KPN, UGC got your number

UnitedGlobalCom reported Q3 numbers yesterday, and had a lot of interesting things to say on VoIP and broadband. Since the launches in the Netherlands and Hungary, the company now has 500k homes VoIP-serviceable, and is heading towards 2m by year-end, 1.5m of which will be in the Netherlands. Four additional countries (France, Austria, Poland, Norway) are slated for launch in Q1 '05, and by mid-2005, the company should have 5.5m serviceable homes in nine countries. That's the rollout, what about the execution?

UGC reported yesterday that conversion rates on its VoIP trial subscriber base are 25% in the Netherlands and 40% in Hungary. Weekly sales are currently running at 3,000 within the 500k serviceable homes, which is a vast improvement over the 2,000 weekly rate the company previously achieved with conventional telephony in a base of 3.5m homes. Another key data point is that 60% of VoIP sales are sold as a bundle with broadband at point of sales, as further confirmation of what Cablecom (Switzerland) and others have previously stated about broadband and VoIP being mutual accelerators. The company is looking for a total of 15 - 20k VoIP subs by year-end across the base of 2m serviceable homes.

It looks to me as if, extrapolating the current 3,000 weekly net add rate across a marketable base of 500k homes, UGC could be adding 12,000 per week by early next year across 2m homes. The real kicker is that UGC is taking a lead from what NTL is doing in the UK, yesterday announcing an off-net DSL unbundling trial, targeted at expanding its footprint (and the VoIP/video threat) to the 60% of Dutch homes outside UGC's footprint. As a player with an existing television offering and well-recognized brand, this seems to pose a very big challenge to KPN's somewhat bizarre three-pronged video strategy.

(As an aside at the macro level, I am intrigued by the whole Liberty Media/News Corp. wrangle. UGC is a Liberty property, and is a major cable player in every European market with the exception of the UK and Italy. News Corp. controls BSkyB and Sky Italia. Talk about blanket coverage in distribution...)