Investor & Analyst Conference Technical Presentation Jan Vorstermans Mechelen - May 13, 2008
Agenda The current network The challenge The actions Cable versus DSL Research & Standardization Capex Conclusion 2
The current network Telenet network footprint Homes passed per km 2 3
Telenet network infrastructure The 3 main levels of the Telenet network 5 Switch Stations 47 Head Ends 4 2255 Optical Nodes 1400 Homes per Node
Telenet HFC network 10,000 km optical fibre - 52,000 km coaxial network 5
Telenet HFC network 10,000 km optical fibre - 52,000 km coaxial network Average distance customer to optical node: 1.5 km 6
Towards an all IP network Focus is on the HFC Aggregation 7
The challenge Bandwidth needs are on the rise Strong natural traffic growth due to richness of content (video) Strong RGU growth n Strong VOD growth Average bandwidth per user Assume a constant increase of 1.5 x every year 8
Maximum bandwidth trend for data modems Past 25 years also show a consistent 1.5 x increase every year Can we extrapolate this trend into 2016? 9
Bandwidth needs and solutions Needs Solutions Higher upstream speed Upgrade upstream spectrum Higher Internet speed, more idtv channels Increase digital capacity with factor 3 Long-tail and communitybased content Switch from broadcast to on-demand (streaming) 10
The actions How to create more bandwidth Increasing the bandwidth, optimizing use of the spectrum Former upstream (Return) spectrum: 5-25 MHz For Internet and VoIP Telephony 11 Former downstream (Forward) spectrum: 87-450 MHz For ATV, idtv, Internet and VoIP Telephony
Action 1: upgrading the existing technology Increasing the modulation scheme from 64 to 256 QAM The more powerful the modulation algorithm, the more bits per Hertz you can add Result Status Cost/HP A better use of the existing spectrum: + 200 Mbps Already finished 0.2 12
Action 2: expanding the existing spectrum ExpressNet/Mach 3 phase 1: expanding the upstream spectrum Before After Result Status Cost/HP Increase of the upstream spectrum to 65 MHz Started in 2005, completed 40 13
Action 2: expanding the existing spectrum Mach 3 phase 2: expanding the downstream spectrum Before After Result Status Increase of the downstream spectrum to 600 MHz Started in 2007, completed by mid 2009 14 Cost/HP 16
Action 3: increasing interactive bandwidth Pulsar: node-splitting From 1400 homes per node to 500 homes per node Result Status Tripling the existing bandwidth, ready for Hybrid PON Started Q1 2008, 5 year program 15 Cost/HP 35
Action 4: more efficient use of bandwidth By introducing Euro Docsis 3.0 Channel Bonding Result Status Downstream up to 200 Mbps, upstream up to 120 Mbps Field trial second half 2008 16
Action 4: more efficient use of bandwidth By introducing Switched Digital Broadcast Result Status Expected gain: 200 Mbps, unlimited number of channels Field trial second half 2008 17 Cost/HP 4
The bandwidth race Cable versus DSL Cable widely outperforms all DSL technologies Speed in Mbps Cable = shared medium, separate spectrum Watching TV does not slow down your internet! 18 Distance between DSLAM an CPE in km
Research & standardization Cable Europe Cooperation & standardization Linked to CableLabs Determine the optimal roadmap for extending cable network capabilities to meet future service demand 19
Capital expenditures Capex-to-revenue ratio Capex-to-revenue ratio down to 22.7% in 2007 and expected to decrease further 200 As % of revenue 25.2% 24.5% 22.7% Continued downwards trend in cost per install 150 20.6% Increasing impact of STB Rental strategy 100 Network infrastructure capex to sustain RGU growth & product leadership 50 Continued network programs 0 2004 2005 2006 2007 20 Support capital Upgrade/rebuild Line extensions Scalable infra Commercial idtv rental CPE
Network upgrade programs Network upgrade programs remain stable and fit with long-term Capex guidance 100 90 80 70 60 50 40 30 20 10 0 2004 2005 2006 2007 2008 21 Support capital Upgrade/rebuild Line extensions Scalable infra Commercial idtv rental CPE
Conclusion Telenet is ahead of bandwidth evolution The HFC network architecture superior to DSL speed independent of distance enables rapid expansion Allows gradual evolution to Hybrid PON Bandwidth per homes passed 22 Time