Kabel Deutschland The Future of Cable in Germany Ernst Uhlig / Director Level 4 03. November 2003...
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Kabel Deutschland
The Future of Cable in Germany
Ernst Uhlig / Director Level 4
03. November 2003
Köln
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 2
Level 4 strategy - agenda
•Market environment and challenges
• Strategic weapons and options
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 3
•What does the industry structure and dynamics look like today?•How severe is the HL4 challenge? Is it getting worse or better?•What is the economic impact on KDG?
Market environment and challenges – key questions
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 4
• Effects of price increase loss of subscribers•Growing density of L4 networks increasing risk of L3 overbuild
Growing urgency to act
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 5
Market environment and challenge - issues
Customers & market
L 4 competitors
Pricing & Economics
• Subscriber development
• Market structure & shares
• Regional differences
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 6
Growth potential from new households limited
•Number of households in Germany– 1998: 37.340 Mio.– 1999: 37.984 Mio.– 2000: 38.383 Mio.– 2001: 38.681 Mio.
Only slight increase of total number
Number of new houses:2002: 0,290 Mio.
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 7
• Total number of private households 2003: 38.443 Mio.• Equipment of private households with:– Personal Computer: 57,2 %– Internet Usage: 36,0 %– TV: 95,9 %–DVD-Player: 14,1 %– Video Recorder: 68,9 %
Already overall high penetrationwith “Multimedia“ equipment – still increasing
The structure of the German market
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 8
•Number of households (WE) by region
Schleswig Holstein
1.340 Mio
Mecklenburg
Vorpommern
0.830 Mio
Hamburg0.922 Mio
Nieder-sachsen
3.684 Mio
Bremen
0.356 Mio
Berlin
1.859 Mio
Brandenburg
1.184 Mio
Thüringen
1.109 Mio
Sachsen
2.133 Mio
Sachsen-Anh.
1.209 Mio
Rheinland-
Pfalz
1.853 Mio
Saarland
0.514 Mio
Bayern
5.632 Mio
Baden-
Württember
g
4.839
Hessen
2.840
Reg1 Reg2 Reg3 Reg4 Reg7 Reg9 KBW iesy ish
3.092 Mio
4.040 Mio
3.043 Mio
4.451Mio
2.367 Mio
5.632 Mio
4.839 Mio
2.840 Mio
8.416 Mio
NRW
8.416
GNP – Gross National Product ( Year 2000, EU = 100)
GNP
111,8
ranking2
GNP
99,6
ranking3
GNP
84,2
ranking5
GNP
69,6
ranking6
GNP
96,7
ranking4
GNP
124,0
ranking1
GNP
120,8
GNP
142,6
GNP
119,8
Regional break-down of the German market
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 9
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
Region 1 Region 2 Region 3 Region 4 Region 7 Region 9
cable (in %)
Sat (in%)
Terr. (%)
Share of cable / satellite / terrestrial in KDG regions
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 10
LE4 and housing associations
L3 operator (KDG)
L4 operator (e.g., TC, PC, ewt, Bosch)
Housing companies / associations
TV households / end customers
Own head end
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 11
Types of customer relationships
Standard marketFormer
DeTeKSDirect
WoWi & HA
Level 4 operators TC-Group
Bosch Primacom
ewt
Otherlevel 4
providers
2.951 748 3.342
2.591 388
10.020
Direct customers + own level 4 customers
6.321
Direct & indirect WoWi & HA
3.699
Numbers of subscribers in Mio. / WE
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 12
Market environment and challenge - issues
Customers & market
L 4 competitors
Pricing & Economics
• Subscriber development
• Market structure & shares
• Regional differences
• TV value chain
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 13
TV value chain
Content creation
Channel programin
g
Network operations
Signal delivery
LE3
Inhouse network
LE4
Marketing
Customer service
Billing
Set Top Box
Cable modem
Studios & Channels L3-Operator
N4-Operator
PlanBuild
Operate
Acquisition Retention
Technical/product service
Billing/collection
Rental/ Provisionin
g
TV Household/Customer
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 14
Market environment and challenge - issues
Customers & market
L competitors
Pricing & Economics
• Tariff structure• Tariffs for L4• Relative economics
• Subscriber development
• Market structure & shares
• Regional differences
• TV value chain
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 15
- €
1,00 €
2,00 €
3,00 €
4,00 €
5,00 €
6,00 €
7,00 €
8,00 €
9,00 €
10,00 €
10 50 100 250 500 1000
WE/ÜP
Entgelt alt
Entgelt aktuell
Before Nov 02
After Nov 02
20
standard market
individual market
• standard market: average price increase 26 % • individual market: average price increase 33 % – not
“linear“
Pricing – before and after November 02
All prices are „Pauschal“
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 16
Level 4 strategy - agenda
•Market environment and challenges
• Strategic weapons and options
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 17
•What are our basic options to master the challenges?•What are our relative competitive advantages?
Strategic weapons and options – key questions
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 18
• Strengthen cable against alternative media• Market digital programmes• Offer new interactive services in defined areas
Basic Options
Berlin and Munich
Kabel DeutschlandThe Future of Cable in Germany, Köln 03.11.2003 Seite 19
Cooperation models for Digital TV with LE4
Source:Marketing working group, Solon
* Optional** for acquisition support
Strong Weak
Profit interest
Level 4 (incl. B1)
Interest in customer relationship
Active sales support
Segments and positions
Housing Associations / Property Management / Others
Professional Level 4 Other L4
Demanding additional digital TV offers
Prof. Housing Associations
Property Mgmt / Others
Transport model Sales partner model Reseller model
One time acquisition fee** *
Revenue share "Transport"
Revenue share "Operations"
Cooperation models
*