Telenet announced last Friday that it has also acquired the non-exclusive broadcasting rights for the remaining 5 matches per weekend in the Belgian competition, on top of the exclusive rights for the top-3 matches that it had already acquired, and this for the seasons 2012-2013 and 2013-2014. The non-exclusive rights cost around € 1m per season (compared to between € 25m and € 30m per season for the exclusive rights to the top-3 matches). This will deal with the problem that football enthusiasts that want to follow all matches would need two decoders, one from Telenet (or VOO in Wallonia) for the top-three matches, and one from Belgacom for the remaining five matches.
Telenet also announced more details regarding the pricing of the football offer. The Belgian competition will be broadcast on the Prime Sports channel, that will be renamed “Sporting Telenet”. Sporting Telenet will cost € 14.95 per month for triple-play clients, € 19.95 per month for dual-play clients and € 24.95 per month for clients that have only Digital TV.
Our View:
The availability of the pricing details allows one to estimate how many clients Telenet would have to sign up for its TV offer in order to make a profit on the deal.
Many different scenarios and assumptions are possible of course, but as an example we calculatethat if Telenet signs up 35k new clients (of which we assume 50% takes a triple-play package and 50% only takes digital TV with the football offer) and they manage to upsell the TV offer to 70k existing triple-play clients, the company would roughly break-even, with the incremental profits covering the costs of the rights as well as the production costs (probably between € 5m and € 10m per season).
Belgacom has never disclosed how many clients it has for its Belgian football offer, but we estimate the number to be between 50k to 70k. Taking these (fairly low) subscriber numbers into account (and keeping in mind that Belgacom covers the whole of Belgium while Telenet only covers Flanders and a part of Brussels), we believe it won’t be easy for Telenet to sign up a sufficient number of clients to generate a profit on the TV offer.
On the other hand, acquiring the rights to the Belgian football competition is of course another important competitive advantage versus Belgacom in the battle for digital TV clients.
Conclusion:
No changes to our investment case and we reiterate our Accumulate rating and € 34 target on Telenet. We will integrate the impact of the Belgian football rights after the publication of the 2Q results on 28 July.
Later this month, Telenet will also proceed with the € 4.50 per share capital reduction (26 July ex-date, 29 July payment date).