Fitch: Turkish telecom companies face increasing triple-play competition

LONDON

Fitch Ratings said it has expected that increased focus on bundled services within the Turkish telecoms market could lead to an increase in content costs, especially for live football broadcast rights in a note on Aug. 24. 

Expanding pay-TV services can help telecoms operators to maintain and grow mobile and broadband market share, but high content costs could erode profitability, according to the rating agency. 

The Turkish telecommunications market is becoming increasingly convergent as the major operators begin to offer pay-TV services as part of their triple or quad-play service bundles. Türk Telekom launched satellite TV services in July to supplement its IPTV product, and Turkcell has a growing IPTV offering, with 16 percent of its fiber customers taking up triple-play services at end-June 2015.

“Football rights are likely to make up an important part of pay-TV operators’ content offerings. In November 2014, Türk Telekom acquired the rights to UEFA European football (champions and Europe leagues) for three seasons, beginning in 2015-2016, and although the cost was not disclosed, we expect it to be sufficiently offset by reduced direct sport sponsorship,” said the statement. 

D-Smart, the second largest pay-TV satellite broadcaster with 1.74 million subscribers, previously held the UEFA rights.

The leading Turkish pay-TV operator is Digitürk with its satellite TV offering serving 2.7 million customers at end of the first quarter. It owns the rights to broadcast the Süper Lig, the country’s top football league until the end of the 2016-17 season. The company’s initial four-year deal, which ended with the 2014-15 season, cost $321 million per season, but this was extended for two more years at a reported cost of $450 million per season - an increase of 40 percent. In their investor call in the second quarter Turkcell stated that they are interested in continuing to grow their IPTV offering, and to potentially acquire sports content to increase its attractiveness. With Türk Telekom having already secured the UEFA European football rights for three years, the Turkish Super Lig rights could see a lot of interest when they come up for auction in the second half of 2016.  

“Having recently been acquired by Qatar-based Al Jazeera’s sports arm, we expect that Digitürk will have significant resources to try to hold on to these rights,” said Fitch, adding that Turkcell, however, with a net cash position, has signaled that it is planning to run a higher leverage profile and this could release significant resources to bid for these rights. D-Smart and TT may also be interested.