2017 Economics of Telecoms Report Update of key economic metrics

Transcription

1 2017 Economics of Telecoms Report Update of key economic metrics December 2017 Fédération Française des Télécoms

2 Agenda 1 Global digital ecosystem: what dynamics? 2 French digital ecosystem: what dynamics? 2

3 Global digital ecosystem: what dynamics? The global digital ecosystem pursues its strong growth, mostly driven by internet players Revenues of the digital ecosystem 1 World, 2007-, Billions of constant Euros 2 CAGR Example of companies Internet Content IT and software services Devices Telecom equipment Telecom operators +5% % +0% +5% +6% 0% +5% Source: Thomson Reuters, Arthur D. Little Note: 1) Panel of 180 companies corresponding to the top 30 by sector in terms of turnover 2) Constant exchange rate 3

4 Global digital ecosystem: what dynamics? Telecom operators, device manufacturers and internet players have driven ~90% of the world ecosystem s growth over Revenues of the digital ecosystem 1 World, 2007-, Billions of constant Euros (31%) 8 (1%) 488 (32%) 171 (11%) (1%) (24%) Ecosystem 2007 Telecom operators Telecom equipment Devices IT and software services Content Internet Ecosystem Source: Thomson Reuters, Arthur D. Little Note: 1) Panel of 180 companies corresponding to the top 30 by sector in terms of turnover 2) The exchange rate Euros vs local currency is applied to the current value of the local currency (x%) : contribution to the digital ecosystem s growth 4

5 Global digital ecosystem: what dynamics? The global digital ecosystem continues to grow at a higher rate than the world GDP growth, with a restart reboot in Europe Global digital ecosystem revenues vs world economy World, 2007-, Base 100 in 2007 CAGR Global digital ecosystem 1 +5% World GDP 1 +4% European GDP 1 +2% European digital ecosystem 1 +1% Source: Thomson Reuters, World Bank, Arthur D. Little Note: 1) In constant dollars for the set of countries considered in the digital ecosystem (accounting for 75% of world GDP, or 70% of the European GDP for European data) 5

6 Global digital ecosystem: what dynamics? European operators have witnessed the lowest growth over 2007-, with a rebound in the last two years Other 2 Asia North America Revenues of network operators by region 1 World, 2007-, Billions of constant Euros % CAGR % +6% +7% CAGR % +3% +5% Europe % +7% Source: Thomson Reuters, Arthur D. Little Note: 1) Nationality according to the location of the head office 2) Includes top 30 players outside Asia, North America and Europe (only Oceania and South America) 6

7 Agenda 1 Global digital ecosystem: what dynamics? 2 French digital ecosystem: what dynamics? 7

8 The French mobile market remains dynamic in terms of equipement and data consumption Connectivity and equipment in France Mobile France, Mobile phone penetration rate 1 4G cards (Millions of active cards) Average monthly data consumption 2 92% 93% 94% 105% 58% 65% 73% 16m +53% 27m 37m 1.8 GB 3.7 GB Q Q2 Q Q2 Q Mobile phone Smartphone 22% 37% X% % of SIM card 50% Illustrative:136h of music streaming or 15h of SD video streaming Source: ARCEP, Operators, AT&T, Arthur D. Little Note: 1) Total population aged 12 and over 2) Active 3G or 4G internet client 8

9 France is experiencing strong growth in broadband subscriptions and a high level of Multiplay 2 subscriptions Connectivity and equipment in France Fixed France, Fixed broadband (BB) and very high speed broadband (VHSBB) subscriptions 1 (Millions of subscriptions) % In Q1 2017, 70% of fixed Internet subscriptions are Multiplay 2 subscriptions (6%) 2.8 (10%) Q1 2.1 (8%) 3.7 (13%) Q % +35% 4K Movies Video game streaming Telemedicine Connected house BB VHSBB >30 et < 100 Mb/s VHSBB >= 100 Mb/s Source: ARCEP, Arthur D. Little Note: 1) Bandwidth >= 30 Mbps 2) Subscriptions considered are "multiplay" subscriptions that include Internet access or several services in addition to television 9

10 R E I T Telecom operators are essential to the French digital ecosystem Relative size of players in the digital ecosystem France, Revenues 1,2 75 billion Direct Employment Investments 3 10 billion Taxes 4 3 billion 12% 16% 53% 13% 4% 3% 4% 0% 4% 3% 6% 18% 1% 1% 1% 16% 3% 76% 87% 79% 5 Telecom operators 5 equipment vendors 5 device manufacturers 5 content providers 5 Internet OTT players y compris filiales Source: Diane, annual reports, Arthur D. Little Note: 1) Revenues declared in France or from literature search 2) Data adjusted to take into account the estimated actual turnover of international players in France 3) Nokia's mobile division investments are integrated into Microsoft following the acquisition of the mobile division in ) Corporation tax, taxes and similar disbursements 10

11 R E I T While the French digital ecosystem has experienced an average annual growth of 4% over 2013-, revenues of telecom operators have stagnated Revenues 1,2 of players in the digital ecosystem France, 2013-, Billions of euros % CAGR % -1% +6% +3% % Telecom operators 5 equipment vendors 5 device manufacturers 5 content providers 5 Internet OTT players y compris filiales Source: Diane, annual reports, Arthur D. Little Note: 1) Revenues declared in France or from literature search 2) Data adjusted to take into account the estimated actual turnover of international players in France 11

12 R E I T Contrary to other key regulated sectors, telecom services have witnessed a sharp fall in prices over Consumer price index evolution on selected products France, 2010-, Base 100 in Electricity Postal services Rail City gas Inflation Telecom services Source: INSEE, Arthur D. Little 12

13 R E I T Prices of telecom services in France remain the lowest among large Western countries Offer benchmark Main operators Selection of countries, November 2017, incl. taxes/ month Fixed (Triple Play) 1 Mobile Source: Operators, Arthur D. Little Note: 1) Triple play offers only; unlimited calls to landline at least; Unlimited broadband internet through xdsl or fibre; television included, excluding additional packs; operators with market share > 10%, 2) Unlimited calls (whenever possible or else >500 minutes), unlimited SMS/MMS, at least 5 GB Internet; packages without devices, packages without commitment; operators with market share > 10% 13

14 R E I T Operators increased their investments despite lower turnover but could not maintain employment levels Employment, revenues and investments of French Telecom operators France, 2010-, base 100 in Operators direct jobs 3 Revenues 5 CAGR Investment effort 1 9,1 % Operators invesments (excluding frequency acquisition) 2 5,6 % - 1,6 % Sector jobs 4-2,7 % - 3,2 % Source: ARCEP, DARES, Insee, Arthur D. Little Note: 1) Investment efforts : operators investments (excluding frequency acquisition) / revenues of operators 2) Provisional ARCEP figures for 3) ARCEP figures 4) ARCEP figures including part of indirect jobs 5) Provisional ARCEP figures for corresponding to revenues collected from final client 14

15 R E I T Telecom operators investments have peaked in 2015 and 71 billion were invested over the period Investments of network operators 1 France, 2007-, Billions of euros 71 billion (excluding frequency acquisition) Before Very High Speed Investment phase including Very High Speed Mobile investments Fixed investissements billion of frequency acquisition over the period 0.9 en en en en 2015 % of revenue % 15% 14% 15% 17% 18% 19% 19% 22% 25% Source: ARCEP, Arthur D. Little Note: 1) Investments excluding frequency acquisition 15

16 R E I T The 7.2 billion euros invested every year by telecom operators represent a significant economic activity Investments 1 in Telecom vs. other sectors France, 2008-, Billions of euros (annual average over 9 years) 7.2 ou 5 nuclear power plants equivalent to the following investments, each year ou 20 «Stade de France» 208 TGV trains ou high schools ou Highways Railways Tr. / distrib. of electricity Telecom 1100 km of highways (i.e. Paris - Berlin) Source: Companies, literature search, Arthur D. Little Note: 1) Telecom: ARCEP figures (excluding frequency acquisition); Electricity: RTE (2009 to ) and ERDF; RFF; Highways: ASFA (Sanef, SAPN, ASF.) 16

17 R E I T Despite the decline in telecom operators revenues, specific taxation remained stable in France Telecom operators taxation France, 2012 and, Millions of euros and % of total taxes Variation Specific tax Corporate tax (38%) (62%) (49%) (51%) +3% -34% 205 (8%) 225 (9%) 192 (7%) (4%) (5%) 410 (16%) (51%) Corporate tax 1 IFER copper TOCE (France TV) Frequencies + FH IFER antenna COSIP (CNC) Other Source: Operators, FFT, Arthur D. Little Note: 1) Perimeter: corporate tax on top 5 companies (set reconfigured in 2012 with corporate tax corresponding to Numéricable + SFR) & FFT members specific taxes 2) VOD & private copy 17

18 R E I T Telecom operators suffer from an asymmetric taxation, which puts them in a disadvantageous position in the digital ecosystem Fiscal optimization mechanism in Europe of the GAFA Country of final consumption Establishment country Place of fiscal registration Exemples Ireland Luxembourg Corporate tax paid in France in x13 3 VAT Corporate tax 600 million of VAT loss on electronic services in France en million of corporate tax paid by «GAFA 2» in France in Telecom operators Internet players Source: Greenwich Consulting, Conseil National du Numérique, PPL Marini, literature search, Arthur D. Little analysis Note: 1) Forecast figures, 2) Google, Apple, Facebook, Amazon, 3) as % of revenues 18

19 R E I T Telecom operators margins are used to finance strong investments Comparison between KPIs of the Telecom sector 1 and CAC40, Base 100 on Revenues Telecom operators CAC 40 average 100 CA EBITDA CAPEX 6 3 Corporate tax 2 2 Dividend 3 Source: Companies, literature search, Arthur D. Little analysis Note: 1) Figures for top 5 French Telecom operators including Orange, SFR, Bouygues Telecom, Free and EI Telecom 19

20 Increased investment is leading to lower cash flow despite productivity efforts Economic performance of major French Telecom operators 1 France, 2013-, Billions of euros Revenues EBITDA Capex Operational FCF % million of EBITDA vs billion of investments +1% +22% % Source: Companies, literature search, ARCEP, Arthur D. Little Note: 1) Top 5 French Telecom operators including Orange, SFR, Bouygues Telecom, Free and EI Telecom 2) Estimated operational FCF (EBITDA CAPEX) 3) ARCEP figures representing sector investments, excluding frequency acquisition % 31% 18% 22% 12% 8% x% % of revenues 20

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