Is cable back on track?

14 Jun 2005

After years of lying in the doldrums, cable is back. Some would argue it never went away but there is no doubt that the promises made in the heady days of the late Nineties went largely unfulfilled. In reality, the troubles that cable went through were matched by the telecoms industry as a whole, but cable suffered. NTL and Chorus both underwent financial restructuring, with Chorus going into examinership and subsequently being sold to French company UGC. However, both companies are bullish about the future.

“Chorus had been over-leveraged with debt for years,” says Phil Friedman, CEO of Chorus. “This caused under-investment in the network and in new products and services. With examinership last year we were able to come out from underneath that and get new investment. Now we are upgrading our Cork networks, which are the largest of our cable franchises, and during 2005 we will be rolling out high-speed data in that city. I should point out that we have almost completed the rollout in Naas.

“In our wireless areas we have upgraded three more sites, which means the percentage of our MMDS customers who receive digital TV is now up to 80pc, so we are back on a roll and providing new services and servicing new areas. For 2006 we are looking to upgrade other areas such as Limerick and a few others. By 2007/2008, 90pc of our customers will be able to receive high-speed data from us,” he says.

The story at NTL is similar. “We now have 100,000 digital TV subscribers in our Dublin, Galway and Waterford franchise areas,” says Mark Mohan, sales and marketing manager at NTL Ireland. In addition our MMDS network is now 100pc digital. “In addition, we have 100,000 homes broadband ready and our Galway and Waterford networks are now completely upgraded to offer broadband.

“Overall cable is back on track,” he says. “But that doesn’t mean all cable operators are going to succeed or be market leaders. But we do believe across Ireland, the UK and Europe cable is making good progress right across the board. We do think that within our network service area we have done well and we have a very competitive product.

“We are in a good position vis-à-vis the competition in TV and broadband. We have a good eye to the future in terms of the triple play and we have a good, layered approach to product development.”

The triple play Mohan refers to is the combination of digital television, high-speed data and telephony. NTL withdrew recently from the telephony market following a safety scare but has plans to re-enter using new voice over internet protocol technology, a plan very similar to that of Chorus.

“We are looking forward to launching a telephone service,” says Friedman. “UGC has already launched such a service in several countries and we have been told that we will be on the map for 2006 in selected areas. So all the things cable was supposed to deliver in the Nineties, we are delivering now.

“During the late Nineties, when a lot of consolidation was taking place, cable companies were valued at between US$1,500 and US$2,000 per customer. If cable companies were changing hands today,” he says, “the value of customers would be between 30pc and 50pc of that. Chorus was a nice little company but we paid too much for some of our acquisitions and the interest on debt killed our cash flow. The same thing happened in Europe and the US.

“With a cleaner balance sheet and lower cost of customer acquisition in terms of equipment, the industry is in a strong position,” adds Friedman. “High-speed data has taken off, the demand is there. In 1999 price was way too high and customers didn’t know what to do with it. Now the costs are lower and demand is higher.”

By David Stewart