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Telstra ramps up Internet TV

Telstra Corporation (ASX: TLS) has reported sales of its T-Box personal IPTV devices hit 500,000 this week, well on the way to the telco’s aggressive target of more than 1 million.

According to a report in The Australian, Telstra is aiming to become a leading media player, aiming to bundle up subscription channels, movies and TV services as well as video-on-demand. IPTV is also known as Internet television, where TV and video content is delivered via the web using high-speed broadband.

Telstra’s TV revenue increased by 1% to $333m in the six months to December 2012, driven primarily by IPTV content. Cable revenue rose 5% to $61m thanks to higher Foxtel revenue. Foxtel is jointly owned by Telstra and News Corporation (ASX: NWS). Telstra’s media executives revealed to The Australian that the telco plans to work more closely with Foxtel, as Telstra positions its IPTV business as the go-to centre for consumers’ entertainment needs. The partnership between Foxtel and Telstra has become closer since News completed its takeover of Consolidated Media, with both companies now owning 50% of the cable TV provider.

Selling compelling content through the T-Box IPTV device provides a lucrative opportunity for Telstra to boost its subscribers, as well as bundling up voice and internet services with IPTV content to its existing 1.5 million customers. Content such as hit shows like HBO’s popular Game of Thrones can make or break IPTV services. Australia’s answer to Netflix, Quickflix (ASX: QFX) has so far failed to deliver the content, which has seen its shares languish under 5 cents since the beginning of the year.

With mobile subscribers reaching maturity, Telstra is looking for other levers to drive its future growth. The company is still gaining market share from competitors Optus – owned by Singapore Telecommunciations (ASX: SGT) and Vodafone, but now wants to drive an increase in revenue from each customer. By bundling up other services such as Foxtel, or IPTV, with broadband or voice services, customers can see cost savings in exchange for locking in Telstra as their one-stop telco shop.

Foolish takeaway

There’s no doubt that the internet has revolutionised many sectors. With faster broadband speeds now available, telcos like Telstra are looking to capitalise on delivering that content to consumers, and not just owning the delivery ‘pipeline’. So far it appears Telstra has the lead over its competitors.

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