redundant to discover this.

The people that Eircom used were complete losses and just did not understand the pay television business. There was a rumour that one of these characters had commented that I knew nothing about conditional access/pay tv at a meeting in the UK and was nearly laughed out of the place.

Pay TV over the internet would work if a: the bandwidth was good enough; b: the programming was outstanding and c: the conditional access (security) was good. Given that Eircom didn't have a clue about any of these factors (I think Morondo wanted to produce some chickenhead MTV-like channels) they did not stand a chance. If there is to be any movement on this, Esat/BT may be the ones to do it. However since Ireland is such a small market and there is such extreme competition here, Eircom and Esat should concentrate on bandwidth provision rather than services. Security wise, I could probably go through any system that Eircom would come up with in a few minutes.

Regards...jmcc

Coyote

Eircom were trying to be both the network and the content and they are far too small to ever be able to do that. you need to be like "AOL Time Warner"
this is what they should be looking at
Link posted by dahamsta to OZ setup

dahamsta

AOL Time Warner is probably a bad example Coyote, they made the same mistakes as everyone else, and they're already being slagged for making the wrong acquisitions at the wrong time. It's possible it could work out at some time in the future, but yes, service provision and content should be separated, at least at this point in time. The ESB and the article you pointed to are the right idea.

If Eircom try to replicate what they were trying to do before, they're dummies. They should concentrate on leveraging their investment and their primary resource - the infrastructure. They should also divest themselves of Eircom Net immediately - it's anti-competitive, and although it won't bring in much, they can use every cent at the moment.

Some might say that their current behaviour /is/ Eircom leveraging their investment, but of course it's not, they're just acting anti-competitively, they're being greedy. Settle with the Regulator and get on with it Eircom, you can't win.

adam

Dustaz

Actually i wasnt even referring to the sheer insanity of eircom trying to be service provider and content creator at the same time. Thats pretty blatantly obvious.
The fact is that to get a decent TV picture over the internet, you need a WIDE spread of pretty huge bandwith pipes into peoples homes.
I have yet to see an example of a commercially succesful implementation of it anywhere.

As for the content that morondo (rofl ) wanted to produce...oooh the stories i could tell:)

SkepticOne

Originally posted by Dustaz
The fact is that to get a decent TV picture over the internet, you need a WIDE spread of pretty huge bandwith pipes into peoples homes.
I have yet to see an example of a commercially succesful implementation of it anywhere.

Kingston Communications in Hull, UK are an example. I don't know how successful they are but they do provide video on demand and 60 channel digital TV.

TV over ADSL may use IP but it does not use the Internet so it doesn't suffer the problems of Internet congestion. It uses a dedicated path from the video equipment to the set top box. I've read reports that the quality is slightly lower than broadcast video but this might be due to out-dated compression techniqes.

The advantage of TV over telephone wire as opposed to cable is that you have a dedicated high bandwidth pipe. Since the switching of channels is done at the exchange end, there is no technical limit to the number of channels that can be carried.

Boston

hes rights i saw something on bbc news afew years back about this, it wasnt pay per view as we knew it, you could like request programs to watch and when to watch them. very nice

sceptre

Originally posted by SkepticOne
Kingston Communications in Hull, UK are an example. I don't know how successful they are but they do provide video on demand and 60 channel digital TV.

Yes, but Kingston are a "special" company in lots of ways (long history of community (public) ownership, genuine commitment to services and they actually do a good job).

Dustaz

Originally posted by SkepticOne
I've read reports that the quality is slightly lower than broadcast video but this might be due to out-dated compression techniqes.

Ive seen the quality of video streamed over IP and unless you have a huge pipe (fnaar:) ) the quality is nowhere NEAR digital.
Admitedlly that was about 6 months to a year ago but i doubt it has improved to such a large scale.
Remember that any company setting this up is in competion with Digital TV not Analogue TV.

Dustaz

Originally posted by Boston
hes rights i saw something on bbc news afew years back about this, it wasnt pay per view as we knew it, you could like request programs to watch and when to watch them. very nice

Yes, Video on Demand.


I doubt Kingston TV are going to challenge Time/Warner or News International in the success stakes tho.

We just had a thread which said that people didnt really need broadband just friaco. That is why a company like kingston could never set up shop here. They have no target audience and they wont have one for years to come - Unless of course Eircom price 2mb connections a lot lower or the ESB comes in like superman to create a wired Ireland ......

irishguy

i think eircom should offer a package like
1)voice over ip
2)high speed net access
3)digital tv
4)telephony service
5)mabey pay per view from sky and video on demand the could also connect to one of the astra`s and that would give them a few hundred digital and radio channels
if they offered a service with number 2 3 4 5 and charged about 100 irish pm [this would include line rental] if they offered a package like this they would only have to upgrade there network area by area [as demand increased] this would mean they would get more per customer and would incourage customers to stay with them instead of using esat for the telephone chorus/ntl for tv it would mean they would stop loosing customers to other companys and anyone that wanted to compeat with them would have to offer more services or be very cheap. also the could install something like vdsl so they could offer scabability i.e they could for very little cost to them offer more telephone numbers higher net connection up to about 2mb/s or so and offer loads of tv and radio channels to existing customers.if eircom offered this service most ppl would change to them in a heartbeat.also they could offer a capedd service with only 56k acess over there vdsl pipe and in time it could be upgraded if the customer wished.if this happened they would have very little competion from esat.

dahamsta

We just had a thread which said that people didnt really need broadband just friaco.

No it didn't.

adam

irishguy

i just read this . its another option 4 eircon if they installed vdsl then rented out the bandwith to different companys which offered digital tv,telephone,video on demand,voice over ip,network gaming,radio. the end customer could choose between the different opperators and switch as much as the want between them they would have a choise of tv from say ntl,chorus,aol time warner and a choise of telephone from ericon,esat,[insert company name],[insert company name] theycould get net access from eircon,esat,aol ect you get the idea
the esb could also offer this service over there new backbone but there package would have the added benifit of esb as well

SkepticOne

Originally posted by Dustaz

Yes, Video on Demand.

I doubt Kingston TV are going to challenge Time/Warner or News International in the success stakes tho.

That is true, but if they were operating here they would be up against NTL and ahem, Chorus.

Quality issues notwithstanding, I still think that companies should not be prevented from attempting TV over ADSL through the use of exclusive licences for cable companies.

Boston

Originally posted by Dustaz


Yes, Video on Demand.


I doubt Kingston TV are going to challenge Time/Warner or News International in the success stakes tho.

We just had a thread which said that people didnt really need broadband just friaco. That is why a company like kingston could never set up shop here. They have no target audience and they wont have one for years to come - Unless of course Eircom price 2mb connections a lot lower or the ESB comes in like superman to create a wired Ireland ......

no not just video, programs like eastenders and neighbours.

acous

Boston: "vid·e·o adj. Of or relating to television, especially televised images."

Dustaz: Video (over IP) over DSL shouldnt be too much of a strain, I don't know the figures but I wouldn't be so quick to dismiss it if I were you. No need for speculation here (yeah, I know I'm guilty too:)), there's plenty of experts who know what's possible and what's not.

Dustaz

Originally posted by Acous

Dustaz: Video (over IP) over DSL shouldnt be too much of a strain, I don't know the figures but I wouldn't be so quick to dismiss it if I were you. No need for speculation here (yeah, I know I'm guilty too:)), there's plenty of experts who know what's possible and what's not.

I have been having this exact same discussion with people I work with for the last 4 years. In that time there have been 3 department heads who advocate the idea of Interactive TV (over broadband) or VOD over broadband. Each one of them has said 'Were on the verge of a revolution, EVERYONE will be doing this next year'. Ive laughed in thier faces each time and have been proved right each time.
The simple fact of the matter is that Interactive TV and VOD is only Viable via satellite or cable - certainly in this country, and mostly thats the case in the rest of the world.

Just because its vaguely possible doesnt mean anyone should waste thier time trying to compete with BSkyB.
Half the reason we have waited so long for ADSL is that eircom were pissing about with half baked ideas for VOD.

dahamsta

I think the reason people get confused, Dustaz, is that it /is/ viable, and it /will/ happen; it just won't happen for a long time - a very long time here, at the rate we're going. Like I said in another post, there is going to be a paradigm shift in telecommunications in the next five to fifteen years, from analog to digital, from PSTN to packets. Technologists talk about this all the time, have been for years now, but the problem comes when the pundits pick up on it (usually the same pundits who told us WAP was the bees-knees and SMS wasn't going anywhere), middle management reads what the pundits have to say, and try and act on it. And you can't act on it right now, because the infrastructure simply isn't ready for it.

Eircom got ahead of themselves - waay ahead of themselves - when they tried to roll out these types of services a couple of years ago, and they should be thanking their lucky stars that the Regulator did what she did, because otherwise they would have ended up looking like even bigger prats than they do now. Eircom has no experience in content services of this kind, and they /shouldn't/ have that experience, they should stick to what they do (let's be honest, they don't even do that very well). But they listened to the pundits, and saw the huge "successes" - like Pixelon, second only to Enron I reckon - and jumped on the bandwagon.

Seriously folks, drop VoIP, VoDSL, VOD and all the other acronyms that get bandied about, they're not ready for prime-time, they're not ready for us. As realist said to murcielago in another thread, let's worry about availability before we even begin to contemplate this other stuff. When we have something, we can start attacking price, QoS and "value-added" services.

adam