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Wireline network market analysis Germany 2013

Wireline network market analysis Germany 2013. Agenda. Part I: Market analysis Part II: Operator analysis Part III: Target Operators Part IV: Competitor’s analysis. Overall broadband market trend 2009 - 2012.

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Wireline network market analysis Germany 2013

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  1. Wireline network market analysisGermany 2013

  2. Agenda • Part I: Market analysis • Part II: Operator analysis • Part III: Target Operators • Part IV: Competitor’s analysis

  3. Overall broadband market trend 2009 - 2012 15 years after fixed network market liberation, DT still holds about 50% market share 2009 2012

  4. Investment in fixed telecommunication assets 2012 Investments are stable, following representation of market share

  5. German Broadband connections 2007-2012 DT & Cable operators still grow, DSL alternative froze, FTTB/H still hardly started

  6. German downstream bandwidth distribution Mbps growth is much smaller than expected in 2009

  7. DSL in Germany DSL shows slight lineloss, competition still far away • Strong competition in German market has lead to further price erosion – Monthly fee for voice and internet flat is about 25 € (DSL 6000 kbps) • 68.7% of DSL connections in Germany are under 6 Mbps in 2012 • DT is still #1 with 12.4 Mil. DSL subscribers (44.9 % of the 27.7 Mil. Total subscribers) • Overall, the four major DSL providers even concluded Q2 2012 with a slight net loss of 32,000 DSL subscriptions. Cable companies, Kabel Deutschland, Unitymedia (including Kabel BW), on the other hand, have won 163,300 additional internet subscribers in the course of the quarter • Number of DSL VoIP connections increased to 6.6 Mil. (more than 55% of DT competitors voice ports are VoIP) • 85% of all broadband connections are realized with DSL technology (23.6 Mil.) • Incipient market saturation is seen

  8. Broadband TV cable in Germany Broadband cable shows nice growth driven by triple play • Market share of broadband TV cable connections increased from 3.6 Mio customer to 4.2 Mio (14.9% market share in 2012) • 28 Mil. Households served by cable TV in Germany (more than 60% of the market) • Triple play products (TV, internet and voice service) are pushing the market. • ARPU for broadband TV cable operator is about 8 € per months for pure TV services but more or about 25 € for internet and voice services. • => Triple play is very attractive for the operators • The consolidation of German broadband cable market started • There are a lot of investors who are interested in broadband TV cable operators to compete DT

  9. FTTx in Germany Many initiatives but no market shares yet to be seen • Some of the competitors of DT, energy companies, local communities and municipal utilities companies have invested Millions of Euros for FTTx projects (see slides 10 and 11 for a complete list of FTTx projects in Germany) • The percentage of the FTTB/FTTH connections in Germany is still very small (around 343K households active in 2012), around 1.1% of the market • High penetration rate over 50% where FTTB is available • FTTB/H investment needed to connect all households in Germany is around 80 bn € • Average invest per household 1.168 € • Trend is seen to be independant from DT infrastructure (last mile)

  10. Agenda • Part I: Market analysis • Part II: Operator analysis • Part III: Target Operators • Part IV: Competitor’s analysis

  11. Competition environment mid 2012 70% of the broadband market is in the hands of three companies Telekom, Vodafone and United Internet "1 & 1" - 1&1 relies on DSL provided by Telekom and other operators.

  12. Analysis of market statistics Cable companies are growing in a decreasing investment market • DT is now number two in fixed network area with revenues of 15.4 Billion € (43.7% of total), still decreasing, but all its competitors have together more or less the same amount of revenues, 15.5 Billion € (43.9% of total), and slowly increasing. • Broadband cable competitor revenues reached 4.4 Billion € (12.5% of total) • Due to decreasing market the total invest in fixed assets has decreased a bit from 6.1 in 2011 to 6.0 bn Euro in 2012 (estimation) • DT has invested about 2.9 bn Euro in 2012 and the competitors about 3.1 bn Euro • Increase of unbundled VoIP and broadband cable connections

  13. Operator analysis Product proposition and strategy • Strong competition in German market has lead to further price erosion - Monthly fee for voice and internet flat is about 25 € (DSL 6000 kbps) • Reduction of the OPEX and CAPEX is essential for the operators in Germany - Key selling proposition must be: low cost, low invest and future-proof technology • They already have experiences and confidence in Chinese companies (Huawei) • Trend is seen that public utility companies want to be independent from DT infrastructure (last mile) - they are willing to invest in FTTx

  14. Operator analysis Broadband TV cable provider developments • Consolidation of German market will take place in near future • Kabeldeutschland had their IPO Providence Equity got 760 Mio Euro • Unitymedia was bought from US investor Liberty Global. They are also interested in Kabel BW • Primacom Group is held by the Luxembourg company MedfortS.àrl to 100%. MedfortS.àrl in turn is 100% owned by Perseus SA. • Tele Columbus Group is the operational business unit of the Orion Cable GmbH and has debts of 1bn € Total number of customers of broadband TV cable operators in Mio Market forecast up to 2012 in bn €. Increase of sales of 7.4% per annum based on Triple Play offers

  15. Opportunity for ZTE ZTE focus areas • Suitable value in market • Provide customers an attractive offer to save CAPEX and OPEX • Fast and efficient development • Gathering of customer requirements • Providing customized solutions • Not promising something what can not be kept (features, availability) • Best support • Focus on potential Tier 2 customers to get profit and built partner relationship. • Provide excellent service (project management, testing, I&C) • Native speakers should strengthen the service teams(Christian)

  16. Agenda • Part I: Market analysis • Part II: Operator analysis • Part III: Target Operators • Part IV: Competitor’s analysis

  17. Operator overview Create overview for tier 2/3 operators to determine top 5 target • Per company/project • One sheet • To the point • Companies to describe • Telefonica • Hansenet • Netcologne • Cable Germany • QSC • Versatel • M-Net • EWE tel • United internet • Unity Media • Short description of the company • Products and services • Since when in use • What equipment • Which vendor (also CPE) • Financial overview (2012) • Revenue, • Profit • Investment • Organisation and contact information (CEO, CTO, procurement responsible) • Technologies in use or planned • Infrastructure plans (replace, expand, budget) • Potential products from ZTE

  18. Operator overview Based on the historie and current status 1 product is targeted and 3 operators are selected • CPE Offering • As Fritzbox is dominating the market it should be possible to get in this market with a lo-mid end device • Create CPE offering for Germany (cable, DSL); should be lo-mid end CPE mainly based on lower Capex for subsidised modems – this can be offered to all operators, especially Telefónica/Hansenet and KabelDeutschland • Most important for detailed information/approach plan are: • UnityMedia – approach to find out opportunity as second vendor • M-net – investigate more about their plans • QSC – approach as possible distributor

  19. Agenda • Part I: Market analysis • Part II: Operator analysis • Part III: Target Operators • Part IV: Competitor’s analysis

  20. Background information

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