APMS CONFERENCE 2017 EECC: GET PRO-INVESTMENT MEASURES BACK ON TRACK. Manuel Braga Monteiro Deutsche Telekom Group Prague, 31st October 2017

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1 APMS CONFERENCE 2017 EECC: GET PRO-INVESTMENT MEASURES BACK ON TRACK Manuel Braga Monteiro Deutsche Telekom Group Prague, 31st October 2017

2 DT GROUP PRESENCE IN EUROPE Integrated Operators Mobile Only Europe (excl. Germany): Present in 12 countries 51.7 million mobile customers 5.6 million broadband lines 4 million IPTV, satellite, cable customers iphone in all European markets 12.7 billion revenue 4.1 billion EBITDA adjusted 48,883 employees 2

3 INTEGRATED NETWORK STRATEGY KEY TO DELIVER ON EU CONNECTIVITY AMBITIONS 1 LTE ROLL-OUT + 2 OPTICAL FIBER + 3 VECTORING + 4 HYBRID ACCESS LTE Roll-Out D: 95% LTE PoP-coverage 1 in 2018 with up to 300 MBit/s CZ: > 93% LTE coverage today EU: 75 95% 2 LTE-PoP-coverage in 2018 with up to 300 MBit/s Vectoring D: Introduction of super vectoring with more than 250 Mbps in cable footprint Optical Fiber D: Glass Fiber household footprint of 80% with at least 50 MBit/s depending on regulatory adjustments EU: 50% of households 3 with at least 100 MBit/s in 2018, 12% of households 3 with up to 500 MBit/s 4 in 2018 HyBrid Access D: Download speed of up to 550 Mbps via hybrid in cable footprint Device Hybrid LTE DSL Hybrid Router 1) Outdoor coverage 2) Depending on country 3) In integrated footprint 4) FTTH, FTTB, FTTC, cable/ed3 (cable, esp. in Hungary with Euro-DOCSIS) 3

4 NEED FOR AMBITIOUS REFORM RECOGNIZED BY DIFFERENT STAKEHOLDERS President Juncker Mission Letter to Digital Commissioners and VP Ansip More ambition should be added to the ongoing reform of our telecoms rules. A harmonised approach to radio spectrum between Member States should be developed. You should set clear long-term strategic goals to offer legal certainty to the sector and create the right regulatory environment to foster investment and innovative businesses. 4 Jüri Ratas, PM of Estonia and rotating EU-President, concluding Digital Summit, 29 Sept We should establish an ambitious roadmap and framework to deploy world-leading optical fibre and 5G networks by We should work together at European level to reach the scale and level of coordination 2 needed to achieve these our goals, and will make every effort to make more spectrum available in a timely and predictable manner

5 AMBITIOUS CONNECTIVITY TARGETS REQUIRE HEAVY INVESTMENTS EU Connectivity Targets Gbps downlink and uplink for the main socio-economic (e.g. schools, transport hubs and public services providers) 100 Mbps downlink for all household - upgradable to Gigabit speed. Uninterrupted 5G coverage for all urban areas and major transport paths. By 2020: One major city with 5G coverage per Member State. Required Investments Gigabit Society vision requires ca. 660bninvestmentsbetween 2015 and : 360bnin ultrafast broadband for almost 100% of households 200 bn in 5G coverage (cell densification, fiber to all base stations) and complete 4G coverage 100bnin low-latency proximity data centers European Commission: 90% of investments should come from private sector. Regulated operators spent 60 to 70% of annual network investments 2. 1) BCG report Building the Gigabit Society: An Inclusive Path Toward Its Realization, ) ETNO-IDATE Annual Economic Report,

6 EU TELCOS INVESTMENT CAPACITY COMPARATIVELY LOW EECC KEY MOMENT TO CHANGE THIS COMPARING EBIT OF EU AND US TELCOS AND ONLINE COMPANIES 1 Online Companies 4,8 bn. (6,0 bn. $) 50,4 bn. (63,8 bn. $) -49% 5,5 bn. (6,9 bn. $) 25,6 bn. (32,4 bn. $) 2006 EU 2016 Telcos 37,9 bn. (47,9 bn. $) 23,8 bn. (30,1 bn. $) + 238% +89% 128,2 bn. (162,3 bn. $) 45,1 bn. (57,1 bn. $) 2006 USA 2016 More Competition, Less Regulation? High competition due to parallel infrastructure, OTTs and Internet Service Provider But: Telcos investments key for broader EU industry We need a framework for a sustainable future Reinvigorate industry growth Same rules for all players along the value chain Incentives for broadband infrastructure investments 1) ETNO Accenture Study: Lead or Loose,

7 COMMISSION S PROPOSAL VS. NEGOTIATING MANDATES ORIGINAL OBJECTIVES IN DANGER Commission s proposal to foster investments Target regulation to deal with problems at retail level Updated symmetric regime to address bottlenecks and facilitate network deployment Update SMP-guidelines to address concerns from some stakeholders around joint-dominance Non-discrimination and competitive constraints at retail level require NRAs to lift price regulation Co-investment as key tool to foster connectivity due to certainty of regulatory outcome 25 years minimum licence durations to ensure legal certainty in view of 5G deployment Peer-review mechanism to ensure consistency in spectrum assignments What is now on the negotiating mandates Competitive retail level may be insufficient to deregulate (EP) Changes in Council create a new fully-fledged access regime parallel to SMP on EU telecoms markets Wording on joint-dominance inserted by EP creates major uncertainty and risk overregulation Council wants to ensure that NRAs keep full flexibility to impose price controls even if safeguards are in place EP dilutes certainty on regulatory outcome of co-investment; Council includes other forms of commercial agreements Council not ready to commit with any minimum licence duration and EP includes uncertainty through early review Council dilutes peer-review turning it a voluntary mechanism 7

8 EECC- CRUCIAL TO GET THINGS RIGHT Facilitate fibre investments through less regulation Attract investments with alternative regulation models for commercial wholesale agreements models Symmetric regulation to facilitate network deployment in less populated areas by addressing real bottlenecks Legal certainty for spectrum investments Spectrum becomes more and more important, longer license durations and legal certainty are important to be prepared for the future. Clear rules for license renewals avoid investment freezing periods. No additional regulation Regulation is only justified in case of dominance electronic communications markets are already largely competitive. Lower thresholds for intervention are unjustified. Price regulation of international calls would cross-subsidize business customers and cost operators hundreds of millions of Euros. 8

9 THANK YOU FOR YOUR ATTENTION