1

Rostelecom cloud based Pay TV service

Russian largest IPTV operator.

Case study

2

Rostelecom at a Glance

3

Russian Pay TV market

20%

14%

13% 8%

6%

10%

29%

Rostelecom (Cable/IPTV) Tricolor TV (Satelite) MTS (Cable)

Er-Telecom (Cable) Akado (Cable) NTV Plus (Satelite)

4

7 years of IPTV experience

5

Platform replacement preconditions

• Internal – Low customer satisfaction level

– Low “old platforms” reliability & performance

– High ownership cost

• External – Growth of video consumption in Internet

– High piracy level on Russian market

– Market development level change compared to initial IPTV product launch in 2006

6

Key business requirements defined before platform choice & implementation

• Service must be available both for on-net (Rostelecom) and off-net (non-Rostelecom) Internet users

• Service should support STB, Tablets, Smart TV, laptop, smartphones, etc.

• Time shift support for TV content is a must

• Video products (TV&VoD) is not the only focus. We’d extend our product to music, books, software

7

Strategic decisions made to meet business requirements • Cloud based service

– Multiscreen content provisioning

– Simple for customer

– Easy to implement time shift service

• 3-level platform architecture – Close to customer

– Reduce network load

– Easy to manage & maintain

– Reflects company structure

Central node

Macro region 1

Branch 1

Macro region 8

Branch 78

….

….

8

High-level platform architecture

All platform was developed according to the very precise requirements defined by different Rostelecom departments • Marketing & product • Content procurement & management • IT • Technical • Network

Content management

Charging & content

synchronization

Content Delivery

User interface

9

What cloud does

• Subscription data – Stores data on purchased subscriptions & items – Expiration date, screen availability

• Multiscreen time shift service management – Paused content – Network PVR management

• Customer preferences – Favorites channel list – Customized channel lists (sorting) – Parental control settings – Recommendation engine

• Content adaptation – Provides required video stream adopted for customer device & available

bandwidth

10

Project history

2006-2010

7 separate IPTV platforms

No single product management

150K subs reached

2010-2011

7 separate IPTV platforms

Single product management

500K subs reached

2012

New platform installed

Product management

1,4M subs reached

2013

Migration of 700K “old subs” into new platform

2,5M subs planned Eo2013

11

Does it work?

12

Rostelecom Media Services Brief description

Cloud based multiscreen content delivery platform

– Set-Top-Box

– Zabava.ru portal

– iPad app

– Smart TV & Android app coming soon

Content available :

– TV channels

– Video (TVoD, SVoD)

– Music

– Games

– Software

13

Interactive TV subscriber base growth 10 times in 3 years

Service growth

-

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

1 600 000

Jan

-10

Ap

r-1

0

Jul-

10

Oct

-10

Jan

-11

Ap

r-1

1

Jul-

11

Oct

-11

Jan

-12

Ap

r-1

2

Jul-

12

Oct

-12

Subscriber base

1 427 599 Eo2012

Service penetration

• 31% Fiber-optics broadband subs

• 10% xDSL broadband subs

• Up to 60% in some regions

• Average service penetration 16%

14

Interactive TV – key element in Triple Play strategy

Broadband Churn reduction – Broadband+TV subs churn 2 times less then Broadband-only

ARPL growth – Media services add 30% to ARPL

Broadband & Telephony ARPU decline compensation – Media services ARPU grow approx. 20% annually in opposite to declining broadband &

telephony services ARPU

New subs attraction – Interactive TV & other media services are product differentiators

15

Rostelecom Media Services Revenue

9,9 22,3

59,5

111,5

0,0

20,0

40,0

60,0

80,0

100,0

120,0

2010 2011 2012 2013(forecast)

Media services revenue, mln Euro

• Rostelecom Media Services revenues doubles every year

Excluding NCN Pay TV services revenues

16

Media services VAS

Revenue streams

Media services revenue

TV packages

Premium TV

packages

VoD

SVoD

Multiroom

20% of media services revenues are generated by VAS

22% 4%

11% 34%

29%

Subs by services VoD users

SVoD users

Premium TV packages subs

Customers with 2+ TV packages

Multiroom subs

17

TV packages

• Customer may choose either to subscribe “Mixed” TV package or “Thematic”

• Every next thematic package cost 20% lower that previous one

• Maximal package includes all thematic packages

18

Premium TV packages

• Viasat Premium HD package

• Adult channels

• HD channels

19

Video On Demand

• 20% of Interactive TV subscribers use VoD service monthly

• Average VoD user does 4 purchases per month

• VoD adds 6% to media services ARPU

20

Subscription Video On Demand

• Monthly subscription for VoD library (certain items)

– PictureBox (NBCUniversal)

– KidsClub (mixed content for kids)

21

Multiroom

• Flat rate fee for any other TV at customer premises

22

ARPU trends Ja

n-1

1

Mar

-11

May

-11

Jul-

11

Sep

-11

No

v-1

1

Jan

-12

Mar

-12

May

-12

Jul-

12

Sep

-12

No

v-1

2

ARPU • ARPU growth 36% in 2 years

• 20% ARPU growth in 2012

• ARPU growth factors:

– Non profitable rate plans cancelation

– Rate plan optimization for each region

– New packaging policy

– VAS upsell

+36% in 2 years

23

Summary

2,5 years took for Rostelecom to set up Media Services

– New product, content & marketing team

– New technical solution

– New business processes

Result:

– Twice reduced churn for bundle subscribers

– #1 Operator in Revenue on Pay TV market (Comnews Awards 2012)

– Upsell Media Services VAS allows to grow ARPU 20%

24

Thank you!

Andrey Kholodnyy

akholodniy@rt.ru

25