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1 Table of contents: Digital TV penetration accelerates in Sub-Saharan Africa Sub-Sahara Africa TV forecasts by platform Sub-Saharan Africa TV household penetration of total homes by country Estimated split of DStv Sub-Saharan Africa subscribers by country Ofcom: Over a quarter of homes in France now have access to an IPTV service Ofcom: Continued growth in value-added services on DTV Ofcom s ICM Report 2012: TV and audiovisual industries summary Ofcom: The TV and audio-visual consumers Turkey: Pay TV subscription growth Editor: Simon Murray Tel: Published: 24 times/year Subscriptions: 800/ 1,000/US$1,200 info@digitaltvresearch.com Copyright: Digital TV Research Ltd Copyright notice: No part of this publication may be copied, duplicated or photocopied without written consent from Digital TV Research Ltd.

2 Digital TV penetration accelerates in Sub- Saharan Africa Sub-Saharan Africa s household numbers (148 million at end-2012, rising by 22 million over the next six years) are fast approaching similar levels to Western Europe. However, the region s TV household total (40 million at end or 26.8% of total homes) is only equal to the total for Germany. Sub- Saharan Africa will have 51 million TV households by 2018 or 30% of total homes. Split of TV households by country in 2018 (%) 1,454 1,533 1,633 1,814 1,972 13,715 11,335 9,013 2,041 3,568 3,206 Nigeria S Africa Kenya Ethiopia Cote d'ivoire Tanzania Uganda Ghana DR Congo Angola Others Source: Digital TV Research Nigeria will account for about 22% of the region s TV households in 2018, with South Africa contributing a further 17.5%. East Africa s Kenya, Tanzania and Uganda will add substantial numbers to their TV household counts. Other countries such as Ethiopia and the Democratic Republic of Congo have large populations, but low TV development due to internal strife and poverty. About 35.3% of TV homes (14.0 million) took digital signals by end-2012, and this digital TV penetration will rocket to 95.5% by 2018 with household numbers quadrupling to 49.0 million. Complete digital transition will have been completed in Kenya, Tanzania, Uganda and Zambia by end Sub-Saharan Africa will have 33.8 million DTT homes by million FTA and 8.0 million pay up from 4.6 million at end Nigeria will be the largest DTT nation in 2018, both for FTA (6.2 million) and for pay (2.6 million).

3 Several countries have rolled out hybrid free-to-air (FTA) and pay DTT services; often licensing foreign companies to construct the networks and to manage the subscription services. Pay DTT appeals to the growing middle class, as it is cheaper than the DTH platforms, though settop box and installation prices still put off many. The quality of pay DTT content/programming varies considerably from one DTT operator to the next with some operators accused of only wanting to sell settop boxes. China-based StarTimes is the most active DTT operator, with about 1.5 million subs by end The company has a presence in more than 10 countries (Burundi, Central African Republic, Guinea, Kenya, Mozambique, Nigeria, Rwanda, Senegal, Tanzania and Uganda). The success of StarTimes has led the established DTH operators to change their strategies. South Africa-based Multichoice, owner of the DStv DTH platform, has rolled out its GOtv pay DTT service to five countries (Malawi, Namibia, Nigeria, Uganda and Zambia) since late Two-thirds of the region s TV households still received analog terrestrial signals by end-2012, though this proportion will drop to 4.5% in Twothirds of homes will take DTT (pay and FTA combined) in 2018, up from only 11.7% at end About 27.5% of TV households will have satellite dishes (pay and FTA combined) in 2018, up from 22.9% in Pay TV penetration of TV households will grow from 23.3% in 2012 to 39.8% in Of the 9.26 million pay TV subscribers at end-2012, 7.36 million were pay DTH. The pay total will double to million by 2018, with DTH contributing million and pay DTT another 7.97 million. South Africa supplied 4.26 million of the 2012 total, and will grow to 5.81 million in Nigeria will climb from 1.35 million in 2012 to 4.36 million in Only a small proportion of African homes can afford premium DTH packages. There were 7.36 million pay DTH subscribers by end-2012, with the total expected to rise to million in South Africa accounted for 4.26 million of the 2012 total, rising to 5.23 million in Pay DTH penetration will increase from % of TV households at end-2012 to 22.0% - a small increase by regional standards. However, this is distorted by South Africa where penetration is already above 50%. Excluding South Africa, the number of pay DTH households will double between 2012 and 2018 to 6 million. Sub-Saharan pay TV revenues will reach $4.62 billion in 2018, up from $2.88 billion in DTH accounted for nearly all of the 2012 total, though pay DTT will make inroads (contributing $744 million in 2018). Competition and take-up of the cheaper DTT packages will force ARPU down in most countries.

4 South Africa will remain the dominant pay TV revenue generator. However, its share of the total will fall from 61% ($1.77 billion) in 2012 to 47% ($2.16 billion) in Excluding South Africa, pay TV revenues will rocket from $1.12 billion in 2012 to $2.46 billion in Second-placed Nigeria will nearly double from $388 million in 2012 to $742 million in 2018.

5 Sub-Sahara Africa TV forecasts by platform Households (000) 148, , , , , , ,118 TV households (000) 39,723 41,505 43,366 45,262 47,238 49,264 51,284 Digital cable subs (000) Analog cable subs (000) Pay IPTV subscribers (000) Pay digital DTH subs (000) 7,360 8,159 8,861 9,509 10,126 10,712 11,267 Digital free DTH HH (000) 1,739 1,928 2,094 2,269 2,446 2,631 2,824 Analog DTH Households (000) Analog terrestrial HH (000) 25,704 21,110 14,815 9,136 4,953 3,279 2,326 Primary FTA DTT HH (000) 3,030 6,870 12,701 18,215 22,512 24,467 25,746 Primary Pay DTT HH (000) 1,611 3,060 4,385 5,484 6,376 7,187 7,965 Digital homes (000) 14,018 20,395 28,551 36,126 42,285 45,985 48,958 Analog homes (000) 25,713 21,120 14,824 9,144 4,960 3,285 2,332 Pay TV subscribers (000) 9,259 11,607 13,765 15,649 17,334 18,893 20,394 Digital cable subs/tv HH 0.7% 0.8% 0.9% 1.0% 1.2% 1.3% 1.3% Analog cable subs/tv HH 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Pay IPTV subs/tv HH 0.0% 0.1% 0.2% 0.4% 0.6% 0.7% 0.9% Pay DTH/TV HH % 19.7% 20.4% 21.0% 21.4% 21.7% 22.0% Digital free DTH/TV HH 4.4% 4.6% 4.8% 5.0% 5.2% 5.3% 5.5% Analog DTH/TV HH 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Analog terrestrial/tvhh 64.7% 50.9% 34.2% 20.2% 10.5% 6.7% 4.5% Primary FTA DTT/TV HH 7.6% 16.6% 29.3% 40.2% 47.7% 49.7% 50.2% Primary pay DTT/TV HH 4.1% 7.4% 10.1% 12.1% 13.5% 14.6% 15.5% TVHH/HH 26.8% 27.3% 27.9% 28.5% 29.0% 29.6% 30.1% Digital/TV HH 35.3% 49.1% 65.8% 79.8% 89.5% 93.3% 95.5% Analog/TV HH 64.7% 50.9% 34.2% 20.2% 10.5% 6.7% 4.5% Pay TV Subs/TV HH 23.3% 28.0% 31.7% 34.6% 36.7% 38.3% 39.8% Revenues (US$ million) Digital cable TV revenues Analog cable TV subs revs Cable TV revenues IPTV revenues DTH revenues 2,759 3,020 3,226 3,385 3,512 3,616 3,698 DTT revenues Total revenues 2,884 3,282 3,655 3,964 4,219 4,432 4,615 Source: digital TV research Ltd.

6 Sub-Saharan Africa TV household penetration of total homes by country (%) Average Zimbabwe Zambia Uganda Togo Tanzania Swaziland Sudan South Africa Somalia Sierra Leone Senegal Rwanda Nigeria Niger Namibia Mozambique Mali Malawi Madagascar Liberia Lesotho Kenya Guinea-Bissau Guinea Ghana Gambia Gabon Ethiopia Eritrea Eq Guinea Djibouti Cote d'ivoire Congo, DR Congo, Rep Chad CAR Cameroon Burundi Burkina Faso Botswana Benin Angola

7 Estimated split of DStv Sub-Saharan Africa subscribers by country at September 2012 Nigeria Kenya Tanzania Uganda Zambia Ghana Botswana Namibia Angola 90 Malawi 115 Zimbabwe Ethiopia Others Source: Digital TV Research estimates based on Multichoice total

8 Ofcom: Over a quarter of homes in France now have access to an IPTV service In 2011, IPTV developed further as a competitor to digital platform technologies, encouraged by the marketing of triple-play bundled services in countries with highbandwidth infrastructure. In France, where well over a quarter of primary TV sets (28%) receive an IPTV service, it constitutes a mainstream alternative to DTV. IPTV has penetrated the market more quickly here than in any other comparator country, benefiting from early introduction, competition between providers on price and the restricted availability of cable services. Take-up of IPTV services exceeded 4% in seven of Ofcom s comparator countries, reaching 5% in Canada in In Sweden and the Netherlands, the proportion of main sets connected to IPTV exceeded 10% for the first time. (It was under 1% in the UK). In the Netherlands, where IPTV increased by 6 percentage points in 2011, IPTV subscriptions including catch-up TV, video on demand and HD quality are available at a cost comparable to that for basic digital cable. IPTV take-up on main TV sets in countries where take-up exceeded 4% in FRA GER USA ESP NED SWE CAN Source: IDATE/industry data/ofcom. Notes: Only countries where IPTV take-up exceeded 4% of television homes in 2011 are shown in the chart.

9 Ofcom: Continued growth in value-added services on DTV As digital TV becomes the norm, operators are turning to value-added services such as high definition television (HDTV), digital video recorders (DVR) and on-demand services to ensure that their propositions remain distinctive. At 41%, take-up of HDTV in the UK is higher than France (18%), Germany (28%) and Japan (31%), but behind the US (49%). Take-up of high definition TV UK FRA GER ITA USA JPN AUS ESP CHN 41% 18% 28% 28% 49% 31% 46% 30% 35% Source: Ofcom Consumer Research Among European nations, DTT is now the most popular way of receiving high definition content in the home, accounting for 16.4 million homes. Satellite was the second most popular platform, with a further 15.6 million households; digital cable and IPTV commanded a further 11.2 million between them. In the US, cable was the most popular platform for HD (accounting for 24.6 million homes), followed by satellite and DTT. In Japan, cable s contribution to the total number of HD homes remained very small in 2011, at 0.6 million homes. Of the 23 million HD homes in Japan, 11.9 million were for the satellite platform, with DTT making up a further 10.8 million. Number of HD homes, by platform and country, end 2011 US UK, FRA, GER, ITA JPN Satellite Cable IPTV DTT Total Source: IDATE/industry data/ofcom. Notes: Paying and FTA HD homes; no data available for IPTV take-up in Japan. Digital video recorders are now widely installed in the UK, with 39% of adults claiming to own a DVR device. Of the nine countries surveyed by Ofcom, people in the UK were the most likely to say they had a DVR at home. In the US, Australia and China, more than one in four people say they own a DVR (32%, 29% and 27% respectively). Italy and France had the lowest take-up at 19% and 18% penetration respectively. Claimed DVR take-up and year-on-year changes in take-up UK FRA GER ITA USA JPN AUS ESP CHN 39% 18% 21% 19% 32% 24% 29% 22% 27% Source: Ofcom Consumer Research October 2012

10 With the exception of China, people in the UK and France have the highest ownership of connected TVs (at 15%). Twenty-eight per cent of respondents in China claim to have a connected TV set. Ofocm s research indicates that connected TVs have proved more popular with consumers than televisions with 3D capability. However, many connected TVs come with built-in 3D capabilities, so the actual penetration of 3DTV may be higher than indicated below. Claimed take-up of connected televisions and 3D-ready TVs (%) UK FR GE IT US JP AU ES CH R A S Connected or smart TV % % % 3D-ready TV % Source: Ofcom Consumer Research October 2012 N For connected TV take-up to continue to grow, three areas need to develop: connectivity, content and functionality. In terms of connectivity, connected TVs will deliver high-definition video alongside the benefits of web functionality in a TV broadcast environment. In terms of content, programs which invite engagement and drive viewing will become more widely available across various platforms. So far, examples of content enhancers on Smart TVs are catch-up and social applications. Finally, extra functionality will provide additional services and enable new modes of content discovery.

11 Ofcom s International Communications Market Report 2012: TV and audiovisual industries summary Revenues among the 17 countries analyzed by Ofcom increased by 5.8% in 2011, to 229 billion. As in 2010, the BRIC countries Brazil, Russia, India and China experienced the largest year-on-year growth, with their joint revenues increasing by 14.0% in 2011, up 4 billion to 34 billion. This growth was driven by both rising TV advertising and subscription income. The gap between the BRIC countries and the combined revenues of Japan and Australia has diminished over the past five years, with the two regions now almost equal in terms of TV revenue. While the combined revenues of Japan and Australia increased by 3.0% in 2011 to 36 billion, compound annual growth over the five-year period was relatively small, at just 1.4%. The combined revenues of Europe and Canada experienced the lowest year-on-year growth of all the regions in Ofcom s analysis, increasing by only 2.0% in 2011, to 58 billion. In contrast, the US, which is the largest television market globally, increased by 6.5% in 2011, up 6 billion to 100 billion. Over the five-year period since 2006, US television revenues have increased on average by 5.7% per annum, compared to 2.9% for Europe and Canada combined. TV industry revenues among comparator countries ( billion) USA Europe/Canada Japan/Australia BRIC TOTAL Source: IDATE/industry data/ofcom Compared to the other eight European countries in Ofcom s analysis, the UK experienced moderate growth in television revenues in 2011, increasing by 2.7% ( 0.3 billion). However, at 11.3 billion, the UK remains on a par with Germany (at 11.6 billion). Spain and Italy both recorded declines in television revenue in Spain experienced the largest year-on-year decline, falling 4.9% in 2011 to 4.8 billion, while Italy declined by 2.7% to 7.8 billion.

12 TV industry revenues among European countries and Canada ( billion) GER UK FRA ITA ESP CAN NED POL SWE IRE TOTAL Source: IDATE/industry data/ofcom TV revenues increased in 2011 for all four BRIC countries. Russia saw the highest proportional growth in revenue, up by 16.6% to 3.6 billion. China and Brazil also recorded significant growth, up 14.4% year on year and 12.7% respectively, making them by far the largest television markets among the BRIC countries in terms of revenue, at 12.4 billion. Total TV industry revenues among BRIC countries ( billion) BRA RUS IND CHI TOTAL Source: IDATE/industry data/ofcom Among the major European television markets of Germany, the UK and France, pay TV was the fastest-growing source of revenue over the five-year period between 2006 and 2011 and represents the largest source of TV income for these countries. Spain is the only country out of the 17 included not to have experienced growth in TV revenues between 2006 and As part of the current austerity cuts, the Spanish government has reduced the state subsidy provided to the public audiovisual company RTVE.

13 The US and Japan are the two largest countries by revenue. The US experienced relatively flat TV advertising revenues over the five-year period, with the vast majority of growth coming from pay-tv subscriptions (up from 40.5 billion in 2006 to 63.7 billion in 2011), resulting in an increase in total revenues over the period of almost 25 billion to 100 billion in In contrast, total TV revenue for Japan remained relatively constant over the five-year period, at around 30 billion. The television markets of the BRIC countries all recorded increases in total revenue between 2006 and 2011, driven by higher net advertising revenue and subscriptions. However, the BRIC countries are notable for a lack of public funding, with only Brazil and India having any public funds attributed to TV in TV revenues by source: 2006 and 2011 ( billion) Advertising Public funding Subscriptions UK FRA GER ITA CAN AUS ESP NED SWE IRE POL BRA RUS IND CHI Source: IDATE/industry data/ofcom. US revenue per head continued to lead Ofcom s 17 comparator countries, generating 320 per head in 2011, up 16.6% since This is some way ahead of the second highest, Japan, which increased by 6.8% since 2010 to 244 per head. Among the major European markets, Spain and Italy both recorded declines in percapita revenues in 2011 with Spain down 5.8% to 102 and Italy down 4.1% to 155. In contrast the UK, France and Germany all recorded increases, with Germany up 4.5%, France up 3.2% and the UK up 3.7% to 180 per head. Despite posting significant increases in overall television revenues year on year, TV income per capita for the BRIC countries remains well below the other comparator countries, driven by larger populations and lower penetration of digital TV. For example, India has the lowest TV revenue per head of all 17 countries, at just 5 per person.

14 TV revenues per head in 2011 ( ) Advertising Subscription Public Funding Total UK FRA GER ITA CAN JAP AUS ESP NED SWE IRE POL BRA RUS IND CHI Source: IDATE/industry data/ofcom. For the majority of countries, including the UK, increases in revenue per head in 2011 were driven primarily by growth in income generated from subscription fees. In the UK, 3.02 (82%) of the total year-on-year increase of 3.70 was attributable to subscription fees. The US saw the largest increase in subscription revenue per capita, up 15.17, while Italy was the only country to record a decline in subscription revenue per capita, down 1.81 in For the majority of countries, advertising revenues per head have remained relatively flat, or in some instances declined in In the UK, advertising revenues per head remained relatively stable, increasing a marginal 0.15, while in Spain and Ireland, advertising revenues per head declined, by 4.93 and 3.57 respectively. Only a few countries experienced significant growth in public funding per head in 2011, with the most notable being the Netherlands, where public funding increased by 2 per head against the previous year.

15 Ofcom: The TV and audio-visual consumers By end-2011, the majority of homes had digital television in the UK, France and Spain. DTV take-up reached 100% in Spain, 97% in France and 99% in the UK, where the digital switchover program was completed in October In the UK, satellite TV (including Freesat) was the largest platform (44% of TV homes) while terrestrial TV was the main platform in 38% of TV homes. Digital satellite was also the most popular platform in Germany, Ireland, Poland and Brazil. While digital satellite may not be the top technology choice in many countries, it is often the second most popular platform, taking second place in ten of the 17 countries in our report. Homes in BRIC countries experienced the biggest reductions in analogue terrestrial take-up, while simultaneously seeing the biggest increases in digital satellite take-up. The UK also has one of the highest proportions of TV homes with high definition among the countries included in our research at 41%, higher than France (18%), Germany (28%) and Japan (31%), but behind the US (49%). Digital video recorders and connected TVs continue to grow in popularity in UK TV households, with the highest levels of take-up of all the countries included in our research. In 2011, 39% of UK TV homes had a DVR, while 15% claimed to own a connected TV. Over half (55%) of TV homes in the UK had a pay-tv service in Pay-TV take-up at the end of 2011 was highest in the Netherlands (99%), India (94%), Canada (93%), Sweden (92%) and the US (89%). Growth in pay-tv take-up was most substantial in Brazil (up by 22% on a compound annual growth basis since 2006) and stood at 23% of TV households in The UK has the third highest level of scheduled linear TV viewing, of Ofcom s comparator countries, at four hours per person per day. Despite the increase in online TV, scheduled linear television remains popular, with minutes of viewing per person increasing among most comparator countries. Only Italy (253 minutes per person per day) and the US (293 minutes) watch more television than the UK. Homes in Spain benefited from 100% take-up on main sets, as the digital switchover program was completed in In the UK, take-up had reached 99% by end-2011 as DSO entered the final stages; set for completion in October The Republic of Ireland, where penetration reached 90%, is also set for DSO completion by end In France, where terrestrial switchover was completed in November 2011, 97% of homes had digital television. In the US, where the analogue terrestrial signal was switched off in 2009, digital television take-up reached 89% in 2011.

16 Take-up of digital television top nine comparator countries (%) UK FRA ITA USA CAN AUS ESP NED IRE Source: IDATE/industry data/ofcom At the opposite end of the spectrum, digital television take-up in China, Russia and India remained well below the average of 75% among comparator countries for 2011, at 43%, 40% and 40% respectively. But in each case the rates of DTV adoption ran well ahead of the comparator country averages. Year-on-year increases averaged 32% and the rate of growth over the five-year period averaged 57% in China, Russia and India. In Japan year-on-year DTV growth was comparatively slow despite DTV take-up of 77%. This might be explained by the comparatively slow migration to digital among analog cable viewers. Take-up of digital television the next eight comparator countries (%) GER JPN SWE POL BRA RUS IND CHI Source: IDATE/industry data/ofcom Taking both analog and digital technologies together, cable was the most popular television platform for eight of Ofcom s 17 comparator countries, comprising the US, Canada, Japan, the Netherlands, Sweden, Russia, India and China. For the first time in the UK, satellite TV (including Freesat) was the largest platform (44%) as terrestrial TV fell to second place at 38%. Digital satellite TV was also the most popular platform in Germany, Ireland, Poland and Brazil. While digital satellite may not be the top technology choice in many countries, it is often the second most popular platform, taking second place in ten of the 17 countries analysed in our report.

17 Digital terrestrial was the most popular platform in four countries, including France, Italy, Australia and Spain. Splitting the platforms into their analog and digital components, the digital terrestrial television platform continued to be the largest by market share in Spain (69% of main sets) and Australia (49%). It was also a substantial player in the UK (with a 38% share), ranking second to satellite (44%). Digital satellite was the leading platform in the Republic of Ireland with a 53% market share, the highest proportional take-up of the platform across the comparator countries. Despite the progress made in many countries in migrating homes to digital television platforms, analog technologies are still widely used. The analog cable network is still popular in India, and is the largest platform across the comparator countries with a 58% share of main television sets, followed by Sweden at 33% and Russia at 34%. Take-up of DTV by platform and country in 2011 (%) Digital Analog Digital Analog Digital Analog IPTV cab cab sat Sat Ter Ter UK 15% 0% 44% 0% 38% 1% 0% FRA 8% 3% 24% 0% 30% 0% 28% GER 21% 28% 35% 3% 6% 0% 4% ITA 0% 0% 35% 1% 43% 7% 2% USA 40% 11% 31% 0% 11% 0% 7% CAN 53% 14% 26% 0% 4% 0% 4% JPN 27% 23% 23% 0% 21% 0% 5% AUS 13% 0% 18% 0% 49% 17% 4% ESP 8% 0% 15% 0% 69% 0% 6% NED 47% 23% 13% 0% 0% 0% 11% SWE 21% 33% 15% 0% 6% 0% 11% IRE 26% 6% 53% 0% 8% 5% 2% POL 14% 19% 45% 0% 2% 19% 1% BRA 3% 7% 45% 1% 21% 23% 0% RUS 7% 34% 27% 0% 3% 26% 3% IND 5% 58% 33% 0% 1% 2% 0% CHI 28% 24% 6% 6% 5% 27% 4% Source: IDATE/industry data/ofcom The most substantial change in take-up in 2011 was experienced by homes in Australia, where analog terrestrial market share fell by 11pp. Digital terrestrial was the main beneficiary, picking up a 9pp share, while IPTV take-up rose by 2pp. The progressive upgrade of cable infrastructure to digital during 2011 was reflected in the substantial reduction of analog cable take-up in a number of countries including Canada (-8pp), the Netherlands (-9pp), Sweden (-4pp), Ireland (-6pp) and Poland (- 5pp), as digital cable take-up for these countries increased at a similar rate.

18 The BRIC countries (Brazil, Russia, India and China) experienced the biggest falls in analog terrestrial take-up, while seeing corresponding increases in digital satellite take-up. Elsewhere, the analog market lost share in Germany, where analog cable take-up fell by 4pp while analog satellite fell by 3pp.

19 Turkey: Pay TV subscription growth (000) 1Q11 4Q11 1Q12 2Q12 3Q12 Cable TV subs 1,260 1,261 1,274 1,260 1,249 of which digital 516 Cable Internet Cable Phone IPTV subs DTH subs 3,530 3,875 3,990 4,092 4,867 of which Digiturk 2,286 2,459 2,491 2,526 3,219 of which D-Smart 1,244 1,416 1,499 1,566 1,648 Source: BTK Turkey: Internet subscribers (000) Sep-12 DSL 5,895 6,216 6,641 6,776 6,602 Cable Fiber Other Total 5,986 6,387 7,224 7,662 7,786 Source: BTK