Broadband TV is the next big thing for Nordic Telecoms

STOCKHOLM — Nordic telecom operators are increasing their broadband Internet distribution of television, but it will take some time before they see a return on investment, analysts say.

A full-featured Internet Protocol TV service was launched by Denmark’s TDC AS in February, while TeliaSonera AB has launched a major marketing campaign in its home country. Telenor AS A of Norway currently offers IPTV services in Sweden and plans to launch a major new service next year. However, analysts are cautious about the near-term prospects for this new market, “It’s something they need to do in order to try and secure future growth. However, there are reasons to be cautious about the chances of rapid success,” said Standard & Poor’s Equity Research analyst Bengt Moelleryd..

With traditional fixed-line business declining, Nordic IPTV companies are seeking new revenue streams. IPTV delivers TV programs over a broadband Internet connection to an ordinary television set.

The major operators of the service are France Telecom, Telecom Italia SpA, and Telefónica SA. CIBC World Markets recently reported that IPTV in Europe is attracting subscriber levels that warrant serious attention.

A high level of broadband penetration in the Nordic region makes the service particularly attractive to Nordic operators. The Nordic region achieved the highest broadband penetration in Europe in July 2006, with 23% of the population in Sweden and 29.6% in Denmark, according to European Union figures. Overall, Europe’s broadband penetration rate was 15%.

IPTV was a pioneering technology for TeliaSonera. In January 2005, the company launched service in Sweden, followed by Estonia and Lithuania, and by the summer, the company expects to launch the service in Latvia. IPTV will be rolled out throughout the Nordic region, but a timetable hasn’t been announced.The Swedish telecommunications company TeliaSonera is offering free IPTV to its broadband subscribers as part of its marketing campaign.

At TeliaSonera’s fourth-quarter earnings presentation last month, CEO Anders Igel said, “TV will be of paramount importance.” Igel declined to say how much revenue the company is aiming for. Depending on the success TDC has in Denmark, the company may start selling IPTV service in other Nordic countries. Telenor is developing an upgraded version that will be available across Scandinavia next year. The company does not have operations in Finland.

The revenue that telecom companies generate from IPTV is still a small percentage of their total revenue. In June 2006, around 2% of the four million households with televisions in Sweden, the region’s largest market, had the service.

Research firm IDC estimates about 14% of Swedish households will be connected to IPTV by 2010. According to IDC, IPTV revenue will grow to $130 million in 2010 from $16 million in 2006. “IPTV offers a major new revenue stream for service providers,” said Per Arne Sandegren, an analyst at IDC in Stockholm.

Prior to launching IPTV, the three largest Nordic operators already had traditional TV services. TDC has cable TV in Denmark, while Telenor offers cable TV in Norway and satellite in all Nordic countries. There is cable TV from TeliaSonera in Denmark and the Baltic State.

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