ftthforum 2011 thilo kusch, magyar telekom

FTTH - Quo Vadis ? Thilo Kusch CFO Magyar Telekom, Hungary FTTH Forum 2011, Budapest

Top secret business information of Magyar Telekom! Magyar Telekom’s information requiring top level protection, to be used exclusively by the addressee. 2

Market demand for TV and „real” high bandwidth

Voice Broadband Pay TV

Mobile operators

Fixed operators

Non-telco operators

Cable players

Telco players

RECAP FROM LAST YEAR

It is not a question if we need the FTTH, but the question is WHEN, WHERE , HOW and to WHAT extend?

Multi-room TV with interactivity Raised downlink speed

Short term demand Bandwidth of 300M down, 50-100M up Traffic shifts towards short duration streaming

Long term demand

http://www.upc.hu/

http://hr.satelitv.net/uploads/images/digi tv logo.gif


Decreasing HH consumption 2009-11

Unforeseen events changed FTTH roll-out plan

- 10

- 5

0

51,2%

-5,0%

-0,8% -0,8%

11Q1

-4,0% -5,9%

10Q4

-9,5%

-5,7%

10Q3

-6,1%

10Q2 10Q1 09Q4 09Q3 09Q2 09Q1

Low initial penetration takeup

Regulation not supporting investment

Retail-minus based

GPON unbundling Access to ducts and poles 2

5 Local GPON, cable & copper bitstream

Dark fiber

Regulated backhaul access

Additional fibre roll-out ! ! !

3

6

Technology neutral national bitstream access

1

4

M5

M4

MT started mass rollout in 2009 …but :

Macroeconomic downturn Regulatory remedies implied Penetration take-up is not so fast as it

expected 0

5

10

15

20

25

30

50

150

250

09.03

200

100

0 10.12 09.12

Top secret business information of Magyar Telekom! Magyar Telekom’s information requiring top level protection, to be used exclusively by the addressee. 4 4

Rollout strategy changed but goals achieved

ORIGINAL Goal set in 2008 for EoY 2012 ACTUAL, EoY 2011

∑1 093k ∑1 162k

Higher penetration on new areas

We learnt a lot: New technologies and planning methods New area selection criterias and sales

techniques for a more successful migration -> RESULT

783

380

1 162 HHs

633

261 199

1 093 HHs

FTTH ED3 ED3

VDSL

FTTH


Content/applications - the long-term drivers

MAIN CONSIDERATIONS: •Hen and egg situation / Content or Infrastructure first? • Critical mass is necessary to make the whole thing fly • Huge amount of CX required in a short period…

FTTH Revitalize copper Mobile BB

359k ED3**

261k GPON 240 EUR/HH

EoY 2011: 815 kHH*

0% 20% 40% 60% 80% 100% Max FTTx investment limit

199k VDSL

3,3m HH 25% Partnering or Alone

43% Masterplan for NGFA coverage in MT areas

* Total: 1,093m HH, country-wide ** Total incl. LTO areas : 633 kHH

290 EUR/HH 430 EUR/HH 1 040 EUR/HH

5 FTTH Forum 2011 Budapest / Thilo Kusch CFO Magyar Telekom


Obstacles to be overcome for further FTTH development

Three major problems to cope with

Lack of mass services on the horizon that require FTTH’s high speed and high upload capacity to support short-term demand

Short term investments for a uncertain long term business

Regulatory uncertainty, less investment supporting measures Hungarian regulation is the most extensive and less investment supporting in Europe…


Interactivity to reach critical mass - develop new applications

Cloud services for customer experience roaming Community and family video

solutions

Home security and personal healtcare services

E-learning, distance working and e-gov solutions

New appliactaions to support need for FTTH

From linear TV to full on demand entertainment /content – road to interactive TV

TV RP

C dis

tributi

on

Marketing challenges: Number of households reached Number of channels Exclusive channels as content Quality Price

Marketing challenges: Content: relevance, freshness Relation to linear content Promotion tool,

marketing resources OTT competitors Enabled customers and devices

Technical challenges: Unicast replaces multicast OTT delivery constrains:

adaptive streaming progressive download

Personalization of customer: recommend, targeted ads

2005 2020 2015 2010

Interactive TV boom

Interactive TV

Linear TV

Technical challenges: Bandwidths Set top boxes


Alternative models to smoothen short term risk profile

Marketing

Technology

Financing

ServCo

OpCo

NetCo

Incumbents, AltNets (deliver sufficient penetration)

Vendors, Incumbents, AltNets, Private Equities

(provides efficiency in development)

Government, Infrastructure Funds, Incumbents, AltNets, Policy Banks

(sharing long term investment)

Sucessful alternative models should address all levels

Apply alternative models where every player take its most suitable risk Search for a model which is to be financed also by actors ready to take longer ROI

necessary to FTTH investments


Lessons learned? / Challenges to be overcome

In long term the fibre access is mandatory FTTH network deployment have to start as soon as possible and should be implemented in a

systematic BUT prudent way

Implement new platforms and revitalize copper to win the fibre fight by quickly connecting costumers

first: lock customers in (increase BB footprint) then: migrate them to fibre

Support Content development and usage: Penetrate new type of interactivity usage Mass education necessary to reach critical mass New apps for fiber

Apply alternative models in further rollouts to smooth short term risk profile by risk sharing but maintain mid/long-term technology capabilities


Q&A section

10

Top secret business information of Magyar Telekom! Magyar Telekom’s information requiring top level protection, to be used exclusively by the addressee. 11 1

1

Rollout strategy & technology mix changed but short term goals to be achieved

Higher penetration on new areas FTTH deployment slowed down dramatically, but we learnt a lot

New technologies and planning methods New area selection criterias and sales

techniques for a more successful migration -> RESULT

ORIGINAL Goal by EoY 2012, in 2008 ACTUAL, EoY 2011

∑1 093k ∑1 162k


Copper revitalization

MT rollout strategy is based on mix of solutions, content/applications should be the long-term drivers

MAIN CONSIDERATIONS: Hen and egg situation / Content or

Infrastructure first? Critical mass is necessary to make the whole

thing fly Huge amount of CX required in a short

period… CONTENT

12 FTTH Forum 2011 Budapest / Thilo Kusch CFO Magyar Telekom


Revise Hungarian regulation remedies that are the most extensive and less investment supporting in Europe

Obligation

Austria

Belgium

Denmark

Netherlands

Malta

Portugal

Hungary

Cable modem and BB /fixed BB (EU average app. 15%)

30% 42% 30% 36% 51% 38% 51%

Cable distribution + + + - - + Substructure, poling +

Network distribution cabling - - - - -

+ Symetric, effective for

every operator +

assymetric Optical local loop unbundling

+ virtual - - + - - +

Sötétszál + + +

On commercial basis

? - + +

Migration transition 4th market + + - + - - +

Optical, HFC Bitstream +

Optical, business segment only

? +

VDSL and HFC bitstream

- - - + both

Migration transition 5th market - + + - - + + Information sharing on network development - - - - - - +

All EU remedies are implied in Hungary, however extensive infrastructure based competition (in cable) makes the strict remedies unnecessary even development hindering

Acknowledgement of risks in new infrastructure developments and implementation of a geographic segmentation would be reasonable