IDATE for FTTH Council Europe: FTTH estimates to 2026

IDATE for FTTH Council Europe report forecasting 2020-2026:

• FTTH/B connections in EU27+1 to 202m with 148m subs (73.3%)
• NL: from 3.8m HP with 2.0m subs (25.3% HH penetration) in 2020 to 7.7m HP with 4.6m subs in 2026 (56.4% HH penetration)
• Also for EU39: from 195m HP with 86m subs (43.9%) in 2020 to 317m HP with 208m subs (65.4%) in 2026

KPN CMD 2018: no revenue growth; EBITDA and FCF growth from savings

General

• Strategy
• organic sustainable growth (note: growth refers to EBITDA, FCF, not to rev)
• based on innovative operating model and commercial approach
• based on premium, vlaue, focus, lean
• value over volume (esp. in LE segment)
• not competing for market share
• consumer: grow the converged base
• business: stabilise service rev & EBITDA (mid 2020) (note: adj e2e EBITDA, i.e. incl Networks portion (not reported after 2016))
• lean operating model
• to accelerate strategy for 2019-'21
• new technology
• fiber, 4G/5G, virtualisation/cloud
• faster, higher customer satisfaction, lower costs
• enables service switch-off (from all-IP) and copper network switch-off (from FTTH)
• targets lean, faster & more agile company, more flexible, faster time-to-market, faster innovation
• 3 prios
• best smart converged infra (add 1m FTTH HP by 2021)
• focus on profitable growth (add 300k converged HH, convergence to 70% of postpaid; stabilise adjusted e2e EBITDA on business market)
• accelerate simplification and digitalisation
• Financial targets
• progressive dividend
• based on sustainable FCF growth
• based on organic EBITDA growth and stable capex
• plans cost savings 350m by 2021 (not run-rate, i.e. run-rate 350m is reached mid 2021; opex only, this time; net of restructuring costs and incidentals)
• opex savings large part from restructuring; effect on FCF: cash out after 6 months (pay out severance), accreditive after 12 months)
• maintains 2018 guidance
• capex
• remains 1.1b EUR/yr (excl. spectrum)
• shift to access networks (FTTH, 5G), from 33% to over 50%
• IT/TI lower, CPE lower
• invest in future-prof technology
• growing FCF (for progressive dividend and deleveraging)
• mid term target leverage below 2.5 (incl. spectrum)<2 .5="" font="" incl.="" spectrum="">
• service revenues to stabilise
• Other
• 100 developers in Amsterdam (eliminate 5 Indian developers for 1 in Amsterdam)
• sustainability: green energy (2011), CO2 neutral (2015), 25% energy redux (2020), circular (2025)
• T-Mobile/Tele2 merger: no substantial change expected; solid players are good for the market
• open cable: no short-time effect due to long-running existing contracts with wholesale customers
• Main risks
• execution
• declining revenues
• cord cutting (FT, TV): no
• engineering capacity for FTTH roll-out: no

Networks

• Best networks, enable innovative tech, accelerate (simplification, digitalisation)
• FTTP
• currently 2.35m FTTH HP (30%), FTTC coverage 50%, FTTS 80%, accelerate FTTO
• target +1m to 3.4m FTTH HP (over 40%) by YE 2021
• regional approach, no nationwide coverage (complement with copper and FWA)
• trusted relationships with 8 or 9 construction companies for complete service package
• speeding up from end 2019
• improvements
• roll-out 650 EUR/home (cheaper labour and equipment, optimised engineering), to be reduced further
• design in 20 hr (down from 2 yr)
• raises utilisation 8 pp
• pay-back time 50% shorter (result of lower capex, higher utilisation, higher ARPU, lower churn)
• Copper
• to finalise copper upgrade 2019 (2500 cabinets for 500k HH on FTTC)
• plans to switch off copper from 2019, customers to be migrated to FTTP (first in 6 areas)
• Gigabit
• to add Gfast (FTTB, 1 Gb/s)
• total reach 1 Gb/s 45% YE 2021 (40% from FTTH, 5% from Gfast), 200 Mb/s 70%
• Hybrid
• for rural
• to add 200k additional subs with DSL/LTE hybrid (50 Mb/s)
• 5G
• plans 5G-ready network (i.e. software upgradeable)
• massive MIMO
• "4G connects people, 5G connects society"
• 5G mostly for B2B
• 5G field labs (agro in Drenthe, urban in Amsterdam, automotive in Helmond, harbour in Rotterdam)
• government decision on 3.5 GHz band expected 181218
• Other
• single core network, from 5 currently (rationalise, centralise, virtualise (NFV, SDN))
• decentralised CDN at 160 metro core locations (offload 70% of core traffic, low latency)
• all-IP 100% by YE 2021; enables legacy switch-off (PSTN (450k users), ISDN (160k users), SDH, 3G)
• plans 28 GWh power savings 2019-'21
• target 50% virtualisation YE 2021 (currently 5%)
• reduce 20 to 2 IT stacks (1 for consumer, 1 for business)

Consumer

• strategy: best access, grow converged base, value
• targets
• add 300k converged HH by YE 2021, 70% of postpad base converged in 2021
• to raise SIMs/HH 10%
• FTTH raises NPS 15%, ARPU by EUR6, BB share 9pp, lowers churn 34%
• we are the best, so we don't need exclusive content

Business

• targets: stabilise service revenues, stabilise EBITDA (adj, e2e) by mid 2020
• grow in profitable segments; compete for profitable tenders (in LE segment) only
• total customers: 350k SoHo, 225k SME, 2k LE
• to reduce portfolio 50% by 2021
• to raise connectivity at business parks: 100 Mb/s to 70% (currently 52%)
• KPN EEN (platform for SME and LE)
• target penetration to 100% in SME (currently 35%)
• raises NPS 10 points
• time-to-market x2
• low churn (5%)
• cost to serve -25%
• 75% fewer IT systems
• simplified organisation
• revenue growth SoHo positive, bottoming at SME, still declining in LE

Finance

• targets 2019-'21: organic EBITDA growth, capex stable (1.1b), FCF growth, progressive dividend
• past FCF growth from low cash tax (continues), decreased interest (continues; 55% lower o/w 30% result of lower debt, 25% result of lower interest rates), capex (now fixed)
• now EBITDA growth from opex savings & stabilising rev
• targets "cable-like margin"
• opex redux to continue "for a decade"
• portfolio: rationalise, simplify
• e2e digitalisation front and back-end
• all-IP and virtualisation (incl. CPE)
• IT landscape rationalisation
• organisational effectiveness
• execution strategy ESSA (eliminate simplify standardise automate)
• to provide guidance on FCF, restructuring costs, div with Q4 results (each year)

Deutsche Telekom Capital Markets Days 2018 - Highlights

Deutsche Telekom Group

• Guidance 2017-21: uninterrupted growth for revenues (1-2%), adj. EBITDA (2-4%), FCF (10%), capex (excl US) flat (EUR 12.1b), all units contribute from 2019; dividend 2018 to track FCF (70 c/share over 2017), dividend to track adj. EPS from 2019 (EPS from EUR 1.00 in 2018 to 1.20 in 2021), minimum dividend 50c
• Not on track 2014-18: capex 2014-18 CAGR 1-2% (CAGR 2014-17 6%), opex 2014-18 down (2014-17: EUR 700m indirect costs down vs. target 1.8b)
• Plans indirect cost cutting (excl. US) from automation & digitalisation, EUR 1.5b by 2021 o/w half non-staff (real estate, legacy IT)
• o/w 750m Telekom DE, 400m Europe, 100m T-Systems, 200m GHS
• All-IP complete in Germany by 2019 (consumer) & 2020 (business), Greece 2019, etc.
• Staff reduction already implemented (incl. phased retirement)
• Focus
• Digitalisation: app (Mein Magenta)
• Portfolio simplification
• Automation (1500 bots)
• Data (analytics, AI)
• IT transformation (harmonised API layer)
• Real-time operations (IP/BNG, Access 4.0)

Telekom DE

• Behind on cash contribution target 2014-17 (2% vs 2.7%)
• Guidance: revenue growth >1% (MSR 2%, BB 3-4%), adj. EBITDA growth 2.0-2.5%, cash contribution growth 4-5%, capex flat (EUR 4.2b)
• Target SME revenues EUR 6.5b by 2021E (2017: 6.0)
• Indirect cost cutting: EUR 300m from automation, 250m from operational excellence, 200m from platform retirement.
• Drivers
• Convergence: MagentaEins (HH penetration Europe from 21% (2017) to 40% (2021))
• Multi-brand mobile: focus on premium brands; IoT, 5G
• Leverage fiber & TV investments: TV share 50% YE 2021; wholesale revenue CAGR 2017-21 2%, wholesale end-users CAGR 2017-21 1% to 12.3m, wholesale ARPA CAGR 2017-21 2% to EUR 13.5)
• Customer service: 24 hr problem solving from 66% (2017) to 80% (2021); TRI*M score to 64 by 2021E (2017: 59)
• Broadband 
• >50 Mb/s coverage 62% YE 2018E, 95% YE 2019
• High-speed (50-250 Mb/s) coverage 80% (95% incl. wholesale) YE 2019 (70% access to 100 Mb/s based on vectoring; super-vectoring from 18H2 for 105-250 Mb/s for 15m HH YE 2018, 28M HP by YE 2019)
• To launch FTTH 2018, ramp up to 2m HH/annum from 2021 (given the right regulatory conditions), possibly in co-investment)
• IRR target FTTH/B 7.5%
• Target market share 30% by 2021E
• Mobile: 27k sites (to add 2k/annum), 80% FTTS; mobile base stations to grow from 27k (2017) to 36k (2021) incl. small cells in urban areas, LTE population coverage from 94% (2017) to 98% (2019), 99% (2020)

Systems Solutions

• Outlook 2017-21: rev CAGR 1%, adj. EBITDA CAGR 5%, margin 8-10%, capex stable (EUR 400m)
• T-Systems to return to growth (based on IoT, cloud computing, security solutions), cash contribution break-even by 202E
• Cost savings >EUR 300m
• Transformation 2018-21
• Portfolio focus: 3 clusters
• Core: fixed & mobile
• Growth: ICT, IoT, security, road charging, digital solutions, public cloud managed services, SAP
• Classic IT: managed infra services & private cloud, SI
• Sales revitalisation
• Delivery integration
• Overhead reduction (8 to 5 management layers)

T-Mobile US

• Outlook 2018: postpaid net adds 2.6-3.3m, adj. EBITDA $11.4-11.8b, capex $4.9-5.3b 
• Focus
• Un-carrier
• Beyond smartphone: Music Freedom, BingeOn, Netflix On US, layer3 TV, 5G, IoT
• Simplicity & digitalisation 
• Cost savings >$1b over 3 yr 

Europe (GR, HU, HR, SK, MK, ME, PL, CZ, AT, RO, AL)

• Outlook 2017-21: revenue CAGR >1%, adj. EBITDA CAGR 1-2%, cash contribution CAGR 2-4%, capex stable (EUR 1.8b).
• Indirect cost reduction EUR 400m by 2021 (120m from operational efficiency, 50m from simplification, 90m from digital customer interaction, 100m from leaner structure (incl cross-border synergies)).
• FMC: HH penetration from 26% (2017) to >50% (2021), revenue CAGR 2017-21 25% to EUR 1.7b
• FMCC (cloud): penetration VSE/SMB 31% (2017) to >50% (2021), revenue CAGR 2017-21 10%
• FTTH/B 
• Coverage 17% (2017) to 30% (2021)
• FTTH/B capex
• FTTH/B capex EUR 100m (2017) to 300m (2021)
• HP additions 250k (2017) ramp up to 750k per annum (2021)
• BB revenues EUR 3.6b by 2021E (2017: 3.2b)
• Mobile base stations European subsidiaries from 41k (2017) to 47k (2021) incl. small cells (macro cells adds 1k/annum), LTE coverage 99% by 2021

Group Development (part of GHS)

• Outlook 2017-21: revenue CAGR 3%, adj. EBITDA CAGR 3-4%, cash contribution CAGR 3% (-4% incl. site-roll-out at Deutsche Funkturm), capex flat at EUR 300m (+17% incl. site-roll-out) 
• T-Mobile US: un-carrier 
• T-Mobile NL 
• "Still a long way to go" (SR & EBITDA)
• Unlimited mobile de-risked, based on capacity expansion
• Unique incentive scheme
• Cost cutting 30% of overhead FTE (non-customer-facing) (from early 2017)
• Initiated towers carve-out (stay at DT)
• "Dutch market needs LT-viable maverick"
• Deutsche Funkturm: creating European TowerCo by insourcing tower assets NL, AT, etc.
• DTCP (Venture Capital)
• BT stake

Technology & Innovation: 5G

• Mobile capacity/speed upgrade (i.e. a better 4G). Economic rationale: efficiency gain (opex).
• FWA to complement FTTH/FTTB in (sub)urban areas. Economic rationale: more cost-efficient & faster time-to-market than FTTH/FTTB (capex). Note: capex 30-50% lower, but FTTH/FTTB TCO better after 20 years (FWA higher opex).
• Selected new products/solutions (massive IoT or services based on extremely low latency). Economic rationale: new revenue streams (e.g. campus networks).