Market Insight

BT Sport gains half a million customers

July 24, 2013

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UK incumbent telco, BT, has added more than half a million customers to its soon to launch BT Sport channels, though TV uptake remains stagnant. On the broadband side, BT added 95 thousand retail broadband customers and ended the quarter with 6.8m broadband subscribers, with a 12 per cent uplift in growth compared to the same quarter last year.

BT Sport, which launches on 1 August, has been available to order since May, and is an attempt to boost BT's underlying core ISP business. In May, BT announced its plan to make BT Sport available to all BT Broadband customers, via its IPTV platform, online and via satellite; using premium sport content to push broadband services, particularly fibre.

During the quarter ending 30 June, 197,000 customers either upgraded or signed up to BT's superfast fibre (VDSL or FTTP) network and the company ended the period with 1.5m high-speed broadband customers. BT Openreach fibre optic network now passes over 16m homes and business in the UK. BT, along with the government, was criticised earlier this month by the National Audit Office that the deployment or rural broadband is too slow and lacking competition, with BT being the only supplier and likely to win all of the 44 rural broadband deployment bids.

The majority of the 500,000 BT Sport customers thus far have been existing broadband customers renewing their broadband contract, rather than new BT broadband customers, and taking BT Sport via satellite platforms. As a result, the television service has not seen any increase in net additions, adding 23,000 customers in Q2 2013, in line with quarterly net additions in 2012 and below that seen in Q1 2013.

Though BT Sport is being advertised as a 'free' channel for BT Broadband customers, it still requires access to a set-top box if it is to be watched on the BT TV platform. At an upfront cost of £199 or a monthly fee of £5, it acts as a disincentive for existing Sky customers or Freeview customers to churn in favour of BT TV. Consequently, the option to view BT Sport online or via satellite remains an attractive option for new and existing BT Broadband customers, however, could have implications for other ISPs, particularly Sky.

TalkTalk revealed it has gained an additional 160,000 homes in the past quarter, pushing its total subscriber base to 390,000. TalkTalk added 22,000 customers to its broadband base, remaining the fourth largest player in the UK broadband market. BSkyB is to report half year results tomorrow.

The results are not surprising given BT's plans to protect its broadband business, with little focus on monetising TV. The company's KPIs suggest that 8,000 of BT's ADSL/ADLS2+ customers either left or upgraded to a high speed package, while BT's UK retail consumer broadband and TV revenues fell for the first time in two years, generating £300m in revenues in Q2 2013, down from £305m the previous quarter.

BT has indicated that IPTV net additions have been dampened due to 'a few tens of thousands' churning as a result of Sky Sports 1 and Sky Sports 2 no longer being available via DTT. Access to Sky Sports 1 and Sky Sports 2 via BT now requires a fibre broadband connection, with those previously subscribing to Sky channels via BT TV no longer have access to the channels, unless upgrading their broadband tier. However, there has been no obvious increase seen in fibre uptake suggesting that it is more likely that a number of consumers are churning from BT TV services as a result of no longer having access to Sky channels, rather than upgrading to the more expensive BT high-speed broadband proposition.

BT has indicated that the majority of BT Sport customers at the moment are via satellite, once again highlighting the importance of Sky as a provider of premium sports content. As indicated by IHS previously, Sky TV customers with a BT broadband subscription will effectively get access to BT Sport channels free with no incentive to churn from Sky TV. The BT TV proposition on its own may not be enough for consumers to churn from Sky in favour of BT, due to its limited channel line-up - however the offer does provide BT with some protection from Sky's broadband offer. The requirement to upgrade to a fibre connection on a Vision+ box, and no launch of linear channels including Sky Sports on YouView, are likely to act as a disincentive for customers to switch to BT.

BT also continues to offer TV services on two set-top boxes, with linear channels yet to be launched on the newer YouView set-top box. The discrepancies in content on the two platforms are likely to cause confusion among prospective customers. Linear channels are expected to be launched in the coming month.

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