Last week Sky announced that in 2018 it would introduce an OTT broadband service which would include its SkyQ set-top box, and targeting the 2 million homes in the UK (and 6 million in Europe) which had no possibility of satellite dish reception.
The news went down very badly with investors holding stock in Luxembourg-based satellite operator SES and Paris-based Eutelsat, both of which distribute Sky’s channels and services.
Now a leading investment bank has come out with a report to clients saying bluntly that they should sell their shares in Eutelsat (although they should ‘HOLD’ their investments in SES).
Equity analyst Laurie Davison of Deutsche Bank admits that the debate over whether satellite will be replaced by broadband is “overly simplistic” but argues that the Sky move is a genuine negative. “The advances in video delivery over DSL are outpacing incremental demand from more HD & UHD. There is a strong stock opportunity here. SES is the supplier to Sky, but the implications are broader and ultimately Eutelsat is more exposed to Video decline. SES stock is down 7% vs Eutelsat down 5%,” he says.
The report continues: “The debate over whether satellite will be replaced by TV over broadband (both IPTV and OTT) is being put too crudely. We have explained that, for the foreseeable future, satellite will remain the most cost efficient & practical means to deliver mass reach channels of over 2 million simultaneous viewers. Major pay-TV platforms will not be turning off satellite to move to DSL in the near, or even mid-term. But, the barriers to DSL delivery: sufficient bandwith in local access and congestion in core networks, are falling. Falling costs and rising bandwith is making it more viable for smaller channels to shift to IP, with the customer benefits of interactivity which satellite cannot deliver. This move is a landmark – the first time Sky has offered a full service, equivalent to the cable/sat offer, over terrestrial.”
Davison argues that SES is out of the worst point-to-point exposure and more diversifies into services [than Eutelsat] and more progressed and advanced in Ultra-HD.