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TIM Brazil's Multiplay Strategy Points To Telco-OTT Trend In Latin America

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Brazil's second-largest wireless carrier and emerging fiber broadband provider TIM, owned by Telecom Italia SpA, announced earlier this month that it would be partnering with AT&T Inc.-owned DIRECTV Group Holdings LLC's SKY Brasil to offer discounted DTH video services to subscribers in the cities of São Paulo and Rio de Janeiro, where its fiber networks are deployed. SKY subscribers will also receive discounts on TIM wireless and broadband services.

This is the company's third experiment with offering video through a partnership. The first involved a connected set-top box product — now discontinued — sold in retail stores. The box came with an embedded IPTV app from small MSO TV Alphaville, as well as Netflix Inc. access. More recently, the company has adopted a successful strategy of selling three months of free Netflix bundled with its double-play fiber broadband/fixed-wireless voice offer, joining a growing list of telco-Netflix partnerships across the region.

Netflix-operator partnerships in Latin America

TIM's SKY partnership announcement also follows a general company strategy of meeting customer demand for content without incurring the costs of content. TIM's content offerings for wireless subscribers include music streaming service TIM Music, offered in partnership with Deezer, and TIM Banca Virtual, with online versions of 40 different magazines, among other services from white label providers.

TIM also plans to launch fixed-mobile triple play bundles, including fixed-wireless telephony, fixed broadband and mobile services, as well as what it calls "n-play" bundles, which would also include digital entertainment services offered by partners.

The partnership strategy has also been implemented in other Latin American countries in order to circumvent regulations which forbid incumbent telcos from offering pay TV services, leading to similar agreements in the past, such as between DIRECTV and Argentina's telcos, or Telmex and DISH Network Corp.

Whether due to regulatory restrictions, network limitations or cost saving, operators in Latin America are looking for new ways to offer video to their subscribers beyond the traditional multichannel model. For years now, Argentinean telcos have been offering their fixed subscribers OTT video since regulations in the market forbid forbid telcos from offering pay TV. Telefónica's On Video and Telecom Argentina's Arnet Play both launched in 2011. More recently, Telmex has also adopted over-the-top video as a means to increase customer loyalty and drive adoption of higher speeds among users of its Infinitum broadband product by offering a free 12-month subscription to Clarovideo.

Telmex parent company América Móvil SAB de CV is betting big on its Clarovideo SVOD service, which is available across Latin America to both subscribers and non-subscribers of the company's traditional telecoms services. In September 2016, the company launched a freemium version of the service, Claro Video Básico, which offers free access to a selection of 500 titles from the OTT service's catalog. Telefónica S.A. follows a similar strategy, offering its own SVOD service Movistar Play (dubbed Vivo Play in Brazil) to both subscribers and non-subscribers across the region, whereas Televisa, which only offers cable services in Mexico, has expanded its regional reach to the rest of Spanish-speaking Latin America with SVOD service blim.

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Even network programmers are now joining in on the action, as both ESPN (US) and HBO / Cinemax (US) now partner with ISPs to offer their streaming services to non-pay TV subscribers through bundles with broadband subscriptions. Sony Corp.'s Crackle also changed its OTT offering from a free, ad-supported service to an authenticated service offered by operators, including TV shows from its linear channels in the service's catalog. The company has already closed deals with 26 operators across Latin America.

Some networks are looking to subvert the traditional business model even further by going direct-to-consumer, as with Globosat's plans for its premium brand Telecine. In Mexico, networks FOX (US) and HBO have partnered with DTH operator Dish México to offer their streaming services to non-pay TV subscribers over the DISH OTT platform, and adult content.

The OTT model could become especially strategic in markets where pay TV penetration remains low while broadband is growing rapidly, helping to drive further broadband penetration. In Brazil, for instance, broadband penetration has already overtaken multichannel penetration, which remains under 30%, making the country a prime market for pay TV-OTT substitution. The country is one of Netflix's largest markets, with an estimated 4.05 million subscribers in 2016.

Latin America broadband-TV penetration gap, 2016

Indeed, TIM and SKY's announcement of the joint offers made sure to focus on OTT content. SKY subscribers in the two cities will be offered significant discounts for TIM's 50 Mbps fiber-to-the-curb broadband plan (priced at 69.90 Brazilian reais per month, down from an original price of 109.90 reais per month) and 7GB postpaid wireless plan (99.90 reais, down from an original price of 179.90 reais in São Paulo and 149.90 reais in Rio de Janeiro), which includes content such as music streaming, online magazines and a cloud backup service. TIM's fixed and wireless subscribers, on the other hand, will be offered a free one-year subscription to HBO, including access to the network's VOD service, HBO Go, along with their basic SKY subscription.

As of February 24, US$1 was equivalent to 3.11 Brazilian reais.

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