Specialist
Former executive at Deutsche Glasfaser Group
Agenda
- Impact of inflation on revenue and subscriber growth outlook across fixed and mobile
- ARPU development levers and fixed-mobile converged subscriber outlook
- Competitive positioning across Deutsche Telekom (ETR: DTE), Vodafone (LON: VOD), Telefonica Deutschland (ETR: O2D) and others
- FTTH (fibre-to-the-home) roll-out dynamics and cost per home passed trends
- Cable to FTTH migration trends and FTTH take rate
Questions
1.
Deutsche Telekom is one of the biggest players in the German telecoms industry. What would you identify as the key industry headwinds and tailwinds?
2.
Let’s say a JV between a telecoms company and a fibre provider wants to roll out in a municipality somewhere in Germany. On average, how long does it take from when that initial request will be made to when approval is actually finally given?
3.
I’m aware that Germany has a federal government system. Does the regulation vary from state to state, or province to province?
4.
In terms of the funding levels, you said south Germany spends more. Is that subsidies? Does that region subsidise more, so there’s a higher percentage of subsidy in the south than in the north?
5.
How would the levels of subsidy vary between north and south Germany, as a percentage range?
6.
Is there much difference in government subsidy in east and west Germany? I’m aware of the funds that are put in place to try and reduce economic inequality between the east and west of the country. Is the main difference between north and south?
7.
Deutsche Telekom’s service revenue growth slowed across 2022 – it was 1.8% in Q2 and 1.2% in Q3. Are we expecting service revenue to continue to slow in 2023?
8.
You said we can expect Deutsche Telekom’s revenue growth to continue to slow in 2023. Given it reached 1.2% in Q3 2022, do you think it could dip below 1% in 2023?
9.
Can we expect growth for Deutsche Telekom and other providers to remain at around 1% in 2023 and for the next 12-24 months? Alternatively, can we expect things to pick up, perhaps if there were a conclusion of the Russia-Ukraine conflict?
10.
Obviously an outcome of the Russia-Ukraine conflict is inflation and particularly high energy costs, two things that Germany and the UK have been particularly exposed to. How should we think about the impact on Deutsche Telekom’s service revenue from inflation and high energy costs?
11.
Regarding how much the inflationary pressures are eating into Deutsche Telekom’s margin, how can we expect that to trend over 2023?
12.
The subscriber growth outlook is obviously tied to service revenue. If service revenue is hovering at around 1%, can we assume the subscriber growth outlook will also be pretty stagnant, perhaps only growing a little bit? Deutsche Telekom’s broadband net adds in Q2 and Q3 2022 were about one-third to 50% lower than in a similar period in 2021. Do you think broadband net additions will continue to trend downwards in 2023?
13.
In terms of where fibre has been connected, what fibre take rate is there when we’re thinking about subscribers migrating from cable or DSL [digital subscriber line] to fibre?
14.
You said doing it right is important when migrating subscribers from DSL and FTTC [fibre-to-the-cabinet] to FTTH [fibre-to-the-home]. What does doing it right look like? What penetration rates are achievable when it is done right?
15.
Who is migrating subscribers from DSL and FTTC to FTTH right? What does it look like in the competitive landscape for players such as Deutsche Telekom, Vodafone-Altice, O2, etc?
16.
Do any players have particularly slick or savvy marketing campaigns that have better cut-through when it comes to consumers? In the UK, Virgin Media had a very good marketing campaign that encouraged a lot of people to upgrade to fibre with it. Is there an equivalent in Germany or is it just very standardised, as you mentioned?
17.
Does the fact that German operators such as Deutsche Telekom aren’t raising their prices generally mean that subscribers are staying with their operators? Are we seeing any subscriber activities such as trading down to a cheaper contract with less bandwidth?
18.
Generally speaking, on a broadband contract for a player such as Deutsche Telekom, how would you think about the ARPU?
19.
Obviously, one of the things that operators will try and do is upsell subscribers so they increase their bandwidth, but you mentioned that was happening less often. How much would the ARPU increase in a normal year from bandwidth upselling?
20.
Operators such as Deutsche Telekom will try and look at FMC [fixed mobile converged] and perhaps other services, so not just mobile but TV as well. Is that a phenomenon that you see the company doing quite well in?
21.
What would an ARPU for an FMC subscription look like for Deutsche Telekom?
22.
Looking at the fibre roll-out in Germany, it sounds as if there’s lots of opportunity in the market, but there is the recent exit of Liberty Global’s HelloFiber from the German fibre market. How should we think about the opportunities with the German fibre roll-out, in light of one of the biggest telecoms companies, Liberty Global, having just pulled out of the German fibre market, presumably because it doesn’t feel that it’s worthwhile to it?
23.
Will other operators, and those interested in other operators, find similar headwinds to HelloFiber? Alternatively, was there something specific about HelloFiber – perhaps it being a new operator that was only around for 12 months – that meant it was much harder for the company compared to Vodafone or Deutsche Telekom?
24.
How should we think about some of the metrics that might make an operator think about its business case, such as the cost per home passed, for the German market?
25.
You mentioned that overbuild dynamics was quite a big topic for the German fibre roll-out, particularly in urban areas such as Berlin, Hamburg, Frankfurt, Dusseldorf and Stuttgart. Can you talk through the overbuild risk in such places? What does it mean for Deutsche Telekom and other providers?
26.
Do all of Deutsche Telekom’s competitors face the same level of overbuild risk from the company, or are some more affected than others?
27.
To be successful, would it be fair to say that Deutsche Telekom’s competitors have to strike some sort of wholesale agreement with Deutsche Telekom for a successful broadband business?
28.
What are some key dynamics that you would identify in the relationship between housing associations and broadband providers?
29.
Over what time frame is fibre accessible to the tenants of housing associations from when a housing association would say it wants access to fibre? Are we looking at 9-12 months?
30.
Will housing associations only ever have the agreements we’re discussing with one broadband provider, or will they have multiple broadband providers?
31.
When housing associations are looking to upgrade from FTTC to FTTH, is there an opportunity for them to switch broadband provider?
