This view is gold. From the 53rd floor of the Rotterdam Zalmhaventoren, the real Euromast resembles the miniature version of Madurodam. The KPN head office, on the other side of the Maas, also looks like a tiny place, Leo-Geert van den Berg concludes with satisfaction. He is responsible for the fixed network of VodafoneZiggo, KPN’s largest competitor.
The Zalmhaven is a new-build project where Ziggo has been offering consumers fiber optic since this week. That’s the first time; until recently, the cable company swore by the ‘old-fashioned’ coax cable in the meter cupboard. Coax offers download speeds of up to 1 gigabit per second. Fast enough for most consumers, says Van den Berg. “But for new construction, it may be economically more attractive to install fiberglass to every home instead of coax.”
From 2022, Ziggo will ‘glaze’ thousands of new homes per year, starting in Rotterdam, The Hague and Arnhem. Nothing will change about that one gigabit for the time being: fast enough is fast enough, they think at Ziggo.
Also read: Ziggo is exchanging cable for fiber optic in new residential areas
The foundation for the joint venture between Vodafone (5 million callers) and cable company Ziggo (owned by Liberty Global, 3 million internet customers) was laid five years ago. It is a success for the parent companies: they obtained billions of euros from the cash flow of monthly subscriptions. But will customers also remain loyal if they can no longer watch the Formula 1 races with Max Verstappen next year for free? How does cable TV stand up to Netflix? And is there enough money to handle 5G and fiber optics?
NRC spoke to experts and insiders about the many faces of VodafoneZiggo.
1. The ideal partner
In 2016, Vodafone and the American cable company Liberty Global announced that they would bundle their Dutch networks into one company. In the telecom sector, former state-owned companies – in the Netherlands this is KPN – often as the only provider with a nationwide broadband network and a mobile network. VodafoneZiggo is the first competitor to have its own infrastructure in almost the entire country.
Combined customers (fixed internet and mobile telephony) remain loyal to their telecom provider for longer; it’s cheaper and switching is more hassle. As a bait, VodafoneZiggo is giving away double data bundles and TV packages. That works; 44 percent of Ziggo customers now also have a Vodafone subscription and 71 percent of Vodafone customers have a Ziggo package.
Both brand names will remain, so as not to deter customers. The main connections of both networks are combined, but the customer databases remain separate. That IT project is too complicated and is being postponed.
Shortly after the merger, Vodafoners are said to be a bit more “flashy”, the cable branch more traditional. Ziggo had just completed an exhausting series of mergers. The move to a new head office, next to Utrecht Central Station, helps to make VodafoneZiggo one company. After five years, cultural differences between ‘mobile’ and ‘fixed’ have almost disappeared. What binds the employees is the fight against T-Mobile and KPN.
2. The Gigabit Giant
In the Netherlands there is a fight for broadband customers. T-Mobile and KPN want to connect millions of households to fiber – much faster than the old copper line – and use external financiers to make haste. Installing fiberglass is expensive if the sidewalk has to be opened.
Ziggo switches off analog TV and radio to create space for fast internet on cable. This ‘giganet’ does not require digging, only new equipment is needed. Half of the Ziggo connections have now been increased, all 7.3 million at the beginning of 2022. KPN expects to offer fiber to 80 percent of 7.9 million Dutch households by 2026.
Also read: The gigabit war: superfast internet via fiber and cable
KPN uses the home-working boom during the corona crisis as a reason to promote the higher upload speeds of fiber optic. This is useful, for example in video conferencing. Nonsense, they think at Ziggo: an upload speed of 30 or 50 megabits per second is more than enough and coax can go on for years.
Ziggo wants to be ‘technology agnostic’; 97 percent of the network is already vitrified “and most customers don’t care what comes into their meter box,” says an employee.
VodafoneZiggo will, however, order one million WiFi hotspots in 2020 to resolve complaints about slow network indoors by all those home workers. Two birds with one stone: fewer phone calls to the helpdesk and fewer people leaving. Because nobody is eager to reset all WiFi equipment in the house. Wireless is the new customer binder.
3. The TV provider
VodafoneZiggo has another customer tie: the TV offer. Ziggo Sport offers a lot of European football, and the Formula 1 matches with Max Verstappen. However, the company will lose those F1 broadcasting rights, to the astonishment of many employees. Verstappen has been the figurehead and driver of the Ziggo Go app for years. The fixed and mobile networks are heavily taxed on Sunday afternoons when the Formula 1 races are watched on TVs, tablets and telephones; moments when the network can flex its muscles.
More is disappearing from Ziggo’s offer: NBA basketball, and the Movies & Series package will soon be replaced by streaming service HBO Max.
The F1 rights became too expensive. But the strategic question – will the cable company stick to its own content – she answers with ‘yes’. VodafoneZiggo is looking for options: it may still be able to pass on F1 competitions for a soft price.
The provider also showed interest in RTL Nederland, which had put its commercial channels and streaming service Videoland up for sale. But RTL surprisingly opted for a merger with Talpa. The competition authorities still have to approve the deal – there may still be something left for VodafoneZiggo.
Also read: John de Mol and the merger between RTL and Talpa
Parent company Liberty Global already has its own TV channels in Belgium and Ireland. Those were ‘bargains’ – more opportunism than strategy, says an insider. But such an interest in the entertainment world can serve as a crowbar; for example, to have other broadcasters participate in the introduction of new technologies.
4. The Advertising Network
The viewing time for linear television – watching TV at the time the program is broadcast – is decreasing, in favor of online video from companies such as Netflix, Videoland, Disney+ and Prime Video. Ziggo wants to give their apps a place on its set-top box in the living room, to offer customers an overview via one remote control. Linear television has not yet been written off, although VodafoneZiggo has also recently started selling ‘internet-only’.
The digitization of TV channels offers opportunities for tailor-made advertisements. As soon as you install a Ziggo set-top box, the question arises: „We would like to save the programs you have watched. This allows us to analyze your viewing behavior (…). We may also offer you third-party advertisements that are tailored to you.”
VodafoneZiggo expects to introduce the associated technology within a year. There is an example from our own stable: in Belgium Telenet, also a subsidiary of Liberty Global, offers addressable advertising in collaboration with SBS and publisher DPG. This new advertising product is not yet “mature,” says an insider. But Liberty Global looks hopeful to the US and UK, where custom advertising has evolved.
5. The Marketing Machine
The competition between cable TV and fiber optics is also being fought ‘tailor-made’, city by city and street by street. VodafoneZiggo is losing customers to fiber and that is why it is first bringing its gigantic network to the cities where the competition is going to dig: the ‘counter fiber’ strategy.
In Zutphen, for example, VodafoneZiggo pulled out all the stops this spring: bus shelters with orange Ziggo logos, a Ziggo newspaper and pop-up stores. Such a local marketing machine works like a three-stage rocket: first, the network is ostentatiously checked, with advance notice. The technicians must be ‘visibly Ziggo’: no subcontractors, but their own staff, with logo. Then there are upgrades for existing customers, and a switch offer for those of the competition.
The Vodafone brand is not used in the gigantet campaign. Whether you are a mobile customer does count when calculating your personal ‘switching risk’; the provider calculates this to the nearest percent. They are statistical models, based, among other things, on malfunctions, modem data and the WiFi quality at home – if customers want to share data. Information from the helpdesk also counts: how often and for how long was a customer engaged, and for what reason?
Potential cancellers with the highest risk scores are called to keep them on board. VodafoneZiggo does not use viewing behavior to calculate someone’s switching risk.
6. The 5G Stunter
While broadband is growing, the mobile market in the Netherlands is shrinking. Measured in number of users, Vodafone drops from second to third place. Investments in new 5G technology remain limited. KPN and T-Mobile use separate frequencies for their 5G network, which became available in August 2020.
Vodafone came up with a technical ruse and a month earlier was the first to offer 5G technology on existing frequencies. A marketing ploy, say critics. VodafoneZiggo denies that; The claim is that 5G on low frequencies offers few extras and the customer does not need it.
What the customer does need is reliability. VodafoneZiggo noticed this in June 2020, when mobile telephone traffic at many university hospitals was cut out due to a (human) error in a data center. A surgeon who can’t make calls takes more priority than a cable break that blacks out TVs. The outage put a lot of pressure on the company and was “an expensive lesson” in responding more appropriately to emergencies at corporate customers. VodafoneZiggo wants to grow further in that segment.
7. The Solid Dairy Cow
VodafoneZiggo takes into account an IPO in the long term, both shareholders are still satisfied with their ‘optimal return’. The joint venture is burdened with debt – more than 11 billion euros, according to credit rating agency Fitch Ratings – and is losing money on paper. That is a usual construction for Liberty Global, in which Vodafone goes along. Fitch assesses the joint venture as “solid”.
Tim Poulus, analyst at research firm Telecompaper, calculates that the shareholders took 5 billion euros out of the company in five years. They aim for 600 million euros for the current year miljoen shareholder return. “The network is being milked out,” he says. “VodafoneZiggo continues to upgrade the cable network – as if you don’t buy a new car, but keep refurbishing the old one.”
And as far as mobile is concerned: KPN and T-Mobile have modernized extensively, Vodafone is lagging behind, according to Poulus. VodafoneZiggo emphasizes that it invests 800 million euros annually in networks. There will be a substantial investment next year, when the faster 5G frequencies are auctioned. There is a good chance that shareholders will be able to pay themselves less in 2022.