Werner Schuler: "TSA and Media Networks add synergies so that one plus one equals 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?, which 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, organisational, image changes... now, Media Networks and Telefónica Servicios Audiovisuales (TSA) are organised under Telefónica Digital... how are these business units structured and the relationship between them? Aren't there too many changes?

Heraclitus already said that the only permanent thing is change, and change is always evolution. This industry is very dynamic in an increasingly dynamic and global world, 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 always walking a couple of derivatives ahead. Other companies are also adapting to the changes, although they do not have the global projection of Telefónica, a company that has transnationalized on both sides of the Atlantic, with a strong presence in the Hispanic and European world.

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

Telefónica will be organizing itself to reach the market in the best way and guarantee to meet the needs of our customers 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 infrastructures without compromising commercial or strategic identity... We think as an industry, not as a single company, thus better detecting opportunities.

An example is the satellite platform for white label pay television that we have launched, totally innocuous to the competitive capacity that a customer can achieve in a market. We have customers 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 on for twelve years in Latin America, TSA was first and foremost an intra-group service provider that was fitting our needs. For example, TSA was the one that set up the production company we have in Peru many years ago for the production of 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 a guarantee not only from a financial or solvency point of view, but also from a vision of permanence. There are many possibilities to transfer expertise to both sides of the Atlantic... to improve efficiency and support our customers' 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 also 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 current market situation. For this reason, we have strengthened our structure to meet 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 bring?

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, it could launch a project integrating its commercial management system with the one it already operates through a kind of communication belt that manages the platform and it is absolutely innocuous which end customer it wants to reach. In addition, 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 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 bet on a pay-TV starter, for example, by accessing cheaper set-top boxes. We simplify everything. The potential market for the pay-TV business has expanded and, together with the synergy provided by infrastructure sharing and centralised 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 TV, or telco companies that want to include pay TV in their portfolio to triple play.

Does this model have a chance of working in Spain? What has gone wrong in Spain to make the take-off of pay TV so slow?

In Spain, it has been based on the premise that people do not want pay television. In addition, telcos are internally debating the need for everything new to replace the existing so as not to repeat technologies of the past. And what is really happening is that users are demanding more services every day. Pay-TV levels are going to grow once the situation resets, 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 can't forget that. I believe that, by nature, individuals and families tend to spiral products and services to cover both operational, communication, or entertainment, information... 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 them, improves life.

What plans does Telefónica Servicios Audiovisuales have as an integrator and channel headend?

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 competition, they can trust Telefónica from a perspective of recurrence and permanence over time. That can help us to be a catalyst for the new era we live in this new cycle of the media industry.

In terms of transmissions, the world is increasingly 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 bring compared to other integrators?

Mainly, that we can do things quickly. In addition, by having a presence on the other side of the world, our footprint has grown, improving the ability to negotiate with the key suppliers with whom we have to integrate.

The second reason is that our goal is to always offer the best sustainable solution as well as to accompany the customer in a sustained and solvent way 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 customer needs. We are open to mixed participations. We do not pretend to be the only ones in 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, how will it influence the audiovisual business both from 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, in order to be configured as true networks, need population density and purchasing power... and both in the same time and space. The satellite platform allows one of these two conditions to be broken. We must not forget that the service and use is mobile, but the networks and antennas are fixed... When potential customers shrink, 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, it will be much higher to 30-35%. That in the future it will be fiber or mobile, it will be likely... But along the way, which will last for years, the satellite platform will have an important validity to universalize access to broadband.

Why have you opted for the development of 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 so large antennas are needed. The Ku covers large areas with several footprints, so large antennas are needed for uplink but allows DTH to be received with very small plates.

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 work on is video transmission or signals within this limited space, which is not so small, the use of the Ka-band offers many advantages. For broadcasting local television signals, linear or not, the Ka-band is perfect as well as for backbone services for mobile and fixed broadband and voice services.

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

Telefónica is not, nor does it want to be, a content producer. This does not mean that, exceptionally and occasionally in any 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 doesn't go that way. What is... is. We do intend to generate agreements to increase our customers' ARPUS, expanding our relationship with them to help them build loyalty and gain new customers.