Week 12 in Telecoms, Internet, Media

Corporate

• Euskaltel: Friendly offer from MasMovil (= KKR, Providence, Cinven): 11.17 EUR/share cash (16% premium) = EUR 2b; 52.32% agrees, unconditional at 75%; to maintain brand (Euskaltel, R, Telecable, Virgin)
• Telstra
• Update on proposed legal corporate restructure (part of T22 strategy); to be completed Dec 2021, AGM Oct 2021, scheme booklet to be published Sep 2021; 3 units: InfraCo Fixed (passive:  ducts, fibre, data centres, exchanges), InfraCo Towers (passive mobile: towers), ServeCo (products & services; active networks, RAN, spectrum; separate subsidiary for international business (incl submarine cables); to establish new holding Telstra Group; InfraCo Towers to attract external investment from 21/22Q2
• Rumor: may merge with NBN
• Verizon: Verizon Media to launch Yahoo Shops (marketplace) - Yahoo services have 3m subs, to be Verizon Media's consumer-facing brand
• RTL: Rumor: plans sale of RTL BE (candidates: Telenet, DPG, Rossel, TF1) and RTL NL (candidates: DGP) and M6 (48%, family Frère 7.2%); DPG denies
• Vivendi: Canal+ Polski files for IPO
• WeWork: Plans IPO via SPAC, valuation $9b

Results

• Salt: 20Q4
• Tele2: Annual Report 2020; Kinnevik holds 27.2% of the capital and 42.0% of the voting rights YE 2020; more-for-more strategy in SE; div received from T-Mobile NL zero (note 30), "Over time we see an opportunity to crystalize value for our shareholders as we exit this market."; Other non-current assets (mainly T-Mobile NL stake) valued at SEK 7.16b = EUR 700m); book value T-Mobile stake SEK 7.011b = EUR 690m); "As part of the annual impairment test in 2020, it was reconfirmed that the recoverable amount of our holding in the Netherlands exceeds book value."
• United Internet: 20Q4
• 1&1 Drillisch: 20Q4; plans national 5G roaming & construction deals 21Q2; plans multi-vendor Open RAN, Central, Edge & Far-Edge datacenters, virtualised network; outlook 2021: SR EUR 3.1b, EBITDA 650m (incl 30m negative impact from 5G roll-out, 25m negative from corona virus; excludes 34.4m positive impact from adjusted MVNO deal); adjusted EBITDA 735m for Access, -30m for 5G
• Tele Columbus: 20Q4
• Polsat: 20Q4 & 2020 Annual Report & Briefing
• Gamma Communications: Annual Report 2020
• Ericsson Annual Report 2020

Networks

• General
• BCG for ETNO report Connectivity and Beyond: How Telcos Can Accelerate a Digital Future For All: EUR 300b (o/w 150b for 5G, 150b for fixed) telecoms investment in EU in 4 yr will yield 2.4m new jobs + EUR 113b added to economic growth (from 5G), accelerated green transformation (digital solutions reduces carbon emissions 15%, smart cities 30%, digital transformation in transport 30%)
• Akamai reached new peak: 200 Tb/s
• FTTP
• KPN: Establishes 50/50 JV with APG    
• Proximus: EC approves JV with EQT (Delta Fiber) named Fiberklaar, targets 1.5m premises in Flanders in 7yr, EUR 2.5b [see 201127]
• Voneus sells majority to Macquarie, to transition from FWA to FTTP
• 5G
• Antina (network sharing JV of M1 and StarHub in Singapore) launches SA 5G RAN sharing, with Nokia
• TV Azteca trialed 5G (100 MHz in 3.5 GHz band) for TV transmission (from cameras to the encoding server), with Nokia
• T-Mobile PL extends 5G to prepaid
• Qualcomm launches Snapdragon 780G 5G Mobile Platform for powerful AI performance and brilliant camera capture
• 5G Smart Pole Standard Promotion Alliance established by 25 companies
• 6G
• Next G Alliance launches 2 working groups: 6G Roadmap Working Group (R&D) and Green G Working Group (environmental impact) [see 201013]
• LEO
• OneWeb reaches 146 sats in orbit; plans service launch end 2021 in UK, Alaska, N Europe, Greenland, Iceland, Arctic Seas, Canada; global by 2022

Services

• Video
• ViacomCBS: To raise $3b equity for investing in originals for Paramount+; $2b in Class B common stock,$1b in Series A Mandatory Convertible Preferred Stock - Moody's positive (Baa2, outlook stable)
• NBCUniversal (Comcast): Considers SVOD service Universal Stream for non-US markets (Peacock for US)
• HBO (AT&T): HBO Max to expand to UK, DE, IT 2025 (until then deals with Sky)
• Report on share of exclusive content: Disney+ 89% (Total catalog: 311 TV shows/742 movies), Netflix 83% (Total catalog: 2,069 TV shows/3,766 movies), HBO Max 72% (Total catalog: 606 TV shows/1,932 movies), Paramount+ 41% of TV, 23% of movies, Hulu 40% (Total catalog: 1,700 TV shows/916 movies), Amazon Prime Video 38% (Total catalog: 2,161 TV shows/14,670 movies)
• B2B
• Free (Iliad) enters B2B market with Free Pro, launches new Freebox Pro 50 EUR/mo (first year 40) + 10 EUR/line/mo for additional lines (incl 2 fixed lines, NAS server; WiFi, based on 10G EPON tech, max 7/1 Gb/s; tri-band WiFi; 4G backup; Cloud Sync Pro for protected data storage, firewall, support); offering includes 1 5G/4G line
• Sky (Comcast) Launches Sky Connect to enter SME market; launches Connection Pro: BB 4G backup, VoiceEdge (digital voice, 24 call mgt features), WiFi, security, support
• Google: Launches Network Connectivity Center: console for a business of any size to manage all its networks on a global basis, seamlessly connects VPNs, partner & dedicated interconnects, 3rd-party routers & Software-Defined WANs

Regulatory

• Congress US releases statements from Facebook, Google, Twitter CEOs on Section 230 (liability) for Hearing 210325; Facebook proposes platforms should be required to demonstrate that they have systems in place for identifying unlawful content and removing it; Twitter advocates transparency, has 2 projects: Birdwatch (users report misinformation), Bluesky (open & decentralized standards for social media); Google invests in journalism - Reddit, Etsy and Dropbox defend Section 230

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 49 in Telecoms, Internet, Media

Corporate 

• Telefonica: Establishes 50/50 JV Movistar Money in Colombia (19m subs; may expand in Latam) with BBVA to offer consumer loans, to launch 21Q2
• TIM: Reuters: KKR to sell part of FiberCop stake (max 30%) to Infinity Investments (sovereign wealth fund Abu Dhabi)
• Orange Belgium: Orange plans offer, 22 EUR/share cash (36% premium); plans squeeze-out & delisting on reaching 90% capital, 95% votes; current ownership: Orange 52.91% (via Atlas Services Belgium), Polygon Global Partners 5.05%, Boussard & Gavaudan 3.02%, free float 39.02%
• Tele2: Sells Tele2 DE in MBO, EV EUR 22.8m
• Altice Europe: Sued by Lucerne Capital Management (owns EUR 94m in shares): opposes structure of Next offer, price too low - Sessa Capital agrees
• Optus: Plans to sell 70% of towers, $2b
• Eurofiber: Acquires FullSave (B2B operator in Toulouse & Bordeaux regions; FTTO (600 km), 1 datacenter for colocation, IaaS)
• RTL: Buys out minority shareholders in RTL BE (tv: RTL-TVI, Club RTL, Plug RTL; radio: Bel RTL, Radio Contact, Mint; streaming: RT: Play; news site: RTLInfo.be) in cash & stock
• S&P Global: WSJ: offers $44b for IHS Markit - In stock
• Google: Acquires Actifio (data mgt for businesses) 
• Amazon:
• Record Holiday season to date (Black Friday, Cyber Monday); 3rd-party sales $4.8b (+60% yoy), 71k surpasssed $100k in sales; 3rd-[arty sellers created total 2.2m jobs
• WSJ: to acquire Wondery (podcast maker), >$300m
• Facebook: Acquires Kustomer (CRM solution for small businesses), rumored price >$1b
• Airbnb: Revised IPO filing: IPO price $44-50 (valuation at max $35b), to raise $2.5b, symbol ABNB
• DoorDash: Raises IPO range to $90-95, 33m shares, to raise $3.1b

Networks

• VodafoneZiggo: Integrates internet traffic with Liberty Global (replacing direct peering at AMS-IX) from 201130; expects no quality degradation (latency, packet loss); current peak capacity 6.5 Tb/s
• Fixed:
• WIK report on copper switch-off 
• IDATE for FTTH Council Europe report (State of Fibre: new Market Forecasts 2020-2026 revealed) 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
• RUNE connects first customer to XGS-PON (first in Europe), with Iskratel
• Google Fiber launches 2 Gb/s in Huntsville, Nashville 
• Netherlands:
• CEBF (Connecting Europe Broadband Fund, managed by Cube Infrastructure Managers (Cube IM)) invests EUR 43m (30m equity, 13m debt) in Rodin Group for majority stake; plans 109k premises in Groningen province
• KPN starts roll-out in Zeist region, 30k premises
• KPN plans FTTH in Pijnacker-Nootdorp, 11k premises
• E-Fiber starts roll-out in Zundert
• Wireless:
• Industry reports:
• Ericsson Mobility Report:
• 5G pops coverage YE 2020E 1b, 5G subs YE 2020 220m, 2026E 3.5b
• 5G launched by 106 operators (o/w 22 announced cloud gaming); FWA launched by 200 service providers, YE 2026E subscriptions 180m (o/w 70m = 40% over 5G), from 60m YE 2020E, data traffic 2026E 25% of all mobile data traffic, from 15% at end 2020)
• Mobile data traffic growth 20Q3 10% qoq, 50% yoy, by 2026 5G will carry 54% of all mobile data, data traffic per smartphone CAGR 2020-2026 24%, 30% in MENA, 30% in Latam, 28% in SE-Asia/Oceania, 27% in N-America, 26% in W-Europe, 26% in C&E Europe, 26% in sub-Sahara Africa, 24% in NE-Asia, 15% in India
• IoT connections to grow from 12.6b in 2020 to 26.9b in 2026 (CAGR 13%), CAGR by type: short-range 12%, wide area 22% (o/w cellular 23%)
• 4 time-critical use cases with 5G (low latency; 10s of ms = 99% reliability, 1 ms = 99.999% reliability):
• Real-time media: processing and rendering to the cloud; for AR/VR
• Remote control: moving humans out of hazardous locations
• Industrial control: real-time process monitoring and control, controller-to-controller communication, smart grid control, machine vision for robotics and motion control,
• Mobility automation: automation of control loops for vehicles and mobile robots for automated guided vehicles (AGVs), cooperative maneuvering of vehicles, advanced intersection safety
• 5G network coverage 60% of global pops by 2026, from >1b = 15% in 2020
• [other topics: AT&T FirstNet, Industry 4.0, mobile cloud gaming]
• Operators have 3 main paths to success:
• Quality (to lead the market, taken by 19%)
• Offering (to challenge the market with new offerings, taken by 28%)
• Industry (follow trends; to follow the market, focus on value-for-money propositions; taken by 38%)
• Comsof for FTTH Council Europe report 'Fibre for 5G: the story of convergence' [see 190313]: phased roll-out of FTTH (requires 2 fibers) with spare capacity significantly reduces future cost of 5G (backhaul requires 24 fibers); based on shared trenches & ducts; extra investment to make FTTH ready for 5G is 1-7%
• Viavi Solutions report 'Fiber in 5G Networks': FTTx disaggregated architecture using splitters for FTTH and WDM for small cells
• Enterprise IoT Insights report 'Challenges with Digital Change in Healthcare – from low-level IoT sensing to big-bang 5G and AI, and how Covid-19 has turned the market both on and off': remote monitoring in healthcare
• 5G launches
• Bouygues launches 5G (3.5 & 2.1 GHz) in 20 cities, targets nationwide coverage end 2021; plans 5G Core 2023; launches promo: B&You 25 EUR/mo (unlimited voice & text, 130 GB)
• Viettel launches 5G in Hanoi (free trial), to expand to Da Nang and Ho Chi Minh City
• 5G technology
• Qualcomm launches Snapdragon 888 processor for Android, from 2021: 5G, includes X60 modem (Gern 3), AI Engine (Gen 6), Elite Gaming (Gen 3), Spectra ISP (max 2.7 Gigapixel/sec, allows 120 photos/second at 12 Mb/s), support for CA
• Nokia with Telefonica: 5G (RAN) up to 90% more energy efficient (per traffic unit) than legacy
• MEC: Vodafone partners with AWS for low-latency edge computing in; trials 2021 in UK, DE with Dedrone, Digital Barriers, Groopview, Unleash live, HERE Technologies - Verizon, SKT, KDDI also partner with AWS
• FWA: TIM demos 1 Gb/s FWA over mmWave (26 GHz) at 6.5 km in Rome, with Ericsson, Qualcomm, Casa Systems

Services

• Telecoms
• Vodafone DE resells Apple TV (4K box), 20 EUR/mo (promo: first 6 mo 10 EUR/mo) for GigaTV access
• Video
• EU pan-EU access to same content on streaming services, in accordance with geo-blocking regulation    
• SpotX report 2021 Global Trends Report for Video Advertising
• Netflix: Rumor: to cut library in South Africa (currently 40 titles) to meet new local content quotas
• Amazon: Amazon Fire TV adds local news in 12 US cities (NY, LA, Philadelphia, Chicago, Dallas, Atlanta, Houston, Miami, Tampa, Boston, SF, Seattle), to add 90 in 2021
• Lionsgate: Launches Lionsgate Play in India, 100 INR/mo or 700 INR/yr
• DAZN: Launches in 200 countries, equivalent of 2 GBP/mo (or less)
• Discovery: Plans to launch Discovery+

• in US 210104; Already launched in UK/Ireland (distr. deal with Sky). In US 210104 (distr. deal with Verizon: 12 mo free for Play More or Get More Unlimited subs, 6 mo free for Start or Do More Unlimited subs). To add >25 countries in 2021: Nordics, IT (distr. deal with TIM), NL, ES, Latam, parts of Asia (incl. India).
• 5 $/mo with, 7 $/mo without ads
• Max 5 profiles, max 4 concurrent streams
• 55k episodes from 2500 shows at launch (incl 50 originals, 150 hr of exclusive content), to add 1000 hr of originals in first yr
• No linear channels (content first in linear channels, then on Discovery+) but sports in Europe (incl Tokyo Olympics) be covered (via Eurosport)
• WarnerMedia:
• Entire 2021 film slate (17 films: The Matrix 4, Dune, In the Heights, The Many Saints of Newark, The Suicide Squad, The Little Things, Judas and the Black Messiah, Tom and Jerry, Godzilla vs. Kong, Mortal Kombat, Those Who Wish Me Dead, The Conjuring: The Devil Made Me Do It, Space Jam: A New Legacy, Reminiscence, Malignant, King Richard) to premiere in theaters & on HBO Max on same day because of corona virus - Ends offering free trial - AMC (659 theaters) opposes, will "aggressively pursue economic terms that preserve our business"
• Plans expansion to Europe (replacing HBO-branded services in C&Ê Europe and Nordics), Latam 21H2; long term target 190 countries h
• Rumor: plans 2 streaming video services 2021: CNN (SVOD), entertainment (content from TBS, TNT, Warner Bros films; free AVOD)

Hardware

• Vodafone UK launches smartwatch Neo for kids, developed with Disney, Fuseproject
• Vodafone partners with Nreal (glasses for AR, MR) to develop wearables & services for consumers (sports, gaming, virtual tours, mmersive education) & businesses (conference call capabilities, remote collaboration & technical services, retail-focused offerings incl virtual showrooms) over 5G
• Amazon: Fire TV Cube adds webcam support for calling any Alexa-enabled device 

Regulatory

• Telecoms
• Ofcom (UK) launches Spectrum Management Strategy, consultation until 210226
• Platforms
• Rumor: US federal & state authorities plan 4 lawsuits against Google & Facebook by Jan 2021
• ACM (NL) starts investigation of payment apps and NFC (some smartphone only allow payment app from NFC provider) 
• Google: Federal judge handling DoJ lawsuit [see 201020] calls on both sides to set rules about who will have access to sensitive information
• Facebook:
• Oversight Board interim report: 20k submitted posts since start (201022), selects 6 for comments (by 201208)
• Reuters: >40 US states (led by NY) plan antitrust lawsuit Dec 2020
• US DoJ sues over discriminating against US workers by reserving positions for temporary visa holders

Tele2 acquires Com Hem: target 'untapped customer demand'

Merger announcement & presentation:

• Acquires Com Hem
• HH coverage 60%, 1100 employees
• Results TTM: rev SEK 7.1b, adj EBITDA SEK 2.9b, OFC SEK 1.8b)
• Merger, Tele2 absorbs Com Hem.
• Cash (per share: SEK 37.02 SEK) + stock (per share: 1.0374 B-shares) = SEK 6.6b + 26.9% of Enlarged Tele2 = 146 SEK/share (11.8% premium over 180109 closing price, 15.9% premium over -30 trading days)
• To issue 184.8m new B-shares, total 687.6m shares (o/w 22.8m A, 664.8m B); Kinnevik (to own 27.3% & 41.9% of votes) supports (lock-up 6 mo after completion).
• To close 18H2 (latest 190331).
• Refers to EC, prepared to effect pro-competitive measures if required to complete the merger.
• Total synergies
• 50/50 from costs (mostly opex) & rev (complementary, cross-selling)
• Total 900m SEK/annum in yr 5 (65% in yr 3, 80% in yr 4)
• Integration costs SEK 600m
• Rentention bonus 12-24 mo base salary for mgt & key employees
• Accreditive to FCF from yr 1.
• Management
• Anders Nilsson (Com Hem) to replace Allison Kirkby as CEO.
• New Board to be chaired by Georgi Ganev (Tele2), >= 2 Com Hem members (incl Andrew Barron).
• Targets
• Increase shareholder remuneration.
• Target leverage remains 2.0-2.5 (at closing net debt/EBITDA TTM 2.8).
• Rationale
• Untapped customer demand
• Value accreditive
• Complementary, complete proposition to improve customer satisfaction & loyalty
• Greater scale & diversification
• Unlock synergies
• Revenue & CF diversification
• 2017
• Dividend 2017E: 4 SEK/share for Tele2, 6 SEK/share for Com Hem.
• Combined results TTM: rev SEK 31.8b, adj EBITDA SEK 9.2b, OCF SEK 6.1b.
• Sweden 72% of revenues & 78% of EBITDA (TTM).
• Market shares in Sweden pro forma: 28% mobile, 22% FBB, 39% DTV.

7 Predictions for 2018 for the Dutch market: consolidation, newcomers and an IPO

1. T-Mobile NL/Tele2 NL a strong #3
This merger seems inevitable. What is more intriguing, is options for creating an even stronger challenger to the KPN/VodafoneZiggo 'duopoly'. Candidates include the M7 Group (Canal Digitaal, Online, Stipte, Fiber NL) and EQT's Dutch assets (Delta, CIF, Caiway).

2. VodafoneZiggo IPO
Greater independence from the 50/50 parent companies would instantly create value. Hundreds of millions of euros are extracted from the company every year.
Alternatively, either Vodafone or Liberty Global could buy out its fellow shareholder, but this seems unlikely. Both are actively trying to get rid of assets in countries where there is no overlap.

3. KPN creating PTT network
KPN will want to be part of a new wave of consolidation. Most multinationals are ruled out, for various reasons (Orange not looking to expand its footprint, Altice not in takeover mood currently, etc). Bloomberg recently suggested Proximus, TDC and Elisa could be partners. In fact, there could be many more in this league (Swisscom, Eir, Telenor).

4. KPN will start losing broadband market share
Leapfrogging is rather predictable. ADSL, Docsis 3.0, VDSL and next .... Docsis 3.1. Once VodafoneZiggo turns on Docsis 3.1, it may herald a new phase of growth. KPN's broadband market share will decline and at some point it may relaunch FTTH and do a number of small takeovers to regain share.

5. Eurofiber to bid in 5G auctions
Eurofiber is actively exploring value-creating innovation. It has an extensive fiber network, connecting anything (including bridges & traffic lights) outside the FTTH segment. A 5G network could be devised as wholesale-only. The company could consider bidding through a consortium with T-Mobile/Tele2.

6. Talpa Netwerk to bid for Eredivisie summaries
John de Mol, having sold part of his assets to ITV, has re-created a wide-ranging media company, Talpa Netwerk (TV, radio, streaming video & music, web, events). It appears as a no-brainer to buy the very valuable Eredivisie summaries for the SBS channels.

7. Subsidisation moving to high-value plans
Operators will start realising that subsidisation (handsets, mobile data, content) may reduce churn but destroys value by offering it to all subscriptions. Vodafone's Passes may be too expensive for the Dutch market, but the concept or providing benefits to high-value plans deserves to be copied.

What next for KPN in 2015?

Let's look at the big picture:

• KPN heavily outsources and offshores functions. This implies de-emphasising the network, at least at the management level. Things are left to vendors such as Ericsson. NFV/SDN will only add to this. As a consequence, the emphasis is more on services.
• Market shares are high in general, leaving little room for domestic takeovers.
• There is ample cash, even taking into account debt reduction (€ 2 bn), pension fund (€ 200 mn), the Reggefiber buy-out (€ 770 mn) and cash outflow at Reggefiber (a total of probably half a billion or so over the next few years). The sale of E-Plus left KPN with € 5 bn and a 20.5% stake in Telefonica Deutschland (value € 2.5). Further, Base (€ 800 mn or more) and iBasis (pocket change) can be sold. In all, the war chest could be € 5.5 to 6 bn.
• KPN ended its pan-European MVNO strategy a few years ago.
• KPN wasn't willing to sell to America Movil (at 8 €/share), a very unfortunate decision.

Based on this, KPN is more of a hunter than a target (E-Plus was the company's prime asset). Assets for sale:

• Netherlands: Caiway, Delta Cable, T-Mobile NL,  Eurofiber (all impossible because of concentration issues), Film 1 (no interest), M7 Group.
• Europe: Bouygues Telecom, Orange Swiss, Sunrise, Yoigo, fibre operators in Germany & Italy, Telefonica Deutschland.

Creating value, other than focusing on the core businesses, could involve a major strategy shift:

• Structural separation. Spinning off is a good idea. Network & services are different animals. KPN could retain a stake in the NetCo. Vodafone and Tele2 could buy into the NetCo to speed up FTTH overbuilding.
• Acquire M7 Group (compare AT&T/DirecTV). This will strengthen KPN's position on the TV market. Vodafone and Tele2 may also be interested.
• Gain control of Telefonica Deutschland to re-enter Germany, but now as a full-service provider.
• Buy fibre operators abroad to export the expertise built up in Reggefiber.
• Buy independent mobile operators across Europe. A tie-up with Proximus could be considered. Or even TeliaSonera, bundling together more incumbents.
• Takeovers in other parts of the value chain (compare Telstra/Ooyala or Verizon/EdgeCast).
• Expand in content through a broadcaster: SBS or RTL (compare Comcast/NBC).
• Sell the company. Possible buyers: Altice, private equity.

Data-only providers: do they add to mobile competition?

There are several new entrants waiting to enter the mobile markets. Most are using LTE as the new, more spectrally efficient technology, which allows players without legacy to disrupt the market.

• The latest is Swan in Slovakia, with a wonderful unlimited offering of just 5 €/month.
• Others include Ukko Mobile in Finland,
• Midas in Poland,
• Ice in Norway, Net 1 in Sweden & Denmark,
• Digi in Hungary.

This is interesting in two ways:

• How will it affect the market? Will prices drop, as they did in France? How will the incumbent operators respond?
• Do data-only providers (in Finland, Slovakia, Norway, Sweden and Denmark) add to competition, even if they provide no (legacy) voice/SMS services? Are services such as Skype/Skype Out and Viber/Viber Out considered fully-fledged voice services? And how about WhatsApp, Facebook Messenger, Kik etc. on the texting market?

The latter issue is especially relevant in Norway, where the regulator objects to TeliaSonera and Tele2 merging, even though Ice is launching its mobile data services (the other operator is Telenor). Is this a reduction from 3 to 2 players, or from 4 to 3? Parties have until December 22 to respond.

(In Denmark, TeliaSonera and Telenor are trying to merge, reducing the market from 4 to 3 players (not counting Net 1, only TDC and Hutch 3) or from 5 to 4, depending on your view.)

Announcements to be expected for the Dutch market

What's up for 2014 in NL?

• KPN starts to roll out vectored VDSL from February 2014 to 2.1m HP. FTTH to roll out to 250k HP more to a total of almost 2m. There supposedly is a trial of LTE Broadcast and from April FON will be integrated. A new CFO will be appointed. E-Plus will be sold, Reggefiber will be consolidated and America Movil will probably sell its stake.
• Tele2 is rolling out its LTE network, but will probably launch in 2015. Plans are to unbundle FTTH, not with a time-frame. A new CEO will be appointed.
• Vodafone is also set to unbundle FTTH and appears to be closer than Tele2. It will appoint a new MD for Vodafone Business.
• T-Mobile will appoint a new CEO.
• UPC will launch the Horizon Phone app.
• Ziggo will probably launch a similar app. It remains to be seen what the next step in mobile will be.
• NPO will launch NPO Plus, a paid version (better quality, fewer ads) of its catch-up service.
• NPO, RTL and SBS will launch NLziet, bringing together their respective catch-up services (extended and non-free).

Spectrum holdings in the Netherlands create opportunties, but not for Tele2

Spectrum in the Netherlands has been auctioned off in 2010 and 2012, leading to the situation shown in the figure. A few things stand out:

• All holdings are roughly equal for the incumbents (KPN, Vodafone, T-Mobile).
• T-Mobile has a lot of unpaired spectrum, which could enable TD-LTE and DSL-replacement services.
• Tele2 has limited spectrum. This offers limited options for LTE-Advanced and Carrier Aggregation. And limited spectrum/capacity means limited options for a wholesale strategy.
• ZUM (Ziggo/UPC) only owns 2600-spectrum, which could be used to lower wholesale costs to Vodafone. Ziggo has an MVNO on Vodafone and focuses on WiFi. An alternative would be to focus on the 2600-spectrum, offload to WiFi as much as possible, roam on Vodafone (or T-Mobile or KPN) and cancel the MVNO.

Outlook 2014 for Dutch telecoms market

We have produced a number of articles looking ahead to 2014 for each of the majors on the Dutch telco market. Here are the main questions:

• KPN:
• who will be the new CFO?
• offer from America Movil: unlikely?
• what to do with EUR 5bn from selling E-Plus?
• consolidate the Belgian market and become the prime reseller?
• buy Ziggo and UPC NL to create a national open access infrastructure?
• Tele2 NL:
• what will a new CEO mean for Tele2?
• when will the LTE-network be activated? will it lead to pricing pressure?
• how can the downturn on the fixed market be stopped? when will it start unbundling FTTH?
• Ziggo:
• the new CEO (Obermann from DT): his arrival alone would imply either no deal with Liberty Global, or a guaranteed career for Obermann within LGI.
• expanding the mobile strategy: nomadic rather than a full MVNO?
• OTT-partnerships: unlikely?
• UPC NL:
• will the merger with Ziggo happen? or will a reversed deal take place: Ziggo acquires UPC?
• what can the company do on a standalone-basis to improve its performance? will it follow in Ziggo's footsteps regarding mobile and WiFi?
• will it launch the UPC Phone app?
• will it hold on to the Horizon box, or explore alternatives? (cloud-based solution, TiVo, RDK, Frog by Wyplay, ...)
• Vodafone NL:
• when will it start unbundling FTTH?
• takeovers on the business market?
• T-Mobile NL:
• a new CEO is due, after Thomas Berlemann was sacked.
• how disruptive will the mobile-only strategy be? attack the DSL-market? deploy TD-LTE? follow T-Mobile USA's uncarrier strategy?
• how dependent will it become on Tele2? (2G/3G MVNO income, 4G network sharing income; network sharing cost savings) will it explore more wholesale opportunities?

There are so many opportunities for operators to return to growth, but resources (euros, management time) are scarce. One would wish that the operators would be aggressive, opportunistic and on the offensive, rather than following a me-too strategy, avoid risk and be on the defensive, but that remains to be seen. Ultimately, this is a matter of short-term versus long-term vision.

KPN: away from network ownership and toward FTTH

Today I had the honor to meet with Joost Farwerck, director of Wholesale and Operations at KPN. Most striking were unequivocal belief in FTTH ('the endgame', as I have referred to it before) and an apparent decline in interest in being a network operator.
Joost very tellingly was able to see me in between a trip to Australia and New Zealand and a meeting with bbned (Telecom Italia).

Here are my edited notes.

1. All-IP

• KPN is planning the migration to an NGN, as I have written about before. Many MDF locations, LLU and ADSL2+ will be phased out and replaced by SDF locations, SLU and VDSL2. Fiber will be pushed deeper into the network, to reach all the way to 28k street cabinets (FTTC) and bypassing 1300 MDF locations. No FTTH as yet, only in greenfields and selected towns (Enschede and Almere).
• Currently, details of an MoU are worked out. The MoU was signed over the summer by both KPN and the main unbundlers (bbned, Tele2 and Orange). The new agreement is to be published around December 15. The details are about phasing out the MDF locations, the migration and KPN will present an alternative to line sharing (this product is on the way out anyway, as it is replaced by full LLU). Apparently, street cabinets offer enough space for SLU. Bbned is going the way of SLU.

2. Network operator v. service operator

• KPN believes WBA (wholesale broadband access) is a good product that will ensure competition, based on equivalent access.
• Joost seems to think that OPTA nor the new EU regulations, will lead to functional separation. I think KPN is a case in point where proper accounting separation and a good wholesale strategy + portfolio can fend off functional separation.
• By the way, accordin g to Joost, a wholesale customer can be more valuable than a low-end retail client.
• Outsourcing is becoming a major part of KPN's strategy. At Joost's division up to 50% of current employment levels will disappear.
• Joost seems to be much more of a services man than a network operator. I have noticed this before at both Tiscali and Telecom New Zealand. Network control is less important in a regulated all-IP world.

3. Co-op

• I am a big fan of cooperation. So is Joost, but challengers seem to think differently. KPN tried to team with Tele2/Versatel several years ago, but was turned down. Also, unbundlers are sub-scale in many cases, but (foreign) owners appear to be 'believers', as Joost put is. They all seem to think that they can make it work on their own. Too bad that there are few G9 (Australia) type of intitiatives.
• Joost seems to be similarly at a loss when it comes to long-term commitment of the large Dutch unbundlers. Tele2 is selling off many assets; T-Mobile may sell on the Orange BB unit; Telecom Italia may get rid of bbned.

4. FTTH

• "FTTH is the endgame". I couldn't agree more.
• However, VDSL gets deployed 5-7 times faster (and is written-off in 3-4 years), so it cannot be skipped. Here Joost is very much on the same track as Belgacom.
• KPN recently teamed with 'public enemy #1', Reggefiber, for the city of Almere. Joost told me they will own the passive infrastructure together (I was under the impression it would be 100% Reggefiber); KPN will serve as network operator; KPN (and others, if they wish) will be service provider.
• KPN beefed up its Belgian mobile operator by acquiring Tele2 Belgium. That obviously begs the question: will E-Plus make a similar move in Germany? Joost seems to see better business opportunities for some German expansion (out of the Netherlands), e.g. to the Ruhr area, than for doing FTTH in some rural Dutch areas.

FTTH ultimately drives separation (2)

Will functional (or even structural) separation happen to the European telcos?
Several countries (Poland, Italy, Australia), operators (Telecom New Zealand, TeliaSonera, eircom and of course BT) and the EC seem to be moving in that direction.

Here are the external forces driving or slowing down the movement. They differ from country to country, but the end-game is the same everywhere (FTTH), so separation will happen - sooner or later.

• Cable competition (i.e. inter market): forestalls separation. Sufficient BB market competition was a reason for OPTA to say that KPN needn't be separated (aside from OPTA not having the legal means to enforce it).
• Intra market competition: drives separation. BT is a prime example. The creation of Openreach kickstarted LLU.
• Wholesale offers: forestall separation. Here KPN is the perfect example. Moving from LLU (with fiber to the MDF locations) to SLU (with fiber to the cabinet), it managed to agree on MoUs with the nations largest unbundlers (Tele2/Versatel, TI's bbned and DT's Orange). In other words, no need to kickstart SLU by separating KPN.
• FTTH: drives separation. As this is the end-game, separation I believe is inevitable.

Here is my view of the future:

Nobody wants two FTTH networks, even duct sharing isn't sufficient. KPN resorts to being a service provider in Almere on the Reggefiber network, and UPC will be marginalized unless it follows KPN. The physical layer (the fiber) will be a monopolist utility. It will need to be regulated only once service providers start complaining over rates or services.

Whither Orange NL's broadband unit?

When France Telecom finally sold its Orange NL unit to T-Mobile NL, the focus was on the mobile unit. Deutsche Telekom will, over the next few months, decide what to do with the broadband unit (the former Wanadoo NL, an unbundler).

Here are the possible outcomes I envision:

• Hang on to it. T-Mobile could kick-off a major strategy shift, away from being a mobile pure-play and go the way of Orange and Vodafone. Not impossible, but highly unlikely, I believe.
• Sell it to KPN or Vodafone. That's a double no. KPN has reached the limits of its market share, and Vodafone has just launched a complicated resale arrangement with the former Tiscali NL (now part of KPN). Also, T-Mobile wouldn't want to strengthen a competitor!
• Sell it to another unbundler, i.e. Tele2 or Telecom Italia's bbned. Why not. In time, it could be a way for cooperation between T-Mobile and the buyer of the Orange BB unit. Also, Tele2 is selling lots of assets (Denmark, Portugal, Hungary, Italy, Spain, Austria), and in the meantime focuses on other regions (Scandinavia, Baltics, Russia). It will be interesting to see if Tele2 is really committed to the Netherlands, where consolidation is making the market a lot more attractive. Sort of the same goes for bbned. Or is Telecom Italia only readying the unit for a sale, by beefing it up first?
• Sell it to Reggefiber. Unlikely, since Reggefiber focuses on building infrastructure (FTTH), and it doesn't seem to have access to unlimited cash. However, the argument could be: add a service provider business and in due course migrate the customers to the Reggefiber network (where possible).
• Sell to a new entrant. A wild card. Maybe Telefonica is willing to do a relatively small deal, since it turned away from larger ones. Also, Belgacom could be a candidate (as I have hinted at before).

So, my order of likelihood would be:

1. Sell to Tele2 or bbned (TI).
2. Hang on to it.
3. Sell to a new entrant like Telefonica or Belgacom.
4. Sell to Vodafone, Reggefiber or KPN.

Dell, Tele2 and Google: moving away from cheap services

This New York Times article will probably not reveal anything new on Dell, but it does ring a bell in the telco and internet world.

Basically, Dell is trying to overcome the end of the Dell model. This business model (build to order), together with a strong focus on the US corporate market, gave the company considerable scale, before it broke down. Now however, using its scale, it can 'simply' expand its strategy and hope to make a comeback.

Dell has numerous options: work with retailers, move abroad, turn to the consumer market; add notebooks, software and services; rationalize the company.

Tele2 provides a comparable evolutionary path, from low-cost reseller to fully-fledged quad play operator. It comes with quite a bit of pain, i.e. the sale of operations in many countries (Portugal, Belgium, France, Denmark, Hungary; Italy is next in line).

Finally, Dell and Tele2 could be providing roadmaps to Google. Most services are free + ads, and Google doesn't seem to overlook a single web-based service area. Again, get as many people as possible hooked on your (free) services, and then see how you can develop away from the ads model.

CONSOLIDATION://Orange NL for sale

A newspaper in the Netherlands reports France Telecom has hired Lazard to shop Orange NL around. The unit has 600k BB subs and 2.0m mobile subs and should bring in EUR 800-850m.

Observations:

• Fixed NL: KPN is forcing a choice upon altnets, building its All-IP network: retreat (or be a reseller) or step up investments to make SLU work, as the old paradigm (FTTEx + ADSL2+ = LLU from up to 1300 exchanges) is replaced by a new one (FTTN + VDSL2 = SLU from up to 28k street cabinets). The outcome is still up in the air, as OPTA seems to be backtracking on earlier support of KPN's plans, but Orange seems to think neither option is very attractive. Telecom Italia, through bbned, and Tele2/Versatel seem to be committed to the Dutch market.
• Mobile NL: The mobile market is going to a three-player model if T-Mobile or Vodafone moves in. T-Mobile could even go from a mobile-only strategy (as in the UK) to a triple play offering (as in France). Unless of course China Mobile, Weather, Telefonica, Telecom Italia, Belgacom, Swisscom, CPW or TeliaSonera (cf. Xfera in Spain) deems the time right for a new market entry.
• France Telecom: Going from 5 to 4 countries for its triple play offering (France, UK, Spain, Poland).

Consolidation is continuing, driven by a need for scale economies in mobile and LLU (not to mention SLU). More units could be put up for sale (DT France, DT Spain, Tiscali UK, Tiscali Italy, SFR). What is intriguing is:

• Companies are abandoning saturated markets, like Scandinavia and now the Netherlands (the Tiscali NL sale to KPN is pending at the NMa) and are turning to emerging markets.
• Vodafone, according to the newspaper, wouldn't be interested in Orange NL. Puzzling. Could this be the first step of Vodafone putting even more focus on emerging markets?
• If T-Mobile isn't interested, they might as well leave the market altogether.
• Telefonica is definitely a consolidator. Will they bid for Orange NL, or target the bigger prize: KPN?
• Will this be the European entry of an 'eastern' company (after Hutch and Weather)?
• As PTTs are fighting each other in their home markets, could this sale mark the formation of a pan-European kartel, e.g. FT and DT getting out of each other's markets?

UPDATE: obviously, existing players could strengthen their current presence:

• Telecom Italia: to add a retail business (and mobile) to their bbned offering.
• Tele2: to gain scale and a mobile license, in order to migrate their current reseller business.
• Scarlet: to mirror Tele2's strategy of turning into a facilities-based operator.
• Cableco: to add mobile and to sell the fixed business to somebody else.