Werner Schuler: “TSA and Media Networks add synergies so that one plus one becomes three… not two”

In this interview, the CEO of Media Networks, Werner Schuler, clarifies numerous questions related to the integration of Media Networks and Telefónica Servicios Audiovisuales, under the umbrella of Telefónica Digital, such as what will be the structure of these business units? What objectives do they have? What markets will they focus on? What plans does TSA have as an integrator? Is content production in Telefónica's sights?...

In recent years, Telefónica has undergone numerous structural, organizational, and image changes... now, under Telefónica Digital, Media Networks and Telefónica Servicios Audiovisuales (TSA) are organized... how are these business units and the relationship between them structured? Aren't these too many changes?

Heraclitus already said that the only thing permanent is change, and change is always evolution. This industry is very dynamic in a world, increasingly dynamic and global, with different turning points. We are not afraid of change within Telefónica, despite some inconveniences that transitions always entail. It is the responsibility of a company of Telefónica's caliber to face challenges by always walking a couple of steps ahead. Other companies are also adapting to the changes, although they do not have the global projection of Telefónica, a company that has become transnational on both sides of the Atlantic, with a strong presence in the Hispanic and European world.

Throughout these years we have incorporated professionals from numerous countries, and there is beginning to be a very enriching movement within the company. Growing and moving involves adapting to changes, anticipating our positioning in the future.

Telefónica will organize itself to reach the market in the best way and guarantee to cover the needs of our clients around the world. For example, Media Networks was born in Peru, and expanded throughout Latin America, creating very synergistic solutions, with a center of gravity in the sharing of infrastructure without compromising commercial or strategic identity... we think as an industry, not as a single company, thus better detecting opportunities.

An example is the white label satellite platform for pay television that we have launched, totally innocuous to the competitive capacity that a client can achieve in a market. We have clients who are competitors in retail, who are not negatively affected but, on the contrary, very positively have our support.

For its part, throughout this journey, which we have been working for twelve years in Latin America, TSA was primarily an intragroup service provider that gradually adapted to our needs. For example, TSA was the one that set up the production company we have in Peru many years ago to produce exclusive channels for operators and helped us implement the headend we have in Peru to serve all of Latin America.

Media Networks' relationship with broadcast companies in Latin America is very important, and therefore we saw that, once integrated with TSA under the umbrella of Telefónica Digital, we could maintain the personalities of each company. TSA and Media Networks add synergies so that one plus one equals three, not two.

Having a consolidated leg in Latin America has helped TSA, closing important agreements with broadcast companies in Brazil, Mexico, Peru, Chile... being part of the Telefónica group is an endorsement not only from a financial or solvency point of view, but from a vision of permanence. There are many possibilities to transfer expertise to both sides of the Atlantic… to improve efficiency and support our clients' new business models.

The objective is to strengthen the footprints that we have and have. This strengthens TSA in its relationship with its current and future customers, while strengthening Media Networks. By strengthening and making Telefónica's arm more powerful in different markets. We can offer audiovisual solutions in any facet and infrastructure.
We believe that the formulas do not necessarily have to be the same for Latin America and Spain, due to the market situation today. Therefore, we have strengthened our structure to satisfy any demand.

Media Networks has revolutionized the pay TV market in Latin America with a white label DTH package aimed at operators and retailers. What advantages does this proposal provide?

We offer a package that ranges from the consolidation of television signals, so that the client can select between 600 signals (between 100 and 200 per country), to signal reception, encryption and conditional access systems and a long etcetera... in this way, in three months, you could launch a project integrating your commercial management system with the one you already operate through a kind of communication belt that manages the platform and it is absolutely innocuous which end client you want to reach. Additionally, if you wish, we can create programs or channels for differentiation.

This initiative has had an impact on a market that many believed would only exist in the medium-high segments because the cost structure was very high. Most operators decided about ten years ago to focus on higher ARPU in certain segments with increasingly expensive equipment.

We are betting on an entry in pay television, for example, accessing cheaper set-top boxes. We simplify everything. The potential market for the pay TV business was expanded and together with the synergy provided by the sharing of infrastructure and centralized management, we have drastically reduced the barrier to entry.

At the same time, other traditional operators also began to enter lower segments and the consequence is that in Latin America the penetration of pay TV has almost doubled in the last 7-8 years.
Our platform allows both media companies that want to extend their telecommunications business with pay television, or telco companies that want to include pay TV in their portfolio to do triple play.

Does this model have the possibility of working in Spain? What has gone wrong in Spain for the take-off of pay TV to be so slow?

In Spain it has been started on many occasions from the premise that people do not want pay television. In addition, telcos are internally debating the need for everything new to replace what exists so as not to repeat technologies from the past. And what is really happening is that users demand more services every day. Pay TV levels are going to grow once the situation readjusts, as they are growing around the world, but there will be much more added value as OTT services are going to penetrate more because they are desired by people with individual or consumer devices at home.

Pay TV is a residential product, we cannot forget that. I think that, by nature, people and families tend to spirally incorporate products and services to cover operational, communication, entertainment, information needs... The time that a person is exposed to some type of screen today is much longer than it was just a few years ago. Telecommunications and everything that links it improves life.

What plans does Telefónica Servicios Audiovisuales have as an integrator and head of channels?

Infrastructure sharing is vital. We have the experience to be innocuous in operational management and, in addition, we are part of a landscape that does not generate noise. Customers know that, far from competences, they can trust Telefónica from a perspective of recurrence and permanence over time. This can help us be a catalyst for the new era we live in in this new cycle of the media industry.

In terms of transmissions, the world is increasingly more connected and needs are growing and Telefónica is an extraordinary 'hub' between Europe and America, Africa, Asia... with differentiating elements such as security, a great experience with unique profiles and permanence over time.

What does TSA provide compared to other integrators?

Mainly, that we can do things agilely. Furthermore, by having a presence on the other side of the world, our footprint has grown, improving our negotiation capacity with the key suppliers with whom we have to integrate.

The second reason is that our objective is to always offer the best sustainable solution as well as accompany the client in a sustained and solvent manner in their evolution today and tomorrow.

It should also be noted that we continue to enrich a human team that does not understand borders, but rather projects and client needs. We are open to mixed participations. We do not intend to be the only ones on the market with an exclusive footprint. We are open to agreements to generate the best solution with the mission of generating the best solutions for our clients that last over time.

Telefónica is betting heavily on satellite broadband, what will it influence the audiovisual business from both a B2B and B2C point of view?

In terms of broadband, the satellite platform is the complement to fixed and mobile networks, because the latter, to be configured as authentic networks, need population density and purchasing power... and both in the same time and space. The satellite platform makes it possible to break one of these two conditions. We must not forget that the service and use is mobile, but the networks and antennas are fixed... when the potential clients are reduced, the infrastructure costs rise to an unbearable point. At Telefónica we are convinced that this is a valid and competent platform, as well as a complement to our two large existing platforms. In Europe, the expected GAP between fixed and mobile coverage is 3-4%, but in Latin America, this will be much higher, up to 30-35%. That in the future it will be fiber or mobile, will be probable... but down the road, which will last years, the satellite platform will have an important validity in universalizing access to broadband.

Why have you chosen to develop the Ka band over others?

The appearance of the Ka band generates a dramatic cost reduction although it sacrifices coverage area. The C gives hemispherical coverage, but in that large footprint you distribute all the power of the transponder, which is why large antennas are needed. The Ku covers large areas with several footprints, so large antennas are required for uplink but it allows DTH reception with very small dishes.

The Ka band, on the other hand, reduces this footprint more but also reduces the cost of using the capacity by about a hundred times. If what you are working on is video or signal transmission within this limited space, which is not so small, the use of the Ka band offers many advantages. For the emission of local television signals, linear or not, the Ka band is perfect as well as for providing 'backbone' services for mobile and fixed broadband and voice services.

Finally, Telefónica's relationship with content production has been love-hate in recent years... what strategy do you propose in this area?

Telefónica is neither, nor does it want to be, a content producer. Which does not mean that, exceptionally and punctually in some market, we can produce as has been the case in Peru. Of course, we can be content aggregators since having such an important footprint opens up a spectacular opportunity for those who have content... And in distribution, a very important percentage of OTT entrepreneurship is based on content distribution.

Telefé belongs to the group and is the main content producer in Argentina,… but our spirit does not go there. What is...is. Yes, we intend to generate agreements to increase the ARPUS of our clients, expanding our relationship with them to help them build loyalty and get new clients.