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? ¿No son demasiados cambios?

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.

A lo largo de estos años hemos incorporado profesionales de numerosos países, y comienza a haber un movimiento muy enriquecedor dentro de la compañía. Crecer y moverse, implica adaptarse a los cambios previendo nuestro posicionamiento en el futuro.

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.

Por su parte, en todo este camino, que llevamos trabajando doce años en Latinoamérica, TSA fue primeramente un proveedor de servicios intragrupo que fue encajando con nuestras necesidades. Por ejemplo, TSA fue la que montó hace muchos años la productora que tenemos en Perú para la producción de canales exclusivos para las operadores y nos ayudó a implementar la cabecera que tenemos en Perú para atender a toda Latinoamérica.

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?

Ofrecemos un paquete que abarca desde la consolidación de señales de televisión, para que el cliente seleccione entre 600 señales (entre 100 y 200 por país), hasta recepción de señales, sistemas de encriptación y acceso condicional y un largo etcétera… de esta forma, en tres meses, podría poner en marcha un proyecto integrando su sistema de gestión comercial con el que ya opera a través de una especie de cinturón de comunicación que gestiona la plataforma y es absolutamente inocuo a qué cliente final quiere llegar. Además, si lo desea, podemos crear programas o canales para diferenciación.

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?

En España se ha partido en muchas ocasiones de la premisa que la gente no quiere televisión de pago. Además, las telcos andan debatiendo internamente la necesidad de que todo lo nuevo reemplace lo existente para no andar repitiendo tecnologías del pasado. Y lo que realmente está ocurriendo es que los usuarios demandan cada día más servicios. Los niveles de tv de pago van a crecer una vez que la situación se reajuste, ya que están creciendo en todo el mundo, pero habrá mucho más valor agregado ya que los servicios OTT van a penetrar más porque son deseados por las personas con dispositivos individuales o de consumo en el hogar.

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?

La compartición de infraestructura es vital. Tenemos una experiencia para ser inocuos en la gestión operativa y, además, somos parte de un paisaje que no genera ruido. Los clientes saben que, lejos de competencias, pueden confiar en Telefónica desde una perspectiva de recurrencia y permanencia en el tiempo. Eso nos puede ayudar para ser un catalizador de la nueva época que vivimos en este nuevo ciclo de la industria de media.

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 está apostando fuerte por la banda ancha satelital, ¿en qué va a influir en el negocio audiovisual tanto desde el punto de vista B2B como B2C?

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.

La banda Ka, en cambio, reduce más esa pisada pero también se reduce en unas cien veces el costo del uso de la capacidad. Si lo que trabajas es transmisión de vídeo o señales dentro de este espacio acotado, que no es tan pequeño, el uso de la banda Ka ofrece muchas ventajas. Para emisión de señales locales de televisión, lineales o no, la banda Ka es perfecta así como para hacer servicios ‘backbone’ de servicios móviles y fijos de banda ancha y voz.

Por último, la relación de Telefónica con la producción de contenidos ha sido en los últimos años de amor-odio… ¿qué estrategia plantean en este área?

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.