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Ftth council europe webinar 20 november 2012
 

Ftth council europe webinar 20 november 2012

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    Ftth council europe webinar 20 november 2012 Ftth council europe webinar 20 november 2012 Presentation Transcript

    • Marketing Fibre to the Global ConsumerSNL Kagan & FTTH Council Europe Webinar November 20, 2012 Julija Jurkevic Analyst
    • Presentation Outline 1 Case Study 1: Telefónica 2 Case Study 2: France Telecom - Orange 3 Case Study 3: TeliaSonera 4 Comparison with United States 5 Strategy Comparisons 6 Factors Determining FTTH Deployments Data Sources: SNL Kagan estimates, Operators, FTTH Council Europe © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 2
    • Telefónica Present in 25 countries; Over 313.8 million customers at September 2012. Fixed Broadband Services – Spain, UK, Germany, Ireland, Czech Rep., Brazil,Argentina, Chile, Peru, Colombia Commercial FTTH Services (residential) – Spain, Brazil, Chile Global Brands: Global Presence: © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 3
    • Telefónica - Spain  Telefónica’s Home and largest market  Incumbent Nationwide Fixed Line Operator  Networks: xDSL, FTTH, Wireless  4 Play services – Fixed phone, IPTV, Internet, Mobile voice/dataSpain Major Fixed Broadband Platforms Spain Broadband Net Adds by Platform DSL Cable FTTH 12,000 171 DSL Cable FTTH 56 1,000 10,000 16 2,083 887 10 1,954 1,863 8,000 1,778 800 657 6,000 568 600 4,000 8,392 8,670 7,166 7,734 2,000 400 278 0 145 (000) 2008 2009 2010 2011 200 129 85 91 116 9 6 40 DSL 79.6% 80.0% 80.2% 78.7% 0 (000) 2008 2009 2010 2011 FTTH 0.1% 0.2% 0.5% 1.6% © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 4
    • Telefónica - SpainSpain - Major ISPs by Market Share(%) Telefónica ONO Orange (FT) Jazztel100 5.2 5.1 8.1 80 10.1 12.9 11.2 10.7 11.5 14.2 14.3 60 13.8 13.7 40 58.3 56.7 54.7 50.9 20 0 2008 2009 2010 2011 © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 5
    • Telefónica - Spain Telefónica Total Broadband and Fibre Subs (000) 5,800 5,749 400 Total Broadband 5,722 FTTH 5,672 5,669 5,620 5,607 5,609 5,600 5,613 5,579 5,600 300 5,477 232 5,424 200 5,400 200 5,331 163 5,292 126 93 5,200 100 66 49 25 32 11 19 4 7 9 5,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2009 2010 2011 2012BB Mkt. Share 56.7% 54.7% 50.9%% of Total Subs 0.2% 0.9% 2.9% 4.1%% of FTTH Mkt. 71.3% 87.8% 95.0% © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 6
    • Telefónica – Spain: FTTH Services FTTH services launched 2008 in 12 cities, speeds up to 30 MbpsDeployments alongside VDSL Response to cable threat2011 - FTTH speeds increased to 100 Mbps Regulation requires Telefónica to unbundle all connections under 30MbpsFTTH Network Coverage – about 12% of HHs in mid-2012Target – 50% of premises by 2015 Main cities nationwide FTTH Take up rate – over 11% -> 4% of total broadband subs © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 7
    • Telefónica – Spain: FTTH Marketing & Pricing Both xDSL and FTTH require a phone line FTTH is marketed as a premium service :  FTTH only available at 100 Mbps -> the most expensive service at €40/mo  HD IPTV is only available with FTTH  Upgrading from ADSL to VDSL costs 20% more; upgrading from VDSL to FTTH – 30% more (speed x3 with every upgrade)  Price/MB of data is cheaper with FTTH  However, bundles present good savings: 100 Mbps 4 play is only 12% more expensive than 10 Mbps ADSL 4 play  FTTH bundles are only a little cheaper than comparable HFC services  Movistar Fibre 4 Play is 10% cheaper than Ono cable 3 play with 100 Mbps + comparable mobile plan © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 8
    • Telefónica –Europe: Other Markets xDSL ServicesUK Alternative operator Only 3% market share Decreasing subscriber base Small FTTH marketGermany Alternative operator 10% market share Decreasing subscriber base Telefónica aims to sell 20% stakeCzech Republic Dominant Incumbent operator VDSL deployments offering up to 40 Mbps speeds Sole IPTV provider Fragmented telco competition Sole 4-play provider; largest fixed and mobile network Historically small FTTH market However: strong cable growth and local fibre network roll-outs putting pressureon the Incumbent © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 9
    • Telefónica - Brazil Telefónica’s Second-largest market, largest Latin American Market  One of 2 Incumbents  Networks: xDSL, FTTH, Wireless  4 Play services – Fixed phone, Internet, Mobile voice/data, CATV, DTH, IPTV in Sao Paulo  Long-term regulatory ban on telco IPTV services (lifted 2011) Brazil - Broadband Net Adds byBrazil - Major Fixed Broadband Platforms Platform DSL Cable FTTH Fixed Wrls.20,000 DSL Cable FTTH Fixed Wrls. 829 1,600 160 1,423 627 1,29715,000 78 1,187 403 5,011 1,200 332 32 8 3,82410,000 3,130 2,454 764 800 676 5,000 8,975 10,398 7,678 543 694 7,028 650 0 400 224 202 2008 2009 2010 2011 (000) 48 71 46 8 24 81 DSL 70.6% 67.4% 65.0% 61.9% 0 (000) 2008 2009 2010 2011 FTTH 0.1% 0.3% 0.6% 0.9% © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 10
    • Telefónica - Brazil Brazil - Major ISPs by Market Share Oi Net Servicos Telefónica 100 80 23.2 25.7 21.7 60 25.7 25.3 40 23.7 25.4 22.3 20 37.0 31.6 20.3 29.3 0 (%) 2008 2009 2010 2011 Telefónica Broadband Subs 4,000 3,700 3,732 3,487 3,568 3,648 3,500 3,319 3,394 3,139 2,974 3,000 2,801 ̃100,000 FTTH subs 2,659 2,729 2,580 2,638 ̃500,000 Homes Passed 2,500 Q3 2012 2,000 (000) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2009 2010 2011 2012BB Mkt. Share 23.2% 25.7% 21.7% © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 11
    • Telefónica – Brazil: FTTH Services FTTH services available to 500,000 homes in Sao Paulo region,speeds 15-100 Mbps Response to cable threat, competitive FTTH deployments Infrastructure upgrade for IPTVFTTH Network Coverage – about 500,000 HHs in Q3 2012Target – 1 million subs by 2015 About 100,000 FTTH subscribers at Q3 2012 Cherry-picked deployment to densely populated upscale residences FTTH Take up rate – 20% -> less than 3% of total broadband subs © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 12
    • Telefónica – Brazil: FTTH Marketing & Pricing xDSL and FTTH available in bundles or naked FTTH is marketed as a premium service :  Marketed to upscale households  FTTH only available at top speeds 15 -100 Mbps -> the most expensive service starting at $R90/mo in a combo pack  IPTV is only available with FTTH  Only Fibre IPTV offers advanced services: Interactive services, Multiroom , Pic in Pic  Price/MB of data is cheaper with 10Mbps DSL than with 15Mbps FTTH service (but lower at higher speeds).  One of the cheapest 100 Mbps offer on the market  30% cheaper than 100 Mbps on HFC from NET  Other speed tiers – comparable FTTH Services have higher ARPUs © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 13
    • Telefónica - Chile Incumbent and largest operator Networks: xDSL, FTTH, Wireless 4 Play services – Fixed phone, Internet, Mobile voice/data,IPTV, DTH Chile Fixed Broadband Market (2011) DSL – 50% market share; Cable – 48% share  Cable: faster growth than DSL, gaining market share Nascent Fibre market Telefónica dominates with a 42.5% market share  Main competitor: MSO VTR: 37% market share © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 14
    • Telefónica – Chile: FTTH Services FTTH services available in Biobio Region , containing thecapital Conception; Speeds 4- 80 MbpsLaunched in Q2 2011 Response to cable threat , competitive Fibre deploymentsNetwork upgrade for IPTVFTTH Network Coverage – about 50,000 HHsTarget – 700,000 (80% of HHs) by end-2014 Deployment in selected areas around capital, but target –urban areas nationwide © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 15
    • Telefónica – Chile: FTTH Marketing & Pricing  xDSL and FTTH available in bundles or naked  FTTH is marketed to a wide audience  Fibre services are available at all speed levels  ADSL and Fibre at 4Mbps and 15 Mbps speeds cost same;  Higher speeds – only with FTTH  IPTV is only available with FTTH  Basic IPTV subs access more channels, incl HD, than DTH subs  Matching and undercutting VTR cable prices © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 16
    • Telefónica – Latin America: Other Markets Little or No FTTH, but deployments startingArgentina DSL dominates w. 67% share Until 2010, cable market grew slower than DSL Almost no competitive Fibre deployments 3 strong operators (Telefónica, Telecom, Cablevision) BUT: telco competition and DOCSIS 3.0 driving Fibre trials andgreenfield deploymentsColombia Telefónica has regional monopoly Fragmented DSL and Cable markets Almost no competitive Fibre deployments Low broadband penetrationPeru Telefónica dominates the broadband market w. >90% share Very low broadband penetration © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 17
    • France Telecom - Orange Present in 33 countries; Over 227 million customers incl 15 million broadband atSeptember 2012. Fixed Broadband Services – France, Spain, Belgium, Poland, Slovakia, Moldavia,Romania, Jordan, Egypt, Ivory Coast, Kenya, Mauritius, Cameroon, Tunisia Commercial FTTH Services (residential) – France, Slovakia, (planned in Spain)One Global Brand: Global Presence: © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 18
    • France Telecom – France  FT’s Home and largest market  Incumbent Nationwide Fixed Line Operator  Networks: xDSL, FTTH, Wireless  4 Play services – Fixed phone, IPTV, Internet, Mobile voice/data France - Major Fixed Broadband France - Broadband Net Adds by Platforms Platform DSL Cable FTTH25,000 DSL Cable FTTH 198 3,000 118 1,415 69 1,217 2,50420,000 48 1,160 1,007 2,50015,000 2,00010,000 19,858 20,982 1,277 1,272 17,309 18,586 1,500 1,124 5,000 1,000 0 500 295 153 21 57 198 2008 2009 2010 2011 20 49 80(000) 0 (000) 2008 2009 2010 2011 DSL 94.2% 93.7% 93.6% 92.8% © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 19
    • France Telecom – FranceFrance - Major ISPs by MarketShare(%) Orange (FT) SFR Iliad100 80 22.5 22.9 21.4 21.4 60 21.2 22.4 23.0 22.2 40 45.3 44.8 43.0 42.4 20 0 2008 2009 2010 2011 © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 20
    • France Telecom – France France Telecom -Total Broadband and Fibre Subs (000) 10,000 200 Total Broadband 9,749 FTTH 9,671 9,598 9,478 9,500 9,371 150 9,308 123 9,128 108 9,016 95 9,000 8,880 8,879 8,925 100 82 8,763 73 8,639 65 8,540 54 42 45 8,500 35 37 50 29 31 24 8,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2009 2010 2011 2012BB Mkt. Share 44.8% 43.0% 42.4%% of Total Subs 0.4% 0.6% 1.0% 1.3%% of FTTH Mkt. 50.7% 45.8% 48.0% © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 21
    • France Telecom - France: FTTH Services FTTH rollout started in 2007 in 6 major cities, speeds up to 30 Mbps Primarily, response to competitive Fibre deployments Slow speed of rollout due to lack of clear FTTH regulationFTTH Network Coverage – over 900,000 homes in 20 cities at end-2011Target – 2 million homes by 2015, 15 million (60% of HHs) by 2020across 3,6000 districts 50% of premises by 2015 Infrastructure sharing agreements with competing telcos (SFR,Iliad-Free, Bouygues) FTTH Take up rate –11% -> 1.3% of total broadband subs © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 22
    • France Telecom - France : FTTH Marketing & Pricing FTTH are marketed as a 3 or 4 play bundle only ADSL is available as solo at lowest speed (8Mbps) Strategy – to sell an STB providing access to 3 basicplay and encourage upgrades FTTH 3 play is €5 more expensive than ADSL 3 play butfrequent timed promotions often make it cheaperADSL to FTTH upgrade increases speed x 5 HD and 3D IPTV channels only available with FTTH © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 23
    • France Telecom – Slovakia  Alternative operator  5% broadband market share at end-2011 Networks: FTTH, Wireless  4 Play services – Fixed phone, IPTV, Internet, Mobile voice/dataSlovakia - Major Fixed Broadband Slovakia - Broadband Net AddsPlatforms by Platform DSL Cable FTTH Fixed Wrls. DSL Cable FTTH Fixed Wrls.1,200 120 1111,000 100 89 262 800 236 147 80 600 238 65 200 82 178 94 119 60 52 400 66 80 62 38 38 40 30 200 330 368 398 405 18 22 27 0 20 24 11 18 (000) 2008 2009 2010 2011 8 14 7 0 DSL 56.0% 45.8% 41.7% 38.8% (000) 2008 2009 2010 2011 © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 24
    • France Telecom – Slovakia Slovakia - Major ISPs by Market Share 80 Slovak Telekom UPC Orange 3.4 60 9.0 4.6 7.8 4.9 4.9 9.1 4.2 40 57.5 48.7 44.5 44.4 20 0 2008 2009 2010 2011 (%) 70 62 Orange Slovakia FTTH Subs 60 55 49 49 50 51 45 47 50 43 41 37 40 32 29 21.4% FTTH market 30 25 share at end-2011 20 10 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 (000) 2009 2010 2011 2012BB Mkt. Share 4.6% 4.9% 4.9% © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 25
    • France Telecom - Slovakia: FTTH Services FTTH 3 play launched in 2007, up to 100 mbps FTTH deployed to supplement wireless network, enable 4 play tocompete with Incumbent‘s DSL and UPC‘s cable services Access to Incumbent’s network is very expensive FTTH Network Coverage – 20% (<400,000) of HHs as of Sept. 2012Launched DSL services in late 2011 over Incumbent’s network (accessto over 80% of HHs) FTTH Take up rate – over 12% © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 26
    • France Telecom - Slovakia : FTTH Marketing & Pricing FTTH is available as solo or 3 play package ADSL is available as solo or bundled with home phone FTTH is prices nearly as low as ADSL (€15 vs.€12, respectively) Fibre 3 Play costs only 30% more than solo Fibrebroadband IPTV is available only over FTTH © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 27
    • France Telecom – Other Markets xDSL services BUT: FTTH is gradually being rolled out in hypercompetitive marketsSpainFT provides DSL services over Incumbent’s local loop Cheaper alternative to Incumbent’s services FTTH and cable competition heating up June 2012: €300 mln investment in FTTH over 4 years to cover 1.5 mln premisesPoland FT operates nationwide DSL network, focus on VDSL Historically: fragmented cable and LAN market, little DSL competition Small FTTH market Cable, telco consolidation, nascent Fibre FT losing subs to competitionUK, Belgium, Egypt, Tunisia Other AMEA countries (Jordan, Kenya, etc) FT provides DSL services over Incumbent’s local loop Cheaper alternative to Incumbents’ services  FT operates its own DSL network Little or no FTTH  Little competition Egypt, Tunisia – no cable broadband  Little or no FTTH  Virtually no cable broadband © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 28
    • TeliaSonera Present in 17 countries; Over 180 million customers at September 2012. Fixed Broadband Services – Sweden, Finland, Norway, Denmark, Lithuania, Latvia,Estonia.  Incumbent operator – Sweden, Finland, Lithuania, Estonia, (Latvia – 49%)  Alternative operator - Norway, Denmark Commercial FTTH Services (residential) – all markets where fixed broadband is offered, exc. Denmark (HFC)Uses strong local brands: Global Presence: © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 29
    • TeliaSonera – Sweden, Finland  Largest Markets  Incumbent Nationwide Fixed Line Operator  Networks: xDSL, FTTH, Wireless  4 Play services – Fixed phone, IPTV, Internet, Mobile voice/data Sweden - Major Fixed Broadband Sweden - Broadband Net Adds by Platforms Platform DSL Cable FTTH3,500 DSL Cable FTTH 1503,000 112 1072,500 590 687 794 906 97 100 812,000 563 579 596 6121,500 50 271,000 16 17 16 1,737 1,666 1,591 1,515 500 0 21 0 2008 2009 2010 2011 2008 2009 2010 2011 -50(000) DSL 59.8% 56.6% 53.1% 49.7% -71 -75 -76 -100 FTTH 20.3% 23.3% 26.5% 29.7% (000) © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 30
    • TeliaSonera - Sweden Sweden - Major ISPs by Market Share TeliaSonera ComHem Telenor 90 75 21.4 19.9 18.5 18.4 60 45 17.4 18.0 18.5 19.0 30 38.6 38.7 38.9 39.5 15 0 (%) 2008 2009 2010 2011 Telia Sweden - Total Broadband Subs 1,180 1,156 1,159 1,160 1,149 1,135 1,134 1,138 1,140 1,132 1,132 1,132 1,130 1,131 1,129 1,125 1,124 ̃420,000 FTTH Homes Passed 1,120 Q2 2012 1,100 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 (000) 2009 2010 2011 2012BB Mkt. Share 38.2% 38.3% 37.7% © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 31
    • TeliaSonera - FinlandMajor Fixed Broadband Platforms Broadband Net Adds by Platform (000) DSL Cable FTTH (000) DSL Cable FTTH1,800 80 59 601,500 98 100 180 159 215 40 223 21 18 23 241 2641,200 20 8 21 13 0 900 5 2 -20 600 1,277 1,205 -40 1,132 1,144 -38 -60 300 -80 -72 -73 0 -100 2008 2009 2010 2011 2008 2009 2010 2011 DSL 60.9% 77.0% 72.6% 71.2% © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 32
    • TeliaSonera - Finland Finland - Major ISPs – Market Share TeliaSonera DNA Elisa 80 60 18.6 22.3 23.9 22.3 40 23.7 9.1 13.9 8.6 20 22.8 21.8 22.7 23.4 0 2008 2009 2010 2011 (%) 500 494 493 491 490 TeliaSonera Finland Total Broadband Subs 484 480 476 472 470 470 470 465 460 459 458 458 458 ̃640,000 FTTH Homes Passed 460 Q2 2012 450 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 (000) 2009 2010 2011 2012BB Mkt. Share 21.8% 22.7% 23.4% © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 33
    • TeliaSonera – Sweden, Finland: FTTH Services  Mixed technology NGN strategy:  FTTH, VDSL, ADSL  Partnerships with muni/utility & property owners  Residents pay for Fibre installation or self-install  Response to cable threat, competitive Fibre deployments Sweden Finland•Telia leader in broadband • Sonera #2 in broadband• But: accounts for <25% of Fibre • Early Fibre investmentHP in Sweden (Q2 2012) • >550,000 HH covered in main cities in 2011• Unbundling obligations (30% of HHs)•Target - 1 mln HHs by 2014 • Sonera accounts for 95% of Fibre HP in• Gov. target: 100Mbps speeds for Finland (Q2 2012)90% of HHs by 2020 • Gov. target: 100 Mbps to everyone by end- 2015 © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 34
    • TeliaSonera-Sweden and Finland: FTTH Marketing & Pricing FTTH services are marketed as solo or bundled services Service offers vary depending on type of subscriber: direct or housing assoc. Limited Video options on xDSL  Sweden: HD available only to HH close to exchange  Finland: IPTV is not offered on ADSL below 24Mbps FTTH is cheaper than or same price as comparable DSL services Low-speed FTTH services priced cheaper than comparable cable services Sweden Finland • FTTH: 10Mbps – 1000 Mbps • FTTH – up to 100 Mbps • xDSL: 2-60Mbps • ADSL – up to 24 Mbps • 30 Mbps DSL is 14% more expensive than • FTTB + LAN (EuroDocsis 3.0) – up to 100 100/10 Mbps FTTH service Mbps • Fibre-based 3 play is at least 2% cheaper • Price is same for all high speed (over 10 (start at SEK 428) than DSL-based (start at Mbps) broadband services SEK 439) • FTTH is x2 cheaper at 10Mbps than DSL • Telia’s 100Mbps FTTH pack priced similar • Sonera 10Mbps FTTH priced similar to to ConHem HFC 100 Mbps pack DNA cable 10Mbps service © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 35
    • TeliaSonera - Lithuania Incumbent Nationwide Fixed Line Operator Networks: xDSL, FTTH 3 Play services – Fixed phone, IPTV, Internet Lithuania - Major Fixed Broadband Lithuania - Broadband Net Adds Platforms by Platform DSL Cable FTTH DSL Cable FTTP600 100 89500 80 65400 60 52 47 244 296 343 155300 40 64 52 48200 45 20 19100 222 202 187 -4 -3 173 0 -12 1 0 -20 -14 2008 2009 2010 2011 -15(000) -20 -40DSL 41.1% 34.6% 29.9% 26.2% (000) 2008 2009 2010 2011 © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 36
    • TeliaSonera Lithuania  TEO - Dominant broadband provider – 56% market share in 2011  Fragmented competition:  LRTC (FWA) – 8.7% share  Cgates (FTTH) – 5.3% share TEO Total Broadband and Fibre Subs 400 374 377 200 Total Broadband 367 372 353 358 FTTH 346 147 151 335 140 350 327 131 150 313 319 113 119 305 304 308 104 93 300 85 100 74 63 51 42 250 32 50 200 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 (000) 2009 2010 2011 2012BB Mkt. Share 53.7% 55.3% 56.3%% of Total Subs 20.0% 30.0% 37.7% 40.0%% of FTTH Mkt. 25.7% 35.1% 40.9% © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 37
    • TEO LT: FTTH Services FTTH rollout started in 2007TEO historically controlled close to 99% of all DSL connections Telecom monopoly expired in 2003 Fibre deployed as response to cable threat and competitiveFibre deployments (by telcos and MSOs) Now available in 100 cities nationwide, speeds up to 300Mbps TEO FTTH Network Coverage – about 62% of HHs in Q3 2012  Rapid deployment due to predominance of MDUs and small country size FTTH Take up rate – close to 21% -> 40% of total broadband subs © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 38
    • TEO LT: FTTH Marketing & Pricing Both xDSL and FTTH available as solo or in 2-3 playbundles TEO provides some of the cheapest FTTH services andbundles in Lithuania  Comparable FTTH services from MSOs are up to 20% more expensive Pay-TV programming inferior to MSOs FTTH is cheaper than DSL services FTTH and DSL bundles are similarly priced 1 Mbps DSL pack costs as much as 10 Mbps Fibre pack  50Mbps Fibre pack costs as much as 4Mbps DSL pack  10 Mbps Fibre pack is up to 400% cheaper than 8 Mbps DSL pack or 10 Mbps cable pack  Comparable top-tier DSL and FTTH 3-play services cost same (but fibre offers x25 faster bb)  Subscribers are encouraged to switch to FTTH © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 39
    • TeliaSonera – Other Markets Mix of NGN technologiesNorway NextGenTel - alternative operator Small market share Fibre available in some areas, deployed in partnership with utilities Utilities lead in Fibre deploymentsEstonia Elion – fixed line incumbent Leader in FTTH deployments ADSL – only up to 5 Mbps, FTTH – up to 100 Mbps 5 Mbps ADSL and FTTH priced the same; 12 Mbps DSL priced same as 50Mbps FTTH Government investment: Nationwide 100 Mbps FTTH network rollout for 90% ofthe population by 2012 and 100% by 2015, developed by an independent entitycomprised of all major telcos © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 40
    • Comparison with United States 2011 Market Data: Broadband Penetration: 68.5% Cable share: 56.8% - stagnating (56.4% in 2008)  Cable broadband net adds peaked in 2011 Telco Broadband (xDSL+FTTH) share: 39.3% - decreasing (41.5% in 2008)  Telco broadband net adds falling Wireless broadband – strong gains Main telcos (4 play): Wireline: FTTH, ADSL FTTH – Greenfield + ADSL upgrade in  Wireline: FTTH, FTTN,main cities ADSL FTTH expansion is effectively over exc.  FTTH – Greenfield onlyprevious contractual obligations 77% of telco FTTH deployments (2011) But: FiOS accounts for <6% of USbroadband subs (2011)Main competitors – Cable MSOs (3play) Cable and Telco 3 play service offers are similar © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 41
    • Verizon FTTH Services  FTTH up to 300 Mbps FiOS achieved 37% service take-up rate in Q3 2012  60% of Wireline Broadband subs are on FTTH  87% of FTTH broadband subs take IPTV  Consumer ARPU: upwards of US$100 in 2012 WHY AND HOW? FiOS bb solo is 130% more  Little or no telco (xDSL or Fibre) competitionexpensive than DSL FiOS 2-play 43% more expensive  Targeted deployments, DSL shut off in fibre footprintthan DSL  Leverage wireless network to offer value-added/TV Everywhere services  Higher speeds than cable  Able to offer IPTV on Fibre to compete with MSOs  Able to match or undercut cable prices in some areas  Heavy marketing campaigns criticizing cable  Fibre is ‘cool’, ‘modern’, ‘the future’ (and nobody else has it!)  Consumer dissatisfaction with cable © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 42
    • Strategy Comparisons  No single global strategy Telia comes close with Fibre deployments in most markets  Global Telcos leverage their wireless networks  Integration of Video strategy with Fibre  Fibre priced to make bundles more attractive Telefónica FT-Orange TeliaSonera VerizonGeographic Spain: Nationwide Nationwide Nationwide Main cities, quite selectiveReach Lat. Am.: Cherry-pickedBrands Several established Global brand Local brands Distinct brand for FibreBundling • 1-4 play •FR: 3-4 play •1- 4 play •1-4 play • Large savings w. bundles •SK: 1-4 play •Large savings w. bundles • ES: HDTV only on fibre • Limited Video •Lat.Am: IPTV only on fibre • FR: HD, 3DTV only options on xDSL •IPTV only on fibre on Fibre •SK: IPTV only on fibrePricing •Fibre usually available at highest • Fibre available only • Fibre available at all • Fibre available at all speed speeds only at highest speed speed levels levels •More expensive than DSL (20- • Priced similar or • Priced similar or • More expensive than DSL 30%) cheaper than DSL cheaper than DSL (130% more on solo, 43% • Cheaper (up to 30%) or • Priced similar to HFC • Low-speed fibre on 2 play) comparable to than HFC cheaper than cable • Premium service • Premium serviceMarketing • Better alternative to cable • Price competition • Price competition •Better alternative to cable • Price competition w. high-end • Price competition w. high- cable end cableTarget • HHs who need speed Everyone Everyone • HHs who need speedConsumer • Wealthy HHs (esp. Lat.Am) • HHs unhappy w. cableDSL -> FTTH Spain: DSL decreasing DSL still growing DSL subs decreasing DSL subs decreasingmigration Lat.Am: DSL – primary business © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 43
    • Factors Determining FTTH Deployments  Fibre service take-up increases with time  Cherry-picked, targeted deployments usually have higher take-up ratesFactors: Regulation Economy Market Size Competition Role of Public BodiesPromote • DSL LLU -> • High • Dense • Strong • National BBFibre incumbent purchasing population cable market Strategies deployments power, GDP • Smaller size • Competitive • Public-Private • No functioning Fibre Partnerships LLU -> altnet deployments • Regional dev. deployments FundsInhibit • Fibre LLU • Large • Low • No/little • No publicFibre • Telco TV ban Income urbanization cable, fibre incentives • Uncertain reg. disparity • Predominance • Small of single homes middle class © 2012 SNL Kagan, a division of SNL Financial LC, estimates. All rights reserved. 44
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