4 takeaways from Digicel’s anticipated entry into the cable TV market

Digicel is well known as a mobile/cellular provider, with a presence in 32 markets in the Caribbean, Central America and Asia Pacific. However, recently, it has been acquiring a number of cable/subscriber TV operations across the Caribbean. Here are four takeaways from those activities.

Over the past several months, Digicel has made a spate of purchases of cable/subscriber television (TV) operations across the Caribbean. As at the time of publishing, the firms acquired would give Digicel an operation in six countries from which to jumpstart its entry into the cable/subscriber TV market (Exhibit 1). However, its most recent acquisition of majority stake in International Media Content Limited, the parent company Sportsmax and North American broadcaster CEEN-TV, has given the firm virtually immediate access into 23 markets.

Exhibit 1: Select cable TV acquisitions by Digicel between 2013 and 2014 (Source: Digicel Group)

Without a doubt, Digicel would have expended considerable sums –hundreds of millions of United States Dollars – on those acquisitions; hence they are likely to be crucial components in is longer term strategic thrust and where the future of technology is going. Here are four things that we can take away from the firm’s recent activities.

1. Voice is dead

Although telecoms firms across the region have been avidly opposing services that use Voice of Internet Protocol, voice services is just one of many that the Internet can support. More importantly, compared with other types of information transmitted over the Internet, for example, text, images and photos, generally voice communication consumes relatively little bandwidth, and tends to be seen as virtually inconsequential by many. Furthermore, voice tends not to be the way the most active demographic on the web (those between 18 and 29, Pew Institute) communicate, which again underscores the limited attention it tends to be given.

The Internet has changed how voice, especially mobile/cellular is perceived, and consequently its value. It is no longer the cash cow for telecoms firms, where there were very clear and well-known rules, along with a consistent and predictable value and revenue. In today’s mobile/cellular communication space, voice service is a secondary capability, behind texting and data services, and a strategy built primarily around voice – as Digicel’s appear to have been for several years – is no longer tenable.

2. The Internet is the new playground

Following from the previous point, the emergence and dominance of the Internet – as a technology and infrastructure used by telecoms companies to deliver their services, and as the medium of choice by consumers to access and use a broad range of services – should not be underestimated. Current thought is that the Internet will continue to dominate into the foreseeable, as its full potential and the opportunities that can be harnessed through it, are yet to be fully realised.

For an entity, such as Digicel, which had built dedicated mobile/cellular networks through which to deliver mobile/cellular services, the changing landscape is likely to have had it feeling somewhat pigeonholed. Hence for the more astute, those changes would have been an impetus to update their infrastructure and roll out new Internet-based services, such as the “4G Broadband” service using WiMax that Digicel offers in a number of countries across the Caribbean.

3. Content is, and will continue to be, king

The Internet is a medium for content. Though the success of social networks such as Facebook, Twitter and LinkedIn, is undeniable, video traffic is expected to grow and dominate into the future. According to Cisco report published earlier this year:

• 55% of all Internet traffic will cross content delivery networks by 2018 globally, up from 36% in 2013
• IP traffic will grow at a compound annual growth rate (CAGR) of 21% from 2013 to 2018
• mobile data traffic will grow at a CAGR of 61% between 2013 and 2018
• globally, IP video traffic will be 79% of all consumer Internet traffic in 2018, up from 66% in 2013 (and does not include video exchanged through peer-to-peer (P2P) file sharing)
• all forms of video (TV, video on demand (VoD), Internet, and P2P) will be in the range 80—90% of global consumer traffic by 2018.

In light of such trends, it may not be enough to own and operate the networks upon which all of that traffic – that content – will be transmitted. Consequently, the acquisition of Sportmax has potentially catapulted Digicel into the content delivery space. It would have access to the 23 markets already served by Sportsmax, and be in a position to sell not just capacity its networks, but also access rights to content.

4. Those who control the pipes still control the game

However, with all of the focus on content, it is easy to overlook the importance of the infrastructure – upon which the successful and timely delivery of all of that content depends. Though Digicel has full control of its terrestrial networks, through which its services are delivered, for the most part, its international traffic in the Caribbean would be handled by a third party, such as a Columbus Networks or Cable and Wireless Communications.

It therefore perhaps should not have been a surprise when Digicel started to secure submarine cable licences and acquire submarine cable systems across the region. The most prominent transaction was that with the Loret Group and Caribbean Fibre Holding, which resulted in Digicel owning a 2,100km submarine fibre network from Guadeloupe to Trinidad and Tobago.

The strategy to acquiring submarine cable networks across the region will allow Digicel to position and market itself as a “full service provider”, especially for international clients and to be further recognised as a truly global player. However and perhaps more importantly, it also allows the firm to position itself in respect of content delivery, since it now controls Sportmax. All of that sports coverage can be delivered to countries across its newly acquired submarine networks, thereby increasing the overall value of all of its networks and of the firm itself.

Image credit:  Jonas’ Design (flickr)

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