Week 3 in Telecoms, Internet, Media

Corporate

General

• Telefonica DE: CMD: Strategy update; confirms outlook 2020; raises div to 18c over 2020, sets 18c as floor for 2021-23; 3 growth pillars: 1. Mobile growth: grow market share in rural areas & reinfoice urban, 2. Smart bundling (fixed & mobile, incl FMS) based on tech agnostic approach, 3. Attack in B2B (esp SME) opportunity; takes 10% stake in FTTH venture Unsere Grüne Glasfaser, to invest EUR 100m in FibreCo; target full 5G coverage (>100 Mb/s) by 2025, to sunset 3G 2020-21; to add 1500 built-to-suit (BTS) mobile sites (via Telxius) by 2025; guidance 2020-22: cum rev growth >= 5%, margin higher, capex/rev 17-18% in 2020-21, normalising from 2022; to be climate neutral by 2025
• Deutsche Telekom: Merges T Infra NL (3150 towers & rooftops; rev EUR 60m, EBITDA AL 30m, plus EUR 250m loan) with Cellnex NL (984 towers acquired 2016-17 for EUR 492m) for 38% stake to be held by newly established DIV, total 4314 sites (incl 180 build-to-suit sites), DT to deconsolidate, Cellnex expects rev contribution EUR 63m, FCF to increase EUR 30m, T-Mobile NL to lease for 15 yr (automatic renewal 10 yr); establishes Digital Infrastructure Vehicle (DIV, independent mgt, focus on European digital infra (fiber, tower, datacenters, open to institutional investors, DT to hold 25%), DT contributes EUR 400m, Cellnex EUR 200m, with dealflow agreement for future transactions in European towers (Cellnex to co-invest for 51% stake) `
• Orange: Establishes Orange Concessions, 50/50 with consortium of La Banque des Territoires (Caisse des Dépôts), CNP Assurances, EDF Invest, call option for Orange to take control & consolidate, to close end 2021; co-control; 23 PIN networks, 4.5m FTTH lines (plugs) (built or to-be-built), valuation EUR 2.675b [ie sells 50% stake for EUR 1.33b]; roll-out & maintenance by Orange - To decide on towers 210218
• Elisa: Establishes JV with Lounea (western Finland, #4 operator) to create nationwide FTTP network
• VOO (= Nethys (= Enodia), Brutele): Rumor: Brutele (owned by 30 munis) to sell to Enodia

Results

• Telia: 20Q4
• ProSieben: 20Q4 prelim; Mediaset Spain raised stake by 3.43% to 13.18%
• Netflix: 20Q4    

Other

• Sunrise UPC: Integration leads to reorganisation and job cuts (significantly less than 30%) (Sunrise had 1763 FTE, UPC CH 1500)
• Amazon: CIRP: Amazon Prime reaches 142m subs in US YE 2020 o/w 52% on annual tier
• Iliad: Targets carbon neutrality by 2035, 10 pledges
• Tele2: Launches new sustainability strategy, 4 focus areas: 1. Advance circular economy to combat climate change, 2. Maximize potential through an inclusive and diverse workplace, 3. Boost innovation for sustainability, 4. Protect children in a connected society

Networks

Fixed

• Finder (Australia): 85% of users stream online o/w 36% experience buffering weekly, 16% daily
• France gvt allocated EUR 570m for FTTP rural expansion (total EUR 3.57b)
• Ookla Speedtest Global Index (Dec 20): global average FBB 96/52 Mb/s, MBB 47/13 Mb/s; FBB: Thai #1 (308), Sing #2 (245 Mb/s), HK #3 (227), RO #4 (191), CH #5 (189), NL #26 (136); MBB: Qatar #1 (178), UAE #2 (178), S Korea #3 (169), China #4 (156), Australia #5 (113), NL #9 (101)
• EC approves public funding for FTTI (12k schools) in Italy, EUR 325m
• FTTH
• CityFibre (= Antin, Goldman Sachs) reaches 500k premises passed; target 1m YE 2021, 8m (30%) YE 2025
• Lothian Broadband (FWA & FTTP) plans 50k FTTP lines in areas where already present
• Virgin Media UK activates FTTP in Accrington (Lancashire), 6800 HH; average max speed 516 Mb/s
• Google Fiber renegotiates access deal with Provo City: fee changes from 5% of TV rev to 2% of BB rev

Wireless

• Telekom DE and Telefonica DE to share several hundred sites (incl active network) for 4G (800 band) in grey areas in 2021 - Also between Vodafone DE and Telefonica DE
• Agcom (IT): average data consumption 20Q3: 9.2 GB/mo (+48%)
• 5G
• Inventec and Affirm (Microsoft) partner to develop smart industry solutions
• Salt Home (FWA over 5G & 4G; with Gigabox: outdoor antenna, WiFi 6 router) coverage reaches 2m pops (>50%); max 400 Mb/s over 4G, 1 Gb/s over 5G
• Mobily (KSA) demos network slicing (RAN, Core & transport; separates critical traffic from general internet traffic) for FWA (over 5G and 4G) in Riyadh, with Nokia; enables prioritising customers (service tiers for consumer or enterprise) and premium services (voice, data, gaming, home office apps etc)
• SmarTone (HK) launches 5G SmarTransport Safety Monitoring System, with Route 3: provides video footage from tunnels and highways to control room (motion-detection cameras, ML/AI analytics
• LEO
• SpaceX launched 60 sats (batch #17) for Starlink, total >1000

Services

Video

• Youfone: To expand to BE on Proximus networks (fixed & mobile), to launch April 2021
• Pluto TV (= ViacomCBS): Expands to FR 210208, 40 channels; next to expand to IT, end 2021
• Lionsgate: Expands Lionsgate Play to Indonesia
• Newsplayer+: Launches in UK; live news channels, 2.50 GBP/mo; channels: Al Jazeera, Bloomberg TV, Bloomberg’s Quicktake, Euronews, Newsmax, Africanews, Germany’s DW-TV, France 24, China’s CGTN, India’s NDTV 24×7, Israel’s i24, Russia’s RT, Australia’s Ticker, Turkey’s TRT, US network NewsNet
• Critics’ Choice Awards TV nominations: Netflix 26 (6 for The Crown, 6 for Ozark), HBO 22

Smart city

• Turk Telecom launches smart city platform (50 services: next-generation transportation, energy, environment, health, life, security) in 9 cities

Regulatory

Spectrum

• Subtel (Chile) plans 5G auction 210208: 700 MHz (2x10 MHz), AWS = 1800 & 2100 MHz (2x15 MHz), 3.5 GHz (150 MHz), 26 GHz (400 MHz), valid 30 yr; Claro, Entel, WOM interested, to be awarded 26 GHz spectrum without tender
• PTS (Sweden) raises SEK 2.32b from auction (2.3 & 3.5 GHz, valid 25 yr until 451231); Telia SEK 760m for 120 MHz in 3.5 GHz band, Net4Mobility (= Te;e2, Telenor) SEK 666m for 100 MHz in 3.5 GHz band, 3 Sweden SEK 491m for 100 MHz in 3.5 GHz band, teracom SEK 400m for 80 MHz in 2.3 GHz band

Platforms

• Google France agrees remuneration deal with news publishers, represented by APIG (use of snippets under neighboring rights), to negotiate individual licensing agreements with IPG certified publishers, to participate in News Showcase [see 201001]
• Google to block Google Search, Facebook to block News in Australia if News Media Bargaining Code approved

Week 33 in Telecoms, Internet & Media

5G

• AT&T plans SA 5G by end 2020
• Cisco & Taiwan's Industrial Development Bureau establish 5G open networking experiment platform, with Foxconn Technology, Compal Electronics, Inventec, Pegatron, Sercomm, Accton Technology, Alpha Networks; may partner with Open Radio Access Network (O-RAN) Alliance & Telecom Infra Project (TIP)
• Rakuten Mobile plans 8652 base stations = 70% pops coverage by 210331; nationwide coverage (96%) summer 2021 (originally Jan 2028); to launch SA 5G service end Sep 2020
• Liverpool granted GBP 7m from UK gvt for Private 5G (at 60 GHz) project 5G Create: Connecting Health and Social Care
• Elisa expands to city #33: Kaarina
• Zain KSA expands 5G to 5 new cities: Duwadimi, Hawtat Bani Tamim, Hayathim, Muzahimiyah, Quwayiyah (total 35)
• Xiaomi launches 2 5G smartphones: Redmi K30 Ultra (low-end) & Mi 10 Ultra (top-end)
• Telefonica plans live broadcast TV over 5G trial, with Intel & Aviwest
• NTT Data & Mavenir to develop radio & core access solutions, plus data & device mgt platforms & analytics tools for private 5G & 4G networks in DE, CH, AT
• HMD Global plans first 5G smartphone Aug 2020: Nokia 8.3

VIDEO

• AT&T
• Rumor: to sell Crunchyroll to Sony but price ($1.5b) too high
• Rumor: CNN plans global streaming service
• Apple: Bloomberg: plans bundling Apple TV+ with CBS All Access (stand-alone 10), Showtime (stand-alone 11) for 10 $/mo (on top of 5 for Apple TV+)
• Locast: Launches in Minneapolis-St Paul, total pops coverage US 42%
• ViacomCBS
• Bloomberg: plans SVOD bundle (CBS All Access, Showtime) with Apple TV+ for 15 $/mo
• Rumor: to rebrand CBS All Access in 2021, possibly to Paramount+
• Fox Corp: Fox News Media to launch Fox News International (SVOD, based on Fox News Channel & Fox Business) 200820, 7 $/mo first in Mexico, 200917 in ES, DE, UK, total 20 countries YE 2020; apps for iOS, Android, Apple TV, Android TV, later Amazon Fire TV, Roku
• Telenet: EC approves streaming JV of Telenet & DPG Media: Streamz, to be established 200901, Peter Vindevogel (Telenet) CEO, Kris Vervaet (DPG) Chair; to focus on Flemish & int content
• Tricolor (DSB, Russia) adds TVOD to streaming service

MEDIA & SERVICES

Internet

• Amazon
• To add podcasts to Amazon Music (both free and paid tiers), Audible (combined 55m users)
• Apple
• To direct users to Apple News+ for reading articles (instead of publisher websites) from autumn 2020; also for links appearing in social media & search results
• Bloomberg: Plans Apple One subscription bundle Oct 2020, with Family Sharing (max 6): Music, TV+ (video), News+ (news), Arcade (gaming), iCloud (storage) (not Apple Care or monthly paid hardware); 3 tiers: 1. Music + TV+, 2. Music + TV+ + Gaming, 3. Music + TV+ + Gaming + iCloud; could be limited by music majors agreements not allowing Apple Music bundling with other services; plans app for virtual fitness classes (subscription-based, codename Seymour)

Media

• New York Times Plans subscription service for Wirecutter (product recommendations)

Telecoms

• Sunrise launches Back to School promos until 200831: 100 CHF/mo in 24 mo contract for BB, TV (neo max), Macbook Air (retail price CHF 1130), Apple TV (retail price CHF 200); free iPhone SE & Apple Airpods for new Freedom swiss unlimited subs (65 CHF/mo in 24 mo contract); fgree MacBook Air for new Freedom europe & US subs (100 CHF/mo in 24 mo contract)
• Ludwigsburg (DE) launches V2X tech from Cohda Wireless, with Swarco (traffic tech): all traffic lights & intersections fitted with Cohda MK5 road-side units, which correspond with MK5 on-board units in fire trucks & rescue vehicles to grant them green-light passage when on the way to emergencies

REGULATORY

Platforms

• Amazon
• Appeals Court: can be held liable for 3rd-party sellers’ defective products in California
• Competition Bureau Canada starts investigation into 3rd-party sellers (willingness to sell on other platforms or own websites; viability of 3rd-party store not using FBA & Amazon ads; influence on shopper habits using 3rd-party sellers' competing items)
• Facebook
• To ban implicit hate speech (blackface, anti-Semitic stereotypes etc)
• Removed 7m of misleading corona virus content items in 20Q2
• To show pop-up warning to users sharing corona virus info
• Instagram sued for collecting, storing & profiting from the biometric data of more than 100m users without consent; fine up to 5k $/user total $500m
• Instagram to force suspicious accounts (inauthentic behavior, such as bot accounts) to verify their identities
• Twitter Adds feature to control who can answer to a tweet to limit hate speech

Platforms general

• Indonesia extends 10% VAT on Amazon, Google, Netflix, Spotify [see 200710] to Facebook, Disney, Apple, TikTok; to be collected from 200901
• EU and US talk over replacing Privacy Shield
• Social networks (Google, Facebook, Twitter, Pinterest, LinkedIn & Microsoft, Reddit, Verizon Media, Wikimedia) cooperate on scenario planning during run-up to US Presidential Election 201103
• Epic Games sues Apple & Google for banning Fortnite from app stores as Fortnite bypassed in-app payment systems from Apple & Google, claims monopolistic behavior (violates Sherman Act & California’s Cartwright Act), claims that Google blocked OnePlus & LG from pre-installing Fortnite launchers on new smartphones - Spotify and Match Group support Epic; [Apple has monopoly on iOS access for apps through App STore; Google allows sideloading app (not through Play Store) and 3rd party app stores such as Epic's, but erected contractual & technological barriers on distributing apps not through Play Store] - Apple refused Facebook's request to waive 30% App Store fee for small businesses hosting live events (Facebook Pay instead applies zero fee)
• The Privacy Collective sues Oracle & Salesforce (CALS) over personal data collection, bundling & trading

Spectrum

• RTR (AT) plans multiband (6 blocks of 2x10 in 700, 12 blocks of 2x5 in 2100, 9 blocks of 1x5 1500) auction Aug-Sep 2020; coverage obligation: 900 towns (of 2100) with little or no mobile to be connected to 5G, bonus (price discount) for connecting any of the 1200 other
• CTU (CZ) launches multiband auction tender, applcations due 200930: 700 band (2x10 MHz reserved for newcomer), 3400-3600 band - MNOs oppose newcomer
• FCC (US) to reallocate military spectrum (100 MHz in 3.5 GHz band: 3.45-3.55) for 5G by 2021
• ACMA (Australia) plans 26 GHz auction March 2021, cap 1 GHz
• MoC Israel ends 5G auction, 3 winners with identical spectrum (2x5 in 700 band valid 15 yr; 2x10 in 2600 band valid 10 yr; 100 in 3500 band valid 10 yr): Cellcom/Golan Telecom/Marathon Telecom (owns 018 Xfone; pay ILS 115m = $34m), Pelephone (= Bezeq; pays ILS 88m), Partner Comms/HOT Mobile (ILS 62m); to be paid Sep 2022
  

Telecoms

• Ofcom (UK) starts investigation of personalised pricing in telecoms
• Ocfom (UK) launches wholesale voice market consultation until 201008, to take effect April 2021: fixed wholesale deregulation, continuation of MTA & FTA caps etc

CORPORATE

• BT: Daily Telegraph: pension deficit (GBP 11.3b) could be reduced by shifting part of Openreach (estimated value GBP 20b) to the fund
• CK Hutchison: 3 DK plans infra (1275 towers) spin-off as HI3G Networks, open for others
• Equinix: Acquires 2 datacenters (carrier neutral) from GPX India, $161m
• PPF: Rumor: considers selling MNOs acquired from Telenor (Bulgaria, Serbia, Montenegro, Hungary)
• Liberty Global: Offer for Sunrise (CH)
• Sunrise board & shareholder Freenet (24%) support
• 110 CHF/share cash (premium 28% to 200811, 32% over last 60 days average), valuation CHF 5.0b, EV CHF 6.8b
• valuation 7.5x adj EBITDA or 10.3x adj OpFCF after synergies, 10.0x adj EBITDA or 17,6x adj OpFCF before synergies
• to be financed from cash (CHF 3.5b) & new debt (CHF 3.2b o/w 1.6b for refinancing Sunrise debt)
• synergies NPV after costs CHF 3.1b (o/w CHF 2.6b from low-risk cost & capex), annual run rate from rev, costs, capex CHF 275m (46m from rev, 187m from opex, 42m from capex)
• tender to start end Aug 2020 for 40 business days, unconditional on reaching two-thirds, to squeeze out minorities & delist, expects approval end 2020
• break-up fee CHF 50m for Sunrise
• pro forma combination: >3500 employees, rev CHF 3.1b, 2.1m postpaid subs, 1.2m BB subs, 1.3m TV subs, market share in each ~30%
• target gigabit BB coverage 90% of HH by 2021 (UPC 75%, Sunrise 30%), to upgrade to 10 Gb/s over time
• "attractive opportunity to deploy existing cash to unlock substantial synergies and sustainable free cash flow growth. (...) “This transaction is another significant step on our path to create fixed-mobile champions in all of our core markets. (...)  after this deal, and assuming completion of our recently announced UK transaction, we will continue to have approximately $7 billion of liquidity8 to drive value-creation for shareholders."
• UPC/Sunrise to become part of UPC credit pool, target leverage 5.0x
• May consider IPO fo the merged business in the future
• Vivendi Proposes talks with Mediaset to settle differences - Mediaset rejects, demands compensation
• ViacomCBS Speculation on future after Sumner Redstone died 200811
• Warner Music Group Acquires IMGN Media (creates shareable social media content including memes & short videos for Instagram & TikTok)
• FuboTV: Files for IPO; Walt Disney acquired 6.6m shares = 17%
• Alphabet
• Google invests in HMD Global (device manufacturer, brand Nokia), $230m with Nokia, Qualcomm
• Distr deal for Google Search with Mozilla for Firefox to be default search engine, 3 yr, rumored value 400-450m $/yr
• Facebook: Bloomberg: establishes F2 (Facebook Financial) arouind payments (Facebook Pay, Novi (formerly Calibra), WhatsApp Pay), led by David Marcus

EARNINGS

• Deutsche Telekom: 20Q2
• T-Mobile NL: Tele2 integration & synergies on track, corona virus reduced roaming income (VR, OoB outgoing), 5G-700 reached 85% coverage (nationwide end 2020)
• TDC: 20Q2
• Swisscom: 20Q2
• Turkcell: 20Q2
• Go Malta: 20Q2
• Freenet: 20Q2
• United Internet: Raises outlook 2020: rev growth 2020 4% (formerly: flat)
• 1&1 Drillisch: Raises outlook 2020: rev growth 4%
• QSC: 20Q2
• RTL: 20Q2
• TV ad rev -40%
• streaming subs (TV Now, Videoland) 1.77m (+45%), TV Now subs +50%, viewing time +36%, Videoland subs +41%, viewing time +31%
• outlook 20Q3: tv ad rev -10%
• outlook 2020: rev & adj EBITA significantly below 2019
• 3 priorities: 1. Strengthen core (TV ads), 2. Boost growth business (streaming & content (Fremantle)), 3. Foster alliances & partnerships (Smartclip, Atresmedia)
• LT streaming targets 2025 maintained: 5-7m subs, rev >EUR 500m, content spend 350m EUR/yr, EBITA break-even
• Meredith: 20Q2
• Dentsu: 20Q2
• FuboTV: 20Q2: 286k paying subs,  rev $44m (+53%), net loss $100m

Liberty Global offer for Sunrise

Offer

• Sunrise board & shareholder Freenet (24%) support
• 110 CHF/share cash (premium 28% to 200811, 32% over last 60 days average)
• Tender to start end Aug 2020 for 40 business days
• Unconditional on reaching two-thirds, to squeeze out minorities & delist, expects approval end 2020
• To be financed from cash (CHF 3.5b) & new debt (CHF 3.2b o/w 1.6b for refinancing Sunrise debt)
• Break-up fee CHF 50m for Sunrise

Valuation

• Equity CHF 5.0b, EV CHF 6.8b
• 7.5x adj EBITDA or 10.3x adj OpFCF after synergies
• 10.0x adj EBITDA or 17.6x adj OpFCF before synergies

Synergies

• NPV after costs CHF 3.1b (o/w CHF 2.6b from low-risk cost & capex)
• Annual run rate from rev, costs, capex CHF 275m (46m from rev, 187m from opex, 42m from capex)

Pro forma combination

• >3500 employees
• Rev CHF 3.1b
• 2.1m postpaid subs, 1.2m BB subs, 1.3m TV subs, market share in each ~30%
• Target gigabit BB coverage 90% of HH by 2021 (UPC 75%, Sunrise 30%)
• To upgrade to 10 Gb/s over time
• UPC/Sunrise to become part of UPC credit pool, target leverage 5.0x
• May consider IPO of the merged business in the future

Quotes

• "attractive opportunity to deploy existing cash to unlock substantial synergies and sustainable free cash flow growth."
• “This transaction is another significant step on our path to create fixed-mobile champions in all of our core markets"
• " ... after this deal, and assuming completion of our recently announced UK transaction, we will continue to have approximately $7 billion of liquidity to drive value-creation for shareholders."

Sunrise & Salt establish FTTP Joint Venture in Switzerland

Sunrise and Salt are establishing an FTTP joint venture in Switzerland. Presentation available.

• Name: Swiss Open Fiber
• Equal shareholdings, with prospective equity partner for minority stake
• Chairman Marc Furrer (formerly ComCom)
• Target 1.5m HP with FTTP (10 Gb/s) in 5-7 yr (by 2027), from 20Q4
• Max CHF 3b
• Focus on underserved & non-urban areas (sub-urban, medium dense), 30-35% of all HH
• Sunrise and Salt anchor tenants, open for all RSPs
• To cooperate with Swiss Fiber Net (SFN) for platform (for delivery & commercialisation)
• Expects agreements with partners (equity, debt, wholesale) in 3-4 mo