Thursday, February 01, 2018

KPN Q4: FTTH to migrate to PON technology after 2018

Details from the main release

  • Outlook 2018
    • Adj EBITDA flat, capex 1.1b, FCF up (excl TEF DE div), div 12 c/share; Telefonica DE stake 8.6%
  • IFRS 15
    • recognition & measurement of revenues
    • different timing of revenue recognition for handset transactions via direct & indirect channels, and a higher threshold probability in revenue related disputes
    • revenues for handsets sold via direct channels are recognized in the P&L as nonservice revenues at date of the transaction, matching the associated handset costs. Revenues (nonservice) and fees (SAC) for handsets sold via indirect channels are no longer recognized in the P&L, but reported in the balance sheet. The threshold in revenue related disputes (variable consideration) is raised, meaning that revenues are only recognized when highly probable (>75%), up from >50% under IAS 18)
    • impact (from 180101): adj rev -130m, adj EBITDA -100m, FCF unchanged, equity (at 170101) +285m
  • Q&A
    • RLAH more favorable than expected (wholesale costs, VR income, data usage grew multiple (>3x)), effect 2018 comparable (shorter yoy effect but expanded usage)
    • Expects Business Market stabilisation in 1-3 yr
    • 3.5 GHz band crucial for 5G
  • Technology update
    • Fiber reduces latency to 6 ms (DSL 14 ms, LTE 20-26 ms)
    • FTTH reaches 2.3m HH, new build FTTH only, AON in 2018, thereafter migration to PON (not for existing lines), plans access on 3rd party FTTH
    • Stepped up FTTO (after regulation ended)
    • FTTS reaches 80%
    • Bonded V Plus roll-out from 18Q2 (>400 Mb/s), cabinets suitable for VDSL & FTTH, local loop typically 150 meters
    • Hybrid DSL/LTE has 1400 subs (Nijkerk trial), average download 6 to 73 Mb/s (note: DSL is needed for IPTV & fixed IP address, LTE for peaks & streaming)
    • LTE-M nationwide by 18Q2
    • Plans 4 5G pilots: urban, rural, transport & logistics, automotive ("4G connects people, 5G connects society")
    • Plans VoWiFi
    • Network integration
      • Access
        • 1. Combine (hybrid access): FTTC/FTTH & DSL/LTE
        • 2. Massify (facilitate massive device comms)IoT over LoRa, LTE-M and 4G M2M
        • 3. Verticalise (5G for verticals): eMBB (broadband), mMTC (massive), URLLC (latency)
      • Core
        • 4. Rationalise (simplification): all-IP
        • 5. Virtualize (increase scalability, reduce time-to-market): NFV (generic cloud hardware, faster time-to-market) & SDN (smart routing)
        • 6. Decentralise (content closer to consumer): CDN at 161 metro locations (for content caching, core-network offloading, improves experience), edge computing (for 5G, improves latency for automotive, e-health, smart industry)
    • Simplification: phase 3 of simplification will follow (savings 1 & 2 relative to 2016: 570m EUR/yr)
    • IT simplification: originally for 80k subs, invisible for customers, focus on a single My KPN app, focus on open source, added 150 developers in 2017 (total 30 nationalities), time-to-market (halved to 7 days) to be halved again

No comments: