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Cable in Europe: Innovation-drivengrowth in a hyper-competitive marketMaria Rua Aguete, IHS MarkitExecutive DirectorJanuary 2018maria agueteConfidential. 2017 IHS MarkitTM. All Rights Reserved.

2Who are we? Information, insight, and analytics across critical technology marketsIHS Markit analysts are among the most respected, experienced, influential, and quoted in the businessAutomotive ElectronicsDisplaysEnterprise & IT Electronic systems & semiconductors Cost management Connected car Display manufacturing& supply chain Display materials & components Large displays Small & medium displays Touch & interface Healthcare TechnologyManufacturing TechnologyMedia & AdvertisingMobile & Telecom Medical devices & equipment Healthcare IT Capital equipment & machinery Electric motor systems Discrete & process automation Mobile, Consumer & ConnectedDevicesPower & Energy TechnologySecurity TechnologySemiconductors Smart grid & energy storage Power supplies & wireless charging Solar Mobile devicesConsumer electronicsLightingDigital signageSmart home & appliancesConfidential. 2017 IHS MarkitTM. All Rights Reserved.AdvertisingTV media & contentVideoDigital mediaGamesCinemaAccess control & fireVideo surveillanceCybersecurity & digital IDCritical communicationsData center & cloudEnterprise networks & communicationEnterprise IT securityM2M, IoT & connectivityOperators & servicesMobile innovationMobile networksVoice & data networksService provider Broadband & videoManaged servicesSemiconductor marketSemiconductor componentsSemiconductor manufacturingMEMS & sensorsMemory & storage

3European Broadband Cable 2017 Published in December 2017 Now in it’s 17th year The only definitive and fully comprehensive data report on theEU28 cable markets Historic and current data on the size and value of the industry Review and analysis of latest industry trendsConfidential. 2017 IHS MarkitTM. All Rights Reserved.

Traditional pay TV is still growing everywhere except North America – cord-cuttinghas not spreadPay TV penetration by region100 Other regions have not fallen victim tothe same factors that left North Americavulnerable:9080Penetration (%)70 High pay TV penetration – little roomfor organic growth6050 High price of subscriptions40 Slow response to competition in theonline-video space with innovation oftheir own3020 Poor and much-maligned customerservice10020112012Asia Pacific20132014Eastern Europe20152016Latin America201720182019Middle East and Africa20202021Western EuropeSource: IHS MarkitConfidential. 2017 IHS MarkitTM. All Rights Reserved.

Traditional pay TV is still growing everywhere except North America – cord-cuttinghas not spreadPay TV penetration by region100 Other regions have not fallen victim tothe same factors that left North Americavulnerable:9080Penetration (%)70 High pay TV penetration – little roomfor organic growth6050 High price of subscriptions40 Slow response to competition in theonline-video space with innovation oftheir own3020 Poor and much-maligned customerservice10020112012Asia Pacific20132014Eastern Europe2015Latin America201620172018Middle East and Africa20192020North America2021Western EuropeSource: IHS MarkitConfidential. 2017 IHS MarkitTM. All Rights Reserved.

What is the ARPU for Cable TV in the US vs the rest of the world? 86 23 6 7Confidential. 2017 IHS MarkitTM. All Rights Reserved.

Triple play packageUnbundled set upBroadbandNetflix 33.49a month 7.99a month(HD Package)NowTV 7.99a month(Standard Entertainmentpack) 48AmazonInsant Primea month 57.46a monthConfidential. 2017 IHS MarkitTM. All Rights Reserved. 7.99a month

8In Europe pay TV is still growing and most Europeans still receive their pay TV viacable The role online video has played has been to expand the overall market for subscription videoPay TV and online video subscriptions in EU282006218060Online video160Subscriptions (m)5856120100548052Pay DTTPenetration (%)50.1m140IPTVSatelliteCablePay TV penetration 014201520162017Source: IHS MarkitConfidential. 2017 IHS MarkitTM. All Rights Reserved.

9But Cable TV subscribers have been declining since 2009Cable TV net additions and digital TV penetration in e TV net addsPenetration (%)Net additions (000)2007Digital as a % of total cable TVSource: IHS MarkitConfidential. 2017 IHS MarkitTM. All Rights Reserved.

10However, digital transition is helping drive up cable TV ARPUs – up 17% in last 5years The higher value of digital TV subscriptions has compensated for overall declines in cable TV customers Cable TV subscriptions were worth an average of 16.75 a month in 2017 – lower than satellite ( 31.40/month) but higher than IPTV ( 14/month)Cable TV revenues by type and monthly ARPU in EU28121816Revenue ( bn)1481210684Monthly ARPU ( )10AnalogueDigitalTV 2017Source: IHS MarkitConfidential. 2017 IHS MarkitTM. All Rights Reserved.

The power of the bundle: cable operators have grown total ARPUs 21% in 5years by selling more servicesTotal Europe: cable operator revenue generating units180,00030160,00025RGUs (m)120,00020100,00015ARPU ( )140,00080,00060,0001040,000520,000Total TV 2016IHSConfidential. 2017 IHSMarkitTM. All Rights 201120102009200820072006020050ARPU ( )11

Cable’s loss has been IPTV and satellite’s gain, with telcos driving subscriber growthPay TV net additions by region and platform, 2011-20172014015120Net additions (m)Net additions (m)1051008060400Western EuropeEastern EuropeNorth AmericaLatin AmericaMiddle East and Africa20-50Asia Pacific-10CableSatelliteIPTVPay DTTSource: IHS MarkitConfidential. 2017 IHS MarkitTM. All Rights Reserved.

13Cable broadly achieved solid growth in 2017, with broadband the star performerGrowth in key cable metrics in EU28, 2016-2017Subscribers and revenue-generating units-50% change5Digital cable TV subscribers10Revenues and average revenue per user1513.5-20% change24Cable Internet revenue4.94.5Cable ARPU3.8Cable TV ARPUCable telephony subscribers2.2-0.11.5Cable TV revenueCable telephony revenueTotal cable TV subscribers3.53.5Cable Internet ARPUTotal cable RGUs87.1Total cable revenueCable Internet subscribers63.42.7Cable telephony ARPU-0.8Source: IHS MarkitConfidential. 2017 IHS MarkitTM. All Rights Reserved.

14Cable has been a high-speed broadband pioneer with DOCSIS 3.0, kick-startingNext-Gen Access (NGA) broadband network deployments across EuropeAvailability of NGA technologies in EU big five DOCSIS 3.0 services have beenavailable to more than a third of homesin the EU big five for several years80%70%% of all households60% This has spurred competition –availability of NGA technologies in thethese markets now exceeds 75%50%40% Telco rollouts have accelerated –VDSL now passes more homes thanDOCSIS 3.0 in these markets30%20%10%0%2012DOCSIS 3.02013VDSL2014FTTP20152016Overall NGA coverageNote: NGA technologies typically deliver download speeds of at least 30 Mbps – some VDSLconnections can drop below this (to around 24 Mbps), depending on the distance from the cabinetConfidential. 2017 IHS MarkitTM. All Rights Reserved.Source: IHS Markit

15But cable is doing a better job of maximising the return on its NGA investment,converting a higher percentage of subscribers to the faster top-tier technology More than two-thirds of all cable broadband subscriptions in the EU big five are NGA, compared to around 15% for DSLDOCSIS 3.0 and VDSL and as a % of total cable and DSL connections in EU big five70%Conversion rate (%)60%50%40%30%20%10%0%20112012VDSL as a % of all DSL connections2013201420152016DOCSIS 3.0 as a % of all cable connectionsSource: IHS MarkitConfidential. 2017 IHS MarkitTM. All Rights Reserved.

16DOCSIS 3.0’s success has put broadband on the path to becoming cable’s biggestrevenue generatorCable revenue by source in EU2820102017 3.7bn20% 4.9bn27%TVInternet 4.9bn20% 11.1bn45% 9.6bn53% 8.5bn35%TelephonyTVInternetTelephonySource: IHS MarkitConfidential. 2017 IHS MarkitTM. All Rights Reserved.

How important is content for a cable operator?Confidential. 2017 IHS MarkitTM. All Rights Reserved.

Pay-TV operator strategies reflect the increased competition forconsumers’ time and spendEnhanced Pay TV PropositionsCONTENTVALUE ADDExclusive contentOriginal programmingBoxsetsSame day releaseINNOVATIONAdvanced STBs, cloud basedstoragePartnerships beyond videoENTERING THE OTT SPACE3RD Party AppsConfidential. 2017 IHS MarkitTM. All Rights Reserved.MultiscreenPay TV Lite

Pay TV operators, particularly telcos, are increasingly investing in originalcontentProduction &DistributionConfidential. 2017 IHS MarkitTM. All Rights Reserved.Altice Studio 40m productionbudget for filmOrange Studio 100m contentcreation spend over 5yrsTelefonica Studio 100m investment fororiginal productionAll3 Media (50%),Lionsgate (3.4%)Sky Vision 600m on originalscontent creationspend over 5 yrs19

How much is a series ( )?Confidential. 2017 IHS MarkitTM. All Rights Reserved.

New online entrants are offering consumers unique content that, in many cases,complements pay TV Scale achieved is driving significant investment in original programming, perpetuating growthOriginal and acquired programming spend for selected groups10987bnSpend ( bn)76.7bn6543210DisneyNBC UniversalViacomHBO2014Confidential. 2017 IHS MarkitTM. All Rights ce: IHS Markit

But it is not only pay TV operators investing in contentConfidential. 2017 IHS MarkitTM. All Rights Reserved.

Major online services are operating consumer facing services atunprecedented global scaleNumber of countries & territories with consumer video services300250200150100500NetflixConfidential. 2017 IHS MarkitTM. All Rights Reserved.AmazoniTunesBeIN MediaLiberty Comcast

Attitudes to Netflix have softened – pay TV’s ‘frenemy’20132014Virgin Media (UK)Com Hem (Sweden)Waoo (Denmark)Atlantic Broadband (US)Grande (US)RCN Corp (US)Suddenlink (US)GCI (US)Midcontinent (US)Cable ONE (US)Proximus (Belgium)Bouygues (France)Orange (France)Deutsche Telekom (Germany)BT (UK)Dish (US)2015TalkTalk (UK)Optus/Fetch TV (Australia)Elisa (Finland)Totalplay (Mexico)Telecom Italia (Italy)Vodafone (Spain)KPN (Netherlands)Vodafone (Portugal)Bell (Canada)2016SingTel (Singapore)Vodafone (Ireland)PCCW (Hong Kong)StarHub (Singapore)D’Live (South Korea)Comcast (US)Liberty Global (global)Telia (Finland, Sweden)Orange (Spain)2017Telenor (global)Bharti Airtel (India)Videocon (India)Partner (Israel)Altice (global)Telekom Malaysia (Malaysia)DNA (Finland)Orange (global)Cox (US)Deutsche Telekom (global)Verizon (US)Strategic goals of online video partnerships for pay TV operatorsSupport subscriberacquisition byenhancing contentoffering – including4K contentConfidential. 2017 IHS MarkitTM. All Rights Reserved.Upsell customers tohigher-tier bundleswith higher-specCPEBoost the appeal ofhigh-speedbroadband requiredfor streaming videoBoost customersatisfaction/loyaltyand reduce churn

Conclusions andrecommendations:Confidential. 2017 IHS MarkitTM. All Rights Reserved.Cable companies should continue to invest in infrastructure tomake sure that they provide fast and reliable connections Make ‘frenemies’ of new online channels that add value to yourcustomers’ subscriptions But also consider going beyond partnerships – be on the look outfor strategic investment opportunities Seek opportunities to execute a pay TV strategy of your own –don’t lose touch with the mobile-first generation Focus on the core, high-ARPU bundled proposition by deliveringon the promise of anytime-anywhere TV and video Invest in new video technologies and standards; metadata, voice,personalization, smart home.

26IHS Markit: An unbiased big pictureview with detailed focusIHS Markit: comprehensiveinsights and intelligenceIHS Markit: extensivevertical market coverage50,000 140 Customers worldwideIndustryWorkflows 70% of the Fortune US 1000Aerospace,Defense & SecurityEconomics &country risk 85% of the Fortune Global 1000AutomotiveProduct designServing business, governments, andorganizationsChemicalSupply chainEnergyFinancial MarketsMaritime & TradeTechnology, Media& TelecomConfidential. 2017 IHS MarkitTM. All Rights Reserved.IHS Markit: 360-degree viewServing customers in over140 countries

27Insight and perspective trusted by the industryIHS Markit analysts are among the most respected, experienced, influential and quoted in the business.Our researchers work closely together to provide unmatched cross-market perspectives.On a monthly basis,the IHS MarkitTechnology groupconsistently beats IDC,Strategy Analytics andGartner when it comesto citations in top-tiermedia outlets.Source: MeltwaterConfidential. 2017 IHS MarkitTM. All Rights Reserved.139,000 In 2015 more than 139,000articles included IHS MarkitTechnology statistics andanalyst commentary.

28Research methodology: IHS Markit Media & Advertising50 RESEARCHNEED- 100 countries covered- Deep market insight- Custom research & liableMARKET DATAPRIMARYRESEARCH Advertising TV media & contentRegularANALYST ACCESS Video Digital mediaActionableEXPERT ANALYSISDELIVERYIncredibleVALUE FOR MONEYResearch Categories Games CinemaSECONDARYRESEARCHKey Topics Virtual reality and entertainment Games and mobile media OTTFEEDBACK &REFINEMENT Television mediaSolutions Intelligence Services Advertising Broadband Media Broadcast & Internet Video Software,Security & Analytics Cinema Connected Devices Games Home Entertainment KPIs Mobile Media Operator Multiplay TV Media TV Channels & Programming TV Sets Video Media Databases, reports, and market trackersConfidential. 2017 IHS MarkitTM. All Rights Reserved.

Thank [email protected] more information about IHS Markit v-media-intelligence-serviceTo sign up to receive our monthly technology industry newsletters please click here.Confidential. 2017 IHS MarkitTM. All Rights Reserved.

Cable broadly achieved solid growth in 2017, with broadband the star performer 13.5 4.9 3.5 2.2 -0.1 -5 0 5 10 15 Digital cable TV subscribers Cable Internet subscribers Cable telephony subscribers Total cable RGUs Total cable TV subscribers % change Subscribers and revenue-generati