Week 4 in Telecoms, Internet, Media

Corporate

• KPN
• AFM: America Movil stake raised to 20.02% (841423137 ord shares) up from 16.08% [see 181128]
• 20Q4
• Orange: Partners with Sanofi, Capgemini, Generali to establish e-health JV platform, funding EUR 24m, to launch June 2021 (virtual), Dec 2021 (physical)
• TIM: Establishes Noovle: cloud & edge services for enterprises [see 200527], to be based on 17 datacenters, targets rev CAGR 20% to EUR 1b by 2024 with EUR 400m EBITDA
• Telia: 20Q4 final, Annual Report 2020, motto Dare Care Simplify; Strategy update Reinventing a Better Telia; establishes Telia Asset Mgt (towers & fiber); focus on raising mobile ARPU (from improved customer experience & 5G monetisation), FMC (reduces churn, upselling potential), ICT (new rev streams), FWA; to establish separate Infra Cos (to crystalize infrastructure value & accelerate investments); Outlook 2021-23: service rev  growth LSD, adj EBITDA growth LSD-MSD, capex/sales from 17% down to 15%; leverage target 2.0-2.5x, div floor SEK 2.00 with ambition of MSD growth
• Elisa: 20Q4
• Vodafone
• Rumor: to merge Vodafone ES (& PT) in 60/40 (or 50/50) JV with MasMovil (= KKR, Cinven , Providence)
• Bloomberg: to sell Vodafone Ghana stake to Vodacom
• Liberty Global: Plans more M&A deals, interested in VOO (Wallonia), MNO Ireland
• RTL
• 2020 prelim: rev EUR 6.0b, adj EBITA 850m
• Rumor: RTL considers selling M6 stake, Vivendi, Altice Europe, Mediaset, TF1, Daniel Kretinsky candidates; valuation EUR 3b
• Vivendi: Closes stake sale to Tencent 210129, UMG plans IPO 2021/22
• Vimeo: Raises $300m equity from T Rowe Price Group and Oberndorf Enterprises at $5b valuation; spin=off planned 21Q2; 200m users in 190 countries, 1.5m paying subs
• Facebook: 20Q4; outlook 2021: commerce ongoing shift to online and consumer demand shifts from services to products positively impact advertising, yoy rev growth 21H1 stable to modestly accelerating, 21H2 pressured (due to reversal of corona virus trends), ad targeting headwinds from platform changes (iOS 14 from March 2021), 2021 total expenses $68-73b, capex $21-23b, tax rate high teens; expands SBB by $25b
• Twitter: Acquires newsletter publishing platform Revue (NL, 6 employees)
• AT&T: 20Q4; charges $15.5b on pay-TV, $650m on WarnerMedia
• Verizon: 20Q4

Networks

• FTTP
• TIM: Proposes co-investment in OA FTTH via FiberCop to Agcom: fiber to 1610 munis in grey & black areas (urban & semi-urban) to connect 75% of premises by 2025; atrchitecture to balance eficiency, infrastructure competition, simple customer migration; to comply with EU Telecom Code
• CETIN: Avege download speed 2020 105 Mb/s (+25%); to expand FTTP/FTTB to 150k YE 2021, 1m by 2027 
• Virgin Media plans FTTP at new homes built by Barratt Developments, 15k in 2021 - Rolls out FTTP in Shrewsbury - Launches FTTP in Debdale (Greater Manchester), 5k HP
• GlasVoorNop starts roll-out in Noordoostpolder (10 villages, total 47k pops), first in Creil; RSP: KPN (incl Solcon, XS4ALL, RoutIT), T-Mobile (incl Tele2), Online (= Canal+), Youfone, Tweak, Kliksafe, Freedom Internet, Oxxio, NEM, Budget, ONVI, Qonnected, HeldenVan.nu, hallo,
• Google Fiber launches 2 Gb/s in Salt Lake City and Provo (Utah) and in Atlanta (Ga)
• Mobile network sharing
• O2, 3, Vodafone UK to expand Shared Rural Network project by 222 towers (2021-24) to improve rural 4G to 84% area coverage [see 200120]
• Orange FR & Free (Iliad) scrap network sharing plan [see 210108]
• DNA and Telia FI expand network sharing agreement (incl spectrum combination) via Finnish Shared Network [see 140411] to 62.5% area coverage, 28.5% pops coverage (~70% of pops to be covered by their independent separate networks)
• 5G
• Ericsson launches 5G RAN slicing, proposes slicing for high-revenue generating use cases (cloud gaming, smart factories, enhanced video, smart healthcare), enables 1 ms latency at RAN (with SA 5G)
• 6G
• EU launched Project REINDEER (REsilient INteractive applications through hyper Diversity in Energy-Efficient RadioWeaves) as part of 5G PPP, funding from Horizon 2020, 210101 until 240630, Ericsson to develop multi-antenna-based smart connectivity platform, with KU Leuven, Linköping University, Lund University, etc; RadioWeaves technology is key deliverable: fabric of distributed radio, compute & storage, to enable large-scale intelligent surfaces & cell-free wireless access to offer capabilities far beyond future 5G networks, to offer capacity scalable to quasi-infinite, perceived zero latency & interaction with a large number of embedded devices
• LEO
• Starlink asks FCC permission to lower LEO system, Amazon opposes over interference fears with Project Kuiper

Services

• Television
• VodafoneZiggo: Ziggo Sport adds Ziggo Sport Tennis channel, holds exclusive ATP rights 2021-23
• Telenet: Rebrands channels VIER, VIJF, ZES as Play4, Play5, Play6; to add Play7 (females) 210402
• B2B telecoms
• Youfone launches Youfone Zakelijk for medium & large enterprises (minimum 8 lines)
• Streaming video
• WarnerMedia: HBO Max 17.2m activations at 201231; to launch AVOD tier (reduced price) 21Q2
• Discovery: Launches discovery+ Channels: linear streams of 9 series
• Documentary+: Launches
• Streaming music
• Spotify: Launches audiobooks (trial), exclusive
• Online advertising
• Google: Federated Learning of Cohorts (FLoC, replacing cookies (to be phased out by end 2021) in Privacy Sandbox) has >= 95% of conversions of cookies
• Apple: Launches iOS 14 (beta, full release spring 2021), includes App Tracking Transparency: opt-in requirement for allowing tracking; Identifier for Advertisers (IDFA) enables data sharing - Google details impact - Facebook considers suing Apple in antitrust case
• Hardware
• Amazon: Launches Ring Video Doorbell Wired, $60: 1080p video, night vision, custom motion detection zones, support for other Ring products & services
• Orange: To refund buyers of Djingo smart speakers (EUR 100 for subs, 150 for non-subs) [see 201007] 

Regulatory

• Auctions
• Ofcom (UK) delays auction (700 & 3.6-3.8) by 2 mo over corona virus to March 2021
• MNUs HU (Magyar Telekom, Vodafone, Telenor) extend 900 & 1800 licenses by 15 yr until 370409, HUF 150b (EUR 418m); Magyar Telekom 16 MHz in 900 & 40 MHz in 1800; Telenor 26 MHz in 900 & 40 MHz in 1800; Vodafone 2x9 MHz in 900 for HUF 22.7b & 2x20 MHz in 1800 for HUF 26.4b
• Switching
• Telecoms Minister BE & BIPT plan relaunch of Easy Switch system

KPN preview 13Q4: slowing down Reggefiber for a truce with Ziggo

KPN's 13Q4 results are due February 4. The employee reduction program (4-5k in the period 2011-15) is probably ahead of course (reaching 4.5k). Already, at the 13Q3 results a new program was launched: simplification, aimed at distribution, customer processes and networks & IT, as well as reduction of jobs and products. At the same time, the capex budget was announced for the 2013-15 period: less than EUR 4.7bn, which includes Reggefiber in 2015.

Since the 13Q3 results, it has been relatively quiet around KPN, which is a good thing. Pending corporate issues include:

• Will the E-Plus sale proceed? KPN hopes it to be cleared mid 2014. It will bring KPN EUR 5.5bn in cash and 20.5% of Telefónica Deutschland (valued at EUR 3.6bn, based on a call option Telefónica has). What does it intend to do with that?
• What will America Movil do with its 29.7% KPN stake? This, as well as KPN's 20.5% stake in Telefónica Deutschland, is interesting for financial reasons only, not for strategic reasons. Perhaps there will be a swap and maybe America Movil will aim for all of Telefónica Deutschland.
• Will the Reggefiber consolidation be approved? Probably yes and KPN counts on the last day of 2014 for this to happen.

Current guidance:

• NL stabilises during 2014. EBITDA will still drop during 2014 on a yoy basis, but improve on a qoq basis. EBITDA will be flat in 2015. FCF will be flat in 2014 and improve in 2015.
• Outperformance in Belgium.
• Capex 2013: < EUR 1.7bn.
• Capex 2013-15: < EUR 4.7bn.
• Net debt / EBITDA to fall in the 1.5-2.5 range.
• Synergies at E-Plus are conservative (EUR 5.0-5.5bn) and more leverage will allow Telefónica Deutschland to increase its dividend.

Other issues:

• Impact on the fixed-line markets:
• of the Ziggo/UPC merger
• of T-Mobile's new mobile-only strategy
• of the combination of CanalDigitaal and Online.nl
• of Vodafone's and Tele2's plans to unbundle FTTH
• Impact on the mobile market:
• of the Ziggo/UPC/merger
• of Tele2's migration to MNO status
• of T-Mobile's new mobile-only strategy
• The impact of new CEO's at Ziggo, Tele2 NL and T-Mobile NL.
• KPN's LTE plans.
• What next after reaching nationwide coverage in March? This gives KPN a 12 month headstart to Vodafone.
• Where does LTE Broadcast stand? And LTE-Advanced?
• How will it integrate FON?
• Will there be a new job reduction program from KPN?
• KPN's plans for Belgium.

Much of all this has to do with opex and capex.

• Large opex savings are ahead:
• The impact of the new simplification program, including job cuts.
• The impact of LTE and FTTH.
• In other words, large opex savings are ahead.
• Implicitly, capex will drop as well:
• Reggefiber's capex (passive assets only) was EUR 186m in 2010, EUR 291m in 2011 and EUR 381m in 2012. Let's assume stabilisation of roll-out in 2014 and 2015, then KPN is looking at EUR 380m in each year.
• If KPN's capex in 2013 is EUR 1.7bn (excl. Reggefiber and E-Plus), then there is EUR 3.0bn left for 2014 + 2015 - and the latter will include Reggefiber's.

Further:

• KPN's stance on stable market shares in 13Q3 could actually mean that it is settling for a stable broadband market share during 2014 and 2015 (on the TV market, the share grows by roughly 1 point per quarter).
• KPN believes that 40 Mb/s is enough for now, but an upgrade to 200 Mb/s is required within 3 years. Also, KPN believes that 200 Mb/s could be sufficient for as much as the next 5-7 years.
• KPN can do this provided the current VDSL + vectoring + pair bonding copper upgrade is successful. VDSL + vectoring enables up to 100 Mb/s and this is doubled with pair bonding.

Final conclusions:

• The above implies a heavy capex reduction in 2014 and 2015. It looks like this will only be possible if Reggefiber's expansion is slowed down.
• KPN appears to be looking for a truce with the cable companies.

What will America Movil do with KPN's Dutch fixed-line network?

What's next in the battle for KPN/E-Plus, now that America Movil stated that it plans to offer 2.40 EUR/share for the remaining 70.23% of KPN that it doesn't already own (aiming for an acceptance ratio of at least 50%).

First, let's establish that this is all about E-Plus:

• AMXL has an interest in mobile only, as it sees an opportunity in Europe with low 4G penetration.
• Base (Belgium) is too small and KPN Mobile NL is small as well and too much hooked up to the fixed-line network. Hence, it's all about E-Plus.

Next, let's establish that AMXL is not amused with KPN's action to sell E-Plus to Telefonica Germany:

• AMXL's interest in KPN only pertains to E-Plus (see above).
• KPN apparently sold E-Plus without the approval of the AMXL supervisory board members (2 out of 8). Note: AMXL spent billions buying its 30% stake and supported KPN´s rights issue.
• AMXL cancelled the shareholder agreement, paving the way for the intended offer for KPN.

What will happen to E-Plus? A merger with Telefonica Deutschland will unleash synergies valued at EUR 5.0-5.5bn by KPN and Telefonica.

• KPN may still succeed in selling the asset to Telefonica Deutschland, because of the timing of its EGM. AMXL may then withdraw its offer for KPN, but will still be stuck with its 30% KPN stake.
• AMXL may stop the sale of E-Plus to Telefonica Deutschland, either through its intended takeover of KPN or through the KPN EGM (note: AMXL may already be a KPN stock buyer and have its stake increased beyond 30%). The KPN management will likely be replaced. America Movil may hold on to the mobile activities and sell the Dutch fixed-line operation. Next, AMXL may try to buy Telefonica Deutschland.
• Telefonica may launch a higher offer for E-Plus, trying to get approval from America Movil. If it succeeds, America Movil is stuck with the Dutch/Belgian assets of KPN.
• A third party may launch a counter offer for E-Plus. Only Liberty Global seems to be a candidate, as it too will see synergy potential from a takeover. Liberty is expanding into mobile and has a country-by-country approach, ranging from a full MNO in Chile to a 'heavy' MVNO in Belgium (with 2100 spectrum) and other places, to a WiFi focus in the Netherlands (with 2600 spectrum).

What will happen to the Dutch fixed-line activities of KPN?

• If AMXL gets stuck with the Dutch and Belgian units of KPN only, it may try to sell its stake (either 30 or 100%) in due course.
• If AMXL ends up with all of KPN, it may sell the Dutch fixed-line activities. In theory, there are several candidates: the Dutch government (afraid this 'vital' asset to come under foreign ownership), CIF (the Communication Infrastructure Fund managed by Rabobank, whose ideal is to create a national venture controlling all passive network elements in the Netherlands), the public (in an IPO) or a competitor (Vodafone certainly is a candidate, especially now that it is buying Kabel Deutschland).

All in all, it seems likely that AMXL will end up controlling KPN, including E-Plus. The question then is: will it separate the mobile and the fixed-line activities in the Netherlands? And what will then happen to the latter?

What will be the consequences for KPN Fixed? This will obviously depend on who ends up owning it.

• If KPN's Fixed and Mobile activities in the Netherlands are kept together, not much may change.
• If Fixed and Mobile are separated and KPN Fixed is sold, there will be competition between KPN Fixed and KPN Mobile/AMXL, as KPN Fixed may embrace a mobile strategy of some kind.
• KPN Fixed may increase network investments, which will be bad news for Ziggo and UPC.

Finally and in summary, here are the wild cards:

• Liberty Global may make a counter offer for E-Plus.
• Vodafone may buy KPN Fixed NL.