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China tariff uncertainty limiting investment, expansion for American companies

2019 Outlook Turbulence But Cards To Play

2019 Outlook For Latin American Multichannel Broadband Market

Latin American Multichannel Broadband Market 2018 Recap

Technology Platforms For Monetizing Connected TV Have Lots Of Room To Grow


China tariff uncertainty limiting investment, expansion for American companies

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The China-U.S. trade war has had a bruising impact on some American companies, and it could get worse if President Donald Trump follows through with even higher tariffs in the event that the two countries cannot resolve their differences by March 1.

Many American companies are putting decisions on hold until the outcome is clear.

"Uncertainty is bad for business," Jake Parker, vice president of China operations for the U.S.-China Business Council said in an interview with S&P Global Market Intelligence. "When you're uncertain you don't hire, invest more in the market, or plan major expansions."

The council's members, which include Target Corp., Tyson Foods Inc. and several other big box retailers, are still evaluating whether the trade conflict is a short-term or a long-term phenomenon, according to Parker. Moving sourcing out of China could become a necessity.

"In the meantime and until the answer to this question is clear, most companies have delayed new investments," he said.

Washington began to levy tariffs on goods from China in March 2018 as the Trump administration embarked on a campaign to reduce the U.S. trade deficit with the world's largest exporter. A tariff of 10% was slapped on a variety of imports, including electronics, furniture and food.

Some companies have applied to the government for exemptions but few have been granted. Other companies are having to adapt, which means swallowing higher costs, seeking alternative suppliers in other countries or shifting manufacturing out of China.

According to a Jan. 10 survey of 277 companies about the impact of tariffs — from by Panjiva Inc., a division of S&P Global Inc. — 42.8% of respondents said they had postponed investment or other key decisions due to the tariffs. In total, 71.2% of those companies are formulating new strategies and another 25.5% expect to see slower growth due to the tariffs. Less than 10% said they had not seen a material impact on their businesses.

More than 500 companies have commented thus far on the tariffs through earnings and the survey, according to Panjiva.

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Due to the tariffs imposed on hundreds of billions of dollars of American and Chinese goods, 70.7% of respondents to the Panjiva survey said they have switched sourcing, while another 66.7% said they have had to raise prices for consumers, and another 54.6% said they have been forced to accept lower margins. Should tariffs rise, the percentage of those companies forced to raise prices for consumers rises to 73.6%, while those forced to source elsewhere shoots up to 87.4%.

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In an interview with S&P Global Market Intelligence on the sidelines of the National Retail Federation's Big Show in New York City on Jan. 15, Galagher Jeff, vice president of merchandising operations and business analytics for Walmart Inc. said the U.S. retailer was looking for ways to mitigate the cost of additional duties.

"What we're trying to do is work with suppliers the best we can to offset those costs," Jeff said. "When we can't offset them we'll pass them on. It's unfortunate that we have to raise costs on customers but it's really unavoidable."

Walmart is not alone in passing on higher costs to consumers. Industrial conglomerate 3M Co., which makes Scotch tapes and Scotch Brite cleaning products, said in its third-quarter earnings report that it had raised prices due to the higher cost of raw materials. Tools and storage company Stanley Black & Decker Inc. said in its third-quarter earnings statement that tariffs contributed to $50 million in costs in the quarter, requiring it to raise the prices of its products and to cut expenses by $250 million in 2019.

In a meeting at the G-20 summit in Buenos Aires, Argentina, on Dec. 1, 2018, Trump and Chinese President Xi Jinping agreed to a 90-day détente to resolve their trade dispute. However, in the absence of a deal, Trump has vowed to forge ahead with a scheduled hike in duties to 25% from 10% on $200 billion of Chinese imports that include bicycles, juice products, furniture, kitchen appliances and vacuums.

Beyond that, there is also the threatened tariffs on $267 billion of Chinese goods repeatedly threatened by Trump that would include all consumer goods imported from China.

Trump has expressed optimism that a deal can be reached, but in the meantime, businesses are hesitant to make short-term decisions while the threat of higher tariffs remains.

"In case the 25% tariff is imposed there will be less demand for the products, meaning you don't need that extra warehouse space," Rajeev Dhawan, the director of the Economic Forecasting Center at Georgia State University's Robinson College of Business, said in an interview. "You won't take the risk of expanding if the demand isn't there."

Some companies have adapted to the new environment better than others. Womenswear brand Nicole Miller has navigated around the threat of future tariffs on clothing by moving much of its production out of eastern China to places such as Indonesia and elsewhere in Asia.

“We're well-positioned countrywise to take advantage," said Bud Konheim, the co-founder and CEO of Nicole Miller. "We've had to work around everything like everyone else."

Companies that cannot easily find alternative suppliers have stockpiled goods in recent months, but with 10% tariffs already in effect, there is a chance that higher-priced products could be more difficult to sell to consumers.

Gary Philbin, president and CEO of Dollar Tree Inc. warned in August — ahead of the implementation of the U.S. tariffs on $200 billion of imports — that the company would be forced to stop selling thousands of products or to offer lower-value products instead. The value shopping chain relies on inexpensive Chinese labor to offer most of its products for $1 or less, he said.

Target Corp. is one of the hundreds of companies that have petitioned the administration to drop its tariff stance due to the financial burden it would impose on its shoppers in the form of price hikes.

Mark Tritton, Target's chief merchandising officer said in a September letter to the Trump administration that the company was "deeply troubled" by the tariffs that he said would raise the price of cribs, desks, bookshelves and infant car seats, according to CNBC.

"Some products are not so easy to substitute, and then the consumer faces somewhat higher prices where the company has not diversified its supply chain," said Rajiv Biswas, Asia-Pacific chief economist for IHS Markit, in an interview. "There is some risk."

The combination of the trade war and the U.S. government shutdown has contributed to pushing business confidence in the U.S. to the lowest level since the lead-up to the 2016 presidential election, said Scott Hoyt, senior director for Moody's Analytics.

"It appears to be impacting investment plans, although so far hiring plans seem to be holding up," Hoyt said.

China's retaliatory tariffs have been much more effective than those imposed by the Trump administration, said Chris Rogers, research director at Panjiva.

Further tariffs on consumer electronics will lead to higher prices on cell phones and laptops, while U.S. companies sourcing furniture and apparel likely will lead to manufacturer shifts to other countries due to easier production skillsets required, he noted.

"On the U.S. side, most companies have passed through tariffs via higher prices as well as accelerating imports even in the most recent month," Rogers said in an interview.

Apple Inc. maker of the iPhone, on Jan. 2 cited tariffs as a factor in its weak fiscal first-quarter sales in China.

Janet Yellen, the former chair of the Federal Reserve, recently weighed in on the tariffs, noting that the trade tensions "really concern" businesses in terms of planning for the future.

"We're hearing anecdotal reports of —although there's not much in the hard data— about businesses beginning to put investment plans on hold because of the uncertainties that they face in the global environment around supply chains and trade," Yellen said Jan. 14 at the NRF Big Show.


Technology, Media & Telecom
2019 Outlook Turbulence But Cards To Play

Jan. 24 2019 — Multichannel faces headwinds in 2019, including persistent cord-cutting, a maturing broadband market and the launch of high-profile subscription online video services backed by media heavyweights. With the next 'big thing' continuing to elude the sector, debt levels and the possibility of additional Federal Reserve rate hikes could weigh on share prices.

Maturing wireline penetrations and the emergence of 5G promise to slow the reliable broadband growth engine while the internet of things further embeds the role of connectivity as a basic utility. Choice is a watchword for the upcoming year, but next-generation content bundling approaches run the risk of consumer aggravation from re-aggregation.

Kagan, in its 2019 outlook listed the top areas to watch along with the possible impacts and repercussions. Below is sample of the full outlook.

Launch of AT&T, Comcast, Disney online subscription bundles

  • Additional pressure on legacy multichannel subscriptions.
  • Possible long-term disruption of content licensing deals, particularly with direct competitors in the streaming video universe.
  • Consolidation of global home video entertainment market with the top U.S. providers dominating worldwide.
  • Pressure on incumbent subscription video on demand services' growth.
  • Increases in budgets and production of exclusive original content.
  • Bloated online subscription marketplace with $10-$15 offerings piling up, crowding the field.

5G rollout

  • Negligible impact on wireline broadband in 2019 due to limited deployment initially and belated entry of leading U.S. mobile handset maker Apple.
  • Restrictions on wireline broadband rate increases with wireless looming larger.
  • Smooth, reliable streaming of live events on the go, notably sports, which could boost virtual multichannel value proposition.
  • Enables mobile viewing, notably among millennials and younger generations.
  • Democratization of wireline 1-Gig broadband with lower rates on high-end tiers.

Wireline broadband maturity

  • Cable market share gains in areas with belated/slow telco transition to fiber and possibly vice versa.
  • Limited upside and fierce competition — including 5G rollout — for existing customers likely a strong deterrent for widespread implementation of usage-based billing.
  • Subscriber slowdown to weigh on market valuations accustomed to broadband growth in last 10 years. 
  • Net neutrality debate rekindles with Democratic Congress but lacks firepower.
  • Telcos to focus on fiber deployment to support fiber to the home and 5G backhaul.
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5-Year Virtual Multichannel Revenue Forecast Underscores Segment's Opportunities

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Technology, Media & Telecom
2019 Outlook For Latin American Multichannel Broadband Market

Highlights

Pay TV and broadband growth trend strengthens in 2019.

Broadband net adds projected to be almost double those of multichannel in 2019.

IPTV gets a boost from new Telefónica strategy.

Jan. 14 2019 — The Latin America multichannel and broadband industry is heading into 2019 with positive headwinds. Demand for convergent services and economic recovery in larger markets should drive industry growth in 2019. The big caveat is the economy, with external shocks threatening to decelerate economic growth. Amid this environment, we expect the M&A market to remain active, with transactions in Mexico and Central America highly likely. New virtual multichannel, satellite broadband and IPTV services should also gain a foothold in the region.

Pay TV and broadband growth trend strengthens in 2019

Kagan estimates Latin America's multichannel and broadband subscriber bases should expand during 2019, with broadband net adds projected to be almost double those of multichannel. The trend toward convergent services is expected to help cable regain strength in the multichannel market, accounting for the majority of net additions. Multichannel revenues are forecast to grow, with Argentina, Brazil and Mexico expected to be the biggest contributors to multichannel revenue growth. The importance of fiber technologies is rising, concentrating the highest share of fixed broadband net additions during 2019.

Already a client? Refer to the regional profile linked here for additional details.

Economy: Outlook for 2019

The World Bank projects Latin American and Caribbean GDP will expand 2.3% during 2019. However, deteriorating external conditions and local challenges might hinder economic growth. Recovering private consumption and investments should drive GDP growth in the region for 2019, although foreign exchange volatility and rising financing costs could weaken this trend. Prospects for fiscal consolidation in Argentina and Brazil remain challenging due to political opposition, especially in Argentina, where general elections are to be held in October. Venezuela's economic prospects remain dire, worsened by the recent drop in oil prices.

M&A: Mexico and Central America to remain active

The possibility of Telefónica SA divesting its Mexican and Central American operations, along with Millicom International Cellular SA's and Liberty Latin America Ltd.'s continued competition for acquisition targets in Central America to strengthen their positions in the region, raises the prospects for active Latin American M&A in 2019. Investment funds and Latin American telecommunication groups seem to be competing for Telefónica's assets in Mexico and Central America. Liberty Latin America is actively looking for acquisition opportunities in Latin America through its Chilean subsidiary VTR and is cited as a potential buyer for Telefónica assets, along with competitors Millicom, Entel Chile and AT&T Inc., although the latter may be barred in Mexico due to the mobile market concentration that would result.

AT&T Inc.'s acquisition of Time Warner Inc. may also lead to changes in its Latin American operations. After the failed IPO of DIRECTV Latin America LLC (now named Vrio) in 2018, the company may still need to divest some assets in Brazil due to local regulations preventing pay TV operations from owning content producers.

Brazilian regulator Anatel also raised spectrum caps at the end of 2018, opening up the country's mobile market for consolidation. Embattled former iDEN carrier Nextel Telecomunicações SA has been looking for a buyer for years, and Telecom Italia SpA's TIM Participações SA has already announced it has made an initial offer. Regional telco Sercomtel Telecom may also choose to sell its spectrum assets — which may be allowed if a telecom reform bill currently under discussion in the Senate is passed — or even the whole company.

In Argentina, regulatory conditions for the approval of Telecom Argentina's merger with Cablevisión Argentina may lead the company to divest many assets in 2019. The operator must sell off its fixed broadband business in 28 areas of the country where the merger could affect competition, as well as excess wireless spectrum above the regulatory cap.

Already a client? Please click here for our annual global mobile spectrum roundup, and here for an overview of upcoming global spectrum auctions.

A final ruling by the Court of Cundinamarca put to rest the Bogotá municipality's proposal to sell Empresa de Telecomunicaciones de Bogotá SA ESP, or ETB. The court cited irregularities in the approval of the proposal as its basis to nullify the decision. Nevertheless, the court said the ruling does not prohibit the sale of ETB, but that the municipality will have to initiate a new approval process to achieve it.

Effects of election results

The election of Jair Bolsonaro in Brazil and Andrés Manuel López Obrador in Mexico introduced some uncertainty into the Latin American political picture. Both presidents are in the opposite side of the political spectrum, Bolsonaro on the right and AMLO on the left. Nevertheless, both candidates ran on a populist agenda, with ambitious campaign promises that pose a risk to fiscal discipline. Ivan Duque, Colombia's new president, is likely to maintain his predecessor's market-friendly policies, while Argentina's Mauricio Macri's inability to implement fiscal reform may cost him the presidency in general elections in October 2019.

In the telecommunications sector, AMLO pledged to promote market efficiency and close the gap in access to telecommunications, whereas Bolsonaro's program remains vague on issues related to media and telecommunications.

Already a client? Please click here for additional insights about AMLO election, and here for insights on Bolsonaro election.

LatAm countries with upcoming 2019 elections

Argentina
Bolivia
Dominican Republic
El Salvador
Guatemala
Panama
Uruguay

Virtual multichannel

DIRECTV Latin America launched Latin America's first virtual multichannel services in November in Colombia and Chile. The company is expected to expand the offer, DIRECTV Go, to Argentina and other Latin American markets during 2019. Telecom Argentina executives have also hinted that the company's video-on-demand/TV Everywhere service, Cablevisión Flow, which offers over 200 linear channels to pay TV subscribers, may soon be launched as a virtual multichannel service for nonsubscribers.

Telefónica has also been quietly rolling out access to its TV Everywhere platform, which includes several linear channels, to nonpay TV subscribers in some Latin American markets, such as Central America and Chile. The Movistar Play Full offer is available as a value-added service to Telefónica’s mobile and fixed broadband, and to voice subscribers for an extra fee.

Satellite broadband

Penetration of residential satellite broadband is set to increase as more Ka-band satellites become available in the region and new operators enter the market. Hughes Communications Inc. continued to expand its HughesNet service, launched in Brazil in 2016 and Colombia in 2017, to Peru and Ecuador during 2018. Competitors Al Yah Satellite Communication Co. PJSC and ViaSat Inc. also began operating in the Brazilian market during 2018, while satellite operator Hispasat SA launched a white-label service in the region.

Dish México announced it would partner with Hispasat SA and Gilat Satellite Networks Ltd. to launch satellite broadband service in Mexico. Dish México will leverage Amazonas 5, Hispasat's high-throughput satellite, to reach underserved markets. Amazonas 5 has the potential to reach 77% of Mexico's population. The broadband service will use Gilat's SkyEdge II-c platform to provide high-value services to Mexican consumers and small and medium-sized enterprises.

Already a client? Please click here and here to learn more about satellite broadband service offers currently available in Latin America.

Argentina quad-play

Following new regulations allowing telcos to offer multichannel services, Claro Argentina and Telefónica de Argentina SA launched IPTV offers during 2018, but coverage remains limited, as convergent services were initially only permitted in the major cities of Buenos Aires, Rosário and Córdoba, in order to protect small operators in other regions. In 2019, this will be expanded to cities with populations below 600,000. Delays in passing a telecoms reform bill allowing telcos to offer DTH may lead the two companies to abandon plans for a national satellite pay TV offer, choosing to focus on high-end convergent services based on their growing fiber networks.

Meanwhile, Argentina's largest player, Telecom Argentina, will be allowed to offer convergent services only in 2019, as part of antitrust regulators' restrictions for approval of its merger with Cablevisión Argentina.

IPTV gets a boost from new Telefónica strategy

Telefónica made a strategic decision during 2017 to prioritize investments in fiber deployments to power ultrafast broadband and IPTV services, as well as expanding its VOD portfolio for fiber-based subscribers with STB-embedded over-the-top services such as Netflix and Amazon Prime. Based on this, as well as the continued entry of new players and migration of many existing telco and cable networks to fiber, we revised our IPTV forecast up for 2019.

Regulatory outlook

In Brazil and Argentina, "mini-reform" bills for the telecommunications industry remain stalled in Congress but are expected to finally be approved in 2019. Argentina's "Ley Corta," as it became known for being a reduced version of the government's originally proposed telecoms reforms, allows telcos to offer direct-to-home services in major cities starting in 2020, with gradual expansion to smaller towns up to 2022. Although passed by the Senate in July 2018, the bill, which also bans exclusive network agreements in order to encourage network sharing, among other measures, still awaits voting in the Chamber of Deputies.

Meanwhile, the Brazilian Senate is expected to resume discussions on the PLC 79 bill, which have been frozen since 2016. The reform would require telcos Telefônica Brasil and Oi SA to migrate their public fixed telephony concession contracts to a private service authorization contract, as is the case with their mobile and broadband businesses. In exchange, the companies would have to invest in broadband expansion the value of the public fixed telephony infrastructure they would be incorporating. The value of these "reversionary assets" and where these investments should be made are to be defined by the regulator Anatel and may take a year to implement. The PLC 79 bill also tackles several other measures favored by the industry, including a reduction in tariffs for satellite broadband services, which is expected to encourage more competitive prices, allowing telcos to sell spectrum assets and exempting broadcasters from regulatory tariffs.

The Mexican Congress reduced the annual budget for the telecommunications regulator, Instituto Federal de Telecomunicaciones, or IFT, by 25% compared to 2018. The budget cut would weaken the IFT amid regulatory battles with América Móvil SAB de CV's Teléfonos de México SA de CVand other important Mexican players.

Already a client? Click here to access the full article.

Global Multichannel is a service of Kagan, a group within S&P Global Market Intelligence's TMT offering.

This piece was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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Technology, Media & Telecom
Latin American Multichannel Broadband Market 2018 Recap

Highlights

M&A activity drives consolidation in Central America

DIRECTV launched region’s first virtual multichannel service

Brazil multichannel continues losing DTH subscribers

Jan. 11 2019 — Latin America and the Caribbean are starting to show signs of economic recovery, which has helped the region's multichannel market return to growth despite continued direct-to-home losses in Brazil. Meanwhile, some telecommunications groups are acquiring operators in Central America to strengthen their competitive position and gain convergent capabilities. DIRECTV Latin America LLC for its part is honoring its traditions of innovation by introducing the region's first virtual multichannel service and 4K linear TV channel. In Colombia, Empresa de Telecomunicaciones de Bogotá SA ESP's, or ETB's, cost-cutting plan's early results are showing progress.

Economy

The Latin America and Caribbean economic environment seems to be stabilizing, with GDP expected to expand 1.7% in 2018, according to the World Bank. Recovering private consumption, investments and commodity exports should be primary drivers of economic stabilization. Consumer price inflation was 2.6% during 2017, according to World Bank data. However, unemployment remained at 8.3%, a high for the past 10 years, based on World Bank data.

Intense fluctuations in exchange rates in several Latin American markets during 2018, especially in Argentina and Venezuela, are expected to cause multichannel revenues expressed in dollars to drop by 6.1%. The year was also marked by political uncertainty, with elections in seven countries, including the region's largest markets, Brazil and Mexico.

Already a client? Please refer to the economy and multichannel affordability section of Latin America profile for more information. For in-depth analyses of the perspectives following presidential elections in Mexico and Brazil, refer to the articles linked here and here.

Regional

Following a slight drop in subscribers in 2017, mainly due to direct-to-home losses in Brazil, the Latin American multichannel market returned to growth in 2018, while fixed broadband continued to grow steadily, with broadband households expected to overtake multichannel households in the region by year-end 2018. IPTV adoption accelerated in 2018, boosted by Telefónica SA's, or TLF's, decision to upgrade its last mile to fiber, mainly in Brazil and Chile.

Already a client? Please refer to the cable, DTH and IPTV sections of Kagan's Latin America profile for more information, and the article linked here for an analysis of Latin America's top multichannel groups.

Latin America and the Caribbean has one of the lowest levels of fixed-broadband penetration among the global regions included in our analysis, ahead of only the Middle East and Africa estimated at 44.0% in 2018. Cable overtook DSL in 2018 to become the largest broadband technology platform in the region, while FTTP continues to gain market share rapidly.

Already a client? Please refer to the broadband section of Latin America profile for more information, and to the articles linked here for an analysis of Latin America's top broadband groups and here for an analysis of broadband speeds in the region's largest countries.

AT&T Inc. subsidiary DIRECTV, América Móvil SAB de CV, or AMX, and Grupo Televisa SAB were the top three multichannel providers in the region ranked by pay television revenue during 2017. The top three fixed-broadband providers in the region ranked by revenues were América Móvil, Telefónica and Oi SA.

Click here to find out more about our Latin America Multichannel & Broadband Market Overview report, which provides an in-depth group-specific analysis on the multichannel, broadband and telephony market in Latin America.

M&A

M&A activity slowed during 2018 in terms of values compared to 2017, when the merger of Telecom Argentina and Cablevisión Argentina was announced. The deal ranks as the Latin American multichannel market's second most important M&A transaction in the past four years, with an implied value of $11.08 billion. 2018's largest transaction, meanwhile, was Millicom International Cellular SA's acquisition of an 80% share in Panama's largest MSO, Cable Onda SA, at an implied value of $1.46 billion.

Consolidation was intense in Central America, with several acquisitions registered during the year, mostly by Millicom, which is already the leading operator in most markets in the region. In 2017, Liberty Global PLC announced it would divest its Latin American operations and in 2018, Liberty Latin America Ltd. became an independent company, launching an inorganic growth strategy with its largest operation, Chile's Vtr.Com Spa, in charge of seeking acquisition opportunities in the region, also with a focus on Central America. The company led M&A activity in the year with its announcement in February that it had acquired Costa Rica cable operator Cabletica SA, but was outmaneuvered by Millicom, which throughout the year bought several other key Central American assets that Liberty had an eye on.

TV Everywhere and virtual multichannel

In November 2018, DIRECTV launched Latin America's first virtual multichannel service, DIRECTV Go, in Chile and Colombia. The platform gives non-pay TV subscribers online access to over 80 live linear channels, as well as VOD content, through mobile apps or browsers for 19,990 Chilean pesos (13,490 Chilean pesos promotionally) or 80,000 Colombian pesos. Traditional multichannel subscribers to the operator's top premium packages are also given free access to the service. In Chile, online-only subscribers also have the option of acquiring premium programming as an add-on, whereas in Colombia the service is offered in a single package. The company is expected to expand DIRECTV Go to Argentina and other Latin American markets over the coming months.

The company was also the first to launch a permanent linear 4K channel in the region, with a commercial offer in six of its Latin American markets (Argentina, Chile, Colombia, Ecuador, Peru and Uruguay) ahead of the 2018 FIFA World Cup in Russia. The channel will broadcast, in Ultra HD, live sports content from several international leagues as well as original programming and series and documentaries from third-party content providers.

Already a client? Please refer to the report tagged here for more information about global UHD deployments.

Cablevisión has also suggested that it may offer its TV Everywhere platform, Flow, to non-pay TV subscribers as a virtual multichannel service in the near future.

During 2018, content providers such as Fox Networks Group Inc., HBO Latin America Group (SM),Turner Broadcasting System Inc., Viacom Inc. and Sony Entertainment Television continued expanding their offerings of TV Everywhere platforms to non-multichannel subscribers as stand-alone over-the-top services across the region, mainly through partnerships with mobile and broadband operators, but also through mobile app stores and third-party OTT aggregators such as Clarovideo. New OTT and VMC platforms launched across Latin America may put a strain on the pay TV market.

Already a client? Please refer to the report tagged here for more information about content partnerships with mobile carriers.

Mexico: Grupo Televisa not an agent with substantial power

The IFT, Mexico's telecommunications regulator, retracted Televisa's designation as an agent with substantial power in the pay TV market in March 2018. The IFT designated Televisa as an agent with substantial power in the pay TV market after Mexico's Supreme Court asked the regulator to review a previous ruling in 2017. However, a final ruling on this issue by Mexico's Supreme Court ordered the IFT to review the designation based on a new set of conditions. As a result of the new analysis, the IFT determined Televisa did not have substantial power in the Mexican pay TV market. The designation would have obligated Televisa to share its infrastructure, limit its growth in some markets, set pricing structures that promote competition and pay retrans fees to FTA channels.

Since overtaking Brazil in 2017, Mexico remains Latin America's largest multichannel market. In fixed broadband, the country ranks second, behind Brazil.

Already a client? Please refer to the Mexico country profile for more information on its multichannel and broadband market, and to the article here, for an in-depth analysis of the Mexican broadband market's revenues and ARPUs.

Brazil: Multichannel operators continue losing subs

For the first time since 2014, Brazil, Latin America's largest market, is projected to see subscriber growth in 2018, albeit slightly, as DTH operators continue to shed low-income subscribers as a result of the recent economic crisis. Continued political and economic instability has prompted a sharp deceleration of the multichannel market in Brazil. Brazilian pay TV operators have lost an estimated 1.4 million subscribers since 2014, with revenues expressed in dollars dropping 27.4% in the same period, also impacted by currency devaluation. The crisis does not seem to affect the broadband market, though, as the country's fixed-broadband operations added 6.4 million subscribers between 2014 and 2018.

In December 2018, Brazil also completed its planned analog switch-off and migration to digital terrestrial television in major cities, reaching an estimated 63.7% of Brazilian households. In smaller towns where carriers do not have plans to launch 4G services using the 700 MHz frequency, analog switch-off is expected to occur by 2023 but may take longer since the distribution of DTT set-top boxes will no longer be subsidized. There are also concerns among market players that local broadcasters may not be able to afford the migration to digital transmission by that date.

Brazil is Latin America's second-largest multichannel market, behind Mexico, and largest broadband market.

Click here for an in-depth analysis of the Brazilian broadband market's revenues and ARPUs.

Already a client? Please refer to the Brazil country profile for more information on its multichannel and broadband market, and to the article here for the complete article on the Brazilian broadband market's revenues and ARPUs.

Argentina: Operators begin to offer convergent services while currency crisis puts investments on hold

The Cablevisión/Telecom Argentina merger between Argentina's largest cable operator and telco was effective Jan. 1, 2018, the same date that new regulations allowing telcos to offer video services over "physical link" in Argentina also came into effect. Initially, convergent services were permitted only in the major cities of Buenos Aires, Rosário and Córdoba, in order to protect small operators in other regions. In cities with populations below 600,000, this was delayed to 2019.

The deal was approved by antitrust regulators in June 2018, but the approval came with restrictions, which include a delay for permission to offer convergent quad-play services to 2019, while competitors were allowed to do so as of 2018. The operator must also sell off its fixed-broadband business in 28 areas of the country where the merger could affect competition. Telecommunications regulator ENACOM also imposed conditions regarding spectrum caps and infrastructure sharing in regions where the two companies have a high market concentration in broadband.

The new regulations also allowed AMX's Claro Argentina and TLF's Telefónica de Argentina SA to enter the pay TV market in 2018. Both companies launched IPTV services in the country during 2018, leveraging their existing fiber-to-the-home networks, and may launch DTH satellite services in the future, pending congressional approval of a bill expanding permission to offer pay TV over wireless platforms. The law would allow these convergent DTH services in major cities starting in 2020, with gradual expansion to smaller towns up to 2022. Although passed by the Senate in July 2018, the bill still awaits voting in the Chamber of Deputies. Both América Móvil and Telefónica already provide DTH services in Latin America, and permission to do so in Argentina would significantly reduce the cost and time-to-market for their new services.

Argentina is Latin America's third-largest multichannel and broadband market.

Already a client? Please refer to the Argentina country profile for more information on its multichannel and broadband market, and to the article here for an in-depth analysis of the Argentinean broadband market's revenues and ARPUs.

Colombia: ETB cuts costs to improve its financials while sale is on hold

Empresa de Telecomunicaciones de Bogotá's sale is on hold after a Colombian judge ruled that the municipality did not follow the appropriate process to approve the privatization project. Meanwhile, ETB has been implementing an austerity plan since 2017. As part of this plan, ETB shrank its channel lineup during 2017, reducing its programming costs significantly. ETB's 2017 results show the austerity plan is starting to pay off, with programming cost as a percentage of average revenue per user dropping in 2017.

Colombia is Latin America's fourth-largest multichannel and broadband market.

Already a client? Please refer to the Colombia country profile for more information on its multichannel and broadband market, and to the article here for an in-depth analysis of the Colombian broadband market's revenues and ARPUs.

Peru: Operators cannot charge for set-top-boxes

OSIPTEL, the Peruvian telecommunications regulator, prohibited the sale or lease of set-top-boxes in March 2018. Installation expenses can be financed in a maximum of six monthly installments. As a result, operators increased installation fees. Telefónica del Perú SAA increased its installation fees to 309.5 Peruvian soles for cable, up 74.7% from 177.15 soles in 2017. Claro Perú started charging the same installation fee with the possibility of paying in six monthly installments of 51.6 soles.

Peru is Latin America's seventh-largest multichannel and broadband market.

Already a client? Please refer to the Peru country profile for more information on its multichannel and broadband market.

Already a client? Click here to access the full article.

Global Multichannel is a service of Kagan, a group within S&P Global Market Intelligence's TMT offering

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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Technology, Media & Telecom
Technology Platforms For Monetizing Connected TV Have Lots Of Room To Grow

Dec. 19 2018 — In the advertising industry, ads for over-the-top video streaming to TVs either directly or via a device connected to the TV such as a streaming media player or a game console are referred to as connected TV ads. There has been an increasing number of streaming devices shipping worldwide, bringing more viewers to connected TV. Ad tech vendors have noted the opportunities provided by the growth in connected TV ad inventory and are expanding their own connected TV products and services for video providers and advertisers. Kagan expects U.S. connected TV ad tech vendor revenue in ad serving, demand side platforms, or DSPs, and supply side platforms, or SSPs, to grow from $129.1 million in 2017 to $654.4 million in 2022.

The growth in both ad-supported OTT video streaming services and their viewing has OTT providers and the advertising industry looking toward this segment as an important avenue to reach viewers. Unlike traditional TV, which has a finite amount of inventory, the more viewers the advertising OTT services reach, the greater the amount of ad inventory they have.

For advertisers, connected TV inventory brings the best parts of TV and digital advertising together with 100% viewability, 90% plus completion rate, reduced fraud and the ability to target audiences with 1:1 addressability. Brand or sales lifts from the viewing of an advertisement can also be determined by the advertiser. In addition to addressability, part of advertiser interest in connected TV comes from a desire to reach younger consumers who are more likely to use online video services.

However, some issues remain for connected TV. With the fragmentation of platforms and services, each has their own dataset on viewers that cannot always be compared exactly against another. There is also no industry agreement on a common measurement currency for connected TV to equalize the buying process so all know what they are buying. The large number of platforms offering connected TV inventory, none of which have the viewing hours equal to TV at this time, makes buying connected TV complex in determining with whom to work.

When it comes to the technology used for connected TV ad trading and insertion, the pieces are in place but the system is complex. When a provider directly sells an ad, there is a single call made to an ad server. However, with a programmatic marketplace there may be many hops out to programmatic platforms with which to contend. That adds to the latency of the stream and may result in no ad filling the spot or the viewer turning away from the program.

The benefits outweigh the concerns, so we expect the rising awareness of the opportunity in connected TV advertising to drive more usage of the technology to the benefit of advertising technology vendors.

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