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Preview: Communications Breakdown

Communications Breakdown

Telecoms, Internet, Media

Updated: 2017-11-18T22:13:56.261+01:00


Vodafone DE's Gigabit Investment Plan


Vodafone DE launches Gigabit-Offensive, or Gigabit Investment Plan: EUR 1.8-2.2b in 4 yr (18/19 - 21/22), for 1/3 of all HH: 13.7m connections. 3 pillars GigaKabel (Cable): 12.6m HH; EUR 200m (excl CPE); accelerates Docsis 3.1 deployment from 4 to 2 yr; target 0.5-1.0 Gb/s. GigaGemeinde (Municipality): rural, 1m HH = 2m pops, FTTH; EUR 200-400m; requires 33% participation; muni to own passive (image)

The arbitrariness of RLAH regulation


There is a certain level of arbitrariness to the RLAH (roam-like-at-home) regulation, taking effect 170615, looking at it from this perspective: Pricing of mobile services is extremely complex, containing all sorts of elements. Operators try to balance pricing with their own return, competitiveness, differentiation and fairness (giving the customer a sense of the-user-pays and usage-based or (image)

Autonomous car & driving: impacts


The autonomous car & autonomous driving will have far-reaching impact, assuming full autonomy (level 5): No more traffic congestion. Fewer accidents, albeit with liability issues. Less need for new infrastructure (including the hyperloop)? Maybe not, assuming more traffic participants (elderly, kids). More cars, hence more traffic & energy consumption. Less need for public transportation. Less (image)

Combining Telenet/Base and VodafoneZiggo could bring the Vodafone brand to Belgium


Liberty Global has recently made some public statements about its strategy. The integration of the Dutch activities was not discussed. It must be the worry of the VodafoneZiggo joint venture. However, a scenario is conceivable in which Liberty Global pulls in the JV. That could lead to a merger with Telenet / Base, with a stock market listing to boot. Content and network With regard to content,(image)

Breaking down Amazon's revenues (2)


Here are the absolute numbers for Amazon's 8 revenue lines. Note: indicative. Note: from 14Q1 to 16Q4 Prime grew from ~$600m to ~$1.8b. revenue contribution (%)03-31-201430-06-201431-03-201530-06-201531-3-201530-6-201530-9-201531-12-201531-3-201630-6-201630-9-201631-12-2016 media: Amazon (image)

Breaking down Amazon's revenues


Amazon supplies different revenue breakdowns: On a quarterly basis: Products & Services North America & International & AWS Media & Electronics & Other & AWS Shipping revenues (separately) On an annual basis: Retail products, Retail 3rd party, Retail subscriptions, AWS & Other US, Germany, UK, Japan & RoW Note: you have to be very careful about what is included in all these items, (image)

Vodafone Group deconsolidating India - which markets are to be wholly-owned?


Vodafone Group is deconsolidating Vodafone India. Here are the specs: Vodafone India (excl. 42% Indus Towers stake) merges with Idea Cellular (listed; incl. 11.15% Indus Towers stake) Vodafone to own 45.1% (after transferring 4.9% to Aditya Birla for INR 39b = $579m cash), Aditya Birla 26.0% (+ option on part of Vodafone's stake to equalise holdings, free float 28.9%, equal voting rights from (image)

Vodafone & Liberty Global extract cash from & load debt on VodafoneZiggo


Observations from the establishment of the VodafoneZiggo joint venture: Cash was extracted & debt was loaded by the parent companies. Future annual shareholder charges have been raised. Leverage a la Liberty Global (4.5-5.0), even though mobile (with structurally lower margins & growth) is a large part of the business. Vodafone comes first in the name & supplies the CEO, even though Ziggo is (image)

VodafoneZiggo established on last day of 2016 with EUR 10 billion gross debt


The Vodafone Group and Liberty Global closed the creation of their 50/50 JV on the last day of 2016, calling it VodafoneZiggo. Here are the details: 7.1m HP, nationwide 4G, 9.6m fixed (4.0m video, 3.1m BB, 2.5m fixed voice) + 5.2m mobile RGUs at 160930 rev -12 mo EUR 4b, gross debt EUR 10b at 160930 synergies NPV EUR 3.5b (unchanged; capex/opex run-rate savings EUR 210m by 2021 (reduced from (image)

Analysts and arbitrariness


Certain recommendations appear questionable (whether sell-side or buy-side), due to arbitrariness. The reasoning is in three steps: The analyst sums up an arbitrary number of positives. This is a very selective process, which includes downplaying the negatives. All these issues are based on public information and hence discounted into the share price. The analyst could argue that his views are (image)

What makes an internet company?


The ECJ recently raised the question: is Uber a transport company or a digital service? Apart from the legal and regulatory consequences, the question is interesting on a conceptual level. Having a side job in the vacation home business, we have some thoughts to share. At first sight, these companies appear to be genuine internet companies. Booking & customer support, advertising & marketing, (image)

FTTH-related news round-up


In the Netherlands, CIF is reaching the limits of growth, owning a range of small cable companies. Now they are looking to do rural FTTH, with partners, in a ‘line-rental’ model. FTTH is expanding in South Africa, of all places. Reggeborgh is selling a majority stake of Deutsche Glasfaser to KKR. Is that an early exit or a way to raise massive funds? Impressive cost savings from NG-PON2. It is (image)

Why we need FTTH-based gigabit internet access


Streaming requires only so much bandwidth, but there remain several reasons to want gigabit FTTH. There are really a limited number of reasons. The first and last are relevant to operators, the others to end-users. Opex. FTTH brings large savings to operators. Speed, bandwidth. FTTH can handle speeds of 1 or more Gb/s. Downloading. It can never go too fast. And uploading is generally slow on (image)

The risks of banning free streaming tiers


The music majors are negotiating with streaming music providers (Spotify) about curtailing free services. The free service could be capped: Max 3 months, or 6 for existing users. Possibly shorter or longer for selected artists. Before banning free music altogether, one must bear in mind: Free users do convert to paying users. Free users do generate revenues: from advertising. This could (image)

Why we love to hate the entertainment industry


The entertainment industry is suing Bredbandsbolaget, the Swedish ISP, over refusing to block The Pirate Bay. The trial is set for October 23, 2015, in Stockholm. Bredbandsbolaget has a compelling argument: “It is an important principle that Internet providers of Internet infrastructure shall not be held responsible for the content that is transported over the Internet. In the same way that the (image)

Structural separation revisited


Premise #1: Telecoms market characteristsics High entry barriers (network duplication cost, mobile license cost). Scale business. The network effect is essential. There is ample legacy (incumbent operators inherited formerly state-owned assets). Telcos have a tendency to outsource network management to specialised firms such as Ericsson. Apparently, it is not considered core-business by many. (image)

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 (image)

Capex: up for differentiation, down for extortion


Capex is weighed carefully against dividends. Capex is for longer term competitiveness, dividends are for short term investor satisfaction. Reducing capex is hazardous, since it endangers the operator's competitive position. Capex enables differentiation. Smart investors will not be fooled. If capex is reduced across the board, the cause may not be clear and can be any of these: It's typical (image)

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(image)

PwC to telcos: focus on RoI


PwC tells telcos to focus on RoI in its new report 'Capex is king: A new playbook for telecoms execs'. It provides a clever ranking of telcos, based on IRR and WACC. The winners, 'Value Leaders', have the highest share price CAGR & investor return. They had Capital Value turn positive during the last 3-5 years. "Investors reliably reward such behaviour with superior EBITDA multiples." PwC's (image)

KPN Q3 ahead: results due October 28


KPN entered the quiet period leading up to the Q3 results, due October 28. Interim CFO Steven van Schilfgaarde will probably be present at the call, since he exits Nov. 1, but new CFO Jan-Kees de Jager may be introduced as well. Focus is on the question: can KPN maintain its guidance, specifically: can it stand by its previous expectation of 'stabilisation' of consumer trends 'towards the end(image)

Newsletter All Things KPN launches on TidBitts platform


I use the TidBitts subscription platform to manage All things KPN so click Subscribe when you get to my page on their site. It is located here. All things KPN is a new weekly newsletter, arriving each Friday: weekly assessments of everything related to KPN: strategy, M&A, financials, regulation, competition and much more.(image)

KPN's very disappointing road to VDSL, away from FTTH


It's becoming a new reality: KPN no longer is the torchbearer of the fiber community. This historic chain of events: 2008: acquires 41% of Reggeborgh's Reggefiber FTTH venture, with calls/puts for the remaining 59%. Pays in assets (its own FTTH efforts) + EUR 100m cash. Accepts regulation as part of the deal. At the time, Reggefiber Newco had just 10k HP. 2011: acquires other FTTH assets ((image)

Shifting bargaining power in the NN debate


In the net neutrality debate, this is how bargaining power is shifting: OTTs are afraid ISPs will extort money from them, hence claim strong NN regulation is needed. Netflix turned this upside down and hinted at being able to charge ISPs - but added that it won't. Now, Time Warner Cable appears to be afraid of being charged by OTTs. Comcast came out as a defender of NN regulation. And so: (image)

All providers are potential preys in ongoing consolidation


Consolidation is ongoing. International groups consider takeovers, as well as exits. Local companies are acquired. Europe The hunters: Telcos: DT, Orange, Telefónica, América Móvil Mobile: Vodafone, Hutchison, SoftBank, VimpelCom etc. Cable: Liberty Global The hunted: Telcos: KPN, Belgacom, Swisscom, TDC, eircom, BT, PT, TI, etc. Mobile: Bouygues Télécom, Yoigo (TeliaSonera), etc. Cable:(image)