BREKO Broadband Study 2015 Key results for European decision-makers Market survey among BREKO carriers Sources: BREKO network operators across Germany, if not indicated otherwise
Market survey 2015 Regional network operators are driving innovation and investment in Germany 2
The BREKO member survey is representative for the fixed broadband market in Germany BREKO in a nutshell: o 130 network operators (230 member companies in total) o > € 1.5 billion investments each year o Uniting more than 70% of broadband network operators in Germany and thus representing the “voice of competition” o The leading fibre association in Germany o Building the network: a strong partner for cities and municipalities 3
Investment record: Alternative network operators significantly increase their investments once again € 7.4 bn investments in 2014 € bn 8,0 € 4.2 bn 7.4 7,0 7.2 7.1 6.5 6,0 6.4 6.6 6.3 6.1 € 3.2 bn 5.8 5.9 5.7 5,0 3.7 3.8 3.9 3.8 4.2 4,0 3.4 3.6 3.3 3.1 3.2 3.1 3.2 3,0 3.3 3.3 2.9 2.8 3.0 2.8 2.9 2.6 2.7 2,0 2.4 1,0 0,0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Deutsche Telekom competitors (incl. cable) total (Source: BNetzA, BREKO Research) 4
BREKO network operators invest in the future of broadband • Investment rate (turnover): € bn 2.0 22 % • Investment rate (EBITDA): 1.8 1.5 1.7 bn 103 % bn 1.55 1.5 1.5 bn • Compared to: bn 1.35 bn 1.0 bn − Deutsche Telekom: 0.5 − 14 % (turnover) − 38 % (EBITDA) 0.0 − Unitymedia KabelBW: 2007 2008 2009 2010 2011 2012 2013 2014 2015 (exp.) − 25 % (turnover) − 40 % (EBITDA) − Vodafone: − 16 % (turnover) − 53 % (EBITDA) 5
BREKO members lead in fibre deployment NGA deployment 2013 – 2014 850 000 households in urban areas 20.5% 13.8% 1.6 mn households outside urban areas 39.1% 55 % of new NGA* subscriptions 82.3% outside urban areas are 48.7% 78.5% provided by BREKO companies städtisch urban *Next Generation Access: > 30 Mbps, here even > 50 Mbps halbstädtisch semi-urban rural ländlich (Source: TÜV Rheinland) 6
Status quo FTTB/H deployment in Germany of FTTB/H deployment by alternative network operators 0.6 mn hh 29 % 0.96 mn hh 47 % 0.48 mn hh 24 % BREKO operators Deutsche Telekom others (Source: BNetzA, BREKO Research, status: mid-2015) hh = households (homes passed) 7
Infrastructure objective in Schleswig-Holstein is effective 1 Schleswig- households reached with Holstein National average: 4.5 % 23 % FTTB/H (homes passed) Mecklenburg- Hamburg Vorpommern* 14 % * below 1 % 2 Bremen* Bavaria: € 1.5 bn of public funding do not lead to increased FTTB/H Berlin* deployment Lower Saxony 2 % Brandenburg* North Saxony- 3 Rhine- Anhalt* Westphalia 7 % Saxony* Thuringia* Hesse* Rhineland- Palatinate* Saarland* Bavaria 2 % Baden- (Source: BREKO Research, Württemberg* Länder Broadband Competence Centres, status: mid-2015) 8
Fixed line network “to go” Data usage: the indicator of the digital economy 12.6 of mobile internet usage bn GB takes place in WiFi “networks” 10.9 bn GB (Source: Mobidia 01-12/2014) 8.8 bn GB 7.0 bn GB of Germans do not want 5.5 to give up fixed line 4.6 bn GB 35.0 network 3.6 bn GB GB 27.0 (compared to only 65% in bn GB 24.4 GB 2012 and 80% in 2013) 21.2 GB 17.0 290 MB (Source: D21) 15.1 GB 12.6 GB mobile GB ~ factor 100 GB 1.41 % 2.23 % 3.05 % 4.15 % 5.70 % 2009 2010 2011 2012 2013 2014 2015 expected (Source: BNetzA, BREKO Research) 9
Demand for high-bitrate connections increases: Need for upload speed will multiply by factor 15 BREKO companies’ expected demand until 2020 Upload Download 170 grows evermore important Mbps 105 80 in the medium term only satisfied by FTTB/H 30 24 networks 7 Present 2018 2020 10
Broadband needs 2018 • Fibre networks play a key role to preserve and increase prosperity 75.6 Industrial estate 238.1 48.4 Mixed area 151.5 Demand 2013 31.5 Residential area Demand 2018 97.5 Mbps 0 50 100 150 200 250 (Source: MLR Baden-Württemberg) 11
Broadband is the number one location factor Criteria for the choice of location 100% 90% for 63 % of businesses the desired 80% 70% bandwidth is currently not available 60% at their location (2009: 43 %) 50% 40% 30% 20% 10% 0% for more than 60 % of businesses the availability of fast internet has a significant and decisive impact on the next decision to choose a location very important important less important not important Source: IHK Karlsruhe 2014 12
Competition and diversity put Germany in a good position especially compared to the United States Investment • • Prices dominant cable network operators EU: € 34 vs USA: $ 70 in the United States currently for a 30-100 Mbps connection invest roughly 1% of their turnover • Broadband coverage Lessons from the United States: comparable high-speed supply in De-Regulation leads to Germany and the United States • less investment • Monopoly structure in the • higher prices United States • limited choice and quality of service 75% of US households cannot choose their broadband connection (Source: Studie Stiftung neue Verantwortung e.V., 06/2015) 13
Regulation is not a barrier: Deutsche Telekom’s margin is highest in the regulated home market 40.5% 39.7% 39.5% 33.0% 34.0% 35.0% 31.0% 29.0% 29.0% 25.0% 20.0% 19.0% 9.0% 8.8% 7.3% EBITDA margin EBITDA margin EBITDA margin EBITDA margin EBITDA margin group Germany United States Europe systems solutions 2012 2013 2014 (Source: Deutsche Telekom Annual Report) 14
The BREKO Broadband Study shows: Alternative network operators shoulder about three quarters of the deployment of ultrafast fibre connections Local and regional network operators are driving innovation and investment in Germany BREKO network operators stand ready to further intensify their fibre roll-out 15
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