Magyar Telekom technical approach for broadband access Peter Janeck CTO, Magyar Telekom Networks 2006 Conference New Delhi, November 6-9, 2006 01/12/2006, page 1
Hungary key economic and telco indicators S lov e nia H u n g a r y C roa tia U kra ine R o m a n ia M o ldo v a S e rbia Magyar Telekom area GDP/capita (EUR): 6 631 Population (thousand): 7 797 # of fixed lines (100 habitants): 36,1 Ózd Miskolc Szerencs Kisvárda B os nia - H e rz e go v ina M o n te n e g r o A lba nia B u lga ria M a c e d o n ia G re e ce Balassagyarmat Salgótarján Nyíregyháza Mátészalka Eger Sopron Szombathely Sárvár Pápa Győr Tatabánya Székesfehérvár Vác Esztergom Szentendre Gödöllő Budapest Biatorbágy Monor Szigetszentmiklós Gyöngyös Jászberény Szolnok Mezőkövesd Karcag Debrecen Berettyóújfalu Magyar Telekom already presents Magyar Telekom PoP Veszprém Cegléd Zalaegerszeg Nagykanizsa Keszthely Tapolca Marcali Kaposvár Siófok Dunaújváros Paks Szekszárd Kiskőrös Kiskunhalas Kecskemét Szentes Orosháza Békéscsaba Reported revenues grew by 5.4% to HUF 316 bn (EUR 1,154.7 m) in Q2/06 Reported EBITDA increased by 0.5% to HUF 124.7 bn EBITDA margin of 39.5%. Szigetvár Pécs Mohács Szeged Baja Emitel area 100 % owned by Magyar Telekom PSTN lines Q2/06 2.131.000 Down by 4.6% compared to a year ago ADSL lines Q2/06 417.791 More than 20% increase compared to Q4/05 01/12/2006, page 2
Market features specific to Hungary Low purchasing power and high telco/gdp spend Low Internet and PC penetration Low mobility premium and high fixed-mobile substitution Relatively small market size, strong fixed and mobile dependency GDP per capita purchasing power parity (EUR) 30 011 27 452 27 818 26 447 14 198 Germany UK Italy Austria Hungary Internet penetration of households 6% 31% 26% 16% 20% 12% 8% 2001 2002 2003 2004 2005 2006 2007 70 60 50 40 30 20 10 0 Mobile premium price decreased 107% 58 28 31 34 36 Average mobile min cost Fixed minute cost 37 35 2000 2001 2002 2003 2004 2005 Q I. 35 2005 Q II. 36 2005 Q III. 120% Mobile price premium 61% 100% 41% 50 48 19% 80% 43 3% 3% 38-9% -8% 36 60% 33 32 40% 20% 0% -20% Subscriber (thousand) Mobile has grown rapidly, fixed line penetration has slowed, voice has inevitably migrated 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Year Comparison of telecom spending as % of GDP 4,3% 3,1% 3,3% 2,3% 2,3% PC penetration of households 47% 43% 39% 35% 29% 23% 17% Fixed-mobile substitution (minutes, 2002-2005) Mobile** Fixed 3.2 bn. min. 4.7 bn. min. Fixed and mobile telecom market size (EUR billion) 15,5 18,8 17,4 33,6 28,2 26,1 Germany Austria UK Italy Hungary 2001 2002 2003 2004 2005 2006 2007 2002 2003 2004 2005 2,0 3,0 1,7 1,4 Germany UK Italy Austria Hungary 01/12/2006, page 3
Competitive landscape Core sources of competition Extended sources of competition Alternative integrated / cost synergy providers CATV Data Internet Alternative own network providers CATV Data Internet Mobile Pure-play mobiles Mobile PSTN resellers Fixed Pure-play VOIP providers Fixed 01/12/2006, page 4
Market leadership in a highly competitive environment Mobile Market Fixed Line Market 33,3% 21,4% 11% 9% 45,3% 80% T-Mobile Pannon Vodafone Magyar Telekom Invitel Others Broadband Market 19% 27% 54% Magyar Telekom UPC Others 01/12/2006, page 5
Main trends impacting MT s business. High-speed access IP network development Extend geographic coverage Broadband Wireless broadband access solutions with portable intelligent devices based on IP/NGN NGN Development Growing internet penetration and bandwidth demand Common strategy between T-Cabel and T-Com for offering enhanced services (Voip ( Voip,, IPTV, 3play) Mobility Mobile dominates voice market Merging T-Mobile and T-Com Hungary Moving forward fixed-mobile convergence and quadruple play Services Multimedia services for information, communication entertainment, etc 01/12/2006, page 6
Forecasted fixed line development 2 500 Lines (thousand) 2 000 1 500 1 000 500 Voice Total - Target is to stop decline of fixed voice decreasing PSTN/ISDN lines as the result of external effects competitors, mobile and VoInternet substitution ADSL broadband access NGN VoIP deployment on broadband access 0 2005 2006 2007 2008 2009 2010 01/12/2006, page 7
Broadband customer evolution Thousand subscribers 662.000 3rd Party + Corporate DSL 864.000 1 million Target Broadband access VoIP IPTV Gaming 535.000 239.000 336.000 26.000 11.000 116.000 60.000 19.000 143.000 40.000 2005 2006 2007 2008 Targeted broadband customers at the end of 2008: 1.000.000 VoIP, IPTV and broadband gaming customers are also broadband access subscribers MT VAS retail subscribers will take off and represent a significant portion of total customer base: in year 2008 dual and triple players will be 15 % and 22 % of total access 01/12/2006, page 8
3play service delivery platform MT s 3play offer: PSTN (later VoIP), ADSL (512k, 1M, 2M) IPTV with (44 channels + 400 films for VoD) 01/12/2006, page 9
Fixed and wireless BB access technologies Mobility Vehicle High Speed Vehicle Rural Vehicle Urban Flash OFDM IEEE 802.20 Wireless Walk Pedestrian Nomadic GSM GPRS EDGE UMTS* HSDPA* Mobile WiMAX* Wireline** Fixed Fixed Urban Indoor Personal Area DECT BlueTooth ADSL ADSL2+ VDSL2 WiFi* 802.11 Fixed WiMAX* LMDS GPON >>100 Mbit/s 0,1 1 10 100 Capacity [Mb/s] 01/12/2006, page 10
Applied technologies and BB coverage Availability of technologies Volume and breakdown ADSL2+ VDSL2 Eth.. SHDSL GPON WiMAX WLAN HSDPA 2006 2007 2008 2009 2010 In pilot phase Application 1 000 000 900 000 800 000 700 000 600 000 500 000 400 000 300 000 200 000 100 000 0 2007 2008 2009 2012 ADSL ADSL2+ VDSL2 GPON Broadband coverage Rollout plan: 1 133 settlements 2433 settlements T-Com service area T-Com BB service area at the end of y. 2006 Wireline BB solutions Conceptually taken as for wireline BB solution Settlements that cannot be served from business interest Developments funded with governmental or EU finance. Wireline or wireless solution is selected case by case. Cca. 1 000 settlements 1 000+ 300=1 300 settlements T-Com BB service area at the end of y. 2009 01/12/2006, page 11
DSL ranges and loop length distribution The focus is on the continued expansion of broadband access to exploit fixed network s broadband capabilities. Broadband development will serve objectives of IPTV (3play) and the multi-service NGN deployment. Mass market broadband demands will be served on the basis of ADSL and next versions: ADSL2, ADSL2+, VDSL2. 01/12/2006, page 12
Phases of wireline BB access network deployment FTTP (FTTH) FTTN (FTTC/B /B) Optical depth depth Near-term goal Present status Mid-term goal A Extended rézh zhálózat zat broadband részleges coverage cseréje Full optical solution Building optical transport nearer to the user aims - accomplishing coverage to white spots and to solve real estate limits; - increasing bandwidth demands by new DSL standards, ADSL2/2+/VDSL2 having shorter range Implementing DSLAMs at different nodes on a cable-route causes interference problems. Avoiding disturbances needs careful planning and spectrum management. FTT- Central Office Initial broadband coverage Extended bandwidth Technology In long term optical deployment towards user endpoints is the general direction. ADSL ADSL2/2+ VDSL2 ADSL ADSL2+ 1G PON EFM-Fibre Fibre 100M/1G P2P 01/12/2006, page 13
WiMAX is a new, promising wireless broadband access technology WiMAX can be used in the following frequency bands: license exempt frequency band (5.8GHz,expected in 2007) licensed frequency band (3.5 GHz) greater range, higher availability and quality, lower interference suitable for guaranteed services (QoS) High capacity: aggregated rate of one base station can supply about 700 ADSL equivalent subscribers Line of sight is not required ease and freedom of installation WiMAX is to be used where copper network is not available / not economical WiMAX Urban Suburban Rural UMTS/ HSxPA WiMAX implementations have to be harmonised with UMTS/HSxPA roll-out 01/12/2006, page 14
Economical considerations for WiMAX application WiMAX can be utilized economically in T-Com areas with low ADSL availability*; broader opportunity of usage in LTO areas but possibility of unbundling have to be taken account ADSL availability: penetration and conditions of copper network for ADSL implementation Source: WiMAX Forum Accumulated cash flow 40 WiMAX expected pay-back Accumulated cash flow [million Euro] 30 20 10 0 2007 2008 2009 2010 2011 2012 2013 2014 2015-10 -20 Operator Competencies GSM+Fixed UMTS+GSM+Fixed Fixed only New entrant -30 Year Source: EURESCOM P1554 (January 2006) ACF: Accumulated Cash Flow Despite of price drops, current prices of WiMAX equipment still prevent from positive short term business cases for incumbents. Current and estimated specific CAPEX is EUR 650-850/customer 01/12/2006, page 15
WiMAX -Technological system built-up & working services as March 2006 CPE Outdoor Unit with Integrated ANTENNA CPE Indoor Unit 1*ETH WiNET KLIP Sectorial ANTENNA 60 ; 90 ; 120 WiMAX Base Station Outdoor Unit WiMAX Micro Base Station 2 channels, DC CPE Outdoor Unit with Integrated ANTENNA CPE Outdoor Unit with Integrated ANTENNA CPE Indoor Unit 1*ETH Ethernet Voice Gateway IVD3 IVD4 WiNET WiTALK POTS 1.. 8 MT 3,5 Ghz GH freqency: CPE Outdoor Unit with Integrated ANTENNA CPE Indoor Unit 1*ETH CISCO 2650 3462,5-3476,5 MHz 3562,5-3576,5 MHz CAT 5 CPE Indoor Unit Networking Gateway Wireless WLAN 802.11g Ethernet VoIP IP PHONE 01/12/2006, page 16
Overview of ADSL Node and NodeB locations in the country Blue dots are the existing ADSL Nodes (2006) Red dots are the new ADSL Nodes (2010) Purple blocks are the NodeBs in y.2010 Conclusion: Access methods for BB connections should be selected case by case, area by area, based on economic considerations. Fix-mobile convergence for incumbents is key for future success. 01/12/2006, page 17