* Telco investment in content is one of several factors telco investors consider as risk to a sector turn-around
* European Telco investments in content have up to now lost money
* European telcos continue to consider investments in content / TV
* AT&T – Time Warner believe the potential synergies between Telco and TV are growing
− e.g. from targeted advertising – which CS US media team sees as a significant opportunity
* The synergies may be smaller in Europe – due to regulation and less scale (market more fragmented)
− And can be achieved without vertical integration
− Whilst European telco ownership of TV assets could also destroy value (culture clash)
Our conclusion:
− European telcos are likely to continue to debate investing in content/TV, despite losing money to date
− The synergy argument plus competitive pressures may tempt more telcos to invest
− However – we will remain sceptical of the actual returns from such an approach
− Telcos that focus on being the best pipe would outperform those that focus instead on telco/media convergence