Europe approves merger of Tele2 and Com Hem, Kirkby will move to TDC

The merger of Swedish MNO Tele2 with Swedish cableco Com Hem has been approved but Tele2’s CEO Allison Kirkby isn’t hanging around.

Europe had a look at the merger, as it invariably does with any telecoms M&A on the continent, and concluded it raises no competition concerns. The resulting creation of a multiplay operator doesn’t take any players out of either the mobile or fixed markets and therefore there’s still enough competition to allow the EC to sleep soundly at night. It has also concluded a general investigation into the Swedish telecoms market with not further action required.

“We are nearing the closing of this merger and my ambition to create a leading integrated connectivity provider in the Baltic Sea region will soon be realized,” said Kirkby. “I am immensely proud of the Tele2 team’s efforts throughout this process, as well as our incredible achievements the past years.”

“I will leave a Tele2 that is stronger and better positioned to act as an integrated customer champion in an ever more digitalized world. Once the merger is closed, I feel confident that the Tele2 team, including its new colleagues from Com Hem, will continue to challenge the status quo and fearlessly liberate people to live a more connected life.”

Scandinavia seems to have left a strong impression on Kirkby, who has been poached by Danish telco TDC Group to be its new CEO. Right now TDC seems only to have made the announcement via a Danish press release, but we trust Google Translate enough to run with it. Kirkby will start her new gig in December, right after the merger closes.

The CEO of the merged company, which looks like it will be called Tele2, will be the current CEO of Com Hem, Anders Nilsson. “As one company, we will be able to offer a portfolio of truly integrated services, with significant benefits for Swedish individuals, households, businesses and our shareholders as a result,” he said.

“My main focus now is our preparations for a rapid and efficient integration, to the benefit of both our employees and customers. Together with the new Leadership Team, I will also make sure to draw from the strength, knowledge and spirit of both the Tele2 and Com Hem organizations, as well as the Tele2 Board of Directors. When closing comes, we will be ready to kick off the integration.”

The only other thing worth noting is that Kirkby had been one of the people thought likely to be in the running for the BT CEO job. The search continues.

And the winner is… Comcast!!!!

Comcast has emerged as the winner of the drawn-out Sky acquisition battle with 21st Century Fox, offering shareholders £17.28 per share.

After 21 months, much bickering and passive aggressive commentary, the auction was completed on Saturday 22 September, with Comcast valuing the business at £30 billion. The unusual auction process was overseen by The Takeover Panel, an independent body established in 1968, whose main function is to issue and administer the City Code on M&A.

“We consider the Comcast Offer to be an excellent outcome for Sky shareholders, and we are recommending it as it represents materially superior value,” said Martin Gilbert, Chairman of the Independent Committee of Sky. “We are focused on drawing this process to a successful and swift close and therefore urge shareholders to accept the recommended Comcast Offer.”

“Sky is a wonderful company with a great platform, tremendous brand, and accomplished management team,” said Comcast CEO Brian Roberts. “This acquisition will allow us to quickly, efficiently and meaningfully increase our customer base and expand internationally.”

In securing Sky, Comcast not only adds an additional 23 million customer relationships to its current subscriber base of 29 million, it also increases its footprint in international markets. Prior to swallowing the Sky business, Comcast attributed 9% of its revenues to the international markets, though this now increases to 25%. It’s a more diversified business, offering comfort for Comcast shareholders, while also creating a broad and varied content portfolio. Alongside partnerships with HBO and Showtime, Sky also brings with it a heavyweight position in sport content, a presence which has underpinned its success.

Looking more specifically at the auction process, it was a slightly unusual one. Starting on Friday night, both companies made a starting bid, with the lowest offeror at the commencement being afforded the opportunity to make an increased bid in the first round. In the second round, only the offeror that was not eligible to make a bid in the first round could make an increased bid. If there was not an increased bid in the second round, the auction would have been concluded, though it did run to the third (and final) round, where both companies were offered a final opportunity to increase bids.

As a result of this process, Comcast tabled a bid of £17.28 compared to £15.67 per share from 21st Century Fox. The winning bid represents a premium of 125% to the closing price of £7.69 on 6 December 2016, the last business day before 21st Century Fox’s initial approach. Sky has proven to be a very successful bet for investors representing a ten-year total shareholder return (since 1 July 2008) of +402%, compared to +97% as an average of the FTSE 100.

While this might seem to be the end of a prolonged saga, there are a couple of twists yet to be turned. Firstly, Comcast still has to convince shareholders to part with their assets, and secondly, what will the future hold for the Sky telco business?

In terms of the shareholders, for Comcast to officially secure Sky it will have to gain approval of 50% of shareholders. Fox/Disney currently owns 39% of the business and is yet to disclose what its own position will be, meaning Comcast will have to convince 82% of the remaining shareholders to be safe. Due to the Fox/Disney 39% stake, de-listing Sky will be an unlikely outcome (75% threshold is needed), as will squeezing out remaining shareholders (90% ownership is required). 21st Century Fox could remain a thorn in Comcast’s side for some time.

Another question worth considering is what to do with the Sky telco business. Comcast’s intentions in acquiring Sky have been clear; it is Europe’s most powerful content business; though the telco business comes with this prize. Sky certainly has a notable broadband business in the UK (roughly 6 million subscriptions) and has successfully launched its own MVNO, though it is currently unclear whether this is an area Comcast would like to develop or whether it will look for a sale.

According to RBC Capital Markets, an acquirer would have to shell out in the region of £4.5 billion to purchase the Sky telco business, though there do not seem to be many suitors. BT, Virgin Media and TalkTalk are too large for antitrust approval, leaving only O2 and Three in the telco space. Considering the precarious financial position of O2’s parent company Telefonica, and recent comments from CEO Mark Evans dismissing the convergence craze, O2 seems unlikely.

Like O2, Three has a large mobile business but no presence in the broadband space; a converged offer would be of interest to cash-conscious consumers. It is unknown whether Three parent company Hutchison would want to pursue this avenue, though considering it has begrudgingly spent and cash in the past, instead trying to use political influence to better Three’s prospects (it has a reputation as a moany, spoilt child for a reason), we can’t see this as realistic.

The only other option which would be on the table would be a player from the financial market, though RBC Capital Markets feels Comcast will retain the telco business without expanding it to the continent. Sky is demonstrating the convergence business model can work, and it is an important aspect of the offering in customer eyes; why would it want to undermine a healthy position. As the old Bert Lance motto goes, ‘if it ain’t broke, don’t fix it’.

The auctions bring to close a long-running chapter in the European content game, but this is by no means the end of the story. With its 39% stake in the business, 21st Century Fox can still be a prominent character.

Sky convinces Netflix to do the thinkable: move titles off its platform

Having initially announced a tie-up earlier this year, Sky has somehow managed to convince Netflix to loosen the grip on customer experience, integrating its biggest titles into a very chunky on-demand package.

As part of the partnership, Netflix content will be hosted on the Sky platform, allowing customers to access a huge number of on-demand titles without having to navigate between different streaming apps. Having to navigate through different windows to find the right content can be a frustration for consumers which Sky is certainly addressing, though it does seem to contradict the Netflix ambition to standardise customer experience across all platforms and partnerships.

Across one page users will be able to navigate through Sky’s content such as Patrick Melrose and Tin Star, HBO’s Game of Thrones, Showtime’s Billions and now, Netflix titles such as The Crown, Stranger Things, The Kissing Booth, Making a Murderer and Queer Eye. It’s a lot of quality content for one place, cementing Sky’s position as the UK’s king of content.

“Sky wants to position itself as an aggregator of services as underlined by recent tie-ups, bringing services together is to be offer users a seamless and integrated service experience,” said independent telco and tech analyst Paolo Pescatore. “Therefore, the move further increases Sky’s own value as a one stop shop provider. More importantly it will also get access to Netflix’s catalogue and metadata which will prove more attractive to Disney.”

“Europe lags the US when it comes to cord cutting due to numerous reasons. Among other things the pay TV penetration is a lot lower in Europe and has been dominated by a handful of players. However, both regions are seeing huge growth in binge watching driven by changing user behaviour towards on demand programming.”

The mega on-demand deal will cost £10 a month, alongside a Sky Q subscription, with a 31-day rolling contract available as an option. It might be more expensive than a normal Netflix subscription, but with Sky’s box set content available for £5 a month, professional bingers will be able to save money combining the pair.

Sky Netflix

While this is a massive coup for Sky, it is a strange turn of events for Netflix. Last week at IBC 2018, Maria Ferreras, VP of EMEA Business Development at Netflix, stated that while the business was open to partnerships the experience would remain consistent across all platforms and partnerships. In allowing Sky to host its programming on its own content platform, Netflix has essentially handed over the management of customer experience. It’s an interesting announcement with Ferreras insisting maintaining a high-quality and standardized experience across all platforms was critically important for the business.

That said, another ambition of the business is to make its content as accessible as possible. Improving accessibility is one aspect of the strategy to secure additional subscriptions as the growth rate looks like it is beginning to wobble. Perhaps this is simply a compromise. As growth momentum slows executives have to make difficult decisions, some of which they will not like, and maybe this is one. The drive for new subscriptions seems to outweigh owning the customer experience.

Now before anyone gets too excited about this being a possibility for every content platform, this will probably not be the case. Ferreras highlighted last week that each partnership is weighed on its own individual merit. There are frameworks in place to guide the parameters of each relationship, though the end product will entirely depend on who is sitting on the opposite side of the table.

Taking this an example, Netflix might have been happy to hand over the customer experience management because Sky has an excellent content platform which it has spent years honing; it is a solid experience with content easy to find. Others cannot say the same, take Virgin Media for example. We cannot imagine Netflix would allow a similar integration of content due to the cumbersome nature of the TV offering.

The search for new subscriptions will certainly take Netflix into some interesting partnerships. After the last quarter’s results, were subscription growth looked to stagger, there might be more pressure for executives to loosen the stranglehold on the platform, and be more flexible when it is discussing partnerships. Netflix still has the upper-hand when it comes to negotiations, though if it wants to maintain its lofty market cap ($152 billion!!!) it will have to be more pliable. Offering more access to its valuable customer data and behaviour insight could be one of those areas.

IBC 2018: Let’s get figital

We’re not 100% sure how to spell it, or whether it is actually a thing yet, but appealing to the fidgety younger consumer could be the key to cracking the content market

For many telcos, convergence is a business model which offers a shining light of profitability in the cut-throat digital economy. While connectivity providers should be viewed as the bedrock of the digital economy, capturing revenues has been an increasingly difficult task. The Silicon Valley internet giants have been securing the lions share, only allowing crumbs to fall down the value chain, relegating the telcos to the dreaded role of connectivity utility, though convergence offers a glimmer of hope.

Convergence allows to telcos to offer value. Whereas mobile and broadband offerings and the experience are purely defined by being able to connect to the internet in a timely, efficient and secure manner, content takes the telcos away from a commodity offering. Though a massive question still remains; how can the telcos penetrate this ecosystem in a profitable manner?

We do not believe owning content is a particularly sensible way to go about it. AT&T’s acquisition of Time Warner might have been one of the biggest stories over the last 18 months, but running a creative content business is completely different from the scientific and risk-adverse connectivity game. BT has already shown billions can be wasted for little reward, so where is the opportunity?

The aggregator business model is one which has proved successful in recent months, offering customers a single platform and billing service, but for the telco which can think a bit more creatively, the fidgety consumer offering opportunities.

Speaking at IBC 2018 in Amsterdam, Endemol Shine’s Chief Creative Officer Peter Salmon pointed towards the restless nature of younger demographics as one of the biggest complications for the content industry. These digitally native audiences are used to consuming media on multiple devices simultaneously, seeking content through a much broader range of channels than traditional industry can keep pace with.

For example, Love Island was one of the companies more successful titles in recent months, not only due to a refresh in the content, but because the target audience was engaged through Snapchat. This is a platform which is becoming incredibly popular with younger demographics, and while there longevity questions surrounding usage as the user gets older remaining, it allowed the company to provide a multi-platform experience for the user. Mobile is driving a substantial amount of content consumption nowadays, but to truly capitalise on the opportunity, new means of engagement have to be considered.

“Companies need to go where the consumer goes,” said Salmon.

Linear TV is one channel, on-demand is another, social media platforms are an excellent one as are apps to bring everything together. The industry is struggling to engage this audience, as well as adapt the relationship with the user to make it relevant for today’s trends. While this is a complication for the traditional industry, it offers an opportunity for the telcos to add value; the insight through mobile usage is already there.

Short-form content is another trend worth keeping an eye-on. These videos, typically 8-10 minutes long, are a new way to engage audiences. They have failed in the past, but with the current domination of mobile platforms and the penetration of social media, new opportunities have arisen. Salmon believes this format is set for a boom in its own right, but as a supporting player for traditional content through the alternative channels, its critical. This presents yet another complication for delivering content to the consumer.

The telcos are organizations which know how to manage these complicated relationships with customers, in theory, as they have been dealing with the multi-platform universe, which is becoming so prominent in content nowadays, for years. Connectivity is also crucially important in everything to do with content moving forward. Mobile is king in the digital economy, and telcos know all about delivering these experiences to the consumer, not necessarily owning the content. Multi-platform, mobile driven engagement is an area the telcos know about.

The “war for attention”, as Salmon describes it, is creating a huge headache for the content industry, though it does present the telcos an opportunity to gain entry to this much-desired aspect of the digital economy. Wherever there is disruption and complications, the door is open for new players.

IBC and TM Forum play match-maker for telco and media ecosystem

With convergence becoming an unavoidable buzzword throughout the telco industry, the telco and media ecosystems will have to learn to become playmates.

IBC and TM Forum are stepping in to make sure sparks fly. Like Mobile World Forum for the telco industry, IBC is the annual meeting place for those on the technical side of media. It might seem an odd proposition to have a conference organiser taking the lead in setting the tone, though such is the breadth and depth of the industry these annual meetings hold significant influence over the activities and conversations which will dominate the year.

This latest announcement from the pair builds on a partnership announced earlier this year, and puts five new ‘Catalyst’ projects onto the agenda. Each Catalyst team will build a working proof-of-concept solution to a specific industry challenge and the successful projects will be showcased at IBC2019 and Digital Transformation World 2019, the TM Forum’s own annual bonanza.

“IBC is pleased to be able to help facilitate the convergence that we are seeing throughout the industry,” said Michael Crimp, CEO at IBC. “With our unique position within the media community, and now our collaboration with the TM Forum, we are now fully equipped to facilitate long-term solutions to the most vexing problems facing the telecoms and media industries today.”

“Media is an increasingly important sector for our global membership as the boundaries between telecoms and media continue to blur,” said Nik Willetts, CEO of the TM Forum. “The digital age is changing the landscape for creation, distribution and consumption of media, and we believe that through industry collaboration we can drive a new wave of innovation and growth. We’re delighted to collaborate with IBC, and to extend the Catalyst model to explore the convergence of telecoms and broadcasting.”

Examples of the projects include:

  • Using 5G powered drones for enhancing the viewing experience during live sporting events
  • Utilising blockchain to support the media supply chain in ways such as royalty tracking and collection
  • Tackling piracy and the unlawful use of unlicensed streaming boxes
  • Developing an open API to securely and anonymously monitor advertising performance in digital media

With the world becoming increasingly mobile, and customer experience for the telcos being increasingly defined by the ability to access the right content at the right time, getting these two ecosystems on the same page will become more and more important. Let’s hope IBC and the TM Forum prove to be effective match-makers.

Legere gives up the weird and wonderful for loyalty-focused Uncarrier move

Revamping customer services and launching a loyalty programme might be very intelligent plays by T-Mobile, but it isn’t quite the grandeur of kick-starting an assault onto the TV content market.

Whenever CEO John Legere pulls on the magenta t-shirt, applies the gallons of mousse to the hair and presumably drinks 15 shots of espresso to get the authentic wired look, the industry has come to expect big, disruptive and combative things with Uncarrier announcements. The latest ‘challenge’ is somewhat more traditional than we are now used to as the norm with the eccentric CEO.

Back in January, when T-Mobile US completed the acquisition of Layer3 TV, it paved the way for the magenta army to tackle the convergence market. T-Mobile has been promising a disruptive TV service and is yet to deliver. When Legere decided to stoke the fire of excitement by telling us the next Uncarrier move was coming this week, assuming it would be the TV embrace would have been a fair bet. The reality is functionally a great route for the business, but it isn’t anywhere near as stimulating as what we imagined, even if Legere does his relatively-shallow excitable-puppy routine.

The banner for the new initiatives is ‘Rock Star Treatment’, which does seem to be a rip-off of the Virgin Atlantic adverts of yesteryear. The first prong will be to revamp the customer services operations, creating a proposition where the customer feels valued. Despite Legere claiming this is disruptive, it is something which should have been done anyway. The song-and-dance surrounding the upgrade just illustrates how little telcos think of their customers in the first place. Secondly, the loyalty programme is very similar to the proposition which O2 has built in Priority. It’s a very effective loyalty programme for O2, so we have no issue with Legere ripping off the UK market leader.

“Our customers get treated like rock stars with Team of Experts, and we believe they ought to be treated like that everywhere they go,” said Mike Sievert, COO at T-Mobile US. “Music connects us, so we’re connecting our rock star customers with exclusive magenta extras at Live Nation events and with Pandora. Now, when they turn on their tunes or head to a show, they’ll get an elevated experience, just for being with T-Mobile.”

On the customer services side of things, the T-Mobile Team of Experts has been launched nationwide which promises no robots or automated phone menus, and a dedicated customer services representative who will be assigned to a customer. As part of the initiative, Legere has promised you will talk to an actual person, no bouncing from department to department, 24/7 call centres, call-back features will be introduced and integration with Alexa or Google who will be able to assist negotiating the beige maze.

Some of these features are welcome additions to the customer services mix, while other are something the telco should have been doing anyway. Although this is hardly the most exciting aspect of the communications world, it is a critical one. Telcos who take customer services seriously are the ones who have the lowest churn and highest Net Promoter Score (NPS). Many business experts will tell you it is more profitable to keep current customers happy that constantly chasing acquisitions to replace the churn. It seems like an obvious thing to say, but with the attitudes of the telcos, you wonder whether it has hit home. T-Mobile is seemingly making efforts to improve here, and the second aspect of the Uncarrier launch will also add to momentum.

The second aspect is a loyalty programme. Here, a partnership with Pandora will offer Uncarrier customers a year-long Pandora Plus subscription, and through a tie-up with Live Nation, will have exclusive and early access to gigs, as well as discounted tickets. This is an approach to retention and rewarding customers which we really like and smells very similar to O2’s strategy.

When looking at free value-adds for customers, some telcos look at big ticket items like sports. While this might attract certain customers, the risk is there is little interest from others. A focus on music offers breadth and accessibility. With Pandora, customers can choose their genre, or tap into alternative content such as podcasts and radio stations. It offers something for everyone. With the Live Nation tie up, this is relatively risk free as it gives the consumer the choice of what to purchase. T-Mobile is offering value to the customer through discounts and early access, though it is placing the financial commitments on the consumer. They choose what they want, but are receiving value through being a T-Mobile customer.

Overall, this is an alternative approach to convergence. The ventures into content are not to generate revenue directly through increasing ARPU, but focused on retention of customers. Offering value-adds for free makes the customer feel rewarded and an indirect boost for the bottom line. Securing customers for the long-term is an excellent way to improve profitability, and a better relationship with customers will only create more brand ambassadors.

While this is not the devilish and enticing Uncarrier move which we have become accustomed to with Legere and his wild eyes, it is a pragmatic business strategy to secure the user base and improve the foundations. If T-Mobile US can take it retention capabilities up to the same level as its subscriber acquisition, the duopoly might not be that far on the horizon after all.

Orange continues to bang convergence drum

Virgin Media might be struggling to live the convergence dream in the UK, though Orange doesn’t seem to be having any problems as it reports another positive set of results.

Total revenues for the first half came in at €20.2 billion, a year-on-year increase of 0.9%, while operating income grew much more favourable, an increase of 2.8% to €2.35 billion. While this might be the highest profit margin in the industry, Orange has continued to demonstrate it is building for the future investing another €3.36 billion in CAPEX, 16.6% of total revenues delivered over the six month period.

“The 1st half results showed accelerated growth across all the Group’s financial metrics,” said CEO Stéphane Richard. “Revenues grew in all our regions while the strong acceleration in the Group’s adjusted EBITDA, which rose 3.3% during the half, reinforced our strategy of differentiation on the basis of service quality and demonstrated our constant focus on operational efficiency.

“Our investment strategy in fibre and 4G is reflected in the sharp increase in our very high-speed broadband customer base. Orange now has 50 million 4G customers with 13 million in Africa, twice as many as a year ago. In fixed very high-speed broadband, the customer base continued to show particularly strong growth enabling us to reach 5.5 million customers, almost exclusively in fibre.”

Looking at the convergence strategy, the team reported an increase of 9% in convergent offers year-on-year, a total of 10.7 million customers, while the number of SIMs attached to these offers increased to 18 million. Orange often boasts about being the leading convergent player in Europe, and with numbers like these it is hard to argue otherwise.

Spain has continued to be a strong market for the business through this period, and following the conclusion of the spectrum auctions, it is looking to be in a solid position for the 5G race. During the auction, Orange Spain acquired 12 blocks of frequencies, paying €132 million, representing 60 MHz in the priority spectrum band to offer 5G services. Orange is now the only operator in Spain in reach a total of 100 MHz in this spectrum band, which it claims is essential for the development of the new ultra-fast mobile broadband technology.

The Virgin Media TV debacle is a lesson in how to do convergence badly

Virgin Media seemingly tried to usher through some profitability in its negotiations with UKTV over programming, but the cost-cutting quest could have some wide-ranging repercussions.

It is certainly a delicate tight-rope to walk. The much-hyped convergence business model is one which is supposed to attract new revenues, though how much investment should be committed to making the alternative offerings attractive to the customer? Any additional streams to a telcos business model need to be striking and engaging to the user, but over-spending could complete negate any benefits, as BT’s former CEO Gavin Patterson found out.

A very public disagreement between Virgin Media and UKTV seems to be based around the telco trying to strike this balance. In attempting to only secure the free channels for its TV platform, Virgin Media essentially ended any agreement between the two to secure UKTV programming. And the impact has been notable.

UKTV claims to have received more than 50k Twitter mentions on the topic, many of them condemning Virgin Media’s decision to degrade the content experience, while there were several comments on a story we wrote on the saga, with readers suggesting this would be the end of their relationship with the telco. Research from Kantar TNS also suggests there will be a negative impact.

Although you have to bear in mind this research was commissioned by UKTV, it will be slightly biased, Kantar TNS reports 43% of the respondents are considering cancelling their Virgin Media subscription as a result of the lost channels. 64% felt UKTV channels were an important part of the Virgin Media TV package, with 41% claiming they watched the content more than once a week. 65% believe the replacement content is worse than what was being offered by UKTV.

Overall, this is a prime example of convergence done badly. Your correspondent can testify to the fact, as a former Virgin Media customer, the TV offering was nothing more than okay. Dave and Alibi are channels which do provide good content, and perhaps this is the issue with the Virgin Media platform on the whole. There simply isn’t the breadth of quality content which you can consume in comparison to other content platforms, such as Sky.

Convergence is a very good way to improve customer retention and also bring ARPU up, but when it is done badly the risk of damaging the overall brand and subscription numbers is high. With the accessibility and variety of content platforms on the market now, telcos can ill afford to produce a substandard offering. It risks more than reputational damage in that one vertical, the ripples can spread throughout the business.

That said, according to tech and telco analyst Paolo Pescatore, these spats are not uncommon:

“These carriage disputes occur more frequently than we realise. The content owner wants more money while the platform provider wants to pay less. Ultimately the consumers who pay for Virgin TV missing out. And this is not good for either party given how quickly this dispute has escalated and in public. Arguably, Virgin media has more to lose than UKTV.

“Undoubtedly we are going to see more of these issues. More so as content and media owners look to offer their own content on an exclusive basis through their own direct to consumer services, OTT.”

The negative consequences could be avoided by Virgin Media. If negotiations are reopened (UKTV confirmed lines are open, but the conversation is not happening at the time of writing) and the channels reinstated on the platform, it will probably be able to salvage the relationship with the customers. But should it decide it can get by without UKTV, there could be an impact on the spreadsheets.

Not all of the customers will follow through with threats to ditch Virgin Media, changing suppliers is made too much of a cumbersome and frustrating process by the telcos, but it will be interesting to see what the impact of badly done convergence is.

You can see why there’s so much interest in Sky

Sky has released its financial results for the last twelve months, and you can see why a bidding battle enraged over the UK’s biggest premium content provider.

Total revenues for the year stood at £13.6 billion, while operating profit was £1.034 billion, year-on-year increases of 5% and 7% respectively. Customers are clearly happy with the content platform, and the promise of more original programming over the next twelve months will only make this proposition more attractive.

“It’s been an exceptional year,” said CEO Jeremy Darroch. “We’ve delivered another set of strong results with like-for-like revenues up 5%, Established Business EBITDA up 11% and EPS up 10%. Over half a million new customers joined Sky this year and we now have 63 million products in customer’s homes as they continue to choose Sky over other providers. As a consequence, we have extended our leadership position as Europe’s largest direct-to-consumer media and entertainment business.”

In its largest market, the UK, revenues increased 4% to just over £8.9 billion, adding 270,000 new customers across the year. Churn on its TV product was down to the lowest point in a decade, while advertising revenues increased 6% despite claiming the market overall is relatively stagnant. Content is still by far and away the cash cow for Sky, though with the mobile unit adding another 95,000 customers in the final quarter, taking the total to more than 500,000, while fibre penetration of the broadband business is now up to 38%, the convergence strategy is clearly starting to take hold.

While this strategy might have been championed in the UK, it won’t be too long before it starts making an impact elsewhere. A partnership with Open Fiber in Italy will grant access Fibre-to-the-Home (FTTH) network and allowing the launch of a triple-play service from Summer 2019, while there are also plans to kick-off a GB fibre offensive in Ireland.

That said, Sky might be looking to diversify into new streams, but it is putting into practise a lesson many telcos could learn with learning; its nailing the traditional business first. Many telcos might have forgotten about connectivity in the search for profits elsewhere, but Sky is continuing to bolster its content platform. Keep the customers happy with your core service and build everything else as a bonus.

“The deals forged over the past few months, including a cross-channel sharing agreement with BT, Netflix and other leading online services indicate that Sky is positioning itself as an aggregator of content and services,” said tech, media and content analyst, Paolo Pescatore. “Sky is the undisputed leader in bundling services in the UK and we now expect it to take the same approach in other markets. Content remains at the heart of the company.”

The original content it plans on producing over the next couple of months is just one cog in the machine. New partnerships with Netflix, Mediaset, BT and Spotify start to evolve the Sky proposition into the aggregator model, while sport is back as the big ticket item with top-league football throughout the continent and the rights to the Ryder Cup at the end of the year.

Sky is evolving its business model to fit the demands of the consumer in the digital era, but it has not gotten distracted with the convergence hype, despite gains in the connectivity game. Sky has not forgotten about its core mission to its customers. A few other businesses could learn a thing or two here.