Market Insight

Bulsatcom aims to consolidate its Bulgarian pay TV lead with satellite launch

June 29, 2017

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Bulgarian operator Bulsatcom has successfully launched the country’s first geostationary satellite, BulgariaSat 1, in cooperation with Ellon Musk’s SpaceX. The satellite, which launched on June 24 2017, is owned and operated by Bulsatcom and is the second satellite to be launched in Europe with 100% private investment. The total value of the project is $235 million, with an estimated return on investment of 10 years. 


Our analysis

By expanding its service offering through the launch of BulgariaSat 1, Bulsatcom hopes to preserve its leading position in the Bulgarian direct-to-home (DTH) satellite TV market. Bulsatcom has so far been using the Greek satellite HellasSat 2, however the lower capacity of that satellite did not allow the company to offer a wider range of channels to its customers. The satellite TV operator is planning to start broadcasting via BulgariaSat 1 at the end of July 2017, however it has stated that it will continue using HellasSat 2 after the new satellite is operational. Bulsatcom is initially planning to use its satellite to expand its DTH TV offering in Bulgaria and Serbia, with a focus on increasing the number of HD and ultra HD channels offered and improving the price-quality ratio of its service to the end consumer. 
About 46% of the capacity of Bulgaria Sat 1 will be used by Bulsatcom for DTH broadcasting, whereas the remaining 54% will be rented out to other interested parties. The beam of the new satellite will cover Europe, the Middle East and North Africa, with a primary focus on the Balkans. The company’s initiative was partially born from the fact that until now, there was no satellite with this particular regional focus. Despite strong competition in Europe’s satellite sector from well established players such as Astra and Eutelsat, one of the main goals of Bulsatcom’s sizeable strategic investment is to create a “regional hotspot”. With increasing consumer demand for channels in high definition, the availability of capacity on BulgariaSat will likely generate interest from other DTH providers in the region. In a broader perspective, this will positively affect the overall development of satellite TV in the region in terms of the breadth and variety of offerings.  
There are currently three major players in the Bulgarian satellite TV market: Bulsatcom, the incumbent telecommunications operator Vivacom and Telekom Austria’s Mobiltel. Vivacom broadcasts via the Intelsat 904 satellite, while Mobiltel uses Eutelsat 16A. At the end of 2016 Bulsatcom was the largest operator in terms of subscribers, accounting for almost 70% of the pay DTH market in Bulgaria and over 40% of the total pay TV market. 
Despite its position as the largest DTH operator in Bulgaria, Bulsatcom is facing growing competition in the pay TV sector, particularly from Mobiltel, which recently acquired the major cable operator Blizoo in 2016. Mobiltel has also challenged Bulsatcom in the sports sector. Until recently, Bulsatcom had exclusive rights on a number of sports channels, which it leveraged as a method of customer retention. In 2017, however, Mobiltel entered the market with three of its own sports channels – Mtel Sport 1, Mtel Sport 2 and Edge Sport, having secured the rights to a large portion of the content (i.e. the ATP World Tour Masters) previously held by Bulsatcom. Despite this setback, Bulsatcom will look to mitigate the negative effects of relatively limited sports content through its plan to introduce a larger number of channels in HD and Ultra HD, once BulgariaSat is operational. 
As it moves from satellite capacity rental to satellite ownership, Bulsatcom will shift its strategic positioning as a business. The satellite launch represents part of a wider strategy to secure a competitive advantage against Vivacom and Mobiltel, both of which offer attractive bundles through well-developed infrastructures. By expanding its pay TV offering via BulgariaSat 1 and entering the mobile market, Bulsatcom is hoping to reassert its position as a leading local market player. Shortly after Mobiltel launched its DTH service in Q3 2014, Bulsatcom announced that it had secured funding to build its own 4G/LTE network, which in May 2017 resulted in Bulsatcom launching its own mobile services – mobile data and softphone (voice over IP). 
In the short term, positive buzz created around the satellite launch and extensive local media coverage is likely to generate uplift in Bulsatcom’s subscribers. Furthermore, upon completion of work around bringing BulgariaSat into operation, the company also plans to focus deeper on expanding the coverage of its LTE network beyond the major cities where it currently operates. In the long term, any customer retention and growth in subscriber base will depend on the company’s sustained efforts to capitalise on the momentum created in Q2 2017. A first step towards this has already been taken, with Bulsatcom offering up to 72% off TV, fibre broadband and softphone packages from mid-August, following the planned transmission switch to Bulgaria Sat 1. However, as greater variety and improved quality of services become the standard in Bulgaria, pay TV operators such as Bulsatcom may have to differentiate their services via exclusive and original content to sustain subscriber growth. Bulsatcom’s major market moves may also present financial challenges if the operator sees a slow return on its investments. Currently, ARPU for DTH in Bulgaria is over a third lower than the average for the CEE region and six times lower than the average for Western Europe. Over the following period, Bulsatcom will need to rely on innovation, positive media coverage, extended services (including IPTV since 2015) and discounted offers to continue to attract subscribers and consolidate its position as market leader. 

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