Europe Telecommunications Company Research

6 December 2006

Telecom for beginners 2007 Industry and technology primer
Guy Peddy Matthew Bloxham, CFA
Research Analyst (44) 20 754 58163 matthew.bloxham@db.com

Primer

Gareth Jenkins

Industry Focus

Research Analyst (44) 20 754 58490 guy.peddy@db.com

Research Analyst (44) 20 754 75849 gareth.jenkins@db.com

A real mixed bag: confusing simplicity! The telecom sector can appear confusing: the stakeholders are many and often have contradictory objectives. Balancing government/political designs, huge employee numbers, an increasing competition without limiting investment in an environment of technological evolution and substitution, can appear overwhelming. However, fundamentally the drivers of telecom business models are simple: penetration, customers and ARPU whilst balancing investment levels. Second edition: Revised and updated for 2007 and beyond This is the second edition of our Telecom for Beginners report, first published in January 2004. This comprehensive report aims to show how the telecom sector has developed over time. We focus on the influences on returns, and we examine some of the key issues for the future and we have consciously avoided drawing any company specific conclusions. Structured into discreet parts: Environmental/Technological/Reference There are three distinct sections to this report. In section 1 we examine the telecom business model, highlighting the relationship between penetration, ARPU and revenue, explain the history of telecoms over the past three decades and how the sector had ended up where it is, and assessed the wider telecoms environment showing how operators, equipment manufacturers and content providers interrelate. We study the evolution of the regulatory model, probably the single most important driver of pricing and competition industry, and finally we put telecoms into a wider industry context with some macro comparisons. We have, where relevant, attempted to use standard business analysis tools (such as the BCG matrix and Porters’ 5 forces) to highlight themes. In section 2 we look at some of the key technologies in the industry, starting with a basic explanation of the electro-magnetic wave (i.e. the signal), followed by an assessment of voice technologies (switching, PTSN and VoIP), mobile technologies 1G to 3G, HSDPA and Bluetooth) and broadband technologies DSL, fibre, WIMAX/WiFi and satellite). We also review trends in convergence (TV, IPTV, mobile TV, gaming and music). Finally, in section 3 we summarise basic statistical facts about each European country and a basic SWOT analysis of the industry. We also include those databases that are often forgotten: licence payments and types, European telecom IPOs, key events for large capitalized operators over the past few years, a breakdown of government ownership and a list of recent M&A transactions and finally we end the note with an ever-expanding glossary. Something for everyone This primer is aimed at everyone - those that have been involved in the sector for years and those who are new, and to generalists who like to occasionally dip in and out of the sector. It has been fun to write, but is by no means exhaustive, and we are always open to suggestions on how we improve it going forwards. Deutsche Bank AG/London All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research is available to customers of DBSI in the United States at no cost. Customers can access this IR at http://gm.db.com, or call 1-877-208-6300 to request that a copy of the IR be sent to them. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1

Pan-European Telecoms Team
Guy Peddy +44 20 754 58490 Carola Bardelli +39 0286379-708 Matthew Bloxham +44 20 754 58163 Gareth Jenkins +44 20 754 75849 Vivek Khanna +44 20 754 72905 guy.peddy@db.com carola.bardelli@db.com matthew.bloxham@db.com gareth.jenkins@db.com vivek.khanna@db.com

Sales Contact
Audrey Wiggin +44 20 754 50707 Jonathan Smith +44 20 754 74383 audrey.wiggin@db.com jonathan-d.smith@db.com

6 December 2006

Telecommunications Telecom for beginners 2007

Table of Contents

Section 1: Environmental.................................................................. 5 The telecoms business model .......................................................... 6 History of European telecoms ........................................................ 31 The telecoms environment ............................................................. 47 Regulation ........................................................................................ 57 Telecoms in a macro context.......................................................... 77 Section 2: Technological ................................................................. 82 Basics of Electronic Communication ............................................. 83 Technology: Traditional voice ........................................................ 86 Technology: Mobility....................................................................... 93 Technology: Bandwidth ................................................................ 105 Technology: Convergence ............................................................ 116 Section 3: Reference...................................................................... 129 Country: Austria............................................................................. 130 Country: Belgium........................................................................... 131 Country: Denmark ......................................................................... 132 Country: Finland ............................................................................ 133 Country: France ............................................................................. 134 Country: Germany ......................................................................... 135 Country: Greece............................................................................. 136 Country: Ireland ............................................................................. 137 Country: Italy ................................................................................. 138 Country: Japan............................................................................... 139 Country: Netherlands .................................................................... 140 Country: Norway ........................................................................... 141 Country: Portugal .......................................................................... 142 Country: Spain ............................................................................... 143 Country: Sweden ........................................................................... 144 Country: Switzerland .................................................................... 145 Country: US.................................................................................... 146 Country: United Kingdom ............................................................. 147
Deutsche Bank AG/London Page 3

6 December 2006

Telecommunications Telecom for beginners 2007

Appendix A: European telecoms SWOT ...................................... 148 Appendix B: European UMTS licenses ........................................ 149 Appendix C: AWS auctions........................................................... 152 Appendix D: License lives ............................................................. 162 Appendix E: European IPOs .......................................................... 166 Appendix F: European operator key dates .................................. 168 Appendix G: Government ownership .......................................... 183 Appendix H: European M&A......................................................... 184 Glossary.......................................................................................... 186

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Deutsche Bank AG/London

6 December 2006

Telecommunications Telecom for beginners 2007

Section 1: Environmental

Deutsche Bank AG/London

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Almost all elements of the telecoms industry follow the standard “S” growth curve in penetration as depicted in Figure 1. As we show later in our BCG matrix analysis (Figure 76) and as we also show in Figure 6. Figure 2: Key drivers of the product life cycle Phase of the life cycle Early stage Growth Maturity Source: Deutsche Ban Business model clarity Uncertain Certain Commoditization Competitive environment Limited Focused on growth Market share battle Pricing Premium product Aggressive deflation to drive penetration Commoditization 2006E Capex Capital intensive Customer/demand driven Replacement/maintenance Page 6 Deutsche Bank AG/London .mass market Premium product 40% 20% 0% .business focus 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Wireless Source: Deutsche Bank Broadand Four key drivers In Figure 2 we have attempted to describe. simplistically. much of the European telecoms sector is approaching the maturity stage in the product life cycle. competitive environment. but with significant price deflation and an increasing risk of substitution with the technologies that it has enabled (VoIP. The standard business model relies on a trade off between pricing. pricing and capex) of telecoms profitability at different stages in the product life cycle. Although there are clearly some business models that do not conform to these characteristics. penetration and capital intensity. IPTV etc). we believe most of them do. the effects on what we believe are the four key drivers (business model clarity. Figure 1: Penetration “S” curves in UK telephony 140% 120% 100% Wireless penetration Penetration slows .6 December 2006 Telecommunications Telecom for beginners 2007 The telecoms business model Penetration and ARPU Telecommunications is a very simple business complicated by regulation and politics. with broadband penetration offering a hope of growth.start of a market share battle 80% 60% inflexion .

In the modern world network exclusivity is disappearing as the equipment manufactures increasingly look to manage. Deutsche Bank AG/London Page 7 . As such.6 December 2006 Telecommunications Telecom for beginners 2007 Telecom cycles The telecom industry work in cycles (earning. mobile termination and mobile roaming tariffs: 2004 to ? Financial related TMT bubble: 1998 to 2000 European earnings downgrades: 2004 to ? European deleveraging: 2001 to 2004 The most important consideration currently is where is the growth driver for the European industry? Historically the telecom industry has found ways to invent growth drivers but currently the outlook is void. are entering the distribution place. In the past. such as Google. Figure 3: Re-inventing growth Figure 4: Cycles in telecom trends 3-7 years? Future growth + ve Historic growth US telecoms ? Time EU telecoms ? -ve Today Fixed Source: Deutsche Bank Mobile What is the next technology? Source: Deutsche Bank Evolving value chain One of the major drivers of the current change in the cycle is the revolution in the structure of the European telecom value chain. and outsourced industry R&D to equipment manufacturers (i. In order to respond telecom operators are investing more in R&D to deliver new products and are seeking to take control of distribution channels. operators focused on networks. such as: Market related: Mobile penetration and revenue growth: 1998 to 2004 Broadband penetration growth: 2004 to ? EU regulatory focus on unbundling. This is shown in Figure 3 and in Figure 4 we proffer a view on where European and US telecom industries are in their current cycle. and finally are investing in brand and market segmentation to more appropriately target the consumer. The outlook for the US operators appears to be more positive as the regulatory cycle has subsided and operators are more aggressively roll-out fibre and IPTV services. Ericsson etc). and distribution to third parties (such as Carphone Warehouse in the UK) and this meant that the consumer relationship was minimal.e. where there was an exclusivity of supply. and even own infrastructure. and other media operators and upstarts. both on-line and on the high street. rather than the industry growing at its historical rate (at greater than nominal GDP) expectations are that it grows at rates below nominal GDP in the coming years. Nokia. In Europe over the past 15 years there have been several cycles. revenue growth etc) and they tend to range from 3 to 7 years.

the mobile phone). X25. IPTV. There are however new services and products that offer hope for the future. either with an incremental pricing-based model (i. With growth slowing and many markets in the maturity phase of development new product innovations. Figure 6: European telecoms product life cycle Mobile SMS Mobile voice Broadband Instant messaging VoIP Mobile data Mobile TV. video telephony Traditional wireline – voice ATM. a flat rate package with specified or unlimited usage). are required. A substitutionary product merely deflates existing pricing whereas a revolutionary product opens up a new segment to the market that is incremental (i.e. In Figure 7 we have attempted to show Page 8 Deutsche Bank AG/London . especially in the mobile environment. such as telecoms operators offering TV services. leased lines Introduction Source: Deutsche Bank Growth Maturity Decline However.e. It is most often driven by usage. In Figure 6 we flag where we believe different products/services currently are in the product life cycle and we highlight the maturity of the leading revenue streams (mobile voice and traditional wireline). it should be noted that there is balance between those new services that are substitutionary and those that are revolutionary products. which could be additional services and products that either exploit existing infrastructure or open up new market environments. a charge is incurred for every call made) or through a bundle (i.e.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 5: The evolving telecom value chain R&D New focus of operator services Networks Equipment Distribution Consumer BSkyB Google Source: Deutsche Bank Usage drivers: New product innovation Average revenue per user (ARPU) is one of the most common measures of customer value in the telecoms world.

in most cases the premium charged for incremental services trends to be zero and as such the wireline business model is increasingly focused on access revenues. SMS. cable. As can be seen in Figure 8. Figure 7: Classifying new products and services Product/Service Mobile voice Mobile SMS Mobile data Broadband VoIP Instant messaging Mobile TV IPTV Video telephony Source: Deutsche Bank Categorization Revolutionary Revolutionary ? Substitutionary Substitutionary Substitutionary Revolutionary Substitutionary Substitutionary Affected business Traditional wireline access (PTSN and ISDN) Wireline and mobile voice Email. satellite) Wireline and mobile voice Wireline – all about access and traffic Access – growth and then substitution A wireline business model (either incumbent or new entrant) is fundamentally about securing the consumer access and then charging for incremental services. we have listed which other business areas have they affected. Unfortunately. For those that are substitutionary. Deutsche Bank AG/London Page 9 . voice Traditional TV (terrestrial.6 December 2006 Telecommunications Telecom for beginners 2007 which products and services are substitutionary to existing offers and which are revolutionary products. access line growth in OECD countries was consistent throughout the 1990s but more recently has started to decline as wireless competes as another form of access technology and broadband has reduced the demand for multiple access to single premises -broadband has replaced ISDN and increasingly the convergence with media is such that consumers require only a single TV/telephony access pipe rather than one for each service.

0% 500 4. There may.0% 300 Access channels* Source: OECD Growth In many counties access line penetration has stalled at around 50% to 60% of the population reflecting the fact that the average house has over 2 residents that can share and access. Page 10 Deutsche Bank AG/London .0% 1.0% 2.0% 400 3.0% 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 -2.0% 200 0. and is considerably more cost effective to deploy – the civil works in constructing wireline infrastructure can be excessive. be incremental demand if broadband penetration picks up. however. In certain countries.0% 600 5. as wireless is picking up the incremental demand for access technologies. access penetration remains lower and we doubt there will be huge long-term growth.0% 100 -1.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 8: Access lines (m) and growth (%) in OECD countries 700 7.0% 6. such as Mexico. but again there is an affordability issue in many of these under-developed countries.

000 10.000 -3.000 30.000 20.000 0 -1. ISDN has become more redundant and since 2005 DT has experienced access line erosion due to unbundling. with the launch of broadband.000 3. Using Deutsche Telekom as an example below (Figure 11).6 December 2006 Telecommunications Telecom for beginners 2007 Figure 9: Access lines penetration in OECD – 2004 100 90 80 70 60 50 40 30 20 10 0 United Kingdom Netherlands Belgium Czech Republic Denmark Slovak Republic United States Germany Portugal Canada Norway Korea Greece Italy Austria Australia OECD average Hungary France New Zealand Sweden Switzerland Finland Iceland Poland Ireland Turkey Japan Spain Luxembourg Mexico 2003 2004 100 90 80 70 60 50 40 30 20 10 0 % of population Source: OECD OECD average In Europe.000 5. However.000 Figure 11: Deutsche Telekom PSTN and ISDN access lines changes (000) 5.000 40.000 35.000 2. This ISDN growth replaced existing PSTN accesses.000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 PSTN Source: Company data ISDN Source: Company data PSTN ISDN Deutsche Bank AG/London Page 11 2005 - .000 25.000 -2. the pressure on access lines is explicit. the company grew ISDN access volumes in the 1990s as if offered higher basic internet dial-up speeds and was not regulated (only PSTN access fees and traffic tariff were regulated).000 15.000 4. which were also starting to suffer the effects of the growth in mobile penetration. Figure 10: Deutsche Telekom PSTN and ISDN access lines (000) 45.000 1.

Figure 13 also highlights how Deutsche Telekom has lost 50% market share in wireline traffic (since liberalisation in 1998).4 40. Figure 12: Share of outgoing mobile minutes (%) – 2005 Portugal Finland Austria France Spain Ireland UK Denmark Italy Greece Netherlands Sweden Germany 16.7 25.9 21.6 40.6 December 2006 Telecommunications Telecom for beginners 2007 Traffic – up.6 31. but this was combined with huge growth in ISP dial-up accesses.4 30. This has subsequently been impacted by the growth in broadband which has reduced dial-up ISP minutes and increased mobile substitution. Page 12 Deutsche Bank AG/London .0 42. which stimulated a dramatic increase in local call volumes. volumes in the industry have rolled over. But due to mobile.3 49.7 10 15 20 25 30 35 40 45 50 55 60 Source: Analysys In Figure 13 we show how the German fixed-line voice market grew between 1997 and 2002 due to liberalization and the growth in dial-up ISP traffic.8 55. down and down Over the past decade it is has been difficult to construct a view on the underlying trends in tariff as there have been many material one-off events.2 48.3 29.2 19. Liberalization of the European telecoms markets and consequential tariff deflation led to increased volumes. broadband VoIP. especially in markets where mobile is the dominant traffic device (such as Portugal and Finland as shown in Figure 12). Increasingly VoIP substitution is also depressing traditional traffic volumes.

access charges have increased and traffic fees have declined.000 15. In this scenario. has increased by 32% but traffic revenue has declined by 71% since 1998.000 1997 1998 1999 2000 2001 2002 2003 2004 2005 Access revenue Source: Company data Traffic revenue Deutsche Bank AG/London Page 13 .000 10. corporates) subsidised domestic telephony. but traffic fees were high.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 13: German market traffic growth (bn of minutes) 400 350 300 250 200 150 100 50 0 1997 1998 Other Source: Bundesnetzagentur Broadband. However. access fees were kept to a minimum in order to stimulate penetration.e. Figure 14: Access and traffic revenue at Deutsche Telekom’s domestic wireline business (Euro m) 25. and for philanthropic reasons.000 20. access revenue.000 5. with the charges in EV model to more accurately reflect the cost of provision. due to price increases and DSL growth. Indeed at Deutsche Telekom. heavy users (i. This also reflects a huge rebalancing of tariff that has been undertaken in Europe over the past decade. VoIP and mobile substitution and ISP growth Liberalisation and ISP growth 1999 2000 2001 2002 2003 DT AG 2004 2005 This shift in traffic revenue has led to a substantial cut in the importance of wireless traffic revenue in an operators revenue mix. Historically.

000 1. up from low single digits a decade ago. In total volume terms. due to handset price deflation and severe competition in Brazil as the market has consolidated.6 December 2006 Telecommunications Telecom for beginners 2007 Mobile – penetration is the king Universally the mobile technology has been accepted by the consumer.. The technology has grown such that penetration is now over 40%. This has materially enhanced the attractiveness of the emerging market mobile business model (hence the huge growth in markets such as China and India) Figure 15: Global digital mobile customers (m) Figure 16: Technology spread of mobile customers 3. Page 14 Deutsche Bank AG/London . has led to infrastructure price deflation. the Chinese market is driving the huge absolute. This growth has predominantly been driven by the near universal acceptance of GSM technology (other than in Korea and Japan) which has led to a consequential reduction in both capex and handset costs as shown in Figure 16.000 500 81% 1% iDEN PDC 2% 1% 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 H1 2006 Source: EMC and Wireless Intelligence Source: Wireless Intelligence Europe was the main driver of GSM growth (as the EV adopted it as a single technology in the early 1990s) as penetration is over 100%. Key to this business model is penetration (access or SIM). helped by consolidation. even if relative growth is less discernable.e. This has allowed mobile technology to be rolled out into emerging markets where ARPUs are low. The combination of competition in the infrastructure market. The scale of industry growth since the turn of the century across the globe has been outstanding. The US has grown on a more steady trajectory. but the growth in LatAm has been the most marked.500 3 GSM 3% CDMA 2.000 2. stimulating wireline penetration). once the price point of entry has been lowered (with advances in handset development. (especially with the entrance of Chinese vendors such as Huawei) and the belief that 2G technology will soon be replaced by 3G. infrastructure costs have declined for the benefit of the consumer) and in many emerging markets the wireless device has become the pre-eminent access technology (i.500 2% CDMA 1x GSM 9% CDMA 1x EV-DO TDMA 1% Analog 0% 1. and growth in GSM technology over the past three years (the USA also has CDMA technology). and advances in handset technology are such that ASPs (average selling prices) have declined as the cost of low-end handsets has reduced to $30 and below. and the industry growth becomes challenging when penetration growth slows down (as we depicted in Figure 1) and a market share battle materialises.

In Figure 19 we attempt to show how the European mobile business model is changing and the importance of the current wave of regulatory pressure which is driving down roaming. SMS.2x increase Reduction of 2/3rds 2010E Mobile Termination Non SMS data Outgoing voice SMS data Putting these trends into context. Figure 19: Changes in the European mobile business model (% of revenue) 100 90 80 70 60 50 40 30 20 10 0 2006E Roaming Source: Deutsche Bank estimates Assuming elasticity 1x 3. primarily due to stages in competition. development and regulatory pressures.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 17: Penetration of mobile by continent Figure 18: Geographic spread of digital mobile customers (2006E) Europe: Eastern 17% Europe: Western 22% 120% 100% 80% 60% 40% 20% 0% 2003 Europe Asia Pacific 2004 2005 Middle East + Africa North America 2006E China LatAm 2007E Middle East 6% USA/Canada 5% Asia Pacific 41% Africa 9% Source: Deutsche Bank estimates and company data Source: Wireless Intelligence However. in Figure 20 we have attempted to assess the drivers of the mobile business model in each region. across continents the mobile business model varies significantly. data (potentially) and mobile termination revenue. Figure 20: Comparing mobile markets (2006E) Europe Stage in product life cycle Competition Regulatory threat Source: Deutsche Bank USA Growth Controlled Negligible Japan Maturity Controlled Limited Asia Mixed (but mostly growth) Light Limited Middle East Africa Latam Growth Light Limited Growth Severe Significant Maturity Severe Significant Deutsche Bank AG/London Page 15 .

Page 16 Deutsche Bank AG/London . price declines and regulation. whereas it has been more stable in the US. a lack of usage and demand. the difference between fixed and voice pricing is indistinguishable and consequently mobile usage (and elasticity) continues to be positive. as there are spurts of 3G investment and then a slowdown to reflect. Figure 21: Western European wireless operators: Aggregated revenue and EBITDA growth (YoY) 40% 35% 20% Figure 22: Western European wireless operators: Aggregated capex growth (YoY) 30% 30% 25% 20% 15% 10% 5% 0% 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 -5% -10% Revenue Source: Deutsche Bank -10% 0% 1Q02 4Q02 1Q03 1Q04 2Q04 2Q02 3Q02 2Q03 3Q03 4Q03 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 10% 1Q06 -20% -30% EBITDA -40% Source: Deutsche Bank Whilst penetration is king to the mobile business model it is also important to stress ARPU. Due to a combination of penetration-mix effects. in many countries. This highlights how mobile pricing has converged in the UK closer to wireline levels over the past decade. but also reinforces the fact that mobile voice revenues are premium revenue earners. Figure 23: ARPU per month for UK operators (£) 180 160 140 120 100 80 60 40 20 0 Q1 1994 Q1 1995 Q1 1996 Q1 1997 Q1 1998 Q1 1999 Q1 2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006E Vodafone Source: Deutsche Bank estimates and company data O2 T-Mobile Orange In Figure 24 we compare the revenue yields in each market (mobile and fixed line) in the UK and the ratio between fixed and mobile pricing. price cuts and regulatory pressure. To compensate for this slowdown and in order to support returns and cash flow generation. elasticity and pricing. capex levels have been volatile but essentially flat. ARPU in Europe has contracted in recent years (we show the trends in the UK since 1993 in Figure 23). growth in the European mobile market has slowed down dramatically due to a combination of penetration peaking. In the US.6 December 2006 Telecommunications Telecom for beginners 2007 Over the past 20 quarters. This may also reflect different usage patterns and price points.

Other technologies. of course.0 0. cable and DSL. we show the relative penetration of broadband at the end of 2005 in most OECD countries and the split by technology.0 8. The lack of cable broadband in France.10 0.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 24: Comparative UK fixed and mobile pricing (GBp) 0. There are.0 4. but strength of cable in any market is driven by the legacy position of the technology and TV distribution (cable dominant in TV distribution in most of these countries) and the cable operators’ historical ability to fund a network upgrade from narrowband to broadband in the early part of the century.40 6.0 Mobile Source: Deutsche Bank estimates.30 0. OFCOM and company data Fixed Fixed/mobile ratio Broadband and regulation Broadband is a generic term describing the consumer demand for greater internet access speeds.60 0. WIMAX and satellite are either infant or are merely used to infill footprint where cable and DSL are uneconomic.0 10.00 Q1 1993 Q1 1994 Q1 1995 Q1 1996 Q1 1997 Q1 1998 Q1 1999 Q1 2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006E Page 17 12. exceptions such as the Netherlands.70 0. and is predominantly a battle between two technologies.20 0. Deutsche Bank AG/London . In Figure 25. Generally. such as WiFi. Germany and Italy is as stark as is the scale of cable in the USA and Canada.0 0.50 0.0 2. North America and Korea have a strong cable broadband presence and the EU is led by DSL.

In the US.0 United Kingdom Netherlands Belgium Czech Republic Denmark Slovak Republic United States Germany Portugal Norway Canada Korea Italy Hungary Austria Australia New Zealand Sweden Switzerland Finland Iceland Luxembourg Mexico Greece France Poland Ireland Turkey Japan Spain DSL Source: OECD Cable Modem Other In Figure 26. as effectively two competitive networks control access pipes into homes and businesses. technology-based competition is removing the need for regulatory body to set wholesale DSL tariffs. From a regulatory perspective.0 10.0 0. we reinforce the fact that the EU is dominated by DSL. where DSL is 2x the size of cable and in Figure 27. we show the scale of relative cable and DSL broadband in the OECD. and increasingly so in the Netherlands.0 20. Figure 26: Broadband access technology (2005) .OECD Other 7% Figure 27: Broadband access technology (2005) – EU 15 Other Cable Modem 16% 2% Cable Modem 31% DSL 62% DSL 82% Source: OECD Source: OECD Page 18 Deutsche Bank AG/London . the strength of cable has huge implications.0 25.0 15. regulators are forced to maintain wholesale access in order to compensate for the fact that there may only be a single access pipe connected to a home or business.0 5. Where DSL is dominant.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 25: OECD broadband penetration (as % of population by technology) 2005 30.

email communication remains the most popular use on the internet (both in a broadband and narrowband world). In particular. music and film downloading. broadband growth will depend upon the success of non-PC access technologies (such as television and mobile). but as shown in Figure 28 there remains growth if only to fully penetrate current internet (PC) demand. as we showed earlier. Thereafter. Ofcom 7% 16% 17% 21% 22% 38% 40% 38% 46% 57% 60% 72% 67% 82% 84% 91% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Narrowband Deutsche Bank AG/London Page 19 . However. to date broadband is following the “S” curve trends of other technologies. and is also a substitute for traditional voice telephony. such as Google and Party Gaming. However.6 December 2006 Telecommunications Telecom for beginners 2007 Assessing the long-term penetration of broadband is difficult. Figure 28: Internet subscribers in total OECD (m) 300 250 200 150 100 50 0 1999 2000 2001 2002 2003 2004 2005E 2006E 2007E Total Internet subscribers (including broadband) Source: OECD Broadband subscribers As we show in Figure 29. Figure 29: Applications used by broadband versus dial-up Real time gambling/trading Chat & voice calls Gaming Music or film downloads Banking Making purchases General surfing e-mail 0% Broadband Source: Deutsche Bank. we would highlight the growth in business models. broadband has also opened up new markets. which have been spawned by broadband growth. such as gaming.

0 12.0 1998 1999 2000 2001 2002 2003 2004 2005E Time Warner/Disney Source: Datastream Google Source: Deutsche Bank Telecoms and PayTV: Converging through fear What is convergence? Convergence is an overly used generic term. preferably where they are unregulated (as they would be new entrants). to increase consumer stickiness.0 50.000 Q1 2002 Q3 2002 Q1 2003 Q3 2003 Q1 2004 Q3 2004 Q1 2005 Q3 2005 Q1 2006 Q3 2006 8. Increasingly technology agnostic consumers. Technology evolution dissolving barriers to entry.0 10. Page 20 Deutsche Bank AG/London 2006E . Telecoms and PayTV operators are increasingly fearful of their existing business models. As a consequence telecoms and PayTV operators are chasing the residential consumer’s wallet and both industries are therefore being consumerised. In turn this is leading to a charge to “own the consumer” and the operators are seeing other business areas.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 30: Value transfer to new media: Aggregated market cap of Time Warner and Disney compared with Google ($m) 200.000 14.0 2.0 4.000 100. This expansion of strategy is being driven by: Expectation of declining returns.000 Figure 31: Growth in internet gaming (revenue ($bn)) 16. Historic returns driven by network differentiation. and are therefore executing the “prisoner’s dilemma” – entering each others markets with a marginal cost pricing model.0 150. which are historically technology dependent. which is hiding an underlying rationale: “fear” – the opportunity cost of inactivity and business model evaporation.0 6.

as telecoms operators price at a more marginal cost and exploit the imbalance between traditional and IPTV content rights – triple pay offerings are now priced at Euro35. currently not offered by cable operators. such that around 60% of all customers are dual bill. this framework is changing dramatically: Pricing for premium services reduces dramatically. The major decision maker in the home. has shown a willingness to accept single electricity and gas providers in the UK.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 32: Current landscape of communications technology and the consumer Figure 33: Future landscape of communications technology and the consumer Pay TV Free to air TV Broadband Mobile Fixed voice Source: Deutsche Bank Consumer Consumer Consumer Consumer Consumer Consumer Consumer Consumer Consumer Consumer Pay TV Free to air TV Broadband Fixed voice Mobile Source: Deutsche Bank Consumer Consumer Consumer Consumer Consumer Consumer Consumer Consumer This convergence of distribution channels for voice and data (content) is dramatically increasing the consumer choice as we highlight in Figure 34. The move to digital TV will require every European television consumer to acquire some kind of digital receiver (DTT box. invariably an adult. For example television in the UK has three existing distribution channels – terrestrial free to air. satellite and cable. With telecoms operators entering the media sector. Offer simplicity – a single provider for services in the home. Offer integrated services with mobility. but all three have coexisted for the last one decade as there was sufficient differentiation. cable or IP TV). Deutsche Bank AG/London Page 21 . which means telecoms operators could benefit from this transition. satellite.

We would expect this imbalance to narrow at the next auction in 2008. Is broadband really different? We have identified five key drivers of the change in consumer activity that is affecting the way media operators think about the internet. With ADSL 2+ the downstream capacity will increase to “up to 18 Mbit/s” in the UK A measure of convergence will be the pricing of terrestrial TV and IPTV football rights. This was aimed at showing why current moves are different from the “super-highway” nonsense of the late 1990s. In a converged world where the technology differential is non-existent there should be limited difference. In Figure 35 we summarise these drivers.5 Mbit/s upstream ULL “Unbundled local loop” Telephone Exchange DSLAM 120-200 digital channels Low capacity phone line return Cable Operator Satellite Operator TELCOS INTERNET CONTENT Source: Deutsche Bank NB.5 Mbit/s + voice telephony D O S D L E M M 2-way wireline/ wireless link Cable Modem Set Top Box 2-way internet + voice telephony Up to 10 Mbit/s downstream Up to 0. Page 22 Deutsche Bank AG/London Uplink of TV broadcast signals Downlink (1 -way) . For example on the 1995 sale of Bundesliga rights the winning consortium paid Euro420m per annum for the traditional terrestrial TV rights whereas we estimate Deutsche Telekom paid around Euro40m for the IPTV rights per annum. offer examples and also relate them to the telecoms space.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 34: Broadband fixed connections into the home – The UK example annels 00 ch ) 400-5 nk (1-way li Down Digital Terrestrial TV (DTT) 50-70 channels (1-way) Broadband (ADSL) Up to 8 Mbit/s (downstream) Up to 0.

facilitate access rather than infrastructure access). traffic) rather than in content aggregation.e. coupled with new applications being released by portal operators and other Internet service providers. To compensate for this threat media companies are increasingly looking to expend their service offerings and distribution platforms. Furthermore. Deutsche Bank AG/London Page 23 . This in turn will lower pricing power as media companies have smaller direct audiences. These. The moves by telecoms operators into broadband access and rollout of IPTV will create higher capacity networks.e. For example in the UK an unbundling strategy opens media companies to a c. by passing TPS and Canal+. The media sector is pricing in a massive shift to online media operators. As an example of the devaluation of content aggregation in early 2006 France Telecom signed an agreement to access Viacom content directly. This is leading to a scenario where value lies in monetizing customer traffic rather than content exploitation or connection. but may stimulate operators to acquire business in this space in the longer term as they may offer increased access to both services and customers Google and its roll out of music downloads. stimulated by the EU’s aggressive deregulatory policy agenda. suggesting that historic distribution franchises are being eroded and value is being generated by businesses that provide gateways (i. as it protects existing revenue but also breaks into unregulated business areas Less relevant to operators. Value will remain in content ownership as a driver of generating consumer interest (i. Historical silo-based oligopoly competition will slowly break down and with it the high margin characteristics of the sector will be threatened. Operators sense a demand for integrated services and so are diversifying their technology exposure – clearly the integrated operators have an existing competitive advantage Not relevant to telecoms operators but Vodafone and Google are now cooperating to limit exposure Not relevant currently. this has since stimulated their merger in order to improve their competitive strength. Portals will increasingly become conduits for information and services currently provided by media owners. will bring about a steep change in online functionality. web-hosting. operators will focus increasingly on services as they try to circumvent "independent" gateway providers The key driver of existing market expansion and is being stimulated by declining access prices as competition increases.£6bn market with limited capital investment and limited only by consumer’s willingness to churn and a desire for a strong marketing push. but given network advantages are diminishing. VoIP etc Consumer demand 10pp growth in EU penetration in 2005 Piracy Content owners seeking direct customer relationships Robust on-line business models Source: Deutsche Bank Google is not a "dot.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 35: Drivers of increased economic scale of online activity Driver Investment in network expenditure Online applications Examples BSkyB's entrance into ULL and DT's FTTC roll-out Implications for telecoms operators This is the primary focus of operators. as a longer-term threat to medium distributors. telecoms operators are increasingly purchasing content either on fixed or on mobile platforms.com" era business model PayTV: Moving offline to online? The rollout of broadband networks by telecoms operators is radically changing the European media distribution landscape.

000 Mobile Consumer Telephony Residential TV Subsciption Licence fee TV Adspend Figure 37: Relative market size of telecoms and media in the Germany (annualized 2005E) (Euro m) 14.000 30.000 14.000 10.000 2.000 4.000 8.000 40.000 10.000 4.000 4. Company data Source: Deutsche Bank.000 12.000 Consumer Telephony Licence fee Subsciption Residential Adspend Mobile TV TV - Figure 41: Relative market size of telecoms and media in big five European markets (annualized 2005E) (Euro m) 80.000 12.000 Consumer Licence fee Telephony Subsciption Adspend Residential Mobile TV TV - Figure 39: Relative market size of telecoms and media in Italy (annualized 2005E) (Euro m) 16.000 2.000 4.000 Mobile Consumer TV Subsciption Telephony Residential Licence fee TV Adspend Source: Deutsche Bank.000 Consumer Telephony Subsciption Residential Mobile TV - Source: Deutsche Bank estimates Source: Deutsche Bank estimates In Figure 42 we attempt to highlight the potential winners and losers in the new media distribution world.000 2.000 2.000 8.000 6.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 36: Relative market size of telecoms and media in the UK (annualized 2005E) (£m) 14. Page 24 Deutsche Bank AG/London .000 12.000 60.000 10.000 8.000 4. OfCOM.000 6.000 50.000 70.000 6.000 10.000 6.000 12.000 Consumer Telephony Subsciption Residential Licence fee Licence fee Mobile Adspend Adspend TV TV TV - Source: Deutsche Bank estimates Source: Deutsche Bank estimates Figure 40: Relative market size of telecoms and media in Spain (annualized 2005E) (Euro m) 12.000 8.000 6.000 2.000 14.000 10. Company data Figure 38: Relative market size of telecoms and media in France (annualized 2005E) (Euro m) 16.000 8.000 20. FNA.000 10.

film and video. Source: Deutsche Bank Small mobility premium. It will lead to a reduction in the power of content aggregators and potentially reduce developer distribution costs). there is further risk to high street volume contraction and price declines. but strong internet brand such as Amazon.6bn by Paramount who intends to sell off its rights library which could fetch $850m to $1. Deutsche Telekom acquired the IPTV rights to the Bundesliga for 1/10th of the traditional rights costs although the offering will be comparable. distribution and brand strength key With the value of networks diminishing it will be increasingly difficult for operators to sustain superior returns through network advantages. Where this spend is targeted is difficult to judge (i.e. Capital intensity Most of the other areas of telecoms we have discussed so far are macro revenue growth drivers. Therefore. In particular. The consumerisation of media and telecoms will result in a greater level of marketing activity. Note. Examples: Increasingly this is Google's domain. and the slowdown since 2000. content that secures the consumer eye and wallet. we would anticipate significant increases in advertising and promotional spend. It will also lead to the abandonment of the generic mobile strategies (all operators currently target all segments of the market with similar networks and services) and technological differentials. in what has historically been a capital intensive business. there are cycles in capex. it is important not to forget the importance of capital expenditure. potentially music labels. Traditional high street media retailers In a converged world with the ability to download content and with mass market video-on-demand. Examples: Premiere's business model is requiring immediate surgery. in their area football is a killer application in Europe and is something that US telecoms operators will struggle to replicate. Advertising agencies With the proliferation of new business models (IPTV for example) and the increase of the cost of “must have content”. Losers Content aggregators Network providers will increasingly circumvent the telecoms aggregators and source content directly from the developers.0bn).6 December 2006 Telecommunications Telecom for beginners 2007 Figure 42: Winners and losers in a media world Winners Content developers Why? The expansion of competing distribution technologies will increase the value of quality content (i. Examples: Dominant IP network and IPTV operators. high street billboards or TV or press advertising) but there may be an increase in the total budget. Industry analysts have long talked about the integration of media and telecoms (“infotainment”) and increasingly telecoms operators across Europe are launching TV over broadband strategies (entitled IPTV or TV over DSL). BBC. TV content producers such as ITV. IPTV platforms Entry costs are minimal as the network capability is a core element of any telecoms network and the access to content is cheap as there is limited current demand. Admittedly. print. Similarly Premiere will have to reposition its business model and this will require continued brand investment. Also with operators such as Orange turning their retail distribution into communication centres. This represents a very cheap option in our view. diversification of service. as shown in Figure 43.e. but others such as Sogecable and BSkyB are at risk through potentially losing rights or significant price inflation as other distributors (cable. this reflects the growth in European mobile penetration and the subsequent focus on balance sheet recovery post 2000.music. telecoms) seek to compete. Examples: Sports rights licensors. Deutsche Bank AG/London Page 25 . such as European integrated operators. film studios (such as DreamWorks which has recently been bought for $1.com could benefit. Examples: The German cable operators will aggressively publicise their Bundesliga offerings as DT will publicize its IPTV offerings. which highlight the growth in telecoms infrastructure during the 1990s. Also aggregators that previously monetized an exclusivity of content through a specific distribution platform or with premium channels are at risk. Content gateways Cross media platforms that act as bucket shops to all types of media . we would expect them to offer on-site access to content that is downloadable into CDs and DVDs (replicating the home environment for those that do not have a PC).

6 December 2006 Telecommunications Telecom for beginners 2007 Figure 43: Telecommunications infrastructure investment for OECD ($bn) and growth rates 300 40% 30% 250 20% 200 10% 150 0% -10% 100 -20% 50 -30% 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Growth 2003 2004E -40% OECD Total Source: OECD Capex/sales is often assessed as the best measure of capital intensity. we prefer EBITDA/capex multiples. European and Japanese operators over the past 15 years. In Figure 44 we show the capex/sales ratios of US. and in Figure 45 the implied EBITDA/capex multiples. As such. but it works best in a steady state environment and fails to reflect the marginal return on capex. Figure 44: Comparative capex/sales ratios 60% 50% 40% 30% 20% 10% 0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E NTT US EU BT Vodafone DoCoMo Source: Deutsche Bank estimates and company data Page 26 Deutsche Bank AG/London . which highlight the range (from past to current levels) in the European capex cycle relative to the US.

Deutsche Bank estimates Deutsche Bank AG/London Page 27 .0 1. The volatility in Europe was also driven by the faster mobile penetration in the late 1990s and the requirement for the year 2001 to 2003. Usage patterns differ depending on customer and tariff profiles. which often leaves networks underutilized (breeding marginal cost business model).5 2. Interestingly only 48% was actual network investment and a further 19% was backbone transmission-related. In Figure 47 we show our best estimate of the usage profile of T-Mobile UK and O2 UK. Indeed the key determinant of capex is peak capacity. Figure 46: Vodafone capex analysis for FY05/06 (£5bn) Other operations 2% Figure 47: T-Mobile UK and O2 UK – comparison of usage patterns 100% 90% 80% Other mobile 31% 3G network 36% 70% 60% 50% 40% 30% 20% 10% 0% 2G network 12% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Transmission 19% O2 Source: Deutsche Bank estimates TMO Source: Company results announcement.5 3.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 45: Comparative EBITDA/capex multiples 3.5 1. have much residual capacity.0 2. we believe.0 0. How operators spend capex lacks clarity but Vodafone has offered details of its capex spend for its March 2006 financial year as shown in Figure 46. highlighting the fact that networks are built for two peak hours in the day.5 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E NTT US EU BT Vodafone DoCoMo Source: Deutsche Bank estimates and company data Indeed the greater consistency of the US relative Europe can be interpreted as offering greater certainty.

we have shown in Figure 50 the performance of the European telecoms sector over the past 14 years and categorized the sector into three periods: utilities. which broadly show the trend of declining multiples as the sector has converged with general market multiples.0 1992 UK liberalisation and move to digital mobile technology EU earnings downgarde cycle Technology bubble Focus on cost control and deleveraging 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E P/E ratio Headline (x) Source: Deutsche Bank Total Headline Earnings Growth (%) In order to contextualize the environment. Page 28 Deutsche Bank AG/London .0 -20.0 40.0 20.6 December 2006 Telecommunications Telecom for beginners 2007 Earnings and P/E trends In Figure 48 we highlight the trends in earnings and P/E ratios in Figure 48.0 -40.0 EU liberalisation 80.0 0.0 60. Figure 48: Cyclicality of earnings and market enthusiasm 100. bubble and uncertainty (we explain these definitions in more detail in Figure 51).

regulatory convergence Figure 50: Telecoms sector (.SXKP) over the past 14 years 1. as are operating cash flow margins. in order to put the sector into context. we attempt to compare the overall telecoms sector with other sectors. mobile growth. substitution. EBITDA/capex ratios for the sector as a whole are comparable with other sectors and the wider market. but the relative capital intensity (capex/sales) has declined significantly over the past few years following the end of the wireless boom.200 "BUBBLE" 1.000 800 600 400 "UTILITIES" 200 "UNCERTAINTY" 0 05 January 1992 05 January 1993 05 January 1994 05 January 1995 05 January 1996 05 January 1997 05 January 1998 05 January 1999 05 January 2000 05 January 2001 05 January 2002 05 January 2003 05 January 2004 05 January 2005 05 January 2006 05 July 1992 05 July 1993 05 July 1994 05 July 1995 05 July 1996 05 July 1997 05 July 1998 05 July 1999 05 July 2000 05 July 2001 05 July 2002 05 July 2003 05 July 2004 05 July 2005 05 July 2006 Source: Deutsche Bank and Reuters Telecoms: Financials relative to the total market In the following charts (Figure 51 to Figure 56). broadband explosion. The messages are clear however. broadband in infancy Mobile maturity. fixed line declines. margins are high.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 49: Key characteristics of each period Utilities Bubble Uncertainty Source: Deutsche Bank Monopolies in fixed line. mobile in infancy. suggesting a greater “financial risk” to the telecoms sector. retail regulation M&A expansion. Over time telecoms earnings multiples have converged but indebtedness has increased significantly. Deutsche Bank AG/London Page 29 . commoditization of pricing.

0x 25.0x 0.5x 1.0 2.5x 2.0x 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005E 2006E 5.5x 0.0x 15.5x 20.0x 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005E 2006E 2007E 2008E 50% 40% 30% 20% 10% 0% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005E 2007E Telecommunications Source: Deutsche Bank estimates and company data ALL SECTORS EUROPE Telecommunications Source Deutsche Bank estimates and company data ALL SECTORS EUROPE Figure 55: Converged P/E multiples 40.0 1.5x 3.0 0.0 1.0x 35.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 51: High relative EBITDA margins Figure 52: High relative operating cash flow margins 60% 50% 40% 30% 20% 10% 0% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005E 2006E 2007E 30% 25% 20% 15% 10% 5% 0% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005E 2006E 2006E 2007E Telecommunications Source: Deutsche Bank estimates and company data ALL SECTORS EUROPE Telecommunications Source Deutsche Bank estimates and company data ALL SECTORS EUROPE Figure 53: Comparable EBITDA/capex ratios Figure 54: But declining capital intensity 3.0x 1.0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E Telecommunications ALL SECTORS EUROPE Telecommunications Source: Deutsche Bank estimates and company data ALL SECTORS EUROPE Source Deutsche Bank estimates and company data Page 30 Deutsche Bank AG/London 2007E .5x 10.0 0.0 2.0x 2.0 Figure 56: Shift in relative indebtedness 3.5x 30.0 0.

communication was a haphazard affair. but then national and international connections were made that facilitated long distance communication.Nova Scotia Canada US-Bermuda Eastern end Scotland France England France Spain France England France Spain Germany France GB. of channels Western end 48 Newfoundland 72 Newfoundland 276 New Jersey 345 New Jersey 2112 Rhode Island 10. widely considered to be the father of the telephone. the post office still owns most of the property that houses the telecoms operators’ switches.Newfoundland . Transatlantic services started in 1927 using two-way radio. which has since been expanded by many multiples again.000 40.840 2 x 2. but the first trans-Atlantic telephone cable was laid in 1956. Deutsche Bank AG/London Page 31 .USA . carrier pigeons. and was carried out using basic tools such as paper. with TAT-1.USA .5 Gbit/s Transatlantic 64 x 10 Gbit/s Transatlantic 80 1.000 Rhode Island 10. With the laying of TAT-8 in 1988.5 Gbit/s 3 x 140 Mbit/s Final No. Originally. couriers.USA x 2 .6 December 2006 Telecommunications Telecom for beginners 2007 History of European telecoms Telecoms over the ages: Pre-1980 Before Alexander Graham Bell.000 80. Date(s) 1956-1978 1959-1982 1963-1986 1965-1987 1970-1993 1976-1994 1978-1994 1988-2002 1992-2004 1992-2003 1993-2003 1996 2000 1961-1986 1974-1992 1994 1989 Initial No. With developments in electronic communications and with advances in cable technology. D. Indeed. NL. noise.000 2 x 565 Mbit/s 2 x 565 Mbit/s 12 x 2. FR GB.500 New Jersey .USA x 2 . before the privatisation wave of European telecoms in the 1990s most governments had to separate out into different legal entities the telecommunications business from the post office. Indeed in some countries such as Austria. of channels 36 48 138 138 845 4. providing 36 telephone circuits. telecoms was deemed a “philanthropic” investment predominately lead by governments and often combined with the national postal operators (therefore building a complete communication monopoly). The first experimental satellite was commissioned in 1962 (Telstar 1). beacons. the Scotland born scientist and inventor. networks were developed. Initially these were local area networks. the 1990s saw the widespread adoption of systems based around optic fibres.000 4.USA . Figure 57: A history of transatlantic cable Cable Name TAT-1 TAT-2 TAT-3 TAT-4 TAT-5 TAT-6 TAT-7 TAT-8* TAT-9 TAT-10 TAT-11 TAT-12/13 TAT-14 CANTAT-1 CANTAT-2 CANTAT-3 PTAT-1 Source: Deutsche Bank and Wikipedia.USA . which introduced a 10-fold increase in capacity. most national calls were switched manually by operators but in the 1960s there was the first international direct-dial call between the UK and USA. DK Scotland England Europe Ireland-UK In Europe. semaphore and flags. FR.

It was also the first move to immediacy. AT&T (known as “MaBell”) agreed to divest its local exchange service operating companies. the fax machine was deemed a revolution in the industry in the mid-1970s as it stimulated demand for incremental lines and volumes. It was also the first mover of the telecoms industry outside voice. AT&T was formed through the amalgam of different geographically diverse US telecoms companies and it was not until the 1920s that the concept of universal services was developed.6 December 2006 Telecommunications Telecom for beginners 2007 In the USA. was a relatively simple. Department of Justice anti-trust suit against the telephone monopoly. in return for a chance to go into the computer business. with penetration growth slowing. was born. the industry was deemed “utility like” and. as can be seen. Figure 58: European telecoms in context: Application of BCG matrix – 1980 STAR ? Business growth rate High European traditional wireline CASH COW DOG Low US traditional wireline High Relative position (market share) Source: Deutsche Bank Low The 1980s: Embryonic This decade was the start of the telecommunications evolution. as we know it today. AT&T Computer Page 32 Deutsche Bank AG/London . As the PC and the videorecorder were growing in importance dramatically. In Figure 58 we use the Boston Consulting Group matrix to highlight the relative development of European and US telecoms. BT was privatized in the UK and mobile technology. Indeed. In 1980. In the US. Under the terms of a settlement finalized on 8 January 1982. AT&T’s monopoly was broken up.S. Break-up of AT&T The break-up of AT&T was initiated in 1974 by the U. the structure of the telecoms industry changed forever. and it started to challenge the postal services as a distributor of hard copy information.

Mobile phones began to proliferate through the 1980s with the introduction of "cellular" phones based on cellular networks. and the abbreviation of it ("Natel") persists as Swisscom Mobile’s brand today. TACS. At this time analogue transmission was the technology in all systems. Networks were constructed by multiple base stations located relatively close to each other. Returning to the BCG matrix in Figure 59 we note that by 1990 the telecoms environment is becoming busier and a new growth driver has arrived with mobile technology. although at this stage there were question marks over the long-term penetration rate the technology would achieve. continued to run all its long distance services. part of Cable and Wireless. In the early days. In 1982 BT's monopoly on telecommunications was broken. AT&T. It was announced in 1980. although it lost some market share in the ensuing years to competitors such as MCI and Sprint. C-Netz. Mobile phones were large with a battery pack the size of a briefcase and were designed for permanent installation in cars (hence the term carphone). Indeed mobile was expected to be a premium product aimed at the corporate market. BT privatization In 1981 BT became a state-owned corporation independent of the Post Office. the name of the big car-based phone models was "Nationales Autotelefon". RTMI. and as such. which in turn was eventually acquired by NTL. was not particularly private. AMPS. In late 1982 the Nordic countries started an NMT network with automatic roaming between countries and became pioneers of the technology (hence Nokia and Ericsson’s dominance today). Towards the end of the decade the handsets were becoming “transportable" but still briefcase size. Mercury proved only moderately successful at challenging BT's dominance as in 1997 the Mercury brand was abandoned and it was amalgamated into Cable and Wireless Communications (the UK cable division of the group).6 December 2006 Telecommunications Telecom for beginners 2007 Systems. was the first mobile telephone “brick”. Deutsche Bank AG/London Page 33 . and protocols established for the automated "handover" between two cells when a phone moved from one cell to the other. Mercury Communications was Cable and Wireless’ UK national telephony business (formed in 1981). reduced in value by about 70%. First generation (cellular) mobile telephony The Motorola DynaTAC 8000X. with the sale of more than 50% of its shares. and Radiocom 2000) which later became known as first generation (1G) mobile. BT’s privatisation occurred in 1984. AT&T's local operations were split into seven independent Regional Bell Operating Companies (RBOCs) known as "Baby Bells". Cable and Wireless privatization and Mercury Communications Cable and Wireless was one of the early privatisations by the Thatcher government in the UK. it was an NMT system manufactured by Svenska Radio Aktiebolaget (SRA). The weakness with analogue mobile technology was (and still is in many markets) easy to eavesdrop. Effective 1 January 1984. In Switzerland. achieving a maximum of 10% penetration. with the grant of a license to Mercury Communications. In September 1981 the first cell phone network with automatic roaming was started in Saudi Arabia. with Cable and Wireless privatised in November 1981. which received approval in 1983. there were multiple differences in analogue technologies (NMT.

In Europe the later years of the decade were dominated by IPOs (national incumbents and new entrants) and liberalization. "Competitive Local Exchange Carriers" (CLECs). US Telecommunications Act of 1996 The Telecommunications Act of 1996 was the first major overhaul of United States telecommunications law in nearly 62 years. The Act removed barriers which had previously prevented telecoms from competing head-to-head. grew to compete with the incumbents (also known as "ILECs" or “Incumbent Local Exchange Carriers”). However. but no one envisaged the growth in the industry towards the end of the decade. amending the Communications Act of 1934.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 59: European telecoms in context: Application of BCG matrix – 1990 STAR ? European mobile High US mobile CASH COW DOG European traditional wireline Low US traditional wireline High Relative position (market share) Source: Deutsche Bank Low The 1990s: Revolution At the beginning of the 1990s the telecoms sector was slowly evolving from its utility-like reputation. The general intention of the Act was deregulation and promotion of competition. which introduced local loop infrastructure competition. leaving the following telecommunications companies in the US: Page 34 Deutsche Bank AG/London . Deregulation and the new entrants provided consumers and businesses choice in local phone service. Over time. the bubble-fuelled large scale M&A as operators chased scale. the passage of the Act has resulted in several major telecommunications mergers. footprint and in some cases anything that had either “com” or “data” in its description. the most significant events in the decade were the dramatic pick-up in mobile penetration growth rates and the equity market bubble. A new group of telephone companies. In the US there was the Telecommunications Act in 1996. In particular.

SBC was created when. the number of telecomsrelated IPOs have been small. This also reflected the liberalization of European telecoms in 1998 and the launch of many smaller start-up businesses. Bell Atlantic previously merged with NYNEX (1998) and MFS. Verizon Wireless was the analogue of Bell Atlanta mobile and Vodafone’s Air Torch business. Verizon: Verizon acquired MCI in 2005. but in 1999 and 2000. European liberalization Most European markets were liberalized en masse on 1 January 1998. Bell Atlantic and GTE merged to form Verizon. Deutsche Bank AG/London Page 35 . BellSouth: AT&T and BellSouth are in the process of merging. but effectively the delay merely just deferred the introduction of competitive pressures. which are both focused on the growth in broadband. In 2000. as Southwestern Bell. it acquired Pacific Telesys. Cingular. and Teleport Communications. Qwest: Qwest was founded in 1996 and merged with US West in 2000. AT&T and BellSouth are already connected through their wireless joint venture. In some cases delays were generally awarded to allow the incumbents to complete the tariff rebalancing processes. AT&T previously acquired TCI. limited primarily to eircom (also for the second time) and Belgacom. Media One Cable. Figure 60: European market full liberalization dates Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland UK Source: Company data Jan-98 Jan-98 Jan-96 Jan-98 Jan-98 Jan-98 Jan-01 Jan-00 Jan-98 Jan-98 Jan-98 Jan-00 Oct-98 Jan-93 Jan-98 Mar-91 A wave of European IPOs As the equity markets motored in the late 1990s and offered a glut of capital. start-up or early stage new entrants dominated the list.6 December 2006 Telecommunications Telecom for beginners 2007 AT&T: SBC acquired AT&T in 2005 and adopted the name AT&T. Since Orange (for the second time) was IPOd in 2001. and Iliad and Telenet. The trend was kicked-off with incumbent privatizations. the Southern European operators still benefit in 2006 from these early liberalization delays we believe. Ameritech and SNET. Indeed. both of which were IPOd in 2004. but there were a few exceptions as shown in Figure 60. there was a wave of telecoms IPOs.

especially in 1992 to 1995 when the first generation analogue operators converted into digital. Its aim was to build a network which would provide easy global connectivity to multinational corporations. Company data and GSM Worlds Associations The start of the M&A frenzy Worldcom bid for MCI – the M&A catalyst: In June 1994. This Page 36 Deutsche Bank AG/London . This alliance progressed further on 3 November 1996 when the two companies announced that they had entered into a full merger agreement to create a global telecommunications company to be called Concert plc. BT and MCI launched Concert Communications Services which was a $1bn joint venture between the two companies. Figure 62: An explosion in European mobile operators (service launched per annum) 14 12 10 8 6 4 2 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E Source: Deutsche Bank estimates. which would be incorporated in the UK with headquarters in both London and Washington DC. and GSM 1800 spectrum became available.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 61: IPOs per annum New entrant IPOs 16 14 12 10 8 6 4 2 0 1994 1995 1996 1997 1998 1999 2000 2001 2003 2004 2005 Privatisation of incumbents Privatisations/ broadband Source: Deutsche Bank estimates and Bloomberg European mobile licenses There was a proliferation of 2G operator launches in the 1990s with the auction/beauty contest of many third and fourth licenses.

Olivetti. Hutchison Telecom (including 3 UK. but was consistently unsuccessful. and AirTouch Paging) to form Verizon Wireless. it was never a financial success. PrimeCo Communications. The merger proposition gained approval from the European Commission. Then in September 1999. The globalisation trend NTT DoCoMo invested heavily outside Japan. Vodafone bought German conglomerate Mannesmann AG to get control over the mobile network operator Mannesmann Mobilfunk GmbH & Co KG. which would have. MCI accepted the Worldcom bid and BT pulled out of its deal with a generous severance fee of $465m. Vodafone’s moves to increase footprint. DoCoMo had significant sums invested in KPN. France Télécom bought out the other partners. where there were cross shareholdings.8bn in Sprint at the same time. but in late 2000 the two Boards eventually fell-out due to both BT and AT&T’s excess debt levels and management changes. the number 2 in Italy. Deutsche Bank AG/London Page 37 . saved billions of Euros in the UMTS license auction process of 2000 and 2001. KTF and AT&T Wireless. the US Department of Justice and the US Federal Communications Commission and looked set to proceed. BT also bought from MCI its 24.4bn. The conglomerate was subsequently broken up and all manufacturing-related operations sold off. DT invested Euro367m and both DT and France Télécom invested $1. Deutsche Telekom and Sprint Corporation (each owned 1/3rd) and France Télécom and Deutsche Telekom both owned 10% in Sprint. operating the "D2" network in Germany and control of Omnitel. and in 2001 it was taken over by Equant. BT switched to AT&T as its global partner. The proposed transaction broke-up Deutsche Telekom’s partnership with France Télécom . In April 2000 after a long battle. BT made even more money when it sold its stake in MCI to Worldcom in 1998 for £4.159m on which it made an exceptional pre-tax profit of £1. With the purchase of MCI by Worldcom. Telefónica and KPN – squashed by political meddling: In early 2000 Telefónica and KPN were discussing a merger. on 1 October 1997 Worldcom made a rival bid for MCI which was followed by a counter bid from GTE. However. In January 1999. Its aim was to build a network which would provide easy global connectivity to multinational corporations. formed in 1996 as a joint venture between France Télécom.133m. with hindsight. and unfortunately had to write-off or sell-off all of these investments. BT and MCI launched Concert Communications Services. The deal is one of the largest in European history and is Germany's first hostile takeover by a foreign firm and valued Mannesmann’s equity at Euro181. in a cash-stock transaction valued at $62bn (to be rebranded as Vodafone AirTouch) and after AirTouch had received a bid from Bell Atlantic. but was squashed by political interference. wireless operations (Bell Atlantic Mobile. who themselves have since been bought by France Télécom. Concert was split into two: North America and Eastern Asia went to AT&T. In 2000. in June 1994. It also avoided being mired in the later Worldcom scandal. BT's remaining Concert assets were merged into Global Solutions group and Concert disappeared. AirTouch Cellular.9% interest in Concert Communications making Concert a wholly-owned part of BT. the rest of the world to BT. Hutch in India). Global One and implosion: Global One was an international voice and data telecommunications carrier. but was trumped in a wave of nationalistic frenzy by a bid by the Italian conglomerate. Although Global One built an extensive international network. Deutsche Telekom and Telecom Italia – a deal that got away: In 1999 Deutsche Telekom and Telecom Italia tried to merge.S. Concert with MCI. AT&T and then implosion: As mentioned above.6 December 2006 Telecommunications Telecom for beginners 2007 would have given BT an entry into the US market and MCI a global reach. Bell Atlantic and Vodafone Airtouch agreed to merge their U. AirTouch agreed to be acquired by Vodafone.

AirTouch. After a total debt and equity investment of $4. including Alcatel. Page 38 Deutsche Bank AG/London . and was named from the element iridium. except a division called AUCS. European mobile was now a huge growth sector and “data” was the new buzz word.3bn.3bn. The system was originally designed to have 77 active satellites. Iridium: The Iridium satellite constellation is a system of 66 active communication satellites and spares around the Earth. Globalstar Telecommunications Ltd. the company predicted the system would launch in 1998. Swisscom joined in 1993 with an initial investment of CHF100m and Telefónica followed. Deutsche Aerospace. The IPO price of $20 per share was equivalent to $5 per share after two stock splits. the two sponsors announced formation of Globalstar with financial participation from eight other companies. Iridium communications service was launched on 1 November 1998 and went into Chapter 11 bankruptcy on 13 August 1999. listing assets of $570m and liabilities of $3. as we know it today. raised $200m from its initial public offering on NASDAQ. which has atomic number 77. The stock price eventually fell below $1 per share. Broadband. Operators were increasingly breaking down their business models by technology in order to highlight multiple growth drivers and the BCG matrix was ever more crowded. ICO filed for Chapter 11 bankruptcy protection in August 1999. and Qualcomm. but emerged (as New ICO) in May 2000. was in its infancy and the valuation (equity market) bubble created the M&A cycle that was to continue in the coming years. which was sold to Infonet (since bought by BT). Hyundai and Vodafone. The Globalstar project was launched in 1991 as a joint venture of Loral Corp. The satellite bubble: Telephony access where there is no demand Globalstar: Globalstar is a low Earth orbit satellite constellation for telephone and lowspeed data communications. ICO: Founded in January 1995. on 15 February 2002 Globalstar Telecommunications filed for Chapter 11 bankruptcy. ICO Global Communications. At that time. In February 1995. Again focusing on the BCG matrix as shown in Figure 63 the outlook for the Telecoms sector had changed dramatically by the end of 1990s. On 24 March 1994. The stock price peaked at (post split) $50 per share in January 2000. and the stock was delisted by NASDAQ in June 2001. planned to build an MSS constellation in medium earth orbit (in two 45°-inclined orthogonal planes). In 1998 the owners decide to sell off and dismantle the Unisource business during 1999.6 December 2006 Telecommunications Telecom for beginners 2007 Unisource and implosion: Unisource was set up in 1992 by KPN and Telia.

with the leading pan-European operators spending between Euro15.0bn was invested in 3G licenses in Europe.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 63: European telecoms in context: Application of BCG matrix – 2000 STAR ? US mobile Emerging market mobile High European/US broadband European mobile CASH COW DOG European traditional wireline Low US traditional wireline High Relative position (market share) Source: Deutsche Bank Low The 21st century The past decade has been dynamic for the sector. The UMTS bubble The beginning of the decade was marked by the UMTS license frenzy. Starting at the tip of the technology bubble. In Figure 268. then a smaller portal (“hype” bubble) and then the super expensive M&A. France Télécom) to the edge of financial disprove.1bn and Euro21. BT. which necessitated recapitalisation. which has only recently abated. However the change has come at huge costs: firstly there was the European UMTS license bubble. TeliaSonera. Footprint and geographic breadth became buzz-words. Deutsche Bank AG/London Page 39 . Figure 269 and Figure 270 which start on page 149 we provide a full breakdown of all European UMTS licenses. and finally technology differentials are evaporating leading to simpler business models. especially in the UK and Germany. expectations have changed 180 degrees and pessimism now prevails.1bn and leading many (KPN. Overall a total of Euro105.

Vizzavi – a wireless portal joint venture between Vivendi and Vodafone aimed at provision of mobile content and information services. Indeed Google has taken over the space originally targeted by these mobile portals. 10.000 UK. 34.027.000 0 France Telecom Deutsche Telekom Telefonica Vodafone 32% 8% Germany. These portals were expected to drive an explosion in critical data revenues.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 64: Leading UMTS license spends (Euro m) Figure 65: Breakdown of UMTS spend (Euro m) Other. 8. As shown in Figure 66.000 20. volumes and the ability for the technology to not only deliver a call but to also hand over calls from one call to another. the license auction and the technology development were separated from reality such that there was a four year delay (2001 to 204/05) between most operators receiving a UMTS license and launching services.490. Operators jumped onto the internet bandwagon and launched online portals such as T-Motion and Vizzavi. prices.292. Figure 66: European UMTS launch profile (y-axis – operator launches per year) 35 30 25 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006E 2007E Source: Deutsche Bank estimates.000 15. T-Motion – a joint venture between T-Mobile and T-Online but eventually consumed within T-Mobile. the launch focus only kicked off in 2004. 12. 25.000 5. 48% Italy.141. but were years ahead of themselves and too technology specific. This was due to a combination of handset quality. 50. Company data and GSM Worlds Associations The portal bubble Running hand-in-hand with the UMTS bubble was the “mobile portal” bubble. It was established as part of the Page 40 Deutsche Bank AG/London . 12% Source: Deutsche Bank estimates and company data Source: Deutsche Bank estimates and company data Unfortunately.

apart from Vizzavi France which was absorbed by SFR. for the leading operators.7m. This acquisition has given Telefónica additional footprint in the UK.0bn. This lead Vodafone to divest Orange as there was a conflict of interests in the UK) in a deal with an equity value of Euro40.7bn) acquisition of the O2. with France Télécom and Telefónica at the fore of these moves over the past year. At the time of the announcement (31 July 2000) the equity consideration was valued at $50.3bn (Euro43. Telefónica previously owned a green-field UMTS license but pulled out of its 3G venture (Quam) in 2002. along with Southern regional carrier Powertel.9bn). These groupings are Deutsche Telekom.5bn (Euro54. In September 2002. we have highlighted all controlled assets in deep grey and associate assets in light grey. Telefónica and Vodafone. France Telecom. operators are slowly returning to the theme of footprint breadth. the asset was re-branded T-Mobile USA and has been a success story in the intervening years. In May 2001.7bn (Euro25.2bn enterprise value) and then merged it with existing mobile operations (France Telecom’s key asset was Itineris in France). Deutsche Bank AG/London Page 41 . with debt of $5.6 December 2006 Telecommunications Telecom for beginners 2007 overall Mannesmann acquisition by Vodafone (as a way of Vodafone gaining Vivendi’s support for the Mannesmann bid). Wireless footprint expansion After a few years of respite. was acquired by Deutsche Telekom. Deutsche Telekom and VoiceStream: VoiceStream Wireless was spun off from Western Wireless in 1999 and promptly acquired regional GSM carriers Aerial Communications in the Midwest and Omnipoint in the Northeast. The acquisition of O2 has re-energised the debate in Europe over the value of inter-country consolidation. the European market is starting to condense into four groupings and there is likely to be interest if assets become available in Italy and France in the future. itself purchased by Vodafone shortly after. VoiceStream. In 2002 Vodafone acquired all of Vizzavi for £142. As result. In the footprint maps below. The super expensive M&A France Télécom and Orange: In 2001 France Télécom acquired Orange plc (which had been acquired by Mannesmann AG. Republic of Ireland and Germany and marked a return to Germany for the group. Telefónica and O2: On 26 January 2006 Telefónica completed its £17.

6 December 2006 Telecommunications Telecom for beginners 2007 Figure 67: KPN Figure 68: OTE Source: Deutsche Bank Source: Deutsche Bank Figure 69: Telefónica (including O2) Figure 70: Telekom Austria Source: Deutsche Bank Source: Deutsche Bank Page 42 Deutsche Bank AG/London .

6 December 2006 Telecommunications Telecom for beginners 2007 Figure 71: Telenor Figure 72: TeliaSonera Source: Deutsche Bank Source: Deutsche Bank Figure 73: T-Mobile (Deutsche Telekom) Figure 74: Vodafone Source: Deutsche Bank Source: Deutsche Bank Deutsche Bank AG/London Page 43 .

where premium valuations were placed on anything with “. Page 44 Deutsche Bank AG/London . We have based our analysis on the company’s investor presentations at Rio de Janeiro in 2001 and at Valencia in 2006. the Czech Republic and the UK.com” or “data” in its description. despite not owning any other wireline infrastructure outside Italy. as operators attempted to benefit from the technology bubble. Focus on technology differentials evaporating At the start of the century each operator differentiated its business model by technology. Telecom Italia is also active in the French and German broadband markets (having bought AOL Germany in 2006). but most operators have focused on offering bundled services and therefore offer DSL services where there are existing mobile assets. Spain. Deutsche Telekom appears to be focused predominantly on wireless in their geography. We also show how the company is evolving following recent changes in management structure following the merger of Telefónica with Telefónica Móviles in mid-2006. Belgium.6 December 2006 Telecommunications Telecom for beginners 2007 Starting to see DSL footprint expansion There is also an increasing move to expand internationally into the DSL space. France Télécom has launched an integrated mobile/DSL strategy in 2006 in France. but interestingly do have broadband assets in France and Spain. As an example. Telefónica O2 has a bundled strategy in Germany. in Figure 75 we depict how Telefónica’s disclosure has changed over the years and how the emphasis on different business areas has changed. Telefónica has regularly been one of the most progressive operators in terms of reporting and business segmentation. Poland and the UK.

Although complete separation of ownership has yet not occurred across the sector following the UK’s Telecommunications Strategic Review (TSR). this convergence is lowering barriers to entry and consequently reducing returns. Deutsche Bank AG/London Page 45 . which competes with other telecoms providers for customers. Theoretically. in September 2005 BT signed legally-binding undertakings with Ofcom to create Openreach.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 75: Telefónica’s evolving management structure and business model Rio 2001 Telefónica de España Telefónica Data Terra Lycos Valencia 2006 Telefónica de España From 27 July 2006 Telefónica de España Emergia Telefónica Latinamericana Telefónica Latinamericana Telefónica Latinamericana Telefónica Moviles Telefónica Moviles O2 Cesky Telecom O2 Atento Telefónica Media Endemol TPI Source: Company data Atento Atento Divested or to be sold Separation of wholesale and retail businesses There has been a constant debate over much of the decade as to whether an incumbent wireline business should be split (physically. Not only is there a convergence of technologies and services. treating the rest of BT on an equal basis as other operators. However. economically and legally) into a wholesale business and a separate retail business. Returning to the BCG matrix Convergence is likely to become the most commonly used word in the telecoms space. but also of regulation. and is currently essential to the unbundling process in the UK. highlights the uncertainty in the growth prospects of the industry in the future. As we picture the BCG matrix in 2006 in Figure 76. which is responsible for managing the UK access network on behalf of the telecommunications industry. Openreach manages the UK's telecommunications infrastructure. the scarcity of business in the “?” box.

6 December 2006 Telecommunications Telecom for beginners 2007 Figure 76: European telecoms in context: application of BCG matrix – 2006 STAR ? Emerging market mobile High Business growth rate European/US broadband US mobile CASH COW DOG European mobile Low European traditional wireline US traditional wireline High Relative position (market share) Source: Deutsche Bank Low Page 46 Deutsche Bank AG/London .

It lists the key players in the chain. where users are often subsidised hundreds of Euros on new handsets. Equipment providers are thus categorised as network component providers (Alcatel.6 December 2006 Telecommunications Telecom for beginners 2007 The telecoms environment Telecoms value chain In this section we investigate the structure by which telecoms operators deliver services to their customers. and user equipment. and many replace these every year. such as cabling and routers. especially if operators can get access to these shortly ahead of their competitors. Siemens. or end-user equipment providers (Nokia. LG. such as video and 3G data services. as is normal for PCs. optimisation and upgrade services Basic application platform providers User application providers Provide content to be viewed or used while communicating using various applications They include: Content creators Content aggregators Content distributors Owners of the basic network on which the voice or data traffic is carried May provide services to end consumers themselves Use their own or another network operator’s network to provide services to customers in a particular region Source: Deutsche Bank Players in the telecoms value chain Equipment providers (e. Samsung. Ericsson. Motorola). especially for mobile handsets. such as modems and phones. End-user equipment is sometimes sold directly to the users by the manufacturers or their agents. generally with a subsidy of up to 100%. which enable users to use the network. and each of them participate in the telecoms industry. Palm. LG. which constitute telecoms networks. Deutsche Bank AG/London Page 47 . Sony Ericsson. Sharp. Nokia. but it is also often supplied by telecoms operators. Figure 77 summarises the players and in Figure 87 we have adapted Michael Porter’s five forces model to the telecoms space. Operators may sometimes self-brand the equipment. network maintenance support. Figure 77: Telecoms Services Value Chain Equipment Providers Network Component Providers End-User & Distribution Equipment Providers Test Equipment Providers Implementers Application Providers Content Providers Network Operators Service Providers Software and hardware integrators Also provide consulting. Having sought-after handsets is a useful differentiator. The most significant end-user equipment relationships are probably in mobile. Qualcomm).g. Alcatel. and newer handsets will be more suited to accessing the latest services. Sony Ericsson) Equipment can be divided into network equipment.

In the wireless infrastructure market. although this may expose large firms to greater competition by driving down start-up costs. Chinese presence in telecoms equipment is large and growing. especially as leading US operators have migrated from TDMA. as component costs and manufacturing enhancements have led to the development of low-end handsets that have enabled the economic explanation of emerging markets (LatAm. In Figure 79 we show the market shares of the leading handset manufacturers. and it is worth noting the growth of LG and the recent improvement at Motorola (due to the Rzar). likely to the benefit of those buying it. The peak in 2001 was due to the explosion in Page 48 Deutsche Bank AG/London .000 800 600 400 200 European growth Emerging market growth Figure 79: Leading handset vendors market share trends 40% 35% 30% 25% 20% 15% 10% 5% 0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 1997 Nokia 1998 1999 2000 2001 2002 2003 2004 LG 2005 2006E 2007E Sony-Ericsson Motorola Samsung Source: Deutsche Bank estimates sand company data Source Deutsche Bank estimates sand company data In Figure 78 we show the enormous growth in handset volumes in recent years. Basic hardware can become commoditised. This is detailed in Figure 83. there has been a recovery in growth due to the combination of expanding emerging 2G markets (Asia. Africa and China). India. Africa. Going forward. we expect WCDMA to become increasingly significant as the pricing of 3G handsets decline. Figure 80: 2006E handset volumes by technology CDMA 17% WCDMA 11% US Dig ESMR 1% PDC 0% GSM 71% Source: Deutsche Bank estimates As with much general manufacturing.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 78: Wireless handset volumes (m of handsets) 1. We also highlight in Figure 80 the continued dominance of GSM technology.200 1. LatAm) and 3G investments in Europe and Japan.

000 10. where the number two and three mobile handsets suppliers aggregate to just under 40% market share. design and scale are more important drivers in the handset space than infrastructure market.000 20.000 5. but secondly. This reflects the fact that brand. Firstly.000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E Nortel 9% Motorola 10% Nokia Lucent 10% Alcatel 9% 13% Source: Deutsche Bank estimates and company data Source: Deutsche Bank estimates and company data Figure 82 shows two of the most important characteristics of the global wireless market.000 10. the leading priorities of Ericsson (similar to Nokia in the handset market).000 50.000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E Europe Asia Pacific North America South America Middle East & Africa Source: Deutsche Bank estimates and company data Deutsche Bank AG/London Page 49 .000 15.000 30. Figure 83: Growth in each region of global wireless infrastructure market (US$ m) 25.000 40.6 December 2006 Telecommunications Telecom for beginners 2007 both penetration and networks in European mobile and the early rollout of 3G in Japan and networks in China. the fragmented nature of the rest of the market.000 60.000 20. Figure 81: Global wireless infrastructure market (US$ m) Figure 82: 2005E market share of wireless infrastructure market Siemens 12% NEC 7% Ericsson 30% 70. and importantly.

Page 50 Deutsche Bank AG/London . using hardware components provided by the equipment manufacturers. In Figure 84 and Figure 85 we show the DSL market share by device and revenue.g. Most implementers offer additional services relating to planning. a focus between 2001 and 2005 in Europe on debt reduction and advancements in software/compression techniques which have added life and bandwidth to traditional infrastructure. Huawei (which has only been a noticeable player for three or four years) has introduced a new level of competition compounding the fact that significant overcapacity remains. Cisco. This has been due to a contraction of the number of buyers. which according to Telenor has deflated by around 20% per annum between 2002 and 2006. Figure 84: Global DSL aggregation (ports) market share 2005 Huawei 16% Siemens 7% Figure 85: Global DSL Aggregation (revenue) market share 2005 Alcatel 37% Alcatel 26% Huawei 13% Siemens 5% Ericsson & Marconi 5% Tellabs 4% Others 39% Source: Infonetics Ericsson & Marconi 6% Lucent 6% Source: Infonetics Others 36% The other major element to remember in the infrastructure market is the significant annual deflation in equipment pricing. Nortel) Implementers (aka ‘network integrators’ or ‘turnkey solution providers’) build networks for the network operators. and upgrading networks. managing. Lucent. with the importance of the alternative carrier sector.6 December 2006 Telecommunications Telecom for beginners 2007 In the wireline sub-sector. Figure 86: Telenor’s view of telecoms equipment prices 100 80 60 40 20 0 2002 Source: Company data 2003 2004 2005 2006E Implementers (e. The key in the future will be the development of a next-generation network (IP). highlighting Alcatel’s continued outperformance and the price discounts offered by Huawei (16% market share of parts but only 13% share of the revenue). as well as software from application providers.

Yahoo) Apart from simply providing networks. Basic platforms are underlying sets of instructions. The application providers supply software to everyone else in the value chain.g. to e-mail applications. Price elasticity in most markets.Stabilising Increased handset competition. Disney.g.g. but just a connection to an internet customer. Apple. IP versus switched. Government/regulatory policy key Threat of Substitutes = High Competition Market specific Significant exit costs Capacity = bête noire Fixed versus mobile. These include technologies such as Java.g. from the level of operating systems. Microsoft. which can be outsourced to Application Service Providers (ASPs). Service providers control the user experience to varying degrees: e. This is often done by providing rich content. Increasingly. telecoms operators are looking to differentiate offerings with superior user experiences. Offerings are more and more popular with many customers. on top of which other software may be built. User applications perform actual computing tasks. Media versus telecoms. Low switching costs. Content providers produce a massive variety of products. Content providers (e. Reuters. starting at free. 3G) but to date most has been information-based content and the explanation of entertainment-based content in its earliest stages by telecoms Deutsche Bank AG/London Page 51 . High switching costs – the risk of reverse actions Barriers to Entry . like Windows. Sun) Telecoms services require huge amounts of software. a company might provide both handsets and front-ends to mobile customers. Companies need not operate their user applications. Google. which is divided into two main categories: basic platforms and user applications. Regulatory drive. Returns on wireline and wireless wholesale declining.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 87: Possible application of Michael Porter’s five forces into the telecoms space Supplier power . which may or may not be chargeable. and may draw users to telecoms services (e. telecoms can get involved in how people use them. High churn – reduction is key Buyer Power = Varied Scale is key. with various pricing structures. Homogenous products. Low buyer concentration Source: Deutsche Bank Application providers (e.High Spectrum allocation limited in mobile. Access to equity capital harder. Chinese entry into infrastructure (fixed versus mobile).

but some may also provide origination to service providers with no network.g. content must have value (i. B Sky B. This model has been employed in the UK in the utility and raid sectors.g. With the increasing expectation of convergence going forward. as distribution sites are dismantled and more and more access technologies fight over the ownership of the consumer “pipe”. so all service providers must pay for others’ capacity. Deutsche Telekom. but for exclusivity. and its network access business. MSN. Content providers are broadly divided into content creators (e. Google). In Figure 88 we highlight the mobile TV value chain. where the content providers are even more important. so that one may own a network of mobile base stations. and network operators rent out capacity to other operators. to varying degrees. content providers are likely to play an ever more important role. However. All will charge interconnection and termination fees. In Figure 89 we show the relationship between network (wholesale) and service providers (retail) in the UK wireline market and we have also attempted to depict the influences (and forces) on incumbent operators (former monopolists) in Figure 90. Exclusive content can give service providers an advantage against competitors. Increasingly. Page 52 Deutsche Bank AG/London . In reality.6 December 2006 Telecommunications Telecom for beginners 2007 operators. as yet no telecoms operator has physically separated its network for its service provider (retail business). Figure 88: The DMTV value chain Alcatel Nokia Ericsson IPWireless R&S DiBcom T. but network ownership is a matter of degree.g. and BT is the most advanced in this regard with open reach. Disney. for example. Source: Deutsche Bank 3G/2G Cingular SKT O2 Orange etc.g. France Télécom ) Network operators own and run the networks which carry voice and data traffic. in order to split some of the legacy market dominant positions of incumbents. football rights). Those who have evolved from former government monopolies are termed incumbents. EMI). BT. Most important network operators are also service providers. content aggregators (e. and content distributors (e. regulators are seeking to separate networks and service providers. Network operators (e.I Qualcomm etc Testing kit Chipsets IP Encapsulators Muxes Software MobiTV Sky Yahoo Google Canal + NTL Arqiva Modeo MediaFlo TowerCast YLE Content Providers Content Aggregation Equipment in Network Broadcast Network DVB-H/TDMB/FLO Consumer Terminal Mobile Network Universal Fox Disney Premier League Endemol etc. much of operators’ traffic travels beyond their home network. ITV). but rely on someone else’s network to link them together.e.

6 December 2006 Telecommunications Telecom for beginners 2007 Figure 89: Network and service providers in the wireline market CPS: Tele2. this part of the value chain was changing regularly and we doubt the structure depicted in Figure 89 will be evident in five years. it could be argued that the wholesale DSL business shown above in Figure 89 has already started to morph into the infrastructure space. Deutsche Bank AG/London Colt Page 53 . AOL RETAIL Cable & Wireless UK Cable Energis WHOLESALE BT Wholesale Other MARKET SIZE Source: Deutsche Bank estimates Clearly. Indeed. Carphone Warehouse BT Retail Wholesale DSL – Tiscali.

service providers buy inputs from the rest of the value chain. Redundancy of infrastructure Source: Deutsche Bank Service providers (e. LRIC). Wholesale pricing (ROCE. In other European markets there are a far greater number of MVNO’s. KPN) Service providers provide the telecoms services to their customers.g. Tesco Mobile. Service providers tend to be the main recipients of revenue from users. where there were over 35 launched by 30 June 2006. Drives scale of capital intensity Equipment Vendors Infrastructure. Page 54 Deutsche Bank AG/London . Vodafone. the clarity of the picture is starting to get fuzzy. Generally. pricing and competition Regulation Incumbents Retail market power. and may be integrated with these suppliers. and therefore some of the capacity they sell.g. software and handsets Power. but not always (e. although not exclusively. such as in Germany. content providers often bill customers themselves.g. Open network access.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 90: Influences on an incumbent operator Access to Capital Defines targeted Returns. Substitution. It should also be highlighted that H3G has outsourced its network management to Ericsson and so even here. They will usually (e. Political influence Threat of Technology Inter-modal Competition.g. In Figure 91 we show the relationship between mobile service providers and network owners. e. Virgin Mobile) own networks. Vodafone).

Dixons. operators may run their own retailers. for example.g.g. Carphone Warehouse) Telecoms operators use advertising to bring customers to them via phone or internet.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 91: Network and service providers in the wireless market MVNO’S – Fresh. some of these relationships are starting to break. which owns over 700 shops in France and Cosmote. bought the number one Balkan retailer (Germanos). Increasingly. France Télécom. as seen by Vodafone UK withdrawing its contract products from Carphone Warehouse in October 2006 and going exclusively with Phones 4 U Figure 92 summarises all players’ relationships to each other. Deutsche Bank AG/London Page 55 . such as Carphone Warehouse. but in mobile. Retailers run both websites and physical shops. easyMobile MNVO’S T-Mobile MVNO’S –Tesco . many customers come through third-party retailers.Tesco MVNO’s RETAIL BT MOBILE WHOLESALE Vodafone Virgin Orange H3G O2 MARKET SIZE Source: Deutsche Bank estimates Retailers (e. and take commission on selling products to customers. Additionally. e.

towers and other network hardware and test equipment Apps for platforms for content development such as web page development using HTML etc. PDA. By selling content directly to the customer. switches. DSL Transceivers. Content Providers Content providers could have two business models: 1. and generally many service providers are also network operators and content providers to some degree. supplied by equipment providers. cables. Selling the content by having tie-up with the service providers 2. build networks for network operators. Dial up modems or Cable modems depending in the technology used Network implementers. Source: Deutsche Bank Page 56 Deutsche Bank AG/London . to users. Any link in the chain may be integrated or semi-integrated with any others.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 92: Telecoms services relationship chart Application Providers Set of rules or protocols for communication of devices Routers. and these networks are then used by service providers to deliver services and product from content providers. Service providers could also offer exclusive content Implementers Network Operators Equipment Providers Service applications for various services Service Providers Equipments used in services distribution Service providers could sell their offerings through a distributor or directly to customers Service Distributor End User Mobile phones. wired telephone sets.

for networks to connect. Although with a wave of Human Rights and Data Protection Acts in Europe in recent years. in an industry where scale matters. Access can be deemed almost a right in European countries. This means it is not possible to have closed networks and scale adds power when negotiating interconnect (access to other networks). Regulation is therefore the key to ensuring scale advantages are not abused. Deutsche Bank AG/London Page 57 . Regulators have been largely concerned with controlling incumbents. Evolution of the European regulatory model Past In the 1990s and until the 2003 EU regulatory framework. they regulate new players. To emulate competition in segments where it is impossible. so for example. Telecoms are heavily regulated not just because of the size of the industry. common protocols are required. we summarize the price caps that were applied to operators in 1997/1998 in Figure 93. but also because of the importance of telecoms services in the wider economy. Telecoms are also subject to regulation to help law enforcement. To promote the contribution of telecoms to wider economic and maybe political goals. All were based on CPI (or RPI) – x (an efficiency factor). Central bodies set these rules. To highlight the retail regulation on wireline pricing. equal availability for access. and so. Operators may also be required to retain customer-usage records.g. Telecoms are obliged to provide their customers with connectivity that may be off their networks. this process is becoming harder. the regulatory model in Europe was based on the principle of ex-ante regulation. Operators often have significant market power (SMP). In particular. every Bluetooth chip can communicate with every other Bluetooth chip. and free calls to emergency services. which require certain service provision. other third party interests can require protection. which must be handed over to the police on request. To promote consumer interests.6 December 2006 Telecommunications Telecom for beginners 2007 Regulation Why is telecoms regulated? Regulation seeks to promote the interests of consumers. the regulatory model was focused on retail regulation (price caps) and liberalization in the later part of the decade introduced the requirement for wholesale wireline offers (and a consequential raft of interconnect tariffs). the importance of telecoms services. and to facilitate the contribution of telecoms to the overall economy by remedying market inefficiencies and promoting competition. so that everyone can benefit from standardisation. but as competition progresses. for example. These protocols must be standardised. There are three main reasons why regulation is such an important part of the telecoms industry: market power. e. Finally. so certain spectrum may be set aside for emergency services. and the need for commonality. and incumbent licenses are often issued with Universal Service Obligations (USOs). Regulators objectives are: To encourage competition.

the normal residential bill must not increase by more than the rate of inflation. Price cap applies to approximately 18% of BT's total revenues and requires annual price reductions of around £45 million. the financial support from premium fixed-to-mobile revenue was important. 3. 6.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 93: 1997/1998 retail regulatory models for selected European telecoms Company British Telecom Efficiency Factor Details 4.0% Annual price increases limited to rate of inflation. Indeed. 6. and international calls 23% during this time period. whilst 40% is normally indicative and 50% can be considered evidence in itself. Prior price cap had efficiency factor of 7. such as Ofcom (although in some countries the initial markets review process is ongoing and progress varies greatly by country). 3.0% Annual price reductions are based on forecast inflation. The first reference period also has separate price caps for both residential and business customers. Indeed. and required annual price reductions of around £350 million. Present The European Commission set an EU-wide competition framework in 2003 (due for review in early 2007).0% France Télécom proposed to effectively lower tariffs by 9% in 1998 and by 4. Deutsche Telekom France Télécom Portugal Telecom KPN TeleDanmark Telefónica Telecom Italia Source: Deutsche Bank In the mobile space there was a soft approach to regulation. Local and extended local call charges cannot be increased during the first reference period (1988/1999). applied to all revenues. but competition authorities may also get involved in certain cases. Retail prices to business customers and up to 20% of residential customers are no longer subject to price cap. In addition. but guidelines state that a market share below 25% is unlikely to mean dominance in a market. but not evidently remediable by NRAs or where there is a cross-border transaction. SMP is defined as market “dominance”. and to decrease provincial long-distance calls 15%. as many networks were only just being built. following from competition law. and then to identify players with significant market power (SMP) in those which are not fully competitive and then offer remedies. which has been implemented nationally by National Regulatory Authorities (NRAs). where the lack of competition is clear. inter-provincial long-distance calls 35%. Most regulation is carried out by the NRAs.0% Price reductions in two reference periods of two years each (1988/1999 and 2000/2001) to be made at start of each reference period. Telefónica had regulatory approval to increase rental charges 14% and local calls 13% prior to January 1. so it is not clearcut. it was not until the significant (around 30%) cuts in UK mobile termination rates were announced in June 2004 that the issue jumped into investors’ consciousness. KPN has historically remained well below this price cap due to competitive pressures.5% in 1999 and 2000.5% Price cap in effect from August 1997 to July 2001 applied to first 80% of residential customers by bill size. The framework defines 18 markets. and requires NRAs to assess whether these are competitive (subject to European Commission approval). 1998. N/A No price cap in 1997 but introduced through to 31 July 1999. rental charges and each tariff category for national and international services may not exceed CPI plus 6% 0. Returns were driven by the capex cycle (network build out costs) and license fees. and issues such as mobile termination were scarcely discussed. Price increases for installation charges.0% Price-cap scheme in effect until January 1.5%. N/A No price cap in 1997. 1999. Page 58 Deutsche Bank AG/London .

currently serving as European Commissioner for Information Society and Media) outlined on 29 June 2006 in a speech. Although the greater superior scale of cable in the US is a significant difference compared with Europe. Fixed-line access to the public telephone network for non-residential customers. Fixed-line call interconnection. This is likely to disadvantage countries where regulatory intervention has. She suggests that perhaps similarly radical proposals might be needed in Europe to make “real progress”. this could have positive implications on the FCF for the likes of DT and FT if they now step away from significant investment plans to upgrade their access networks. Reding references the US where radical regulatory policy in the 1980s (i. combined with tighter timescales for regulatory action. the southern European operators).6 December 2006 Telecommunications Telecom for beginners 2007 Figure 94: 18 telecoms markets under EU competition framework Retail level 1. Fixed-line call termination. Page 59 Structural separation to be put forward as an option for review Deutsche Bank AG/London . 3. Unbundled local loop. Voice call termination on individual mobile networks (MVNOs). Separating infrastructure provision from service provision. Ironically. on the spread of mobile termination rates). Fixed-line international calls for non-residential customers. Source: Official Journal of the European Communities. 5. Broadcasting transmission to end users. Proposals to streamline the market review process central to implementation of the current framework will also be put forward. 9. Deutsche Bank Future Commissioner Reding (a Luxembourg politician. 6. International roaming on public mobile networks. Wholesale broadband internet access. Reding believes that EU regulatory policy is working – stimulating competition which in turn is driving levels of investment in the EU telecoms sector higher than those seen in Asia or the US.e. 4. Such a move could further level the playing field between incumbents and new entrants. 18. Fixed-line local/national calls for residential customers. 11. Fixed-line access to the public telephone network for residential customers. Wholesale leased line interconnection.g. been relatively benign (i. 17. 13. Fixed-line local/national calls for non-residential customers. 10. up to 2 Mbps.e. Fixed-line international calls for residential customers. Fixed-line call origination. to date. Leased-lines to connect to the internet. with Reding re-affirming that the current draft telecoms law is unacceptable and that infringement proceedings will be started if it becomes law without substantial changes. the break-up of AT&T) has subsequently led to sustainable infrastructure-based competition between telco and cable operators. Wholesale level 8. No room for regulatory holidays – competition drives investment Reding makes it clear in her speech that there is no room for “regulatory holidays”. A key proposal will be a reduction “by at least one third” of the list of 18 markets regulators that must review for significant market power (please refer to Figure 94). Germany gets a specific mention. Wholesale leased line termination. 2. 16. a radical proposal for the future of European telecom regulation. will be put forward as a policy option for discussion. 14. 12. 15. The Commission is also looking for greater powers over regulatory remedies proposed by national regulators to smooth out distortions across markets (e. Access and call origination on public mobile telephone networks (MVNOs). as we have seen in the UK through the creation of Openreach at BT Group. Markets 1 through 6 are referred to as ‘the provision of connection to and use of the public telephone network at fixed locations' 7.

such as the postal service. A basic form of resale competition is for example. market-based approach is needed Commissioner Reding argues in her speech that the scarcity of radio spectrum risks is holding back the development of the European economy.6 December 2006 Telecommunications Telecom for beginners 2007 Spectrum management – an EU-wide. but most of these have been recently been removed so that operators have flexibility to increase or decrease their tariffs subject to market forces. However. To promote more efficient use of spectrum. spectrum trading across the EU. The intention is to conclude the review by the end of 2006/early 2007 with concrete legislative proposals that will then be submitted to the European Parliament and the Council of Ministers sometime in 2007. It is a regulated provided route for new entrants to access incumbent’s infrastructure and services based on either retail minus or cost plus pricing model. The idea of a European spectrum agency will also be tabled. three specific measures will be proposed: spectrum allocation on a technological and service neutral basis. and was standard in the wireline telecoms environment before liberalization. we showed the price caps in the European wireline telecoms space in 1998 (at the time of European liberalisation). it is also the most basic form of regulation and is common in nationalized industries. television licenses and rail infrastructure. Types of regulation: Wholesale The basic form of competition-based regulation is wholesale. As a reminder in Figure 93. and a revised licensing process. call-byPage 60 Deutsche Bank AG/London . Figure 95: Regulation timeline for EU regulatory framework of electronic communication networks and services Call for input on Directives and Recommendation on relevant markets Adoption by Commission of proposed legislative measures Transposition of Directives in Member States Negotiation in EP and Council 2004 2005 2006 2007 2008 2009 Commission Communication launching public consultation Draft revised Recommendation on relevant markets Source: Bundesnetzagentur Adoption by Commission of revised Recommendation on relevant markets Types of regulation: Retail Retail regulation is most common in monopolistic markets in order to control consumer pricing in the absence of competition.

000 6. supporting their infant business models.000 72.000 191.6 December 2006 Telecommunications Telecom for beginners 2007 call competition in the fixed-line market.000 237. Although this is only a snapshot.800 15.000 23.600 41. wholesale is a means to drive traffic-based competition in the short term (i. Figure 96: German MOU and fibre investment trends around liberalization Growth MOU DT Others Total Share DT Others Cable (Km) DT Others Total Share DT Others Source: RegTP 1997 178 0 178 1998 185 11 196 1999 200 35 235 1998 7 11 18 1999 15 24 39 100% 0% 94% 6% 85% 15% 39% 61% 38% 62% 150. where a new entrant price discounts standard retail pricing and builds business models that effectively exploit an arbitrage between retail and interconnection pricing. the regulatory model should act as a catalyst for infrastructure-based competition. In Figure 96 we show how Deutsche Telekom lost its monopoly of wireline-voice traffic in 1998 and simultaneously started to lose its position as the pre-eminent investor in German wireline infrastructure. prices down and market share battles) and allow new entrants to win market share.800 7.600 157. when the wholesale business model has scaled. In effect. it effectively highlights the dynamics of basic wholesale regulation.600 16.e.000 213. Deutsche Bank AG/London Page 61 .400 165.400 56.000 21. Deutsche Telekom lost 15% market share of traffic in two years. Then in the longer term.600 79% 21% 74% 26% 70% 30% 31% 69% 32% 68% In Figure 97 we depict a possible view of the evolution of wholesale competition in the mobile and fixed-line worlds.

which was sold either online. However. Service providers were set up as independent of network operators. Enhanced service providers: German phenomenon In Germany. but are likely to consolidate as they are increasingly fragmented and missing the opportunity to benefit from scale leverage.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 97: The evolution from wholesale to infrastructure competition Mobile Service provider Enhanced service provider MVNO Fixed Call-by-call CPS Full ULL Broadband Reseller/wholesale line rental Partial unbundling Wholesale Retail minus pricing Low gross margin Capex light Source: Deutsche Bank Infrastructure Cost plus pricing High gross margin Significant capex requirement Service providers: Early form of competition When the European mobile market was in its infancy in the early 1990s. but have limited financial exposure to subscribers (other than billing related bad debt). but the key difference with the UK is that they offer services on all the network operators and are not exclusively tied. the value of service providers diminished with the exponential growth in prepaid. as further network operators launched services in the mid-to-late 1990s in most markets. Page 62 Deutsche Bank AG/London . The concept behind service providers was to remove the risk of the monopoly/oligopoly among the network operators (of what there were only one or two in each market) dominating the market dynamics. two of the better-known service providers). enhanced service providers still exist (debitel. through independent stores or general retailers. existing network operators were able to acquire the service providers (in the UK Vodafone acquired Talkline and Singlepoint. competition in the mobile market was driven by service providers. and maintained the direct customer relationship. providing basic billing services in return for e-contribution of monthly ARPU. Mobilcom and Talkline et al). Service providers still have around 25% market share (at the end of 2005) of the customer relationships. Additionally. Service providers often receive a commission from network operators when they sign up a subscriber.

MVNOs have also been launched in some markets. Wholesale line rental and broadband resale Wholesale line rental is the most advanced form of basic telephony competition.7% MVNOs: The frenzy Mobile virtual network operators effectively act and interrelate with costumers as if they were network operators. and has built up such a strong brand proposition that UK consumers rarely distinguish Virgin from the other network operators. targeted at immigrants and different language speakers (such as Turkish brand in Germany). CPS (carrier pre-select) is effectively a slightly more advanced call-by-call services. call-by-call and CPS are investment light solutions. the ability to compete with calling tariffs disappears. which was set up on the T-Mobile network.4% Source: Drillisch Telecom. this exploited the arbitrage between retail pricing and interconnect costs. the routing is automatic.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 98: Service providers’ and network operators’ market share (2005) Figure 99: Market share among service providers (2005) debitel 44. However. especially in the long distance area. A key difference with service providers is that MVNOs take a greater economic risk and are responsible for advertising and customer acquisition costs. It gives the alternate operators sole control over the billing relationship (a single bill) and breaks the direct link between the incumbents and the consumer. MVNOs not only provide retail competition.9% Mobile network operator 74. When the variance has narrowed.31% Talkline 16. The downside of call-by-call and CPS competition is that it is nothing more than an arbitrage and is only successful whilst there is a material difference between retail and interconnect pricing. As such.2% Drillisch 8. Consumers signed up with alternative providers and were required to dial an access code so that the call would be routed over the alternative operators’ network. In simple terms. Call-by-call and CPS When the European telecoms sector was liberalised in most markets in 1998.0% Ph.69% Service provider 25. Deutsche Bank AG/London Page 63 . The most well know MVNO is Virgin in the UK. especially when most network operators’ brands are generic and therefore can not appeal to all segments of the consumer segmentation. company data Source: Drillisch Telecom. the difference is that they acquire wholesale capacity from networks (at something around retail less 40%) rather than owning and managing infrastructure. House 4. but are often a more targeted means to increase market segmentation. and enables the call-by-call and CPS operators to recharge the incumbent’s monthly line rental fee. company data Mobilcom 23. the immediate competition was call-by-call.7% Telco 2. but where the consumer pre-agrees that all calls are transmitted via an alternate’s network.

This allows consumers to obtain broadband services from the most competitive provider without installing a second line. A majority of these infrastructure developments were carried out during the time they were state-owned monopolies and hence were effectively financed by the respective governments. However. Unbundling: What is it? European incumbent operators built their local telecommunication infrastructure over several years prior to the liberalization of their domestic market.e. Local loop unbundling can be classified into three main types. unbundling equipment). such as the advent of IP-based services. the incumbent provides alternative operators a share of the bandwidth of the high-speed data transmission circuits between the subscriber premises and the main distribution frame of the fixed public telephone network. These difficulties invariable created an uneven playing field disproportionately unfavourable to the new entrants. it became increasingly important for incumbents to share their infrastructure. especially the ‘last mile’ network. In essence. Obtaining rights of way for infrastructure constructions. Coupled with new developments in the telecommunications industry. The alternate operators use the bandwidth for the provision of broadband services to customers. Page 64 Deutsche Bank AG/London . smaller or new entrant operators have rights to use the local loop of the incumbent and this is achieved by allowing alternative providers to install their own equipment in local exchanges of incumbents. the incumbent owns and maintains the unbundled loop and this is the most widely used form of unbundling. new entrants faced great difficulties in competing with the incumbents with well-established local networks. the incumbent provides the telephone service while the competitor provides high-speed data transmission services on the same local loop by splitting the frequency spectrum of the copper wire signal. This process connects the local loop to their own alternative networks allowing them to effectively take over the copper wire between the exchange and the customer premises. such as switching facilities and backbone as well as ‘last mile’ networks from scratch. It is more of a reseller option. The lessee has full control of the local loop and the service rendered to its customers through both broadband and voice services. Bitstream access: This allows ISPs to compete with a wholesale xDSL product from the incumbent. As such.6 December 2006 Telecommunications Telecom for beginners 2007 In a broadband world. Full unbundling: This occurs when the copper pairs connecting a subscriber to the main distribution frame are leased to other telecoms operators for exclusive use. Shared unbundling: The local loop is used by both the incumbent as well as an alternate operator. with smaller competitors. Difficulties included: Financial non-viability in terms of pay back in building telecommunications infrastructure. The concept of ‘Local Loop Unbundling’ (LLU) emerged as a solution to the above difficulties and to remove the financial bottleneck in networks (the access loops). basic wholesale offerings are simply the resale of the incumbents’ products at a different cost point with the alternative operator covering the marketing and customer acquisition costs. Usually. Although the sector was opened to competition driven by EU regulations in and around 1998. Again it is a low capital way for alternatives to test their brand strength and market proposition before investing in infrastructure (i.

Pricing: Another difficult issue is the setting of unbundling charges. technical implementation problems are no more serious in unbundling than in the case of interconnection. Implementation issues and regulation Unbundling is by no means an easy game to play as good as it may sound.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 100: Differences between full unbundling. and terminations fees which usually vary by the type of unbundling. Collocation: In order to connect to the incumbent’s network. The various price points include monthly tariffs. The charges are determined according to a formula usually based on costs associated with building and maintaining the shared resources. The competitive environment that is created as a result paves the way for improvements in the quality of services offered and can also lead to price declines making the access technology more affordable. pricing and logistical issues hinder implementation. The national regulator sets out the relevant charges the incumbent will be allowed to ask for from the alternate operators. shared unbundling and bitstream access Source: OECD Implications on the customer LLU facilitates the development of a competitive telecommunication market by eliminating the one entry barrier for potential new operators – a local network. Technical: Development of technical specifications to implement LLU is a complex process that usually drags for a significant amount of time – which potentially could retard implementation. Incumbents have rarely agreed with the regulator on the pricing formula or the costs assessments and ongoing litigation regarding the issue is not uncommon. as isolating the costs of a particular service from a large-scale former monopolistic network is fraught with risk. alternate operators need to locate their own equipment at the exchange premises of the former. connection fees. This has been a contentious issue as incumbents have not always cooperated in terms of providing rack Deutsche Bank AG/London Page 65 . Experiences in the countries that have thus far taken up the concept show that many technical. However. It is the task of the national regulator to do the balancing act between the conflicting interests of the incumbent and the alternate operators at the outset as well as on an ongoing basis.

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space, connecting slots and other forms of general assistance (especially timing and resource allocated to the process). Some alternate operators have had to fight hard for collocation and, as a result, some regulators have stipulated minimum obligations on the part of the incumbent in their regulations. There is also the fear that in some markets there is a shortage of space to actually fit unbundling equipment and so remote collocation is often mentioned (remote collocation is where the alternative operator bases its equipments within a separate building within 50m of the incumbents exchange). Quality of service (QOS): The incumbents play a key role in maintenance of the local loop especially in shared access and bitstream access scenarios where the alternate operators have minimal control over the loop. Service disruptions, extended down-time and QOS declines - all due to lack of maintenance of the local loop - have not been uncommon. Alternate operators have usually been quick to accuse the incumbent of deliberate actions or negligence to undermine their operations while incumbents have attributed such incidents as normal or indiscriminate and regulators have generally sought to formalise the service obligations. In addition to the national regulators, the EU has issued several pieces of regulation on LLU. Regulation no 2887/2000 of the European parliament and of the European Council which as of 2 January 2000 is directly applicable to member states. Recommendation 2000/417/EC of 25 May 2000 on unbundled access to the local loop: enabling the competitive provision of a full range of electronic communications services including broadband multimedia and high-speed internet. Additionally in its Notification of 26 April 2000, the European Commission laid down detailed guidelines for the provision of assistance to regulatory Authorities, so that these may regulate fairly the various forms of Local Loop Unbundling. Law 2867/2000 of 19 December 2000 provides for the obligation of Telecommunications Operators with significant market power to provide Fully Unbundled Access to the Local Loop to a new entrant in this particular field of activity, under the same terms, with the same quality and at the same deadlines as those applicable to the provision of the same facility to enterprises which are already associated to them, without discriminations and at a price that corresponds to the actual cost. Types of unbundling charges and their declining trend There are several types of fees and charges associated with LLU. Installation charges: These are usually one-off charges made at the time of providing a connection. Some operators may refer to these as connection charges when reporting. Access fees: These usually take the form of a monthly rental. Direct charges associated with LLU have been on a steady path of decline. In recent years as regulator have sought to stimulate ULL in order to build alternative competitive networks, prices have been reduced in order to improve the economics for alternative networks. Termination charges: These are charges for terminating a line lease. End customers may be charged when they opt to obtain communication services from an alternate operator or the alternate operator providing such services may be charged instead. There may also be a termination charge levied on alternate operators when they terminate a line lease. Collocation cost: These may include the cost of renting space, site preparation, exchanging site surveys, power usage and security. In Figure 101, we show the trends in different elements of Deutsche Telekom’s ULL charges.

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Figure 101: Deutsche Telekom’s LLU charges (Euro per month)
120.0 100.0 80.0 60.0 6.0 40.0 20.0 0.0 1999 4.0 2.0 0.0 2000 2001 2002 2003 2004 2005 14.0 12.0 10.0 8.0

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Current charges The declining trends in LLU charges, both at the connection fee level and the monthly access rental level, are clear and endemic. Connection fees, as shown in Figure 102 and Figure 103, for both full unbundling and shared access have either remained flat or come down across the 25 European countries studied by the EU except in Greece where there has been a sizeable increase. Denmark has also seen a slight increase. Accordingly, both the EU 25 and EU15 weighted average connection charges for full unbundling have come down by close to 31% to Euro 52 and Euro 46 respectively while the weighted average connection charges for shared access have come down by 26% and 28% to Euro 59 and Euro 51, respectively. Figure 102: Prices per full unbundled loop – Connection (Euro)
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Monthly rentals, as shown in Figure 102 and Figure 103, have been on a decline except for the marginal increases in Denmark and Italy (shared access only). The EU 25 and EU15 weighted average rentals for full unbundling have come down by 6% and 9% to Euro 10.6 and Euro 10, respectively, while the EU15 weighted average shared access rental has come down by 9% to Euro 2.8 even as the EU25 average has marginally increased to Euro 3.4 due to figures of new EU member states (which joined in May 2004) pushing up the average.
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Mobile termination, roaming and number portability
An important point to highlight in the world of mobile telephony is whether the environment is based on a “calling party pays” tariff structure (where the caller picks up the entire cost of a premium cost call from a phone to a mobile) or “receiving partly pays” (where the callers pays a standard calling rate for the call to a mobile and the receiver pays any incoming premium). Where a calling-party-pays mobile pricing exists (most countries outside the US), mobile interconnection rates (often knows as mobile termination or fixed-to-mobile charges) are regulated. Mobile termination is the cost the mobile operator charges the wireline operator (or any other operator) to complete a call on its network. Historically, the cost of calling a mobile was deemed a premium rate call, in order to provide a sustainable revenue and gross profit contribution for start-up mobile operators. However, as the European telecoms space is maturing, there is increased regulatory pressure to lower mobile interconnection. In Figure 106 we show the spreads of average mobile termination rates across Europe (as detailed in January, which highlights a current average of Euro 0.115 per minute in Western Europe). We would highlight that we have adjusted the tariffs for Greece to reflect the tariff cuts announced in June 2006.

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10.7

10.9

6

6 December 2006

Telecommunications Telecom for beginners 2007

Figure 106: Average mobile termination rate per country (as at 1 January 2006 but Greece has been adjusted for cuts announced in April)
0.180 0.160 0.140 0.120 0.100 0.080 0.060 0.040 0.020 0.000
Average UK Denmark Netherlands Germany Portugal Belgium Greece France Norway Austria Italy Luxembourg Switzerland Sweden Ireland Finland Spain

Source: Company data and ERG

However, the national regulatory bodies are attacking these tariffs and recent moves in Belgium, the Netherlands and Spain as shown in Figure 107 and Figure 108, are targeting a medium-term rate around Euro 0.06 per minute and are debating whether asymmetry (i.e. different rates for different operators in the same country to reflect differing stages in life cycle) remain valid. Figure 107: Recent changes in mobile termination (Euro cents per minute)
Belgium - Agreed Proximus Mobistar Base Asymmetry - Mobistar Asymmetry - Base Netherlands - Proposed KPN/Vodafone Orange/T-Mobile Asymmetry
Source: Company data, NRAI

Current 12.66 15.98 19.60 3.32 6.94 Current 11.00 12.40 1.40

01-Nov-06 8.09 12.75 15.81 4.66 7.72 01-Jul-06 9.70 10.63 0.93

01-May-07 7.33 10.16 12.76 2.83 5.43 01-Jul-07 7.33 8.86 1.53

01-Jan-08 7.48 9.38 11.82 1.90 4.34 01-Jul-08 5.50 7.09 1.59

01-Jul-08 6.56 8.21 10.41 1.65 3.85 Cumulative cut -50% -43%

Cumulative cut -48% -49% -47%

Deutsche Bank AG/London

Page 69

13 7. calls to another number in the same country).81 Oct-07 9. have tagged the wholesale rates to national mobile termination rates.7% 11.05 Mar-08 7.83 7.56 8.97 12.5% 21.99.15 Current 11.66 8.87 8.00 6.1 Mar-07 10.115 per minute average for Europe) and 3x national mobile termination for international calls. The plan also eliminated roaming (as networks were regional rather than national in the late 1990s) and long-distance tariffs. As such all calls to mobiles are charged at the standard operator rate (local.00 -6.0% -7. as mobile phone users turned their phones off in order to avoid incoming call liabilities.00 7. and in 2006 alone.) European roaming In 2006. These roaming rates will obviously fall overtime. However.7% 16.7% US: receiving party pays In the US wireless industry there is no need for mobile termination charges as the industry is based on a receiving-party-pays structure.21 13.400 minutes for $149.23 10.15 Oct-06 11. are still being debated. long distance or mobile) and the mobile owner pays a premium for receiving the call. pricing has declined by around 40% to 50% and a variety of different roaming pricing options have developed.9% -7.15 Apr-07 10. For local calls whilst roaming (i. however. the regulation of roaming was a key target area for Commissioner Reding.9% 23. the EU proposed the "home pricing" principal for calls made whilst abroad where customers would not pay anymore to make mobile calls whilst roaming compared with what they would pay at home.97 12.61 10.4% 21.8% 2.9% 12. Initially this system was a restriction on mobile usage.17 7.48 11.e.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 108: Spanish mobile termination glide path (Euro cents per minute) Final revised TEM España Vodafone España Amena (Orange) Originally proposed TEM España Vodafone España Amena (Orange) Variance TEM España Vodafone España Amena (Orange) Source: Deutsche Bank estimates and CMT Current 11.4% 2. The final proposals.74 9. and 1. (AT&T Wireless’ initially offered three tariff bundles: 600 minutes for $89.7% 16. a charge the EU expects to eradicate. Page 70 Deutsche Bank AG/London .8% 30. Since the focus on roaming was kicked off in the EU.00 7.00 6.48 9. many European operators have proactively led a price-cutting agenda.89 Apr-08 8. The wholesale rates for incoming calls.97 12.21 13. This stimulated a dramatic increase in usage and significant price deflation.47 8.99.13 Oct-06 11.31 Oct-08 7.99. especially as national regulatory authorities had indicated that they did not have a mandate to regulate as no operator had market dominance on EU roaming.08 Sep-07 8.00 6.00 6.8% 16.14 11.000 minutes for $119. the wholesale premium should be capped at 2x national mobile termination rates (currently around Euro 0.07 10. Originally. reflecting the downward pressure on national termination rates.2% 33.00 Apr-09 7. 1.35 12.31 10.5% 31. which effectively was a huge bundle of minuets that could be used for either incoming and outgoing calls and effectively capped a mobile user’s total tariff.3% 13.21 13.03 Sep-08 6.4% 2.00 Apr-09 6. on 11 May 1998 AT&T Wireless introduced the first “Digital One Rate” plan.

The timetable for number portability has.7% 4.2% 1.1% 1. With the rapid penetration of the mobile phone and the increased dependency consumers have with the technology. has a material value (this is one of the major differences with fixed-line business models.8% 1.1% 3. Spectrum. however.6% 2001 2. where there are no spectrum restraints) and is an undeniable barrier to providing wireless services.5% 3. Germany France.6% 1.8% 0.6% 1. ITU 1997 1998 1999 2000 2001 2002 2003 2004 2006 Figure 110: Churn rates by market 1998 UK Hong Kong Netherlands Spain Italy Germany USA Source: Deutsche Bank. varied considerably in different markets.6% 2.5% 1.8% 1. the requirement to maintain the same number has inherently become a quasi-personnel identification for individuals.5% 4.2% 1. to more actively mirror capacity demand and supply.0% 2000 2.7% 2.5% 1. Denmark.5% 3.4% 2004 2. Netherlands Spain.8% 1.4% 2.1% 1.0% 2. there is also a move to enable spectrum trading.5% 2. WIFI and the mobile spectrum are a scare resource and different wavelengths in the electromagnetic spectrum are used for different applications.4% 1.3% 1. Portugal USA Japan Source: Deutsche Bank.3% 5.1% 1. Switzerland Australia. Ireland.1% 1. Finland.5% 5. As we discussed earlier.8% 1.1% Access to spectrum Spectrum is a key instrument in the development of wireless technologies. Austria. Deutsche Bank AG/London Page 71 .0% 2.9% 1.0% 1.1% 1.1% 1. company reports 1999 2.5% 1.9% 1. Norway Belgium. WIMAX. Figure 109: Mobile number portability Singapore UK Hong Kong.5% 2.4% 2.4% 2.1% 4.8% 2002 2.8% 2003 2.5% 3. therefore. and the most memorable and highly publicised event has been the auction for UMTS licenses in 2000 and 2001.6% 1.0% 2.4% 2005* 3.4% 2.9% 2.6 December 2006 Telecommunications Telecom for beginners 2007 Number portability Wireless number portability has also been a major driver of churn in markets as it reduces a barrier to the switching provider and implicitly tags a consumer to a number rather than a network. Sweden. Italy.

Telefónica and Telecom Italia. 10 mm – 1 mm Above 300 GHz. operators have often restricted investment. or for set periods. wireless LAN. such as 15 or 20 years. wireless heart rate monitors Navigation. The liberalization of the telecoms market and the introduction of wholesale regulatory pricing has lead to a dramatic increase in the number of operators (as shown in Figure 112 which looks at the growth in wireline operators) and in the mobile space. time signals. avalanche beacons. 1 m – 100 mm 3–30 GHz. wholesale competition possibly limits investment as it just exploits an arbitrage opportunity between retail pricing and its underlying costs. technologies or operators. 10 m – 1 m 300–3000 MHz. France Telecom. ground-to-air and air-to-air communications Microwave devices. In Figure 284 on page 162 we highlight Vodafone’s wireless licenses. 100 km – 10 km 30–300 kHz. 10 km – 1 km 300–3000 kHz.000 km 30–300 Hz. Regulatory effects The regulators are generally driven by the principles of increasing competition without restricting levels of investment. mobile phones. as are many in the US. 100 m – 10 m 30–300 MHz. with its key four European properties at the head of the table and the European. most modern Radars Radio astronomy.000 km – 10.000 km Extremely low frequency Super low frequency Ultra low frequency Very low frequency Low frequency Medium frequency High frequency Very high frequency Ultra high frequency Super high frequency Extremely high frequency Source: Deutsche Bank Example uses ELF SLF ULF VLF LF MF HF VHF UHF SHF EHF 1 2 3 4 5 6 7 8 9 10 11 3–30 Hz. 1 km – 100 m 3–30 MHz. high-speed microwave radio relay Night vision Licenses (a bag of spectrum) are either awarded for indefinite periods. 100 mm – 10 mm 30–300 GHz. 10.000 km – 1000 km 300–3000 Hz. In order to sustain return in the face of wholesale competition. As a general comment. and also much of the license data for the other large European operators (Deutsche Telekom. Setting the licenses for specific periods provides a framework to review the most efficient use of the spectrum and refarming (re-allocating) to different uses. The former wireline incumbents are no longer dominant provided and in many cases now control less than 50% of traffic and ULL is reducing their control of accesses. wireless LAN. > 100. Page 72 Deutsche Bank AG/London . 100.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 111: Summary of electromagnetic spectrums Band name Abbreviation ITU band Frequency/Wavelength < 2 Hz. < 1 mm Communication with submarines Communication with submarines Communication within mines Submarine communication. 1000 km – 100 km 3–30 kHz. In Europe most have been set for specified periods so that there are regulatory reviews of spectrum utilization. AM longwave broadcasting AM (Medium-wave) broadcasts Shortwave broadcasts and amateur radio FM and television broadcasts Television broadcasts. MVNO’s have added to the competitive intensity (but not to the level of investment).

0 2.000 1. Homes often had more than one line such that there was always a dedicated voice channel for calling and a dedicated ISP access. Deutsche Bank AG/London Page 73 . However. This has led to a significant increase in mobile usage as show in Figure 117.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 4. Initially liberalization stimulated an increase in volumes. Also. Figure 114: Falling costs of wireline telephony Figure 115: Falling retail prices: annual MOU (m) and average revenue per minute (Euro) 200 180 160 140 120 100 80 60 40 20 0.0 12.0 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% 1998 1999 2000 2001 2002 Average Line rental National call (10 mins) MOU (Bn) Revenue yield (Euro cents per minute) Source: European Commission Source: Deutsche Telekom Liberalization and competition has also stimulated a dramatic increase in mobile and broadband penetration as prices have reduced to levels where the product has mass market affordability. but due to substitution from mobile (and more recently VoIP) and the moves to broadband.239 1. the early demand for dial-up ISP access stimulated a demand for incremental access lines.738 2.000 800 600 400 200 0 1998 1999 2000 2001 2002 2003 945 1.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 112: Wider choice of operators Figure 113: Former monopolies less dominant (market shares) 1. Indeed in the broadband arena. but in the wireline segment it has also led to a change in the mix as access pricing has increased and traffic tariffs have declined. a noticeable differentiation with broadband is that it can simultaneously deliver both broadband and voice connectivity.800 1.583 1. partly driven by dial-up ISP access.561 1.0 10.0 6. The impact on incumbents has been even more extreme due to the simultaneous loss of market share.0 8.600 1. minute volumes have also started to decline on wireline.200 1. the pace of growth has picked up in 2006 as shown in Figure 119.484 100% 80% 60% 40% 526 20% 0% 1997 2004 1998 1999 2000 2001 2002 2003 2004 EU15 estimated number of fixed public network operators Source: European Commission Source: Deutsche Telekom Access Traffic The competition has lead to a reduction in pricing for both wireline and mobile.400 1.

0% 40.500. or net entrant biased with rate of return regulation.000 1999 2000 2001 2002 2003 2004 2005 2006E 3Q 2005 EU15 customers (million) Source: European Commission EU15 penetration (weighted) Source: OECD Figure 118: Penetration (of population) of broadband (pp) 18 16 14 12 10 8 6 4 2 0 2001 2002 2003 2004 2005 Figure 119: Broadband growth accelerating: net additions (m) 14 12 10 8 6 4 2 0 1Q 2002 3Q 2002 1Q 2003 3Q 2003 1Q 2004 3Q 2004 USA Source: OECD EU15 OECD Source: OECD Country differentials Although the EU has set the framework for regulation.000 2. On the X-axis we highlight the scale of the regulators’ bias towards the incumbent fixed-line operator or the new entrants.0% 350 300 250 60. French and German regulators has changed in recent months. where we picture the “regulatory axis”.0% 50 1998 1999 2000 2001 2002 2003 2004 2005 0. We have attempted to encapsulate this in Figure 120.000.0% 120.0% 80.000 1.500. In reality these axes coexist.000. Page 74 Deutsche Bank AG/London 1Q 2005 . and on the Y-axis the scale of protection versus the focus on rate of return regulation on the incumbent.000 500.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 116: Mobile growth extraordinary: total customers (m) and penetration 450 400 100. such that there are only two realistic outcomes: incumbent biased with political protection. each NRA has adopted a separate interpretation of the model.000 1.0% 200 150 100 20.0% Figure 117: US mobile usage growth (millions of minutes per annum) 2. We have also attempted to depict how we perceive the interpretation of the Austrian.

which compare the average costs of a fixed-line and a mobile telecoms basket in each market.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 120: Axes of regulatory influence Political protection Iberia and Greece Italy France Germany Switzerland Austria Incumbents New entrants UK/Netherlands Nordics EU objective Scale regulated returns Source: Deutsche Bank estimates The effects of these regulatory differences are highlighted in Figure 121 and Figure 122. Deutsche Bank AG/London Page 75 .

6 December 2006 Telecommunications Telecom for beginners 2007 Figure 121: Average annual costs of an OECD national residential basket (at June 2006) (US$/PPP inc VAT) 900 800 700 Figure 122: Average annual costs of an OECD medium user post-paid basket (at June 2006) (Euro/PPP inc VAT) 700 600 500 600 400 500 400 300 200 100 100 0 Greece UK EU Average Netherlands Germany France Denmark Hungary Slovakia Austria Belgium Italy Luxembourg Czech Republic Luxembourg Portugal Sweden Finland Ireland Poland Germany France EU Average Austria Greece Italy Denmark Netherlands Hungary Slovakia Portugal Sweden Ireland Finland Spain Poland Czech Rep Belgium Spain 0 UK 300 200 Access Usage Access Voice usage Messages Source: Comreg Source: Comreg Page 76 Deutsche Bank AG/London .

speeds and automation. has over the past 20 years opened up telecoms as a new retail market (we have called this process consumerisation in the past). information. In the early 1990s. Indeed of the countries shown in Figure 124 only Portugal has seen a decline in employment levels and others such as Finland and Austria have benefited from a strong increase. when combined with society’s greater demand for immediacy (of service. and today we are in the midst of an acceleration of broadband but without actually knowing how the incremental bandwidth (capacity and speed) will be utilised. This was hand-in-hand with the explosion in the electronic games market. in developed markets. as shown in Figure 125. The growth in Finland. However. Figure 123: ICT revenue ($bn) and growth in OECD 1.6 December 2006 Telecommunications Telecom for beginners 2007 Telecoms in a macro context Important in economic development The telecoms sector has been and continues to be an important driver of global economic activity. the growth was fuelled by the penetration of the PC both as a tool at work and then at home. The boost in communication technologies. In the late 1990s. highlights the positive effect of Nokia and the world of mobile technology. Deutsche Bank AG/London Page 77 . the mobile phone became a phenomenon.000 14% 800 12% 10% 600 8% 400 6% 4% 200 2% 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Growth 2003 2004 0% OECD Total Source: OECD The growth in ICT spend. which built a whole new market in the home entertainment segment. Most new products are substitutionary and we await the next revolutionary product. as shown in Figure 123.200 18% 16% 1. has lead to a pick-up in the relative importance of the sector as an employer. delivery etc). especially Europe the consumerisation of telecoms is leading to a commoditization of pricing and consequently growth rates and returns are declining.

6 December 2006 Telecommunications Telecom for beginners 2007 Figure 124: Share of ICT-related occupations in total economy (percentage points) in selected OECD countries 5.5 2. Page 78 Deutsche Bank AG/London .5 4.0 1. Indeed the southern European countries (although a generalisation) are absorbers/implementers of technology rather than developers/investors.5 1.0 3.0 0.5 0.0 2. which possible highlights the differing pace of technological innovation in these regions and that the southern European economies are more service (tourist) dependent.0 United Kingdom Netherlands Denmark Germany Australia United States Belgium Canada Austria Italy Greece Luxembourg Portugal Finland France Sweden Ireland Spain 1995 Source: OECD 2004 We are also intrigued that the Nordics are among some of the greatest employers and the southern Europeans the lowest.0 4.5 3.

These charts not only highlight the solid growth of the industry but also that there is occasional volatility.0% 0.2 1.8% 2.4 1.5% 2.2% 2. in Figure 128 we graph the quarterly growth in telephony and telegraph revenue since 1959. The uncertainty Deutsche Bank AG/London Page 79 1999 Greece Italy Ireland Spain .3% 2.0% 8.6 0.4% 2.6% 2. We show the trend for the USA in Figure 126 and the relative growth compared with nominal GDP growth rates in Figure 127.0 -0.0% -2.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 125: Change in share of ICT-related occupations in total economy (percentage points) in selected OECD countries between 1995 and 2004 1. where returns are currently under structural pressure.0 0. which offers a glimmer of hope to operators in Europe.0% 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 Source: Deutsche Bank estimates and US Bureau of Economic Analysis Source: Deutsche Bank estimates and US Bureau of Economic Analysis Again using the USA as a data-point.8 0.4 0. The purpose of the chart is to highlight the constant growth in the industry over the past 50 years.0% -4. Figure 126: Broadcasting and telecommunications as % of US GDP 2.0% 2.0% 14.0% 10.4 United Kingdom Netherlands Denmark Belgium United States Germany Australia Luxembourg Portugal 2001 2003 France Austria Canada Sweden Finland Source: OECD More specifically broadcasting and telecommunication have grown in most economies.0% 12.0% 16.7% 2.1% Figure 127: Nominal GDP and broadcasting and telecoms growth 18. But the chart also shows that the pace of absolute growth has slowed from the aggressive rates in the 1990s.0% 4.2 0.9% 2.2 -0.0% 6.6 1.

in Figure 129. four of the economies which have benefited from ICT growth are English speaking.000 80. Germany and France) are at the tail of the chart and are materially divergent from the UK. Figure 128: Quarterly spend in telecommunications and telegraphy in USA ($m) 160.6 December 2006 Telecommunications Telecom for beginners 2007 as to what happens next (ie. Interestingly. piggy-backing off the innovation in the US and all running similar “competition”-based economic models. reflecting the fact the country is at the vanguard of industry trends.000 120.000 140. It is difficult to draw significant conclusions.000 0 1961-III 1966-III 1971-III 1976-III 1981-III 1986-III 1991-III 1996-III 2001-III 1959-I 1960-II 1964-I 1965-II 1969-I 1970-II 1974-I 1975-II 1979-I 1980-II 1984-I 1985-II 1989-I 1990-II 1994-I 1995-II 1999-I 2000-II 2004-I 1962-IV 1967-IV 1972-IV 1977-IV 1982-IV 1987-IV 1992-IV 1997-IV 2002-IV 2005-II Source: US Bureau of Economic Analysis Finally.000 40. It is surprising that three of Europe’s largest economies (Italy.000 100. but the data again shows the power and importance of the ICT industry in the US economy. a reacceleration or a further showdown in growth rates) is probably the most important issue dominating telecoms and broadcasting.000 20. we show the contribution of ICT investment to GDP growth. Page 80 Deutsche Bank AG/London .000 60. other than the step up in growth between 1995 and 2003.

6 0.1 0.7 0.2 0.9 0.4 0.0 United Kingdom Belgium Netherlands Denmark United States Portugal Greece Italy Germany Canada France Australia New Zealand Sweden Finland Austria Japan Spain Ireland 1990-95 Source: OECD 1995-2003 (1) Deutsche Bank AG/London Page 81 .8 0.3 0.0 0.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 129: Contributions of ICT investment to GDP growth in selected OECD countries (percentage points) 1.5 0.

6 December 2006 Telecommunications Telecom for beginners 2007 Section 2: Technological Page 82 Deutsche Bank AG/London .

the distance from the start to the end of a wave.3 × 109 / wavelength.e. typically one of two different values at each data-point. Electromagnetic waves travel at the speed of light (300. a fixed line.e. As such a light-wave. Digital signals have discrete values. People see and hear analogue signals. i. and analogue waveforms look smooth.e. i. which is the value that will be recorded for it. Each wave has amplitude. so there is a value at each point. But what is wave? In general terms there are four key details describing a radio wave: Wavelength The wavelength measures the length of each wave. in a short space of time and each wave can carry a coding point (bit). This is due to the fact there are many waves. i.6 December 2006 Telecommunications Telecom for beginners 2007 Basics of Electronic Communication The importance of waves All of the data transmitted in telecommunications is transmitted as an electromagnetic wave. according to the formula Frequency= Speed/Wavelength. and one to 0 (i.e. its binary coding) Longer wavelength signals bend more easily around obstacles. Strength Stronger signals travel further as the wave will take longer to peter out. such as a fibre-optic cable. The downside is that they may interfere with other signals being transmitted elsewhere in the same frequency. so frequency would be 0. This data can then be interpreted by recording and processing a string of 1s and 0s. where the amplitude is around 1 billionth of 1meter will not bend easily around obstacles (hence the reason we have shadows). i. an individual strength. such as mobile phone signals. called bits (binary digits). Frequency is inversely proportional to wavelength. there will be two distinct amplitudes. Analogue/Digital Analogue signals vary continuously. Deutsche Bank AG/London Page 83 . Frequency Measures how many waves come each second. wirelessly.000 meters per second). High frequency waves have high data capacity (bandwidth) and so can carry lots of data. or they can travel through the air. These waves can either travel down a guided channel. so they will travel further than shorter wavelengths. whereas TV signals which has an amplitude around 1meter are more malleable and can therefore bend around obstacles. with one corresponding to 1.e. data-points.000. In a digital wave.

like traffic on a railway system. Routers then direct the packets along the network towards the destination. so bandwidth can be used fully. Using a modern day analogy circuit-switching is equivalent to running a marathon route that has been roped off so that people not racing are excluded from the running route. This allows for capacity management and is fails safe. their data is split into packets. a circuit or route is identified (by routers). as it depends on how many others are using each portion of the route. To solve this. and so remains empty. The randomness of packet-switching is its key advantage. Because circuit-switching involves massively cordoning off bandwidth and preventing its use. and direct traffic along the right route. bandwidth is reserved). whilst packet-switching uses it as needed. All packets travel together. according to its destination. when two users wish to communicate. Routers and switches sit on junctions in the network. This is a serious problem for time-sensitive traffic such as a voice conversation especially when it is important that the order of packets is reconnected on the correct order. However. using dynamic databases of the most appropriate route to each address. bandwidth is still reserved for them. but is very inefficient. protocols such as MPLS may be used. such as the internet (running on IP). This ensures constant quality of service on the connection. When users are not sending each other data. In a circuit-switched network. with space never reserved in advance. labelled with their source and destination addresses. Networks are most commonly built in loops so there are multiple means of getting to the end point. which label packets according to their temporal priority. when users wish to communicate. such as the traditional PSTN. In a packet-switched network. and where excess space is available routers will identify a potentially quick route.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 130: Analogue wave Figure 131: A 32-bit digital wave 1 wavelength Amplitude Wavelength 1 1 1 1 0 0 1 1 1 1 0 0 1 1 1 1 0 0 1 1 1 1 0 0 0 0 0 0 1 1 0 0 Analogue wave Source: Deutsche Bank Source: Deutsche Bank Digital wave Packets and switching Telecom traffic (voice and data) typically needs to be directed along a network. but allocated to people on the basis of their occupying it at the moment. Page 84 Deutsche Bank AG/London . which will utilise MPLS to provide bandwidth suitable for all of its services in one unified network. and then allow bandwidth to be reserved for these to run along a predictable circuit-connection that is part of a network where other data travels as packets. Implementation of MPLS enables the bandwidth efficiency of packetswitching to be combined with the reliability of circuit-switching for data that needs it. ensuring the sustainability of service of a network element fails. packet-switching means that time to delivery is unknown. fitting into whatever space (capacity) is available. and then held open all the way between them (i. This is equivalent to a mass of pedestrians walking around and consulting signposts when they reach a junction. BT is currently building a “21st Century Network” (21CN).e. packet-switching is vastly more efficient. and their knowledge of the network.

6 December 2006 Telecommunications Telecom for beginners 2007 Figure 132: Services available by technology Voice PSTN GSM (2G) GPRS (2.5G (HSDPA) DSL Cable Wi-Fi (802.5G) 3G 3.11g) Wi-Max Satellite Source: Deutsche Bank VoIP SMS MMS E-mail • Browsing • Broadband IPTV Video-calls (VoD) Games • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Deutsche Bank AG/London Page 85 .

6 December 2006 Telecommunications Telecom for beginners 2007 Technology: Traditional voice There are multiple ways of carrying voice traffic. including mobile. with all data travelling along this same route. ISDN. Relay. VDSL . the route between two communicating nodes will typically involve a string of such channels.IP over ATM Voice -Packet Switching (ATM) SDH/Sonet/WDM Transport Fibre Optics Voice/Data IP Switching FFTx Yesterday Source: Deutsche Bank Today Tomorrow Switching (circuit-switching. and then bandwidth along this route is reserved for the duration of the connection. VoIP requires a moderately fast internet connection. where it is carried on a fixed-line pipe of some-kind. In circuit-switched networks. and circuit-switching. ‘DSL’ Data . cable modem.DLCs. IP networks (VoIP) or on mobile network are three examples that are in people’s consciousness. this definition is determined by type of infrastructure carriage. cable modem.POTs. In Figure 133 we show the evolution of wireline networks and one interesting conclusion is that there is increasing simplicity within network developments. . and so arriving in the order sent. IP. POTs. In complex networks. and is unsuitable for narrowband connections such as dial-up. and therefore a more appropriate split of voice may be technological (switched versus IP (VoIP)). a route is determined between the point of origin and the destination. whereas VoIP is possible on any data network. There are two important types of switching: packet-switching. data for transmission is split up into discrete packets.IPDSL. We discuss mobility later in this Primer and therefore in this section we focus on voice. MPLS) .detail Network switches connect to each other to transmit information. traditional PSTN networks. which then travel independently to their destination along whatever route is determined for them individually. Simplistically to send data from one point (node) to another a switch opens the channel between the points and then sends the data. In packet-switched networks. and are then reassembled at the destination. Page 86 Deutsche Bank AG/London Security/QoS Access . However in many cases these networks run parallel and internet access technology such as cable and DSL may have a PSTN voice channel in addition to an internet channels. However. Voice traffic was traditionally carried on PSTN and mobile phone networks but with the move to packet-switching IP is becoming increasingly important (and price deflationary). analog modem Data -Fr. ISDN. ATM Voice -Circuit Switching SDH/Sonet Transport Fibre Optics Access . Figure 133: Technological evolution of wireline networks Network Management Access .

Switches are appropriate to small networks. so routers need only retain routes for host addresses. its switch will broadcast the message to all it other neighbouring switches hoping that other switches recognises the MAC and then redirects the message to the correct recipient. routers and switches sit on all these junctions and direct traffic Source: The Opte Project Basic small networks Most nodes on a network have a MAC (Media Access Control) address providing a unique identity. routers inform each other (either automatically or on request) about the networks they are connected to. they consult their look-up table for the MAC they have recommended for packets to that IP (a certain portion of the IP will identify the host network of the node. every packet for a nonneighbour would propagate throughout the network. in the IP header. and they thus build up a picture of the network. Routers can be Deutsche Bank AG/London Page 87 . It can then use these routes to instruct switches. and therefore are able to connect multiple networks together. In an IP network. and secondly the other switch. overloading it with duplicate misdirected traffic. each switch knows the MAC of those connected to it: firstly the set of computers. Switches are increasingly intelligent and learn the MAC addresses of the other nodes connected to them. If the MAC is not recognised. not routes to every individual IP). The importance of routers A router is like a switch but learns that there are other routes beyond its immediate neighbours. and when a switch receives information for a known MAC this becomes the preferred route. the packet is sent to all alternative neighbouring switches to all neighbours save the sender. Routers that receive this information record it in a look-up table. which is attached to packets to or from it. In a network consisting of two sets of computers attached to two different connected switches. When routers need to send a packet.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 134: A structural mess: A 2003 attempt to map the internet. so that they know which of their neighbours can be used to reach particular systems. and the rest will identify it within that network. whereby each node connects to the switch. If switches are only connected to end systems and other switches. If a computer attached to the first switch sends a message to one connected to the second. so fail if packets are intended for destinations other than their neighbours. Each node is assigned a unique IP address.

Circuit switched versus packet switched In circuit-switched networks. TCP is essential to ensure reliability. For example. if an IPv4 host network has many members. e. whilst IPv6 allows for around 3. Here the traffic’s inherent unpredictability means that the speed of a packet’s arrival will vary dependent on network traffic. Instead of routers determining one route for all packets to a particular IP address. which is intended to guide it through the network. Certain circuit-bandwidth can then be reserved when required for time-sensitive packets. and so packets do not displace each other. based on their database of IP addresses. but is being slowly replaced by IPv6. There are typically many routes along which a router could send packets for a particular destination. whilst the MPLS label allows this to co-exist with packet-switching by recording whether it is necessary for particular packets. IP itself doesn’t specify which route to choose. in order to generate enough unique addresses for its members. compared to 128 bits in IPv6. A dynamic routing algorithm will constantly update the lookup table as it receives data about the network in order to achieve efficient routing. the capacity available to a packet depends on what is being used by other packets. Data about the network is typically received via TCP (Transfer Control Protocol).3×109). this is unacceptable. or about 4. This then determines which MACs a router chooses when sending packets. rather it describes the sending process. The main difference is that IPv4 addresses are 32-bit long.4×1038. which transmits data about IP transfers. just as there are different routes and modes of transport one can take on a journey. For applications where latency (the time for a single packet to traverse the network) matters. MPLS is a routing protocol that allows for the differentiation of packets to remedy this. as without it there would be no way of knowing whether packets have arrived. based on things like speed and reliability. it is thus a routed protocol. 32 bits allows for around 4 billion unique addresses (~4. bandwidth is reserved to a particular channel of communication. but in IPv6 it is easy to provide a host address that allows for plenty of user addresses in the network domain. Having a huge amount of spare numbers also means that the system of assigning them can be tidier. without knowing where they will end up. plenty for every device to have an IP address. and so this will generate multiple entries in routers’ address records for that single host. which is too few for one per person.3 x 1020 addresses per square inch of the Earth's surface. but in a packet-switched network. Switches thus send packets to other nodes on routers’ instructions. when a router can’t pass on an IP packet it sends a message back via TCP to tell the originating system that the packet has failed. It attaches a label to an IP packet in addition to the IP header.g. Figure 135: A wireless router Source: Telindus The most widely distributed version of IP is IPv4.6 December 2006 Telecommunications Telecom for beginners 2007 attached to multiple switches. it may need to have several host addresses. and will then tell switches about which MACs to send packets to. much the same as in a system where telephone numbers have many digits. the MPLS Page 88 Deutsche Bank AG/London . A routing algorithm is required to decide which routes to take.

g. 1999 A universal technology PSTN is literally worldwide. whilst other packets are sent where bandwidth is greater. the networks of base stations that connect them into it are generally thought of separately. copper cables that carry voice calls as analogue electronic signals. thus saving time and computing for intermediate routers. two wires are twisted around each other. and the other reducing interference. after the design of Alexander Graham Bell. In the modern network. Numerous additional technologies (e. Deutsche Bank A B C A B C Source: eArchiv. dial-up’s low-bandwidth (up to 56kbps) is increasingly inadequate. but as internet usage matures. In the basic version. with one carrying the signal. copper is generally the “last mile” into homes. e.g. leaving aside enhancements. which links in directly to the PSTN. with just about every home in Europe connected.) Figure 138: Twisted Pair Copper Cable Source: "Evolution of the Technology". (This commentary is restricted to vanilla PSTN. Deutsche Bank AG/London Page 89 .6 December 2006 Telecommunications Telecom for beginners 2007 label enables different routes to be chosen depending on the packet. to better the low speed it offers in vanilla form. depending on age and maintenance. PSTN connects everybody potentially to everybody else: most homes have landline telephony. Apart from its main role for analogue voice calls customers can use a modem to dial-up through the vanilla PSTN to the internet’s packet-switched network via an ISP. Figure 136: Packet-switching Figure 137: Circuit-switching A B C Source: eArchiv. ISDN and DSL) have been designed to exploit the massive fixed resource in the PSTN network. The PSTN is formally the concatenation of telephone networks. so that those routes with constant and sufficiently low latency may be chosen for time-sensitive packets. Deutsche Bank A B C Public Switched Telephone Network (PSTN) This was the foundation of telecoms. Though mobile phones connect to the PSTN. Australian Photonics CRC. using circuit-switching. with the main network carried over fibre-optic lines and cable. The description of the route in the label saves routers from searching for the IP in their look-up tables. It varies in quality a little between countries.

ensuring a constant speed of communication. Costs thus depend on what connection is being made. Page 90 Deutsche Bank AG/London . telephonevoting. and operators can match costs to revenues by creating pricing structures that encourage intra-network traffic. this is a sunk cost. Voice was revolutionised by the mobile phone. and those to whom they lease it (as required by regulators). Traditional voice traffic is carried over circuit-switched channels. It represents a large and integral asset for both those who own it. expense can become more of an issue in remote areas. and marginal costs are fairly small (often negligible) for many types of calls.6 December 2006 Telecommunications Telecom for beginners 2007 …but a legacy technology The PSTN is essentially a legacy technology. As with infrastructure generally. shifting traffic away from fixed networks whilst growing overall volume. Value-added options to vanilla voice include services such as caller-identification and voicemail.8bn at the end of 2005). whereby the service provider does not actually own the entire network involved. and conference-call hosting. Though the invested capital base was significant (Deutsche Telekom has a domestic asset base in its domestic network of Euro 27. There are also services offered via premium-rate numbers. However is most European and other developed count roes there has been little growth in provision of the basic offering. directory enquiries. which turned a service that people used separately in their homes and offices into one they could carry with them wherever they went. Figure 139: Basic representation of a switched network Source: International Engineering Consortium Voice/VoIP Voice traffic has traditionally dominated telecommunications and in most market fixed-line virus remains the dominant call origination technology. adult services. but even this is not generally a significant factor. which has been upgraded with other software and technologies to add bandwidth (especially compression technologies). such as tech-support. Marginal costs depend mainly on interconnecting and termination fees.

Deutsche Bank AG/London Page 91 . Figure 140: UK fixed and mobile voice traffic volumes (bn of minutes) 200 180 160 140 120 100 80 60 40 20 0 2000 2001 2002 2003 2004 34 43 51 58 62 174 173 166 167 164 Fixed voice minutes Source: Ofcom Mobile voice minutes Fixed-line users will typically pay a fee to be connected to the network. taking advantage of its much cheaper bandwidth. with mobiles more expensive than normal telephones because of the historic cost of mobile networks and licences. speakers. than VoIP-to-mobile. or else a dedicated device. and which plugs into an internet connection. typically pre-paid.6 December 2006 Telecommunications Telecom for beginners 2007 Voice over IP (VoIP) is voice traffic carried as packet-switched data via the internet. and then per-usage fees. to organise VoIP-to-VoIP. although there may be some services (e. as the operator must pay termination and interconnection charges. a PC) equipped with a microphone. Third parties may offer services (usually cheap international calls). VoIP requires either a normal point of internet access (e. whilst the internet is packet-switched and thus much more efficient. All three voice technologies are networked with each other. Mobile and normal telephones cost more because they must pay for access to the PSTN. e. and software. but it is easier.g. rather than PSTN or mobile networks. Revenue for premium services is shared between the telephone operator and the content provider. Call prices vary depending on who is called. thus saving interconnection charges. Note that the PSTN is a circuit-switched network. minutes of calls) included in the fee. that enable users to route calls via their networks whilst on another service provider’s line.g. which may be designed to look like a traditional phone.g. VoIP technology bypasses the PSTN by going through the internet.

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Figure 141: VoIP System overview

Customer Premises
DSL or Cable Modem

Access

Transit

Core

Transit

Access

Customer Premises

Broadband Broadband VSP**

Internet

VSP**
VoIP user

ATA* Narrowband

Router

PSTN Gateway

PSTN user * ATA = Analog Telephone Adaptor, connects an Analog Telephone to a VOIP network ** VSP = VOIP Service Providers:the next generation telco

Source: Ofcom

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Technology: Mobility
The electro-magnetic spectrum and the allocation of frequencies are key to the mobile industry, which is in the Ultra High Frequency (UHF) range. This allocations of spectrum effectively creates a barrier to access and a capacity restraint, whereas in the fixed-line arena capacity barriers are negligible. Figure 142: The frequency spectrum
3G mobile services: at c.3.2GHz

Super Low Frequency (SLF) Communications with submarines

Very Low Frequency (VLF) Submarine communication, avalanche beacons, wireless heart rate monitors

Medium Frequency (MF) AM (medium-wave) broadcasts

Very High Frequency (VHF) FM and television broadcasts

Super High Frequency (SHF) Microwave devices, mobile phones (W-CDMA), WLAN, most modern Radars

Night Vision

<3 Hz >100,000 km

3-30 Hz 10,000 km -1,000 km

3-30 kHz 100 km -10 km

300 kHz 1 Km – 100 m

30 – 300 MHz 10 m – 1 m

3 – 30 GHz 100 mm – 10 mm

Above 300 GHz <1 mm

3-30 Hz 100,000 km - 10,000 km
Extremely Low Frequency (ELF) Communications with submarines

300-3,000 Hz 1,000 km - 100 km
Ultra Low Frequency (ULF)

30-300 kHz 10 km - 1 km
Low Frequency (LF) Navigation, time signals, AM longwave broadcasting

3-30 MHz 100 m – 10 m
High Frequency (HF) Shortwave broadcasts and amateur radio

300 – 3,000 MHz 1 m – 100 mm
Ultra High Frequency (UHF) Television broadcasts, mobile phones, wireless LAN, ground-to-air and airto-air communications

30 -300 GHz 10 mm – 1 mm
Extremely High Frequency (EHF) Radio astronomy, highspeed microwave radio relay

2G mobile services: GSM 900MHz, 1800MHz, 1900MHz (USA)

Source: Deutsche Bank

Over the past 15 years the technology has moved from traditional analogue mobile telephony to 2G (which is the most prevalent today) and is slowly moving to 3G. The switch between 1G and 2G was mostly the move to digital technology, which offers encryption and greater security, and 3G is a move to greater bandwidth.

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Figure 143: Technological developments in mobile technology

1G (Analog ‘88-’94)

2G (Digital ’94-?)
9.6Kb/s

3G (UMTS ‘02-?)
384Kb/s, 1.8/3.6/14Mb/s

4G (2009-?)
100Mb/s?

GSM

GPRS, HSCSD EDGE

WCDMA

HSPA

LTE (OFDM)

TACS

TDMA WiMAX

NMT

PDC iBurst

AMPS

CDMA IS-95

CDMA2000 IS-2000 (1xRTT)

EV-DO (IS-856) EV-DV

(HC-SDMA)

TD-SCDMA

Source: Deutsche Bank

The main change in voice traffic has been in its technology-migration from PSTN towards mobile networks, (typically at a significant pricing premium although declining all the time) and increasingly to VoIP, (typically at a significant price discount). The current weight of traffic remains skewed towards the wireline network with around 70% PSTN, 30% mobile (this is based on data in the UK, which is around the European average) but in some markets, such as Finland and Portugal the scale of mobile minutes is over 50%. VoIP is not yet significant on this measure, but also hard to quantify being often on private networks and much less regulated. It is also an IP technology which means the voice message in converted into a data byte and then it is impossible to differentiate from another data use (email, web download etc), which make s the measurement of VoIP minutes nearly impossible. In some market however, such as France and the Netherlands around 25% to 30% of broadband customers have VoIP access technologies as well. The mobile industry exploded with the advent of the pre-paid phone, but the catalysts for usage were a combination of declining per minute tariffs and bundles. Mobile usage tends to switch to post-paid as it becomes normalised and as firms try to convert pre-paid customers to more profitable contracts. New mobile phone users often take up pre-pay and then switch to post-paid.

1G technology
The development of mobile telephony can be traced as far back as 1946 when the Swedish police tested a system to connect its police cars to the national network. The early mobile phone units were rather bulkier than the contemporary models and were mostly manufactured for installation in vehicles. These were based on technologies such as PTT (Push to Talk), MTS (Mobile Telephone System), IMTS (Improved Mobile Telephone Service), which are in common referred to as ‘Zero-generation’ technologies as they were the predecessors of the first generation of cellular telephones. It took more than 37 years from the first testing in 1946 for the first commercial mobile system to become available in Chicago and Washington/Baltimore in 1983. The Motorola DynaTAC 8000X (Figure 144) was
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the first mobile unit to receive FCC approval in 1983. It was truly the first mobile unit which could connect to the telephone network without the assistance of an operator and could be carried about by the user and hence dawned the 1G era. One key step-up from the previous generation technologies was the digitisation of the control link between the mobile phone and the cell site. Several mobile technologies emerged from different parts of the world during the early part of the 1980s. NMT (Nordic Mobile Telephone) used in the Nordic region, Eastern Europe and Russia, AMPS (Advanced Mobile Phone System) used in the US, TACS (Total Access Communications System) used in UK and Spain, C-450 in West Germany, Portugal and South Africa, Radiocom 2000 in France, and RTMI in Italy were most prominent 1G technologies. One of the downside of 1G technologies was its analogue signal which allowed for cloning and eaves-dropping as the line was not secure. There was also no roaming market due to the technological differences in different markets and the lack of roaming deals (which allow a customer from one network to access another in a different country). This was also a time when operators expected mobile technology to be a premium bespoke services for businesses rather than a mass market technology.

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The strong growth in European mobile and the dominance of Ericsson and Nokia in the telecom equipment growth phase. being dominant outside of Japan and the USA. The reason GSM became dominant in Europe was largely down to the EU which decided the technology should be roll-out consistently as a single standard. GSM covers all of Europe.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 144: Motorola DynaTAC 8000X Source: Motorola 2G and 2.5G (GSM and GPRS) The launch of digital mobile technology in the early 1990s was the major catalysts for the growth in the mobile. but operators will tend to aim for coverage in excess of 95% geographic coverage in Europe (99% population coverage). Remote areas are less well covered. and in fact has presence across all continents. allowed GSM to become a cost effective and reliable technology Page 96 Deutsche Bank AG/London . Its digital signal gave greater security and the harmonisation of technologies was key to driving down handset pricing but also allowing international roaming.

This approach means that bandwidth can be recycled. Japan remains the only large market where there is no GSM technology. The GSM network is very low-powered. In contrast. transmitting to each area on a different channel. so that everyone can access the same signal. a very large number of conversations can take place totally separately. Another transmitter nearby can then use the same channels. to stop interference. it provides mobile devices with connections to a fixed network. and has become harder as public concern has grown over health risks suggested by some to be associated with proximity to masts. This means that the signals travel small distances. with mobile phones transmitting at less than 5 watts. making it very efficient in terms of bandwidth. is the world’s most widespread mobile technology. is an interim technology between 2G and 3G. Tesco). transmits over a very wide area. This means that once the available spectrum has been filled (ie there is no additional capacity). one might distinguish a few different sounds on it. a mobile phone mast transmits to a relatively small area. which communicate with mobile phones using microwaves. and merely by making sure that its cells of a particular frequency are not adjacent to another base station’s cells of that frequency. or GSM (Global System for Mobile communications. and furthermore divides this area around it into different cells. and working as a packet-switched network. even whilst each signal would interfere were they heard together. Figure 145: Base stations communicate with each cell on a different frequency (represented by different colours). i.e. The GSM network consists of a huge number of medium-sized base stations. The effect is analogous to speech. Like all mobile networks. the PSTN (later technologies connect to the internet) and other mobile networks to which it is physically linked. In the Americas. A traditional broadcasting system. or General Packet Radio Services (GPRS). leading to the cellular element of GSM networks. with channels occupying different portions of spectrum so that there is no interference. As such 2G. the same portion of the spectrum can be used as a different channel very frequently. whereby if there is a tannoy. But. there is a split between GSM and the IS-95 standard (CDMA). therefore permitting basic data services on mobile. to connect mobile devices to the internet. the limit of channels is reached. if a room is full of people all of whom speak quietly to each other.5G. which is also significant. It is rather like dial-up internet access on a mobile phone. Deutsche Bank AG/London Page 97 .6 December 2006 Telecommunications Telecom for beginners 2007 that was then roll-out in other international markets. it ensures non-interference. Source: Howstuffworks 2. Virgin. such as TV. originally Groupe Spécial Mobile). offering speeds of 56-114kbps. Building a mobile network was historically expensive. Owners of networks will typically rent out some of their capacity to companies that establish mobile brands without owning any infrastructure (MVNOs): thus many companies for whom telecoms is not a core offering have exploited their brands (e.g.

SMS volumes have exploded. With the growth in prepaid. with some still issued for free. But once these were in-place and the consumer realised it was a cheaper form of communication.6 December 2006 Telecommunications Telecom for beginners 2007 Most 2G licences were offered free of charge or for a small annual fee. which has exploited a messaging channel. in return for specific network investment and roll-out commitments. SMS has been a successful quasi-data technology. In recent years. and 500bn SMS messages in 2004. However. Short message services are developing very rapidly throughout the world. which was originally established in networks to allow maintenance. whilst the charges for other have been bid up in auctions (such as Germany and the UK in the 3G environment). SMS has also become a conduit to interactive TV voting and commentary. to date the ability to driver revenue had been the missing link. as the value of the mobile telecom industry has risen. just 17bn SMS messages were sent. SMS (short messaging service) One of the barriers to the early exploiting of SMS was the lack of operator’s billing systems. In 2000. However. in 2001. on the condition that network coverage is extended to hard-to-reach rural areas. the costs of subsequent licences has varied greatly in price among countries. Page 98 Deutsche Bank AG/London . SMS usage has exploded. Figure 146: Structure of a GSM network Source: Deutsche Bank and Wikipedia Voice remains the most common usage of mobile networks and consequently mobile data remains in its early stage of development but the growth is strong as shown in Figure 147 and Figure 148. the number was up to 250bn.

6 December 2006 Telecommunications Telecom for beginners 2007 Figure 147: Consistent growth in text (SMS) messages 3. is known by many terms: 1x. CDMA laid the foundation for the development of 3G technologies. The suffix ‘1xRTT’ stands for ‘1 times Radio Transmission Technology’ to represent the version that operates in a pair of 1. a mixture of W-CDMA and the incompatible CDMA2000 1×EV-DO systems are being deployed. 1X. served by 83 operators in 35 countries. Although it qualifies to be a ‘3G’ technology as it supports a data rate of above 144 kbit/s. but uses new phones and base stations to provide much better bandwidth. it is considered by most to be a 2. Greater capacity even in its basic form and scalability in terms of ability to develop extensions that enable greater bandwidth are the key advantages of CDMA.25-MHz radio channels). The first CDMA commercial launch in the US took place shortly afterwards in the spring of 1996. CDMA2000 1x-RTT is one of the earliest versions of the technology.000 1. 1xRTT. The technology requires significant processing. Release 1 can deliver peak data rates of up to 307 kbps. Deutsche Bank AG/London Page 99 . but sometimes called 3G. CDMA remains in its infancy but growth is starting to accelerate. and cdma2000. CDMA2000 1x. the core CDMA2000 wireless air interface standard. IS-2000.000 2.600 1.25-MHz radio channels (vis-àvis 3xRTT. CDMA2000 1X.500 1.200 1. In the rest of the world. 3G and 3.000 800 600 400 200 0 Jan 04 Sep 04 May 03 May 04 Nov 03 Nov 04 Sep 03 Jan 03 Jan 05 Nov 02 Mar 03 Mar 04 Mar 05 Sep 02 Jul 03 Jul 04 Source: Mobile data Association Source: Mobile data Association 2G and 2. of 144Kbps-2Mbps. There were over 50 million CDMA subscribers worldwide. It can serve more users per unit of bandwidth (say 1 MHz) compared with other core technologies such as TDMA and FDMA. with each channel listening to its specific code. hence fitting multiple channels into the one portion of bandwidth. but in different codes. It is important to note in this regard that three of the five ITU standards for 3G (defined under IMT-2000 programme) are CDMA based. which is based on Time Division Multiple Access (TDMA).000 1. which represents three pairs of 1.500 2.5G (CDMA and 1xRTT) Code Division Multiple Access (CDMA)-based mobile standard was developed in 1989 as a concept and gradually emerged as an alternative to the most widely-used GSM. Release 0 supports bidirectional peak data rates of up to 153 kbps and an average of 60-100 kbps in commercial networks. The code division principle allows multiple signals to be transmitted in the same bandwidth. Moreover.400 1.000 500 0 Sep 00 Sep 01 Sep 02 Sep 03 Mar 00 Mar 01 Mar 02 Mar 03 Mar 04 Sep 04 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Mar 05 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Figure 148: Growth continues in WAP usage 2. by the turn of the century. The system in Europe is termed Universal Mobile Telecommunications System (UMTS). The technology to run European UMTS is Wideband Code Division Multiple Access (W-CDMA).5G The third generation of mobile systems (3G) is also built on the base technologies of 2G systems (hence sharing all of its functionality). The world's first commercial launch of a CDMA-based network took place in September 1995 when Hutchison Telecom launched CDMA-based services in Hong Kong.5G service as it is several times slower than ‘true’ 3G speeds.800 1.

Content thus far has included more sophisticated games (including 3D graphics and online gaming). The 3G idea is based on higher data speeds and advances in mobile computing allowing for a much richer mobile experience than 2G. registering a growth of 24% YoY. offers download speeds up to 10Mbps (faster than some home broadband). 3G phones are spreading. up by 48% YoY.6 December 2006 Telecommunications Telecom for beginners 2007 Indeed in September 2006. as the value of a 3G phone to the consumer will increase as their contacts add 3G capability (e. reaching 36m (+123% YoY). The total CDMA2000 subs base reached 275m. This technology is being rolled out as many 3G base stations will be software-upgradeable to offer HSDPA. EV-DO subscriber base continued its strong growth. The new handsets usually offer high-resolution colour screens and built-in digital cameras. known as High-Speed Downlink Packet Access (HSDPA). Page 100 Deutsche Bank AG/London . priced at a premium to voice calls. but in different codes. with the speed of the 3G network allowing business users to access office networks and the internet at close to office speeds. the CDMA Development Group (CDG) announced that the total CDMA mobile subscriber base (including cdmaOne. It is also hoped that users will pay to access multimedia content. such as music videos and short segments of news. but can only offer 3G services when connected to the 3G network. so they can make video calls). mobile phones themselves have been greatly enhanced for 3G. 3G networks are still being built. with each channel listening to its specific code. The CDG counts 169 commercial CDMA operators in 75 countries. although most licenses require provision of a certain level of coverage. 3G phones will use the GSM network for 2G services where there is no 3G available. Figure 149: CDMA2000 subs (m) and YoY growth (%) 300 250 200 150 100 50 0 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 80% 70% 60% 50% 40% 30% 20% 10% 0% Figure 150: EV-DO subs (m) and YoY growth (%) 40 35 30 25 20 15 10 5 0 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 140% 120% 100% 80% 60% 40% 20% 0% Source: CDG Source: CDG The code division principle allows multiple signals to be transmitted in the same bandwidth. but is by no means universal. Coverage is being rolled out first in high-density population areas. This technology requires significant processing. and growth should continue. One early application has been in providing mobile internet access for laptop users. with a further 30 CDMA 1x networks and 41 EV-DO networks under deployment. CDMA2000 and EV-DO) crossed the 335m mark at the end of 2Q06. An upgrade to W-CDMA. or weather reports. This technology will enable service providers to offer enhanced inter-user services such as video-messaging and video-calls. for which revenues will be shared with content providers. as well as greatly increased processing power. of which 163 have commercially deployed CDMA 1x networks and 47 commercial EV-DO networks. On the consumer side.g. comedy. hence fitting multiple channels into the one portion of bandwidth. and video clips.

The latter can take the form of fairly straight education. so there is logic to a data-based pricing model.000 5. with prices varying massively due to the auction structure (see Paul Klemperer.000 20. Tariffs on 3G may be higher and contracts (rather than pre-paid) are more stringently required by operators as part of this effect. Also high are costs to introduce customers to new services through extensive and complicated marketing. What is new to 3G pricing. The downside to bandwidth pricing is that the consumer loses control over the potential cost of the download as it is not always possible to assess/calculate the time/bandwidth/cost equation prior to initiating the download. apart from the increase in focus on selling content. with representatives employed in mobile phone outlets to train customers in how to use 3G phones.000 10.000 15. and peaking at Euro 650 per head of population in the UK. as products need not just advertising but also explaining. Installing the new networks is expensive. As such. but in terms of the data it displaces. and for simplicity. as were some of the licenses. 2002). This could simplify things for the service provider. Deutsche Bank AG/London Page 101 .000 35.000 30.000 40. is that users may be charged by bandwidth rather than call duration. “How (Not) to Run Auctions: the European 3G Telecom Auctions”.000 45. many operators are charging for events/downloads rather than bandwidth. the opportunity cost of each connection is in terms not of other connections.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 151: T-Mobile Europe – cell sites by technology (000) 50. As most consumers are unwilling to pay such prices. The enhanced technology in 3Genabled handsets can mean prices in hundreds of Euros and have historically been comparable with premium 2G handsets. who then need not have extensive relationships with content providers in order to charge appropriately for delivering content.000 25.000 0 2000 2G Source: Deutsche Telekom 2001 2002 2003 2004 2005 plan 2006 3G/HSDPA WLAN 3G is a more expensive technology for service providers. much cost has been borne by service providers hoping to recoup the cost in higher spending on the new services offered. Since the network is packetswitched.

according to Vodafone. which will be launched commercially in 2006. Most operators expect to launch some kind of HSDPA service in 2006 and there will be varying paces of roll-out. Page 102 Deutsche Bank AG/London . speeds of up to 3. the effective rates will be 75% lower than theoretical rates and most likely a level around 1MB/s is possible over mobile. thereby lowering the cost/bit further. Euro 300m/network). CIA High Speed Packet Access (HSDPA/HSUPA) HSDPA is a standardised mobile telephone protocol which sits over WCDMA networks and enhances downlink speeds with various modulation and coding techniques. In reality.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 152: UMTS costs per pop (Euro) 700 600 500 400 300 200 100 0 United Kingdom Belgium Denmark Netherlands Germany Portugal Austria Greece Italy Switzerland Sweden Finland France Spain Source: European Commission. with release 5. although operators continue to talk about 10MB/s speeds. Theoretically. Figure 153: Cumulative HSDPA commercial launches 90 80 70 60 50 40 30 20 10 0 4Q05 Source: GSA 1Q06 2Q06 3Q06 upto Sep 5 4Q06E The benefits of HSDPA to the operators are dramatically increased speeds for limited capex (c.8MB/s are possible.

Uses of Bluetooth are innumerable. the software may be in many devices where users are not aware of its presence. Bluetooth can therefore enable interaction between devices that users might not usually think or bother to connect. over a range from 1-100m. The concept behind Bluetooth is to provide ready connectivity between disparate devices through a common standard.2Mbs/ HSUPA Long term >20Mbps 4 3 2 UMTS 384 HSDPA 1. In addition. Obvious uses include enabling mobile phones and PCs to exchange address book data quickly and wirelessly. The community of users that possess Bluetooth devices may be much larger than that which uses Bluetooth connectivity on a regular basis.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 154: HSDPA/HSUPA evolution v6 DSL6000 Figure 155: HSDPA cost/Mb vs UMTS 6 5 ~ v5 HSDPA 3. but is also in some printers and computers.8Mbps 2006E 2007 2007E ~ HSDPA 1 0 200 400 600 Average monthly usage (MByte) Source: Deutsche Bank 800 1000 While we are encouraged by the increased handset speeds. it may be used most often in these. As Bluetooth is so common in mobile phones (partially due to the frequency with which users replace them compared to other electronic devices). in a device that sits on the ear. Bluetooth Bluetooth is an extremely short-range wireless networking technology. or digital cameras to send pictures directly to printers. offering bandwidth from 5Kbps to 1Mbps. As Bluetooth chips are very small and very cheap. enabling hands-free calling using a pocketed phone. but typically around 10m. In Figure 156 we show how BT intends to use of a Bluetooth phone (Fusion) in the UK. Bluetooth can be implemented in very many different electronic devices that need to connect. Deutsche Bank AG/London Page 103 . Devices need only have the standard implemented. It is extremely common in mobile phones and PDAs. but many applications are aids in convenience. but believe this is better suited to broadcast technologies such as DVBH. One common application is the wireless headset. rather than being specifically designed to connect to each other. we do not see a single application which will replace voice as a key revenue driver. without a computer intermediating. which replicates the microphone and speaker of a mobile phone.6Mbs DSL1000 UMTS 384 kbps 2005 Source: T-Mobile HSDPA 7. We do believe in applications developing long term like mobile TV (see next section). we believe that there are limited applications announced to date which the operators will be able to monetize sufficiently to offset voice revenue pressure.

such as the home-base station.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 156: How the Bluetooth telephone works? Cellular Radio Access Network (RAN) Private Network UMAenabled Dual-mode Handset Base Station Controller (BTS) Base transceiver Stations (BTS) Core Mobile Network OP Access Network Unlicensed Wireless Network (e. The home base station effectively offers GSM in-home coverage vie a box attached to a DSL channel. Page 104 Deutsche Bank AG/London . Bluetooth…) UMA Network Controller (UNC) Source: umatechnolog However. It will allow far greater in-building GSM functionality and therefore make some of the BlueTooth applications redundant.g. it is also likely that Bluetooth technology will be overtaken by new GSM applications. which is likely to be introduced in 2007. WiFi.

It enables any device that accesses it to connect to any other. such as in a public Wi-Fi hotspot. but includes the distribution of data such as video and music via the web. Internet access is generally categorised according to bandwidth.6 December 2006 Telecommunications Telecom for beginners 2007 Technology: Bandwidth Internet access The internet comprises several core offerings. As services migrate online. e. metered by data. metered by time. through RFID technology. taking up ever-increasing roles.6kbps 56kbps 2Mbps 2Mbps 500kbps 2Mbps >8Mbps 10Mbps 25 to 50Mbps 54Mbps 70Mbps 100Mbps Fixed/Wireless Wireless Fixed Fixed Fixed Wireless Fixed Fixed Wireless Fixed Fixed/Wireless Wireless Fixed Figure 158: Wireline bandwidth Narrowband – Wideband – Broadband – Source: Deutsche Bank up to 64 kbps 64 kbps up to 2Mbps 2Mbps upwards Deutsche Bank AG/London Page 105 . It is an entirely packet-switched network. is expanding every day.g. shopping through their portals). owners of superseded technology lose out (as fixed-line telecoms may lose out to VoIP).g. Telecoms service providers may come to provide new online services themselves. The internet is growing both in size and in functionality. Figure 157 demonstrates one such categorisation. Mobile service providers come to offer these services with mobility. as with a dialup internet connection. as with most residential broadband connections (though overall use is often capped). or un-metered. Figure 157: Typical-download speed of consumer internet access Technology 2G PSTN Cable ADSL 3G Satellite ADSL2+ 3. Bandwidth is the crucial issue in each offering. leveraging their client-relationships to become the default provider to their customers (e. Internet access can be free. the largest in history and like the universe we live in. Speed makes a crucial difference to what can be offered via the internet as functionality increases with bandwidth. although 512Kbps is often considered the threshold for broadband (rather than narrowband). most importantly e-mail and web-browsing. as mobile catches up to much of the functionality of home computers. whilst those selling bandwidth benefit from increased demand.5G (HSDPA) VDSL2 Wi-Fi Wi-Max VDSL2 Source: Deutsche Bank Typical download speed 9. as with some 3G technologies.

g. requiring a decoder. fibre-optic cables carry huge amounts of internet traffic under the Atlantic. Figure 159: Coaxial Cable Source: “Evolution of the Technology”. Due to factors such as the lack of interference. Page 106 Deutsche Bank AG/London . lasers or LEDs transmit beams of light. Coaxial copper cables consist of a solid wire at the centre surrounded by an electrical insulator. The downside of fibre-optics is they need to be laid in straight lines otherwise the light signal is compromised. Though satellite and radio technology can also transmit a lot of data. phone services. (multi mode) which reflect past each other forming a sort of matrix. which simply would fail to fit onto traditional twisted pair lines. with similar characteristics and are also crucial to these networks. and so is a focus for triple-play. cable does most of the work of the internet. A single fibre-optic cable can manage bandwidth exceeding 1.000Mbps. Networks vary massively between countries. Combinations of coaxial and fibre-optic lines constitute most of the backbones of the internet and the PSTN. It now carries up to 10800 conversations per line. Cable technology allows transmission of huge amounts of data. which are subject to radio interference. e. Fibre-optics does away with the transmission of electrical signals. which may be incorporated into a PVR. into the home through the same connection. and multi-channel TV. Australian Photonics CRC. making them especially suitable to longdistance transmission. To maximise bandwidth. and an outer conductor. They also use and lose less energy in transmission. It can bring internet. Instead. fibre-optic cables carry huge amounts of data. 1999 Fibre-optic cables are a distinct technology. These cables make up much of the cable television and internet networks in Europe and the USA. as a higher-bandwidth improvement on the twisted pair design of the PSTN. carrying data from central points that collect private lines. and of data transmission in general. compared to a maximum capacity of around 50Mbps for copper cables. the USA has a massive residential cable television network whereas there is no such cable network in Italy. which travel along the closed channel of a glass wire. and the incredibly short wavelengths (and hence high frequencies) of light. Figure 160: Single-Mode Figure 161: Single-Mode Source: Deutsche Bank Source: Deutsche Bank Cables are mostly buried in the ground and so to install them involves often major engineering works (although in the some countries such as the US they have been hung from poles).g. TV is often transmitted digitally.6 December 2006 Telecommunications Telecom for beginners 2007 Cable Coaxial cable was developed during the Second World War. fibre-optic lines are usually filled with multiple beams of light. compared with 12 in twisted pair lines. e.

Lowfrequency sampling will not find an absolute value reflecting the low-frequency signal. Figure 162: DSL technologies use bandwidth left empty by pure voice traffic Source: Aware Figure 163 demonstrates how the two signals combine when transmitted together. For the analogue signal. and connects to the internet. DSL exploits that extra bandwidth to provide broadband internet access through a DSL modem. which accepts connections from customers’ DSL modems. because users normally download much more information than they upload.400 Hertz). and therefore needs LP filter protection. This is rarely the same as the combined line. As DSL data signals are transmitted digitally. and the local exchange must have a DSL Access Multiplexer (DSLAM) installed. To enable a normal voice line for DSL requires the installation of Low Pass Filters (LP filters) to protect normal phone equipment by blocking highfrequencies. only peaks and troughs matter. Figure 163: High-frequency DSL signals need filtering out L o w fre q u e n c y a n a lo g u e s ig n a l C o m b in e d s ig n a l Source: Deutsche Bank H ig h -fre q u e n c y d ig ita l s ig n a l The most commonly used variant of DSL is ADSL (Asynchronous or Asymmetric DSL). but the low-frequency does not. to screen out the interference. So the high-frequency digital signal thus retains integrity. Asynchronism implies more bandwidth for downloading data than uploading (three to four times). and the line of the combined signal peaks and troughs at the same time as the high-frequency signal. LP filters must be installed on each piece of normal phone equipment in the user’s house. absolute value matters.6 December 2006 Telecommunications Telecom for beginners 2007 DSL DSL (digital subscriber line) technology exploits the fact that twisted pair copper wires have a much higher bandwidth (several million Hertz) than is used when they carry PSTN voice traffic (0-3. Deutsche Bank AG/London Page 107 . to remove interfere with low-frequency voice-data.

The primary barrier to usage tends to be that local exchanges are not DSL-enabled. videoconferencing. bridging. IEEE 2 UK 3 India 4 Germany 5 6 France 7 Italy ADSL usually offers speeds around 1. placing a practical limit of around 5. It can offer speeds suitable for all major broadband applications. but this is upgradeable in such circumstances. unlike with cable internet. Figure 164: Selected profile of local loop lengths 100 90 80 70 60 50 40 30 20 10 0 1 US Source: Company data. which is triggered by a critical mass of registrations.e. The second problem is that customers may be too remotely connected to their exchanges.5km on their wire-distance to the exchange. and 128Kbps-1. DSL signals deteriorate as they travel through the wires. as it piggybacks on the last mile of the existing PSTN infrastructure. streaming content. Page 108 Deutsche Bank AG/London . for two reasons. Please refer to Figure 166 for an illustration of DSL speeds. offering up to 24Mbps (8Mbps for ADSL2) download. Very High Bit-rate DSL (VDSL) originally managed around 100Mbps download and 50Mbps upload. The costs of installing a DSLAM are such that companies tend to want a minimum number of guaranteed users on an exchange before they will invest. The limit of its own internet connection can be tested. DSL coverage is therefore not universal. though it is widespread. and fibreoptic sections that tend to extend service in low-density areas. and 3. Access remains a fairly large issue for DSL. such as IPTV. and they are also disrupted by boosters. whilst VDSL2 promises 26-100 Mbps speeds (i. ADSL2 and ADSL2+ are starting to be selectively deployed. but uploads at that same speed. faster degradation only over short distances).0Mbps download. and VoIP. identical for upload and download. rather than slower.6 December 2006 Telecommunications Telecom for beginners 2007 Symmetric DSL (SDSL) currently offers download speeds similar to ADSL. speed does not deteriorate as new customers are added at the exchange.0Mbps upload. dependent upon distance.5Mbps upload (1Mbps for ADSL2). In some areas this has led to a requirement that customers register interest prior to installation. As DSLAM has a dedicated line for each customer to whom it is connected. In Figure 164 we show the average loop lengths of operator local access networks in selected countries. DSL is relatively cheap. gaming. and does not require major civil works.5-8.

e. Drawing fibre right to the home (or “premise” as businesses/apartments are key) maximises speeds (over 100mbps possible) but is expensive to implement. FTTH offers the potential for significant reductions in operating costs. Well-established FTTH technologies already support 100mbit/s and 1Gbit/s configurations. telecom operators clearly feel the pressure to find a way to deliver higher bandwidths more consistently to a wider addressable market. in markets where competition from satellite and cable TV platforms is strong. This means there are fewer pieces of equipment that can go wrong. This is Deutsche Telekom’s current plan for its domestic market. 20mbit/s of bandwidth combined with leading-edge compression technologies should be sufficient to deliver a range of services to customer homes. Even with the advent of HDTV. The major drawback with DSL over copper is that the available bandwidth is dependent on a number of factors including line length (i. Fibre-to-the-Curb/Cabinet/Node/Street (FTTC. Operators deploy DSL technology at the exchange (where the copper lines are aggregated) to offer customers broadband internet access and related services. In addition. However. Hence BT Vision which aims to complete with BSkyB and the cable operators in the UK market. the same speed in both directions). Significant advances have been made with exchange-based DSL technology to the point where the maximum speeds are as high as 28mbit/s. It is still debatable whether such speeds are necessary. operators have two choices when considering a fibre build: Fibre-to-the-Home/Premise (FTTH. FTTN). Fibre is more resilient to physical degradation than copper and FTTH networks are typically designed to minimize the number of “active” elements in the network. That involves reconfiguring the network at significant expense. therefore reducing the underlying maintenance requirement (compared with copper) and can therefore be a technology that enable operators to reduce their overall cost base. Although an oversimplification. Deutsche Bank AG/London Page 109 . Fibre-to-the-home represents an alternative upgrade path to VDSL. FTTP). the distance between the exchange and the household) and the grade (or quality) of the copper. it is a more expensive solution (than VDSL) but has the potential benefits of offering (much) higher speeds and symmetric bandwidth (i.e. A less costly approach to running fibre to the home is to run it to a cabinet at the end of street and then use copper to drop the final signal into the home using a VDSL (a variant of DSL designed to cope with high bandwidth over short distances).6 December 2006 Telecommunications Telecom for beginners 2007 Fibre Current mass market access networks use copper as the final physical connection between individual households and the core network. In most cases. R&D efforts continue to squeeze additional performance out of the copper infrastructure with VDSL2 offering speeds of up to 50mbit/s – but this performance can only be realized by reducing the distance between the network equipment and each household.

There is a considerable amount of development being carried out on PON-based technologies (for example. This configuration has the advantage that each customer has dedicated bandwidth – there is no sharing with other customers. P2P FTTH deployments involve laying a dedicated fibre connection between each customer and the optical node. Depending on how many customers are served from each optical node this might mean that headline speeds of 100mbit/s plus can be promoted but at peak hours the actual available bandwidth per customer will be significantly lower. Loop lengths important The ability to satisfy consumer demand for bandwidth is dependent upon loop lengths and most network speeds for products such as IPTV are compromised when loop lengths are grater than 5. The advantage of using Ethernet is that it’s a mature technology that works well with IP. Page 110 Deutsche Bank AG/London . The biggest potential drawback with PON configurations appears to be the shared nature of the bandwidth between the optical node and each customer. P2P FTTH deployments typically use well.700 yards or 1.000ft (1.established Ethernet-based protocols operating at either 100mbit/s or 1Gbit/s.) Source: Deutsche Bank Decisions about FTTH deployment appear to focus around to primary options: passive optical networks (PONS) and point-to-point (P2P). For example Iliad in France has indicated it will deploy P2P whereas France Télécom is understood to favour a PON configuration.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 165: Local loop fibre strategies – Passive Optical Network ONT Splitter PSTN (Voice) FT Central Office Class 5 Switch Router Video Server TH P TT (F ) FFTN (FFTC) OLT ONU Copper (VDSL) Data (VOD etc. This has the advantage that more customers can be served via a single optical node (improving scale economics) and is probably attractive for many incumbents who have capital tied up in exchange real estate. PON FTTH deployments also involve laying a dedicated fibre to each household but the connections are aggregated through splitters before they are connected to the optical node which is deployed deeper into the core network – typically at the exchange. Equipment is widely available and relatively inexpensive. combining them with wave division multiplexing) – this is likely to allow significant improvements in the available bandwidth per customer even in peak hours.5km).

5 km Experiences so far – Japan. Two of these have been driven by intensifying competition (US and Japan) and one by government support (South Korea). the corporate consumer warranted a direct fibre connection and for the retail consumer the objective was to reduce loop lengths below 1. Japan and South Korea have relatively high levels of cable competition. Figure 167: Telstra’s proposed FTTN network FTTB Exchange Multi-Service Access Node Fibre FTTN Fibre DSLAM Copper ADSL2+ 1.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 166: Short loop lengths should enable a European fibre build 50 45 40 35 30 25 20 15 10 5 0 1 Source: DSL Forum VDSL ADSL 2+ ADSL 2 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Loop Length (k ft) How these network are built depends on the consumer (whether a corporate or residential consumer). It is no coincidence that the markets that have seen the most rapid take-up of FTTx are those where pressure from external sources exist. US and Korea lead While many of the conditions for fibre build laid out above apply to many international markets. As shown in Figure 169. only three key markets have seen a concerted push to fibre. USA. Deutsche Bank AG/London Page 111 .5 km Node ADSL2+ DSLAM Source: Deutsche Bank <1.500m to allow the optimisation of ADSL2+. As shown by Telstra’s (now abandoned) fibre plan.

NTT as % of total capex The FTTH build-out by Verizon (FioS) and FTTC roll by SBC (Lightspeed) are starting to ramp as the operators push TV services into their customer bases.4m homes passed by fibre in North America. What lessons have been learnt from Japan? Unsurprisingly.) and 30% to the point of drop off. NTT estimates that the installation cost is split 70% to the actual signal transmission (fibre build.000 10.000 40. etc. What is interesting is that while optical capex increased dramatically. There are now 2.000 50.6m just six months ago but as Page 112 Deutsche Bank AG/London .500 3.000 6. We believe a large bulk of the remaining “other” Euro 2.000 20. NTT’s B-FLET 100Mbps fibre service is now provided to 3.5 3 40% 30% 20% 10% 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 60% 50% 3000 2000 1600 1000 0 2002 2003 2004 2005 2006 (y) 2007 2008 2009 2010 1000 2 1.5 0 Optical Access Investment Source: NTT Source: Deutsche Bank.5 Figure 171: NTT Optical Capex 4 3. This is consistent with commentary from Deutsche Telekom that of the Euro 3bn fibre build only Euro 500m relates to actual access equipment. Again. the total annual capex spend has remained c. NTT has now driven these below US$1.500 2. DSL and IP telephony take-up Figure 169: Worldwide broadband deployment (Q1 2006) 60.000 2. the service is ramping as the costs/subscriber is falling.000 1.000 10.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 168: NTT: B-FLET.000 2.000 although we believe that the costs remain well above those of the US RBOCs (US$600-700).4m homes representing 7% of NTT’s total lines and the company expects fibre households to surpass DSL in the current financial year.000 0 USA China Japan South Korea Germany UK France Italy Canada Spain 14. up 46% from about 1.000 0 Mar-03 B FLET Source: NTT 3.5bn is comprised of factors such as civil works. Given this is an extremely low margin business there may well be a negative margin mix shift for the installers (typically the equipment suppliers) as fibre buildouts accelerate. it is perhaps not surprising that the capex dedicated to optical access has increased since B-FLET was launched (August 2001).000 4.000 500 0 Mar-04 Mar-05 Mar-06 Mar-07E 60% 50% 40% 30% 20% 10% 0% FLET's ADSL Optical IP phone (RHS) DSL Source: Deutsche Bank Cable Modem etc Cabe/total In Japan. Figure 170: Cost of the B-FLET service to NTT/sub (US$) 6000 5000 4000 2. underground enclosures.500 1.Y7bn and the portion allocated to optical has increased at the expense of other spending.000 30.000 8.000 12.5 1 0.

and are attached to broadband internet connections.11) is a wireless networking technology.519 329 Deutsche Bank AG/London Page 113 . either as a commercial service.hotspot-locations. or as a free service. or standard 802. Educational institutions such as libraries and universities offer many free hotspots.com 27. whereby users pay via an account with the network.25 0.329 2. Verizon expects 30% penetration of its base with FiOS data services.35 0.15 0. and at major chains of coffeehouses. offering bandwidth up to 54Mbps. etc.793 13.6 December 2006 Telecommunications Telecom for beginners 2007 shown in Figure 173 the number of homes connected with fibre is still a paltry 323k although this is growing rapidly.05 0 Sep '01 Sep '02 Sep '03 Sep '04 Sep '05 Apr-'06 Data Penetration Actual vs Goals Source: Verizon Source: Render. at ranges around 50m. with shared bandwidth up to 70Mbps (so home users would likely be offered 1Mbps). Wi-Fi is also being installed in public places.16) is an advance on Wi-Fi technology. intended to offer ranges up to 50km (although 15km is a more conservative estimate).2 0. e.3 0. whilst paid-for services are available in major airports.g. Figure 174: Wi-Fi hotspots worldwide (Q2 2006) Worldwide Europe North America Asia Australia Source: http://www.670 10.1 0. Vanderslice & Associates FTTH Homes Connected Wi-Fi/Wi-Fi Max Wi-Fi (WLAN. to share a broadband connection. Wi-Max (802. Areas in which a network can be accessed are referred to as hotspots. Wi-Fi is increasingly popular for home networking. Wi-Max is not yet rolled out in Europe. Figure 172: Verizon FiOS roll-out – actual versus expectations 35% 30% 25% 20% 15% 10% 5% 0% 6 9 12 5 yrs Figure 173: FTTH – Homes Connected in the US 0.

Geostationary satellites suffer from fairly significant latency due to a combination of the distances involved and the rate of signal propagation. Satellites use three main sections of the radio spectrum in the Super High Frequency (SHF) range of 3-30 GHz.6-1.8-27m Typical usage Cable intra-network distribution Broadband internet Companies HDNet BSkyB BT 3. It is estimated that there is a delay of approximately 1/4 of a second for a round trip. Signals from satellites are received using satellite dishes.7 GHz 10. The LNB amplifies the signal and converts it into a frequency usable by the terminating equipment (e.7-18 GHz 18-30 GHz 0.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 175: Broadband wireless in action Main Cell Site Business Cell Site Cell Site Home 1. Figure 176: Satellite bandwidths Typical satellite bandwidth usage C-band Ku-band Ka-band Source: Deutsche Bank Typical dish size 1. Signals transmitted at lower frequencies require larger satellite dishes but perform better under adverse weather conditions. Earth stations send signals to a given satellite which then relays them either to another satellite.4-6. with 1Tbps (1. Page 114 Deutsche Bank AG/London .signal degradation due to the interference of rainfall or clouds.000Gbps) capacity. US defence contractor Northrop Grumman is proposing to build an EHF satellite network. Signals transmitted at higher speed need smaller dishes but are impacted by "rain fade" . which focus signals on a radio receiver called a low noise block (LNB). The size of satellite dish required depends on the frequency range being used and the signal strength. a TV set-top-box or a modem).5m Direct-To-Home broadcast 0.5 to 3km Source: Deutsche Bank Satellite Satellite technology uses satellites in geostationary orbit (following the Earth’s rotation to remain still relative to points on the ground) to transmit communication signals. to another earth station or broadcasts the signal across a particular region of the earth.6-1.g.5m Newer satellite technologies are looking at using additional bandwidth in the Extremely High Frequency (EHF) range of 30-300 GHz.

Deutsche Bank AG/London Page 115 . which proposes to offer mobile broadband internet access anywhere on Earth. and costing around Euro 500. These signals may be analogue or digital. and thereby generate subscription revenues. Signals are targeted at desired regions. There are a number of satellite operators providing coverage of Europe including SES-Astra.024kbps upload speeds. Eutelsat and New Skies. depending on the demand and the symmetry required.096kbps download and 1. Satellite broadband comes in an array of speeds. and usually broadcast encrypted (which means customers need the appropriate decryption key . Generally high bandwidth users require speeds of up to 4. Such technology is evolving though to offer broadband internet. This is a professional offering. offering much functionality for IPTV to beat. A satellite's footprint depends on how its beam is configured . and so do not threaten GSM. and is priced for similar users. A geostationary orbit satellite maintains a fixed position over a given point on the equator and can typically cover up to 40% of the earth's surface. Figure 177: Typical coverage of a satellite transmitting TV to Europe Source: SES Astra Communications satellites provide a range of services. with the latter accessing the same benefits as digital terrestrial TV. but typically with higher bandwidth.usually a smart card . prices should come down. carrying some backbone traffic. although mobiles using this are expensive and bulky due to the need to send signals into space. Perhaps the most exciting application is the Broadband Global Area Network (BGAN).6 December 2006 Telecommunications Telecom for beginners 2007 Communications satellites provide comprehensive coverage of the world. The global reach of satellites can also be utilized for a global telecommunications network. A digital decoder may be incorporated into a PVR. so that broadcasters may control access. with the necessary satellite modem about the size of a laptop. They can offer a very sophisticated television offering.a "broad" or "wide" beam will give a large footprint (but with relatively low power especially at the footprint edge) whilst a "spot" beam will provide a relatively narrow but high power footprint. but if volumes increase. such as for Sky’s Sky Plus service.to view the channel). with potentially hundreds of channels. and servicing particularly users out of the reach of other technologies. Access is generally charged by bandwidth used.

6 December 2006 Telecommunications Telecom for beginners 2007 Technology: Convergence Terrestrial TV Terrestrial TV is broadcast through the air via transmission towers. This may mean a free provision of digital hardware to users who have not switched. Depending on the bandwidth used. Functionality may be greatly improved when this is accessed through a PVR. Hardware penetration to receive the digital signals is key in determining the progress of DTT.g. DTT requires a digital decoder that may be either integrated into a newer TV. it is unlikely it will not be completed until the end of the decade in key markets like France and Spain. The inherent uncertainty involved in waiting for people to buy digital decoders has made planning very difficult. and DTT offers around >40 channels. although in the UK. Many countries plan to switch off the analogue signals once digital penetration is sufficient. Wikipedia Analogue coverage is fairly universal. Figure 178: Number of countries to start up TV services per annum 16 14 12 10 8 6 4 2 0 1928 1932 1936 1940 1944 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 Source: Country data. or use of less spectrum. more channels. DTT allows more data to be compressed into a given radio bandwidth. although quality may become more of a focus. the development of Freeview. and not in others. but now Digital Terrestrial TV (DTT) is being rolled out across Europe. which will free up some radio bandwidth to be allocated or auctioned for other services (e. Most TV signals are currently broadcast using analogue (either PAL as in Europe and much of the rest of the world and NTSC in the USA). has dramatically increased the take-up of digital services. but in the UK. these goals are often sought at the same time. particularly to provide more channels in less bandwidth. analogue TV offers 5 channels. In practice. Page 116 Deutsche Bank AG/London . and whilst the European Commission has called for EU-wide switch-off by 2012. where the costs range from around £25 depending on the functionality. and received by roof or TV-mounted aerials. the number of channels offered varies. and so this may allow for greater picture quality. this could facilitate an expansion of DTT services). Digital signals are very widely available in some markets. or contained within a set-top box. such as the UK. and analogue switch-off is unlikely to take place without penetration approaching that of analogue TV.

it has been proposed that popular content could be downloaded off-peak to an inaccessible portion of a PVR hard drive. PPV should be a much larger factor in the development of IPTV and a differentiation from existing broadcasting technologies. but restricted to fast connections. a process termed as video on-demand (VoD). To combat bandwidth problems during peak hours. As one core feature of VoD should be user-control. e. whereby the marginal viewer makes little difference to the network. although the level of control over this entirely digital technology should make it possible to prevent this if users will tolerate such functionality. rather than a selection of channels from which to choose. as well as subscription services and pay per view (PPV). rather than for the actual download. a PC.) Deutsche Bank AG/London Page 117 . and so business models are in flux. which stream it to users when requested.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 179: The digital switchover timetable Year Country Italy United Kingdom France Germany Spain Finland Sweden Hungary USA Apr Apr Apr ?? Oct Quiero TV 1998 1999 2000 2001 2002 2003 2004 2005 2006E Dec Nov ITV Digital 2007E 2008E 2009E 2010E 2011E 2012E July May May May Nov Aug DTT launch/re-launch Official national switch-off date National switch-off date based on latest news Source: Mediaset IPTV Internet Protocol Television (IPTV) replaces the traditional broadcasting model of television with a dynamic internet-based service whereby the user selects content to watch from a database. Content is retained on servers connected to the internet. IPTV is extremely new.g. IPTV is transmitted via the internet. but it is likely to follow the mix of models found in existing multi-channel TV. (advertising-supported and public-service). as to obtain decent video quality requires high bandwidth (a DVD movie is played at around 3Mbps). and only this is transmitted to them. Firstly. with the user then paying to unlock it. in contrast to most broadcasting. but these may not reach commercial mass market. VoD is likely to mean that there will be a marginal bandwidth cost each time users access content. It is accessed either via a set-top box or through a normal internet browsing platform. This would include some free-to-air content. there may be pressure on advertising that users can skip past. to save bandwidth by also utilising users’ own connections. (There are experiments with peer-to-peer distribution techniques.

where as the unicast approach sends a dedicated signal to each device. European operators have different IPTV strategies such as Deutsche Telekom and Swisscom which are pursuing the VDSL route. Iliad and NeufCegetel). Figure 180: Summary of rollout of Telco operators’ IPTV investments Operators BT Technology ADSL ADSL + MPEG4 Moving to ADSL 2+ Capacity (MB/s) up to 2 up to 8 18 Coverage now Over 90% None None Target Comments No IPTV service 4-5mbits with 50% coverage IPTV + Freeview.18m subs 0. The broadcast approach employees a blanket coverage (as in UK radio and TV). In France there are also moves to build fibre in France. c30-50k subs Video delivered to PC Deutsche Tel ADSL T-Online Vision VDSL 1 up to 50 >91% None 20% coverage by 2006 Build out from 2006 with Euro 3bn capex budget 30% coverage by 2008 1m IPTV subs by end 2008 1m IPTV subs by end 2008 35% coverage end 06 for IPTV 50% coverage end 2006 0. In Figure 180 we show some of the leading IPTV strategies in Europe. whereas others are focused on ADSL2+ (France Telecom and Telefónica). However.3m subs Announced Euro 2. There are also two ways to propagate the services to devices. more than 95% of US cable operator Comcast’s VoD content and in the short-term most IPTV operators will add free content to their portfolio as it is easier to aggregate and allows IPTV to at least offer the same basic offering as moist of the TV forms. launch 4 Dec 2006 Available sometime in 2008/2009 Launched Q1 2004. by all three leading broadband providers (France Telecom. Page 118 Deutsche Bank AG/London . they are likely to be more willing to pay for it. It also allows IPTV operators to stress the additional services in their marketing in order to pitch the product as a premium/higher quality offering.1bn investment France Tel Telefónica Telecom Italia ADSL2+ ADSL2+ with MPEG 4 ADSL (MPEG 2) ADSL2+ 18 6 15m homes 4m homes Source: Deutsche Bank Mobile TV Mobile TV is in its infancy and as such there are multiple technologies that are looking to exploit the space (as there were in the early days of mobile). for example.6 December 2006 Telecommunications Telecom for beginners 2007 Secondly. much content is currently free-to-air. as users are choosing exactly what they want to watch.

but existing data on TV viewing patterns suggest that mobile TV could be a an ideal technology for event driven viewing when the consumer is seeking tome sensitive data. streaming usage pre and post launch Whale in the Thames Mobile TV Launch Ashes Big Brother Midnight Midnight Midnight Midnight Midnight Midday Midnight Midday Midnight Midday Midday 6am Midday 6am Midday 6pm 6am Midday 6pm 6pm 6am 6pm 6am 6pm 6am 6pm 6am 6pm May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Average weekly viewing figures Video streaming usage Source: SKY Source: Deutsche Bank The key will be to apply mobile TV into existing usage patters. and it is most likely to challenge the strong early morning usage of the radio and the newspapers.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 181: Broadcast versus unicast approach Broadcast Approach Unicast Approach Source: Alcatel Working out whether there is demand for mobile TV is a harder task. In Figure 182 we show the viewing patterns on Sky in the UK when there was a whale in the Thames and in Figure 183 the pick up in usage when Sky launched its mobile TV services. Figure 182: Sky mobile TV viewing patterns – event driven Sunday Monday Tuesday Wednesday Thursday Friday Saturday Figure 183: Sky mobile TV. Deutsche Bank AG/London Page 119 .

Even here.3/sec).30pm Use Internet 5. specifically designed to spectrally optimise for broadcast DMTV taking elements from both the digital terrestrial television (DTV) environment and applying them to a mobile world. New broadcast technologies have the benefit of reaching many people simultaneously though they require new networks to be built.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 184: Existing usage patterns (N=7000) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 6am-10am Watch TV Source: Mediascope 10am-5. the industry momentum is very much with the new broadcast approach as most mobile operators recognise that new broadcast driven technologies are needed.30-9pm Read Newspaper 9pm-6am Listen to radio 3G network snot suitable for mobile TV Traditional 3G networks – even with HSDPA overlays – are not designed to cope with DMTV broadcasting owing to capacity constraints and device power issues. video runs at c. currently. On a 3G mobile network. they can embrace new technologies. while new broadcast technologies run at 20-30 frames per second. however. there is significant fragmentation – again along regional lines. content providers feel comfortable with the broadcast medium as it enables firmer control over digital rights management (DRM). First. operators wishing to offer DMTV services have two options.15 frames per second (2G is c. Second. they can attempt to adapt 3G networks to a broadcast environment. Therefore. Further benefits of broadcast are the downlink speeds which offer higher quality picture resolution. Page 120 Deutsche Bank AG/London . In addition.

1 segment only Early-2006 2006 Time to market Likely to be Japan only.e. only 700MHz in US Source: Texas Instruments. DVB. Deutsche Bank. battery life DVB-H Europe/US MPEG 4 (H.g DVB-H ~330 kb/s (13.264) MPEG-2 / AAC 6MHz 23Mbps OFDM (13-seg/ch) Mobile use.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 185: Emerging mobile TV technologies e. Figure 186: Mobile TV Standards — Summarised System Region/Country deployment Codec Video/Audio Frequency/Channel size Max Modulation Optimized Handset Power Reduction Service availability Handset availability Advantages Disadvantages ISDB-T Japan MPEG-2 (H.264 5MHz 3x0.org MBMS (Mobile Broadcast/Multicast Service)/BCMCS (Broadcast & Multicast Service) MBMS or BCMCS is the name given to the technology family which sits as an overlay (i.264) MPEG4 / AAC 6MHz 11MBps COFDM Time slicing 2006 (locally through analog channels) 2006 Spectrum there.3 Mbps/40 channels (13.2Mbps COFDM Micro time-slicing Today 2004 MediaFLO US MPEG 4 (H.g DVB-H ~330 kb/s e.128 QPSK Wide industry support. Instead of the network setting up dedicated point-to-point contacts to each device through the entire network.264) MPEG-2 / AAC 8MHz 31Mbps COFDM Time slicing Early 2006 2005 DMB/DAB-IP Korea/Europe MPEG 4 (H. Time to market.3 Mbps/40 channels many MBMS/UMTS: 64-256+ kb/s MBMS/UMTS: 64-256+ kb/s (7-30% of cell power) (7-30% of cell power) MBMS/GSM: MBMS/GSM: 32-128 kb/s 32-128 kb/s (4 TS with 8-32 kbps/TS) (4 TS with 8-32 kbps/TS) MBMS Simultaneously reachable users DVB-H T-DMB FLO as Unic t+ U st nica Unicast Multimedia services UMTS: 64 kbs (CS) UMTS: 64 kbs (CS) 128 kb/s (PS) 128 kb/s (PS) CPRS: ~~40 kb/s (PS) CPRS: 40 kb/s (PS) EDGE: ~ 100 kb/s (PS) EDGE: ~ 100 kb/s (PS) few low (service differentiation. MBMS requires just a single broadcast channel in each cell which has the benefit of increasing capacity. it just requires a software upgrade) on top of the traditional 3G network to offer broadcast and multicast services (bespoke broadcast to a group of users). Deutsche Bank AG/London Page 121 . which we summarise in Figure 186 and in the section below we discuss each of these technologies in more detail.264) MPEG4 / BASC 6MHz 9. etc) high Service customisation Source: Ericsson There are over 12 mobile TV standards world-wide. personalisation. power standards consumption on terminal Spectrum tied up in several markets Spectrum needed Proprietary. technologically sound 2007 2008 Existing infrastructure used Likely to fall over with lots of usage MBMS Any WCDMA MPEG 4 (H. We identify 5 DMTV technologies which are most likely to emerge.264) MPEG4/H.

LG and Samsung. offers lots of channels (up to 50) using existing spectrum and can offer more interactive services owing to the bi-directional nature of 3G networks. S-DMB/T-DMB Developed between 1988 and 1992. and commercially launched in. arguably Vodafone has been the most supportive of MBMS to date (perhaps unsurprising given Ericsson is the company’s main infrastructure supplier).000 2. is that the industry support for this approach has been weak. Orange UK recently committed to trialling MBMS using IPWireless’ solutions in 2006. which is supported by Ericsson and IPWireless. Third. There is no room in TV for dropped calls…. As O2’s CTO stated at the recent CTIA conference “We believe that the 3G networks will not be reliable enough. Korea (by TU-Media/SKT).000 5. Disadvantages: There are three main problems for MBMS. Several television broadcast systems based on DAB have extended by modifications to some of the inadequacies of DAB in regard to video transmission at higher data rates. DAB (Digital Audio Broadcast) derivatives. It is now available (primarily in two frequencies 175-240MHz and 1450-1500MHz) to over 475m people globally.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 187: 3G Network consumption with and without MBMS 6. but even Vodafone is keeping its options open and has been trialling a competing system (DVB-H). Second are technological issues and we question the speed of hand-off between cells as well as constraints on power consumption of devices. ahead of any other dedicated mobile TV network and with the backing of the Korean device manufacturers. Of the operators globally. Page 122 Deutsche Bank AG/London . This argument is of course premised on the fact that revenue/bit of voice does not fall significantly which itself is questionable. First. That is why we think a broadcast service without complex hand-offs will be the way forward”.000 0 3G Voice Source: Analysyss 3G with MBMS Point-to-point video Broadcast video Other data Advantages: The benefit of MBMS. Both types of networks have been supported by. it is standardised already (under 3GPP). and perhaps most serious. DAB was commercially launched globally in 1998 with a view to replacing traditional analogue radio sets with digital receivers tuned to a terrestrialbased network capable of overcoming the faults of analogue.000 4. the major disadvantage of MBMS is that the underlying 3G network would still likely suffer capacity constraints with multiple users and as a result the operators will still choose to allocate spectrum to higher revenue/bit services like voice.000 1. These modifications fall under the title DMB (digital multimedia broadcast) and these come in two forms – networks with terrestrial-based antennae (T-DMB) and those piped directly from satellites (S-DMB).000 3. is that upgrade costs are low.

and Bouygues (France). DVB-H adapts DVB technically for a mobile environment. DVB has been well supported in the past with over 270 organisations in the industry-led consortium in over 35 countries. S-DMB S-DMB Network T-DMB Network Broadcasting Centre S-DMB Audio Video Data Content Providers Mobile Devices Broadcasting Centre T-DMB Transmitter Source: Deutsche Bank Advantages/Disadvantages: There is a great deal of posturing (it reminds us of GSMCDMA) between major proponents of T-DMB and those of DVB-H (see below) as to which technology is “best”. Motorola. Nokia. The disadvantage DVB-H has is that it requires new networks to be built and new spectrum to be allocated to it.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 188: T-DMB. T-DMB is gaining some good traction outside of Korea with debitel (Germany). both are based on similar technological principals (both use OFDM. Virgin Mobile (UK).a subsidiary of Crown Castle) as well as with Nokia. In reality. there have been tests in both China (Beijing Radio Broadcasting) and India. In terms of operator momentum. the biggest advantage for T-DMB is time to market related and the biggest disadvantage is that the world’s biggest manufacturer of terminals. In reality. Technologically speaking it is very similar in performance to both T-DMB and while MediaFlo (see below) may have some technological benefits over DVB-H. Deutsche Bank AG/London Page 123 . Moreover. LG and Samsung. time interleaving. supports DVB-H. DVB-H (Digital Video Broadcasting-Handheld) DVB-H is the latest derivation of the DVB transmission standard which historically has been responsible for bringing DTV to consumers via satellite. all either trialling or commercially committed to T-DMB (DAB-IP) solutions. overcoming issues such as weakening signal strengths while travelling at speed and also lowering power consumption (through “time-slicing” technology). cable and terrestrial networks.) and the differences are so small that they are irrelevant (device power consumption is a little better on DVB-H but greater transmission power is needed due to operating at higher frequency than DMB). the advantage that DVB-H has is that it is standardised by the European Telecoms Standard setting Institute (ETSI 302/4 in 2004). Siemens. etc. Advantages/Disadvantages: Perhaps the most significant advantage DVB-H currently has is that it is gathering momentum with operators in Europe and the US (through Modeo .

The Japanese mobile companies are all currently in the process of launching “one seg” handsets.5 seconds. It supports up to 20 streaming channels of up to 30 frames per second. Qualcomm is actually rolling out (at a cost of US$800m) and operating the network (at 700MHz completed end 2006) for the adopters of FLO. In addition. which offers the service free for terrestrial TV users. Through its wholly-owned subsidiary.e. which to date include Verizon Wireless. Qualcomm highlights its low channel switching time of 1.It is difficult to pull out the exact benefits that FLO has over the other two main DMTV technologies although Qualcomm claims that it is more efficient as it does not attempt to use historic terrestrial standards as a reference (improving both transmission and receiver power consumption).like PDC . The single biggest disadvantage of FLO is its proprietary nature (hence concentrated royalty fees) which means it is unlikely to proliferate in areas outside North America. this is equivalent to these technologies. Forward Link Only (FLO) FLO technology is a multicast proprietary DMTV technology designed by Qualcomm based on many of the similar technological principals as both T-DMB/DVB-H – i. aimed at increasing capacity and coverage (1 transmitter covers 60km) and lowering cost for multimedia content delivery to mobile handsets. though according to both TDMB/DVB-H proponents. Perhaps the difference between FLO and other technologies is the vertical integration that Qualcomm has applied. terminals have short battery life and perhaps the worst problem is that it is controlled by NHK. “one seg”) ISDB-T is the terrestrial DTV standard developed in Japan and the Japanese government has allocated 1/13th (“one seg”) of available broadcasting spectrum to mobile. In addition. MediaFLO.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 189: Example of the equipment needed in a DVB-H network Source: UDCast Integrated Services Digital Broadcasting-Terrestrial (ISDB-T.it is restricted to Japan. Page 124 Deutsche Bank AG/London . Advantages/disadvantages . it is regionally based. Japan’s Broadcasting Company. The advantage with the technology is that it is available today. The disadvantage is that .

Apple has already introduced a video version of its iPod. engadget Other technological possibilities In addition to DVB-H. Deutsche Bank. a satellite-based version (DVB-H(S)) has also been developed and Alcatel and Eutelsat hope to launch satellite-based DVB-H services by 2007/8. Mobile Wimax. commercial availability is unlikely prior to 2009 and we believe that its ability to hand-off between cells and on a ubiquitous basis will mean it is unlikely to be used for mobile TV this decade.26-4 Player Money Other Multicast Networks H. Another technological option is to utilise a mobile Wimax network. Perhaps one of the biggest technological competitors to live streaming broadcast TV comes from a non-streamed source.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 190: MediaFLO in action Media Players Radio Access Networks/FLO Network Encoding Schemes Content MediaFLO Client MPEG4 Player Windows Media Player MPEG4 1XEV-DO MediaFLO Server Microsoft News Sports 1XEV-DO Gold Multicast RealOne Real Player H. However. Indeed. which has a 30GB memory capable of storing 150 hours of video.16e. The fact that 68% still watch live TV suggests to us that mobile TV does indeed have a future. will significantly increase speed over 3G. Deutsche Bank AG/London Page 125 . Sky reported that 32% of its Sky+ watch recorded TV. or 802.26-4 -Digital Rights Management -Billing via existing systems Music Client-Server Architecture Source: Qualcomm. Given that today’s generation is comfortable with “time-shifted” technologies such as pod-casting. it is possible that an elegant iPod/TV synchronisation will render mobile TV obsolete. which runs on terrestrial antennae.

As bandwidth improves and more users discover the technology. Video-calling on mobiles is charged per minute like voice-calling. although dedicated videophones have yet to find mass-popularity. but. the service is now used on other devices such as PCs and 3G mobiles. but at a premium.6GHz) Unlimited Usage T-DMB Already launched Trials with Verizon Wireless T-DMB: Korean govt driving into other regions Unlimited Usage Qualcomm pushing into other US carriers/CDMA customer base Broadcast Networks FLO multi band (USA = 700MHz) Unlimited Usage Source: Alcatel.3/3. free video-conferencing could challenge fixed-line call charges as the high-bandwidth cousin of VoIP (especially if image quality improves towards data-rates of TV or even DVD). Deutsche Bank Video-telephony Since the early days of consumer-telephony. and can be used on broadband-connected computers (often called video-conferencing) so long as they have a microphone. 3G tariffs often include a certain monthly allowance of video calls. Pricing varies in a range around €0.5 GHz) Unicast video Over WiMAX Networks Possible Broadcast Implementation Optimization Implementation Alternative to 3G Broadcast Networks DVB-H in UHF (470-700 MHz) DVB-H trials DVB-H Local Implementations From 2010 on: Massive DVB-H Deployment Broadcast Networks S/T-DMB VHF/L/S-band (T=175-245-1400 MHz S=2. Page 126 Deutsche Bank AG/London . Video-calling is implemented on some 3G phones.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 191: Mobile TV timeline 2005 2006 2007 2008 Beyond ‘08 Mobile Networks 3G/UMTS (2110-2170 MHz) Unicast video over 3G HSPDA MBMS Service launches 3GLTE Mixed Interactivity Better Video Quality DVB-H S-Band Trials Broadcast Networks DVB-S in S-Band (2170-2200 MHz) Unicast/Broadcast DVB-H S-band National Coverage DVB-H S-Band Broadcast Terrestrial launch Unlimited Usage plus Access Everywhere WiMAX Networks WiMAX (2. whilst offering a service superior to the PSTN. speakers and a webcam (a cheap digital camera . but enabled phones are increasingly widespread.30 .down to €20 . creating a latent possibility for the service to take off if users develop a taste for it. people have talked of adding video to their calls.€1 per minute.providing a video feed to a computer). Mobile video-calling is not yet popular. rather than identical. Technology to do so was demonstrated in the early 1960s.

mobile phones.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 192: Number of subscribers with TV embedded mobile phones 80 70 60 50 40 30 20 10 0 2005 DVB-H Source: Nokia 2006 2007 T-DMB 2008 2009 2010 S-DMB Gaming Computer games range from sophisticated fully-immersive experiences. This means that music no longer requires physical media only the digital storage space that is found on all sorts of electronic devices. with plans Deutsche Bank AG/London Page 127 . using advanced technology to offer experiences akin to movies. games downloaded to mobile phones and online gambling. made it convenient to keep large amounts of music on computers. Figure 193: Game offered on 2G phones Figure 194: Game offered on PCs and dedicated devices Source: Deutsche Bank Source: Games Digest Music Advances in storage. and processing technology. and to transmit it digitally. Mobile phones are now available with sufficient storage capacity to act as music players. and also dedicated gaming devices such as the Sony Playstation series. Music is offered through many different devices. and these may well converge. and it can thus be offered through telecommunications channels. Games may be played through TVs. computers such as PCs and PDAs. Particularly interesting are games played online with other players connected to the internet. compression. such as the invention of MP3. then stored and played on communications devices. to extremely basic offerings that may be entirely text-based.

Any sufficiently fast internet platform that can connect to a music player. which can have quality up to that of CDs. and this may be transferred onto dedicated music players. Even where storage is inadequate for much music. Music can be downloaded to devices through a sufficiently fast connection to the internet. storing currently up to about 1000 hour-long albums). as well as imported from media such as CDs. as is usual for the iPod. or can play music itself. may offer music downloads. Computers such as PCs also store music. Page 128 Deutsche Bank AG/London . it may be sold as short ring-tones.6 December 2006 Telecommunications Telecom for beginners 2007 to produce a phone that mirrors the functionality of Apple’s iPod (a high-capacity digital music player.

6 December 2006 Telecommunications Telecom for beginners 2007 Section 3: Reference Deutsche Bank AG/London Page 129 .

175.9 years $265.5% Mobile phones Figure 197: Austria mobile market Operator Parent Technology Launch date 2G Mobilkom Austria T-Mobile Austria One Gmbh tele. Company data TV Figure 198: Austria: TV by household 2005 (Y/E) Total households Cable penetration Satellite penetration Source: Screen Digest. Deutsche Bank analysis 4. WCDMA 3G Dec-93 Jul-96 Oct-98 May-00 3G Apr-03 Dec-03 Dec-03 Dec-03 May-03 Subscribers (2Q’06) 3.1% Page 130 Deutsche Bank AG/London . of major competing fixed line operators (as at Sept ’05) Total incumbent copper subscriber lines Total Broadband BB cable BB DSL Incumbent own-branded DSL Broadband penetration (lines per 100 inhabitants) Source: EcTA.749.8% 12% 3.192.at 1998 8. CIA Rundfunk und Telekom Regulierungs (formerly TelekomControl ) http://www.434 38. 3G GSM 900/1800. 3G.053 345 Market share (%) 39.3% 24.437 2.855 40% 58% 68% 14.569.2% 49. 3G GSM 1800. (PPP) Source: Deutsche Bank.rtr. 3G GSM 1800.ring 3 Austria Telekom Austria Deutsche Telekom Telenor/ EON AG Deutsche Telekom Hutchison Telecom GSM 900/1800.0% 20.095 1. EU 6 2.8bn $32.6 December 2006 Telecommunications Telecom for beginners 2007 Country: Austria Figure 195: Austria: Key information Regulator Regulator URL Liberalised Population Median Age GDP 2005 est.817 1.500 Fixed-line services Figure 196: Austria: Fixed-line subscribers: (Q4’05) No.880 (July 2006 est.) total: 40.(PPP) GDP per capita 2005 est.831 1.9% Source: GSM world.

1% Source: GSM world.(PPP) GDP per capita 2005 est.725 Market share (%) 47. of major competing fixed line operators (as at Sept ’05) Total incumbent copper subscriber lines Total Broadband BB cable BB DSL Incumbent own-branded DSL Broadband penetration (lines per 100 inhabitants) Source: EcTA. 3G GSM 900/1800.434 0.6 December 2006 Telecommunications Telecom for beginners 2007 Country: Belgium Figure 199: Belgium: Key information Regulator Regulator URL Liberalized Population Median Age GDP 2005 est. 3G Jan-94 Aug-96 Mar-99 3G May-04 Sep-06 Subscribers (2Q’06) 4.904.379.100 Fixed-line services Figure 200: Belgium: Fixed-line subscribers: (Q4’05) No.270 3.0% 93. EU 8 4.4% 33.3% Mobile phones Figure 201: Belgium mobile market Operator Parent Technology Launch date 2G Proximus Mobistar BASE NV SA Belgacom France Telecom KPN GSM 900/1800.464 1. Deutsche Bank analysis 4.9 years $322bn $31.) total: 40.067 (July 2006 est. CIA Belgian Institute of Postal services and Telecommunications http://www.273.491 33% 67% 78% 18.020 1.569.5% 19.4% Deutsche Bank AG/London Page 131 .8% 7. 3G GSM 900/1800. (PPP) Source: Deutsche Bank.ibpt.be 1998 10. Company data TV Figure 202: Belgium: TV by household 2005 (Y/E) Total households Digital terrestrial penetration Cable penetration Satellite penetration Source: Screen Digest.

4% 21.2% 2.itst.) total: 39.800 Fixed-line services Figure 204: Denmark: Fixed-line subscribers: (Q4’05) No. EU 7 1. (PPP) Source: Deutsche Bank.613.661 (July 2006 est.450.6% 25.4% Telia Sonera Mobile Telia Sonera Source: GSM world.8% 22. Deutsche Bank analysis 2. Company data * Planned TV Figure 206: Denmark: TV by household 2005 (Y/E) Total households Cable penetration Satellite penetration Source: Screen Digest.982.310 1. 3G GSM 900/1800 GSM 900/1800.877 26% 65% 61% 28% Mobile phones Figure 205: Denmark mobile market Operator Parent Technology Launch date 2G TDC Mobile Sonofon HI3G TDC Telenor Hutchison Telecom GSM 900/1800.8 years $189.013 60. CIA National IT and Telecom Agency http://www.508.8% Page 132 Deutsche Bank AG/London .127 120 Market share (%) 49.(PPP) GDP per capita 2005 est. of major competing fixed line operators (as at Sept ’05) Total incumbent copper subscriber lines Total Broadband BB cable BB DSL Incumbent own-branded DSL Broadband penetration (lines per 100 inhabitants) Source: EcTA.6 December 2006 Telecommunications Telecom for beginners 2007 Country: Denmark Figure 203: Denmark: Key information Regulator Regulator URL Liberalised Population Median Age GDP 2005 est.516 1.dk 1994 5.3bn $34.848 1. 3G 3G Jul-92 Jul-92 Jun-97 3G Oct-05 Dec-06* Oct-03 Subscribers (2Q’06) 2.

) total: 41. of major competing fixed line operators (as at Sept ’05) Total incumbent copper subscriber lines Total Broadband BB cable BB DSL Incumbent own-branded DSL Broadband penetration (lines per 100 inhabitants) Source: EcTA.0% 10.171.6 December 2006 Telecommunications Telecom for beginners 2007 Country: Finland Figure 207: Finland: Key information Regulator Regulator URL Liberalised Population Median Age GDP 2005 est. EU 3 3. Company data TV Figure 210: Finland: TV by household 2005 (Y/E) Total households Digital terrestrial penetration Cable penetration Satellite penetration Source: Screen Digest.9% 52.983 858 Market share (%) 46. CIA Finnish Communications Regulatory Authority http://www.567 26.5% Deutsche Bank AG/London Page 133 .466 1.2% Source: GSM world.3 years $161. Deutsche Bank analysis 2.4% 16. 3G Jun-92 Dec-91 Jan-01 3G Oct-04 Sep-04 Dec-05 Subscribers (2Q’06) 2.000 1.459.9bn $31.fi 1998 5.5% 37.ficora.372 (July 2006 est.000 Fixed-line services Figure 208: Finland: Fixed-line subscribers: (Q4’05) No. 3G GSM 900/1800.(PPP) GDP per capita 2005 est.180.231.363 13% 79% 67% 22% Mobile phones Figure 209: Finland mobile market Operator Parent Technology Launch date 2G Sonera Mobile Networks Radiolinja DNA Telia Sonera Elisa Finnet GSM 900/1800. (PPP) Source: Deutsche Bank. 3G GSM 900/1800.

art-telecom.542 Market share (%) 46.fr 1998 60.754.0% 17.) total: 39. 3G GSM 900/1800 Jul-92 Apr-93 Jan-96 3G Mar-06 Nov-04 Subscribers (2Q’06) 22.136 (July 2006 est. CIA Autorité de Régulation des Télécommunications http://www.2% Page 134 Deutsche Bank AG/London . Deutsche Bank analysis 25.561 6% 94% 47% 17% Mobile phones Figure 213: France mobile market Operator Parent Technology Launch date 2G Orange SFR Bouygues France Telecom Vivendi /Vodafone Bouygues GSM 900/1800.(PPP) GDP per capita 2005 est.028 9.1 years $1.950. Company data TV Figure 214: France: TV by household 2005 (Y/E) Total households Digital terrestrial penetration Cable penetration Satellite penetration Source: Screen Digest.3% 36.794 bn $29. (PPP) Source: Deutsche Bank. of major competing fixed line operators (as at Sept ’05) Total incumbent copper subscriber lines Total Broadband BB cable BB DSL Incumbent own-branded DSL Broadband penetration (lines per 100 inhabitants) Source: EcTA.6 December 2006 Telecommunications Telecom for beginners 2007 Country: France Figure 211: France: Key information Regulator Regulator URL Liberalised Population Median Age GDP 2005 est.219 6.9% 14.876.600 Fixed-line services Figure 212: France: Fixed-line subscribers: (Q4’05) No.28% 22. EU 4 33. 3G GSM 900 .415 8.7% Source: GSM world.390 17.150.

6 years $2.444 11.) total: 42.3% 41. 3G GSM 1800.6 December 2006 Telecommunications Telecom for beginners 2007 Country: Germany Figure 215: Germany: Key information Regulator Regulator URL Liberalised Population Median Age GDP 2005 est.bundesnetzagentur. EU 12 35.3% Source: GSM world. Company data TV Figure 218: Germany: TV by household 2005 (Y/E) Total households Digital terrestrial penetration Cable penetration Satellite penetration Source: Screen Digest. 3G GSM 1800. (PPP) Source: Deutsche Bank.7% Deutsche Bank AG/London Page 135 .480 bn $30. Deutsche Bank analysis 39.2% 36.422.5% 12. of major competing fixed line operators (as at Sept ’05) Total incumbent copper subscriber lines Total Broadband BB cable BB DSL Incumbent own-branded DSL Broadband penetration (lines per 100 inhabitants) Source: EcTA.415 29.600.186 4.711.099 Market share (%) 37.100 Fixed-line services Figure 216: Germany: Fixed-line subscribers: (Q4’05) No.de 1998 82.2% 57.952 2% 97% 62% 13% Mobile phones Figure 217: Germany : mobile market Operator Parent Technology Launch date 2G T-Mobile Vodafone E-Plus (KPN) O2 Deutsche Telekom Vodafone KPN Telefónica GSM 900/1800.537. 3G GSM 900/1800.0% 14.(PPP) GDP per capita 2005 est.000 10. CIA Federal Network Agency http://www. 3G Jul-92 Jun-92 May-94 Oct-98 3G Apr-04 Jan-05 Aug-04 Nov-05 Subscribers (2Q’06) 30.852 10.299 (July 2006 est.

CIA EETT National Telecommunications and Post Commission http://www.5% Q Telecommunications Private equity Source: GSM world.139. 3G GSM 1800 Jan-98 Jul-93 Jul-93 Jun-02 3G May-04 Nov-04 Sep-04 Subscribers (2Q’06) 4. 3G GSM 900 .825 4.gr 2001 10. of major competing fixed line operators (as at Sept ’05) Total incumbent copper subscriber lines Total Broadband BB cable BB DSL Incumbent own-branded DSL Broadband penetration (lines per 100 inhabitants) Source: EcTA.300 Fixed-line services Figure 220: Greece: Fixed-line subscribers: (Q4’05) No. Company data TV Figure 222: Greece: TV by household 2005 (Y/E) Total households Digital terrestrial penetration Cable penetration Satellite penetration Source: Screen Digest.(PPP) GDP per capita 2005 est.3% 35.5% Mobile phones Figure 221: Greece : mobile market Operator Parent Technology Launch date 2G CosmOTE Vodafone Greece TIM_Hellas OTE Vodafone Private equity GSM 900/1800.0% 13.1% Page 136 Deutsche Bank AG/London .4% 7.6 December 2006 Telecommunications Telecom for beginners 2007 Country: Greece Figure 219: Greece: Key information Regulator Regulator URL Liberalised Population Median Age GDP 2005 est.8% 19.113 0% 99% 70% 1.8 years $238.636 2.eett.688.058 (July 2006 est.381 160. (PPP) Source: Deutsche Bank.299 0. 3G GSM 900 . EU 4 5.2bn $22.516 968 Market share (%) 37.0% 0.519.) total: 40. Deutsche Bank analysis 4.

(PPP) GDP per capita 2005 est.062.000 271.3% Deutsche Bank AG/London Page 137 . 3G GSM 900/1800.424 48. 3G GSM 900/1800 3G Jul-93 Mar-97 Feb-01 3G Nov-04 Mar-05 Jul-05 Subscribers (2Q’06) 2.1bn $41. Company data.6 December 2006 Telecommunications Telecom for beginners 2007 Country: Ireland Figure 223: Ireland: Key information Regulator Regulator URL Liberalised Population Median Age GDP 2005 est.) total: 34 years $165. Deutsche Bank analysis 1.comreg.4% Source: GSM world.8% 5.7% 14.ie 2002 4.090 1.272.606 683 250* Market share (%) 45.2% 34. (PPP) Source: Deutsche Bank.600. EU n/a 1.100 Fixed-line services Figure 224: Ireland: Fixed-line subscribers: (Q4’05) No. *23_aug 2006 TV Figure 226: Ireland: TV by household 2005 (Y/E) Total households Cable penetration Satellite penetration Source: Screen Digest.7% 38. CIA The Commission for Communications Regulation http://www. of major competing fixed line operators (as at Sept ’05) Total incumbent copper subscriber lines Total Broadband BB cable BB DSL Incumbent own-branded DSL Broadband penetration (lines per 100 inhabitants) Source: EcTA.078 9% 75% 75% 7% Mobile phones Figure 225: Ireland : mobile market Operator Parent Technology Launch date 2G Vodafone Ireland O2 Ireland Meteor Communications Hutchison 3G Ireland limited Vodafone Telefónica Eircom Hutchison Telecom GSM 900/1800.235 (July 2006 est.

133.1% Mobile phones Figure 229: Italy : mobile market Operator Parent Technology Launch date 2G TIM Vodafone Omnitel Wind H3G Telecom Italia Vodafone Weather Investments SPA Hutchison Telecom GSM 900/1800.667 bn $28. Deutsche Bank analysis 22.917.176 17.6 December 2006 Telecommunications Telecom for beginners 2007 Country: Italy Figure 227: Italy: Key information Regulator Regulator URL Liberalised Population Median Age GDP 2005 est. 3G GSM 900/1800. 3G GSM 900/1800.6% 0% 21. EU 4 21.7% Source: GSM world.2% Page 138 Deutsche Bank AG/London .) total: 42.810* Market share (%) 43.5% 20.agcom. (PPP) Source: Deutsche Bank.2 years $1.028. of major competing fixed line operators (as at Sept ’05) Total incumbent copper subscriber lines Total Broadband BB cable BB DSL Incumbent own-branded DSL Broadband penetration (lines per 100 inhabitants) Source: EcTA.300 6.408 18.4% 9.it 1998 58.000 7.300 0% 95% 73% 12. Company data * 23_Aug 2006 TV Figure 230: Italy: TV by household 2005 (Y/E) Total households (000’) Digital terrestrial penetration (D DTT) Cable penetration Satellite penetration Source: Screen Digest.509 (July 2006 est.4% 26.(PPP) GDP per capita 2005 est.700 Fixed-line services Figure 228: Italy: Fixed-line subscribers: (Q4’05) No. CIA Italian Communications Authority (Autorità per le Garanzie nelle Comunicazioni) http://www.559 14. 3G 3G Apr-95 Sep-95 Mar-99 3G Mar-05 Mar-04 Oct-04 Mar-03 Subscribers (2Q’06) 30.

of major competing fixed line operators (as at Sept ’05) Total incumbent copper subscriber lines Total Broadband BB cable BB DSL Source: Company data.672.4% 2.4% 25. Home Affairs. 3G CDMA PDC 3G Oct-01 Dec-02 Apr-02 Apr-02Subscribers (2Q’06) 51.6 Market share (%) 55. (PPP) Source: Deutsche Bank.2 23. Posts and Telecommunications http://www.3 2.6% 16.K.0% 38.025 bn €31.464 (July 2006 est) Total: 42. Deutsche Bank TV Figure 234: Japan: TV by household 2005 (Y/E) Total households Digital terrestrial penetration (DTT) Cable penetration Satellite penetration Source: Screen Digest. Deutsche Bank analysis 48.5% Source: Company data.soumu.240.go.8% 37.545.600 Fixed-line services Figure 232: Japan: Fixed-line subscribers: (Q4’05) No.267.(PPP) GDP per capita 2005 est.616. Deutsche Bank 3 52.9% Deutsche Bank AG/London Page 139 . (JPhone) Au (KDDI) TU-KA NTT Softbank mobile corp KDDI KDDI 3G UMTS. CIA Ministry of Public Management.9 10. Inc Vodafone K.000 (Sept 2006) 14% 60% Mobile phones Figure 233: Japan : mobile market Operator Parent Technology Launch date 2G NTT DoCoMo.340.475.000 24.6 December 2006 Telecommunications Telecom for beginners 2007 Country: Japan Figure 231: Japan: Key information Regulator Regulator URL Liberalised Population (000) Median Age GDP 2005 est. PDC.2 15.jp 2001 (final stage liberalization) 127.9 years $4.

907.5% Orange Nederland France Telecom Source: GSM world.8% Page 140 Deutsche Bank AG/London .5% 7.3% Mobile phones Figure 237: Netherlands : mobile market Operator Parent Technology Launch date 2G KPN Mobile The Netherlands BV Libertel-Vodafone Telfort BV T-Mobile Netherlands KPN Vodafone KPN Deustche Telekom GSM 900/1800. CIA OPTA http://www.7% 12.4 years $497.400* 2.7% 93.113.264 3.(PPP) GDP per capita 2005 est. (PPP) Source: Deutsche Bank.573 38% 62% 72% 25.6 December 2006 Telecommunications Telecom for beginners 2007 Country: Netherlands Figure 235: Netherlands Regulator Regulator URL Liberalised Population Median Age GDP 2005 est. EU 2 6.377 2.) total: 39.300 Fixed-line services Figure 236: Netherlands: Fixed-line subscribers: (Q4’05) No. Deutsche Bank analysis 6.5% 12. of major competing fixed line operators (as at Sept ’05) Total incumbent copper subscriber lines Total Broadband BB cable BB DSL Incumbent own-branded DSL Broadband penetration (lines per 100 inhabitants) Source: EcTA.opta.9bn $30. 3G GSM 1800 GSM 1800. 3G GSM 900/1800.491.996 Market share (%) 43.nl 1998 16.881 2.932. Company data TV Figure 238: Netherlands: TV by household 2005 (Y/E) Total households Digital terrestrial penetration Cable penetration Satellite penetration Source: Screen Digest.461 (July 2006 est.6% 10.381 1. 3G GSM 1800 Jul-94 Sep-95 Sep-98 Feb-99 -Dec-98 3G Oct-04 Nov-04 Nov-05 Subscribers (2Q’06) 8.7% 20.000 4.

63.6 December 2006 Telecommunications Telecom for beginners 2007 Country: Norway Figure 239: Norway: Key information Regulator Regulator URL Liberalised Population Median Age GDP 2005 est. 3G 3G May-93 Sep-93 3G Dec-04 Jun-05 Subscribers (2Q’06) 2. Deutsche Bank analysis 1.9% Deutsche Bank AG/London Page 141 . Company data TV Figure 242: Norway: TV by household 2005 (Y/E) Total households Cable penetration Satellite penetration Source: Screen Digest.940 11% 82% 52% Mobile phones Figure 241: Norway : mobile market Operator Parent Technology Launch date 2G Telenor Mobil Netcom Hutchison Telenor Telia Sonera Hutchison Telecom GSM 900/1800.709 1.900. company data.610.) total: 38.800 Fixed-line services Figure 240: Norway: Fixed-line subscribers: (Q4’05) No.820 (July 2006 est. of major competing fixed line operators (as at Sept ’05) Total incumbent copper subscriber lines Total Broadband BB cable BB DSL Incumbent own-branded DSL Broadband penetration (lines per 100 inhabitants) Source: Informa. Deutsche Bank analysis 4 2.6% 34.6% 31.242 Market share (%) 68. CIA Norwegian Post and Telecom Authority http://www.4 years $196.4% 0.(PPP) GDP per capita 2005 est.4bn $42.npt.no 1998 4.0% Source: GSM world.1000 685. (PPP) Source: Deutsche Bank.003E 48. 3G GSM 900/1800.

3G GSM 900/1800. Company data TV Figure 246: Portugal: TV by household 2005 (Y/E) Total households Cable penetration Satellite penetration Source: Screen Digest.402 44.5 years $200.0% Vodafone Portugal Vodafone Source: GSM world.605.8% 36. Deutsche Bank analysis 3.1% 19. 3G Oct-92 Aug-98 Oct-92 3G Apr-04 Jul-04 Feb-04 Subscribers (2Q’06) 5. CIA ANACOM Autoridade Nacional de Comunicações http://www.0% Page 142 Deutsche Bank AG/London .icp. (PPP) Source: Deutsche Bank.757 1.6bn €19.pt 2000 10.219.(PPP) GDP per capita 2005 est.4% 15.362.343 2.403 4.201.870 (July 2006 est.) total: 38. EU 3 3.366 Market share (%) 44. 3G GSM 900/1800. of major competing fixed line operators (as at Sept ’05) Total incumbent copper subscriber lines Total Broadband BB cable BB DSL Incumbent own-branded DSL Broadband penetration (lines per 100 inhabitants) Source: EcTA.000 Fixed-line services Figure 244: Portugal: Fixed-line subscribers: (Q405) No.6 December 2006 Telecommunications Telecom for beginners 2007 Country: Portugal Figure 243: Portugal: Key information Regulator Regulator URL Liberalised Population Median Age GDP 2005 est.915 42% 58% 83% 12% Mobile phones Figure 245: Portugal : mobile market Operator Parent Technology Launch date 2G TMN Optimus Portugal Telecom Sonaecom / France Telecom GSM 900/1800.

6 December 2006

Telecommunications Telecom for beginners 2007

Country: Spain
Figure 247: Spain: Key information
Regulator Regulator URL Liberalised Population Median Age GDP 2005 est.(PPP) GDP per capita 2005 est. (PPP)
Source: Deutsche Bank, CIA

CMT Comision del Mercado de las Telecommunications http://www.cmt.es Q4 1998 40,397,842 (July 2006 est.) total: 39.9 years $1,033bn $25,600

Fixed-line services
Figure 248: Spain: Fixed-line subscribers: (Q4’05)
No. of major competing fixed line operators (as at Sept ’05) Total incumbent copper subscriber lines Total Broadband BB cable BB DSL Incumbent own-branded DSL Broadband penetration (lines per 100 inhabitants)
Source: EcTA, EU

6 17,266,520 4,788,484 20% 80% 70% 11%

Mobile phones
Figure 249: Spain : mobile market
Operator Parent Technology Launch date 2G TEM Vodafone Espana SA Telefónica Vodafone GSM 900/1800, 3G GSM 900/1800, 3G GSM 1800, 3G 3G Jul-95 Jul-95 Oct-95 3G Feb-04 May-04 May-04 Dec-06 (planned) Subscribers (2Q’06) 20,655 13,949 10,601 Market share (%) 45.7% 30.9% 23.5% -

(Amena) Retevision France Telecom Movil S.A Xfera TeliaSonera

Source: GSM world, Company data

TV
Figure 250: Spain: TV by household 2005 (Y/E)
Total households Digital terrestrial penetration Cable penetration Satellite penetration
Source: Screen Digest, Deutsche Bank analysis

14,175,767 5.2% 9.28% 17.52%

Deutsche Bank AG/London

Page 143

6 December 2006

Telecommunications Telecom for beginners 2007

Country: Sweden
Figure 251: Sweden: Key information
Regulator Regulator URL Liberalised Population Median Age GDP 2005 est.(PPP) GDP per capita 2005 est. (PPP)
Source: Deutsche Bank, CIA

PTS The National Post and Telecom Agency (Post-och Telestyrelsen) http://www.pts.se 1993 9,016,596 (July 2006 est.) total: 40.9 years $268.3bn $29,800

Fixed-line services
Figure 252: Sweden: Fixed-line subscribers: (Q4’05)
No. of major competing fixed line operators (as at Sept ’05) Total incumbent copper subscriber lines Total Broadband BB cable BB DSL Incumbent own-branded DSL Broadband penetration (lines per 100 inhabitants)
Source: EcTA, EU

10 5,403,000 1,886,821 19% 66% 58% 21%

Mobile phones
Figure 253: Sweden : mobile market
Operator Parent Technology Launch date 2G TeliaSonera Mobile Networks AB Telia Sonera Tele 2 AB Hi3G Access AB Tele2 Hutchison Telecom Telenor Sverige AB Telenor
Source: GSM world, Company data

Subscribers (2Q’06) 4,439 3,235 1,676 120

Market share (%) 46.9% 34.2% 17.7% 1.3%

3G Dec-04 Jan-04

GSM 900/1800, 3G GSM 900, 3G GSM 900/1800, 3G 3G

Nov-92 Sep-92 Sep-92 -

TV
Figure 254: Sweden: TV by household 2005 (Y/E)
Total households Digital terrestrial penetration Cable penetration Satellite penetration
Source: Screen Digest, Deutsche Bank analysis

4,035,744E 13.6% 61.9% 28.0%

Page 144

Deutsche Bank AG/London

6 December 2006

Telecommunications Telecom for beginners 2007

Country: Switzerland
Overview
Figure 255: Switzerland: Key information
Regulator Regulator URL Liberalised Population Median Age GDP 2005 est.(PPP) GDP per capita 2005 est. (PPP)
Source: Deutsche Bank, CIA

Federal Office for Communications (OFCOM/BAKOM) http://www.bakom.admin.ch 1998 7,523,934 (July 2006 est.) total: 40.1 years $240.9bn $32,200

Fixed-line services
Figure 256: Switzerland: Fixed-line subscribers: (Q4’05)
No. of major competing fixed line operators Total incumbent copper subscriber lines Total Broadband BB cable(Oct 2005) BB DSL(Oct 2005) Incumbent own-branded DSL Broadband penetration (lines per 100 inhabitants)
Source: Informa; company data; Deutsche Bank analysis

3 3,931,000 1,600,000 36% 64% 39% 25%

Mobile phones
Figure 257: Switzerland : mobile market
Operator Parent Technology Launch date 2G Swisscom Mobile Ltd TDC Switzerland AG (Sunrise) Orange Communications SA Swisscom and Vodafone TDC GSM 900/1800, 3G GSM 900/1800, 3G Mar-93 Dec-98 3G Aug-04 Dec-05 Subscribers (2Q’06) 4,469 1,289 Market share (%) 63.5% 18.3%

France Telecom

GSM 1800, 3G

Jun-99

Sep-05

1,285

18.2%

Source: GSM world, Company data

TV
Figure 258: Switzerland: TV by household 2005 (Y/E)
Total households Digital terrestrial penetration Cable penetration Satellite penetration
Source: Screen Digest, Deutsche Bank analysis

3,111,536 0.1% 90.4% 26.1%

Deutsche Bank AG/London

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6 December 2006

Telecommunications Telecom for beginners 2007

Country: US
Overview
Figure 259: US: Key information
Regulator Regulator URL Liberalised Population Median Age GDP 2005 est.(PPP) GDP per capita 2005 est. (PPP)
Source: Deutsche Bank, CIA

Federal Communications Commission(FCC) http://www.fcc.gov 298,444 (July 2006 est.) total: 36.5 years $12.31 trillion $41,600

Mobile phones
Figure 260: US : mobile market
Operator Parent Technology Launch date 2G HSDPA, UMTS, EDGE, GPRS, TDMA,GSM AT&T and BellSouth 850/1900/3G Deutsche Telekom UMA, EDGE, GPRS,GSM 1900 CDMA2000 1xEV-DO, CDMA2000 1x, CDMA (Sprint PCS), WiDEN, iDEN CDMA2000 1xEV-DO, CDMA2000 1x, CDMA GSM 850 /1900CDMA2000 1xEVDO, CDMA2000 1x, CDMA, AMPS 3G Subscribers (2Q’06) Market share (%)

Cingular Wireless T-Mobile USA, Inc

Jul-96 Jan-96

Jul-04

57,308 23,534

30.4% 12.5%

Sprint Nextel Verizon Wireless

Sprint Nextel Corporation Verizon

Apr-99 Apr--00

Aug-02 Jan-02

41,860 54,834

22..2% 29.1%

Alltel

Alltel Corp

Jan-96

Sep-03

11,085

5.9%

Source: GSM world, Company data

TV
Figure 261:US TV by household 2005 (Y/E)
Total households Cable penetration Satellite penetration
Source: Screen Digest, Deutsche Bank analysis

113,428 65.9% 24.3%

Page 146

Deutsche Bank AG/London

100 Fixed Line Services Figure 263: United Kingdom: Fixed-line subscribers (Q4’05) No. of major competing fixed line operators (as at Sept ’05) Total incumbent copper subscriber lines Total Broadband BB cable BB DSL Incumbent own-branded DSL Broadband penetration (lines per 100 inhabitants) Source: EcTA.874.7% 24. Company data *23 Aug Company data TV Figure 265: United Kingdom: TV by household 2005 (Y/E) Total households Digital terrestrial penetration Cable penetration Satellite penetration Source: Screen Digest.9% 32.2% Source: GSM world.uk 1997 60. 3G 3G Sep-93 Dec-93 Jul-92 Apr-94 3G Oct-05 Feb-05 Apr-04 Jul-04 Mar-03 Subscribers (2Q’06) 16.840.883 25.500* Market share (%) 24. (PPP) Source: Deutsche Bank.5% Mobile phones Figure 264: United Kingdom : mobile market Operator Parent Technology Launch date 2G T-Mobile O2 Vodafone Orange Hutchison 3G Deutsche Telekom Telefónica Vodafone France Telecom Hutchison Telecom GSM 1800.0% 12.616.3 years $1.9% 22.518 27% 73% 37% 16.403 9. 3G GSM 1800.6 December 2006 Telecommunications Telecom for beginners 2007 Country: United Kingdom Figure 262: United Kingdom: Key information Regulator Regulator URL Liberalised Population Median Age GDP 2005 est.org.951 3. EU 11 25.1% 23.153 (July 2006 est. Deutsche Bank analysis 26.(PPP) GDP per capita 2005 est.818 bn $30.ofcom. 3G GSM 900/1800. CIA Ofcom http://www.0% Deutsche Bank AG/London Page 147 .185 14.609.341 16. 3G GSM 900/1800.) total: 39.730 16.1% 5.

6 December 2006 Telecommunications Telecom for beginners 2007 Appendix A: European telecoms SWOT In the following two figures (Figure 266 and Figure 267 we compare the SWOT of an incumbent operator with that of a new entrant. Threats Competition . there are some generic overlaps and many of the threats to one set of operators are opportunities to others.e. Often a strong cash flow position and strong asset base enabling them to raise finance easily Opportunity for cross selling and bundling of products Source: Deutsche Bank Weaknesses Often running inefficient business models with high cost base (especially headcount) due to legacy of state ownership Burden of interconnect fees (origination / transit / termination charges) Difficulties in balancing revenue and market share declines Often subjects to political influence. alternative infrastructure e. but there are also several distinct differences.Local Loop Unbundling (infrastructure light competitors). Cable. incumbents are technology incubators and therefore can benefit from new products such as IPTV Opportunity to invest in new markets.g. Ofcom continues to increase competition in the UK through introduction of LLU and pressure on wholesale pricing and interconnect rates Alternative providers bundling ‘free’ fixed line services such as broadband with existing products Figure 267: New entrant SWOT Strengths Exploiting declining barriers to entry Speed of entry into market Low capital expenditure enables them to be price competitive Suitable cost base Opportunities Local loop unbundling enabling cross-sell and bundling of products into dual/triple play packages Further regulatory pressures on incumbents making infrastructure access more price competitive First more advantage can drive superior returns Can more appropriately segment markets Source: Deutsche Bank Weaknesses Lack of infrastructure means they are wholesale dependent Low gross margins Lack scale of large established fixed line / wireless operators Risk of being single technology exposed Threats Price competition from incumbents Threat of other infrastructure light entrants e. and alternative technologies and platforms such as VOIP Regulation . MVNOs which also have low barriers to entry Large operators with greater scale and resources can offer wider product range and new technologies Page 148 Deutsche Bank AG/London .g.g. where the “good of the state” may be put before economic/value add considerations. Clearly. Figure 266: Incumbent operator SWOT Strengths Strong domestic market share Ownership of local access network Strong brand awareness and distribution Benefit from scale economies – can generate strong margins and continues to generate high returns Significant free cash flow allowing operates to mount a defence against competition High gross margins Opportunities Interestingly.

490 8.390 8.420 8.6 December 2006 Telecommunications Telecom for beginners 2007 Appendix B: European UMTS licenses Figure 268: Summary of European UMTS licenses (Euro m) License winner Austria Telekom Austria T-Mobile Connect tele.857 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz also 1% of 3G revs also 1% of 3G revs also 1% of 3G revs TeliaSonera Elisa DNA (Finnet) 0 0 0 0 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz Deutsche Telekom Vodafone Telefónica KPN Returned to regulator by Mobilcom Returned to regulator by Telefónica 8.340 8.410 50.ring H3G TEM Total Belgium Proximus Mobistar Base Total Denmark TDC Orange TeliaSonera H3G Total France Orange SFR Bouygues 4th license available Total Finland TeliaSonera Elisa DNA Total Germany T-Mobile Vodafone mmO2 KPN E-Plus Mobilcom TEM (Quam) Total Greece Vodafone Panafon Cosmote Stet Hellas Q Telecom Total Source: National regulators and company data Current parent Telekom Austria Deutsche Telekom Various (Eon.490 2x 10 MHz + 5 MHz 2x 10 MHz + 5 MHz 2x 10 MHz + 5 MHz 2x 10 MHz + 5 MHz 2x 10 MHz + 5 MHz 2x 10 MHz + 5 MHz Vodafone OTE Private equity Private equity 176 161 147 484 2x 20 MHz + 5 MHz 2x 20 MHz + 5 MHz 2x 20 MHz + 5 MHz Deutsche Bank AG/London Page 149 .440 8. Telenor. France Telecom and TDC) Deutsche Telekom Hutchison Telecom Returned to regulator by Telefónica License cost 121 120 120 118 114 113 706 Spectrum 2x 5 MHz + 5 MHz 2x 5 MHz + 5 MHz 2x 5 MHz + 5 MHz 2x 5 MHz + 5 MHz 2x 5 MHz + 5 MHz 2x 5 MHz + 5 MHz Comments Belgacom France Telecom KPN 150 150 150 450 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz TDC Telenor TeliaSonera Hutchison Telecom 129 129 129 129 516 2x 20 MHz + 5 MHz 2x 20 MHz + 5 MHz 2x 20 MHz + 5 MHz 2x 20 MHz + 5 MHz France Telecom SFR (Vivendi) Bouygues Telecom 619 619 619 1.

691 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 10 MHz + 5 MHz 2x 10 MHz + 5 MHz 2x 10 MHz + 5 MHz Telenor TeliaSonera Hutchison Telecom 50 50 50 50 200 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz Portugal Telecom Vodafone Sonae.448 2.141 2x 10 MHz + 5 MHz 2x 10 MHz + 5 MHz 2x 10 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 10 MHz + 5 MHz KPN Vodafone KPN France Telecom Deutsche Telekom 715 714 430 437 395 2.427 2.com Distributed to the other three license holders 100 100 100 100 400 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz Telefónica Vodafone France Telecom TeliaSonera 130 130 130 130 520 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz Swisscom TDC France Telecom Returned to regulator by Telefónica 33 33 33 33 132 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz Page 150 Deutsche Bank AG/London .6 December 2006 Telecommunications Telecom for beginners 2007 Figure 269: Summary of European UMTS licenses (Euro m) License winner Ireland Vodafone mmO2 H3G Smart Total Italy TIM Vodafone Omnitel Wind H3G TEM (IPSE) Total Netherlands KPN Vodafone Libertel mmO2 Dutchtone Ben Total Norway Telenor Netcom H3G 4th license available Total Portugal TMN Vodafone Telecel Optimus OniWay Total Spain Telefónica Móviles Vodafone Amena Xfera Total Switzerland Swisscom Mobile Sunrise Orange TEM Total Source: National regulators and company data Current parent Vodafone Telefónica Hutchison Telecom License cost 114 114 51 57 336 Spectrum 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz Comments Telecom Italia Vodafone Weather Investments Hutchison Telecom Returned to regulator by Telefónica 2.417 2.422 12.427 2.

061 6.200 6.950 2x 15 MHz 2x 15 MHz + 5 MHz 2x 10 MHz + 5 MHz 2x 10 MHz + 5 MHz 2x 10 MHz + 5 MHz Deutsche Bank AG/London Page 151 .100 6.030 6.027 104.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 270: Summary of European UMTS licenses (Euro m) License winner Sweden Tele2 Vodafone Europolitan TeliaSonera H3G Total UK Vodafone mmO2 Orange T-Mobile H3G Total Total Source: National regulators and company data Current parent Tele2 Telenor TeliaSonera Hutchison Telecom License cost 0 0 0 0 0 Spectrum 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz 2x 15 MHz + 5 MHz Comments Vodafone Telefónica France Telecom Deutsche Telekom Hutchison Telecom 9.636 34.

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Appendix C: AWS auctions
On 19 September 2006, the FCC ended the AWS auction in the US. The total spent was $13.9bn for the 90MHz nationwide spectrum. In Figure 274 we show the winning bids in term of total spend and by license category, and in Figure 275, the wining bids on the most valuable licenses. We would also flag however that Cellco, the Verizon wireless bidding vehicle, spent the most per pop, at around $14.6, whereas T-Mobile USA spent around $8.8 as we show in Figure 271. To calculate the population we have attributed to each license the population as defined by the allocation of bidding units, which does not account for license overlap. Figure 271: Total license spend per pop ($)
16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0

Denali Spectrum License, LLC

SpectrumCo LLC

MetroPCS AWS, LLC

T-Mobile License LLC

Cingular AWS, LLC

Barat Wireless, L.P.

AWS Wireless Inc.

Source: FCCs

In Figure 272 we show the cost per license per pop, normalizing for spectrum capacity.

Page 152

Cricket Licensee (Reauction), Inc.

Cellco Partnership d/b/a Verizon

Deutsche Bank AG/London

Atlantic Wireless, L.P.

Wireless

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Figure 272: Cost per pop of the REA licenses adjusted for spectrum allocation
Lic. Name AW-REA001-F AW-REA006-F AW-REA003-F AW-REA002-F AW-REA001-D AW-REA001-E AW-REA005-F AW-REA006-E AW-REA003-E AW-REA006-D
Source: FCC

Market Name Northeast West Great Lakes Southeast Northeast Northeast Central West Great Lakes West

PW Bidder Cellco Partnership d/b/a Ve T-Mobile License LLC Cellco Partnership d/b/a Ve Cellco Partnership d/b/a Ve MetroPCS AWS, LLC T-Mobile License LLC T-Mobile License LLC Cingular AWS, LLC T-Mobile License LLC MetroPCS AWS, LLC

Cost per pop 26.7 17.9 10.6 11.5 11.0 9.4 11.7 7.3 6.1 7.1

Cost per pop (adjusted for spectrum allocation) 13.3 8.9 5.3 5.8 11.0 9.4 5.8 7.3 6.1 7.1

Figure 273: Adjusted cost per pop ($)
14 12 10 8 6 4 2 0
13.3

11 9.4 8.9 7.3

7.1 6.1 5.8 5.8 5.3

West - Cingular

MetroPCS

Central - TMO

West - TMO

Great Lakes -

Southeast -

Great Lakes -

Northeast -

Northeast -

Northeast -

MetroPCS

Cellco

West -

Cellco

TMO

Source: FCC

Deutsche Bank AG/London

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Cellco

TMO

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Figure 274: Top 10 bidders by net provisionally winning bids
Bidder T-Mobile License LLC Cellco Partnership d/b/a Verizon Wireless SpectrumCo LLC MetroPCS AWS, LLC Cingular AWS, LLC Cricket Licensee (Reauction), Inc. Denali Spectrum License, LLC Barat Wireless, L.P. AWS Wireless Inc. Atlantic Wireless, L.P. Top 10 Bidders by Number of Provisionally Winning Bids Bidder AWS Wireless Inc. SpectrumCo LLC T-Mobile License LLC Cricket Licensee (Reauction), Inc. American Cellular Corporation Cingular AWS, LLC Red Rock Spectrum Holdings, LLC Cable One, Inc. Cavalier Wireless, LLC Barat Wireless, L.P. PWBs* 154 137 120 99 84 48 42 30 30 17 Population 60,498,394 267,387,437 474,718,308 117,802,839 22,639,578 198,768,198 5,481,709 4,795,074 13,313,269 41,601,174 Net PWB* Total ($) 115,503,000 2,377,609,000 4,182,312,000 710,214,000 64,782,000 1,334,610,000 7,466,000 22,148,000 14,957,250 127,140,000 PWB* Total ($) 115,503,000 2,377,609,000 4,182,312,000 710,214,000 64,782,000 1,334,610,000 7,466,000 22,148,000 19,943,000 169,520,000 PWBs* 120 13 137 8 48 99 1 17 154 15 Population 474,718,308 192,047,611 267,387,437 144,544,402 198,768,198 117,802,839 58,178,304 41,601,174 60,498,394 35,803,110 Net PWB* Total ($) 4,182,312,000 2,808,599,000 2,377,609,000 1,391,410,000 1,334,610,000 710,214,000 274,083,750 127,140,000 115,503,000 75,294,000 PWB* Total ($) 4,182,312,000 2,808,599,000 2,377,609,000 1,391,410,000 1,334,610,000 710,214,000 365,445,000 169,520,000 115,503,000 100,392,000

Top 5 Bidders by Number of PWBs* In Each Geographic Licensing Group BEA Bidder PWBs* 136 48 25 24 17 PWBs* 105 93 73 73 37 PWBs* 10 4 3 2 2 Population 266,175,900 28,333,075 34,932,012 65,557,424 45,436,013 Population 28,248,097 93,681,616 42,526,867 16,703,526 4,416,425 Population 335,600,679 189,240,313 94,260,346 100,057,254 626,932 Net PWB* Total ($) 2,376,176,000 42,979,000 139,021,000 450,314,000 229,503,000 Net PWB* Total ($) 69,798,000 1,088,866,000 448,909,000 53,133,000 6,264,000 Net PWB* Total ($) 2,863,943,000 2,798,738,000 500,232,000 908,420,000 782,250 PWB* Total ($) 2,376,176,000 42,979,000 139,021,000 450,314,000 229,503,000 PWB* Total ($) 69,798,000 1,088,866,000 448,909,000 53,133,000 6,264,000 PWB* Total ($) 2,863,943,000 2,798,738,000 500,232,000 908,420,000 1,043,000 SpectrumCo LLC AWS Wireless Inc. Cricket Licensee (Reauction), Inc. Cingular AWS, LLC T-Mobile License LLC CMA Bidder

AWS Wireless Inc. T-Mobile License LLC Cricket Licensee (Reauction), Inc. American Cellular Corporation Red Rock Spectrum Holdings, LLC REA Bidder

T-Mobile License LLC Cellco Partnership d/b/a Verizon Wireles Cingular AWS, LLC MetroPCS AWS, LLC Space Data Spectrum Holdings, LLC * PWB = Provisionally Winning Bid
Source: FCC

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Figure 275: Top 10 licenses by provisional winning bids (net) ($)
Geo. Desc. BEA Lic. Name AW-BEA010-B AW-BEA010-C AW-BEA064-B AW-BEA160-B AW-BEA064-C AW-BEA013-B AW-BEA160-C AW-BEA163-B AW-BEA057-B AW-BEA012-B Geo. Desc. CMA Lic. Name AW-CMA001-A AW-CMA003-A AW-CMA002-A AW-CMA008-A AW-CMA004-A AW-CMA005-A AW-CMA009-A AW-CMA014-A AW-CMA006-A AW-CMA012-A Geo. Desc. REA Lic. Name AW-REA001-F AW-REA006-F AW-REA003-F AW-REA002-F AW-REA001-D AW-REA001-E AW-REA005-F AW-REA006-E AW-REA003-E AW-REA006-D * PWB = Provisionally Winning Bid
Source: FCC

Market Name NYC-Long Is. NY-NJ-CT NYC-Long Is. NY-NJ-CT Chicago-Gary-Kenosha LA-Riverside-Orange Cn Chicago-Gary-Kenosha Wash.-Balt. DC-MD-VALA-Riverside-Orange Cn San Fran.-Oakland-San Detroit-Ann Arbor-Flint Phil.-Atl. City PA-NJ-DE

PW Bidder SpectrumCo LLC MetroPCS AWS, LLC SpectrumCo LLC SpectrumCo LLC Cingular AWS, LLC SpectrumCo LLC T-Mobile License LLC SpectrumCo LLC SpectrumCo LLC SpectrumCo LLC

Round of PWB* 20 41 43 32 53 47 34 46 50 37

Pops 25,712,577 25,712,577 10,328,854 18,003,420 10,328,854 8,403,130 18,003,420 9,111,806 6,963,637 7,309,792

PWB* (Net) ($) 468,178,000 363,945,000 228,041,000 215,620,000 162,082,000 148,708,000 114,816,000 80,834,000 78,988,000 77,838,000

PWB* (Gross) ($) 468,178,000 363,945,000 228,041,000 215,620,000 162,082,000 148,708,000 114,816,000 80,834,000 78,988,000 77,838,000

Market Name New York-Newark, NYChicago, IL Los Angeles-Anaheim, Washington, DC-MD-VA Philadelphia, PA Detroit-Ann Arbor, MI Dallas-Fort Worth, TX Baltimore, MD Boston-Brockton-Lowell, Miami-Fort Lauderdale,

PW Bidder T-Mobile License LLC T-Mobile License LLC Cingular AWS, LLC Cricket Licensee (Reauctio Cricket Licensee (Reauctio T-Mobile License LLC Cingular AWS, LLC Cricket Licensee (Reauctio T-Mobile License LLC T-Mobile License LLC

Round of PWB* 23 51 33 38 48 52 36 52 32 32

Pops 16,134,166 8,091,720 15,620,448 4,182,658 5,036,646 4,775,452 5,120,721 2,512,431 4,279,111 3,876,380

PWB* (Net) ($) 396,232,000 254,821,000 179,161,000 133,150,000 82,565,000 65,187,000 50,682,000 43,657,000 36,787,000 35,633,000

PWB* (Gross) ($) 396,232,000 254,821,000 179,161,000 133,150,000 82,565,000 65,187,000 50,682,000 43,657,000 36,787,000 35,633,000

Market Name Northeast West Great Lakes Southeast Northeast Northeast Central West Great Lakes West

PW Bidder Cellco Partnership d/b/a Ve T-Mobile License LLC Cellco Partnership d/b/a Ve Cellco Partnership d/b/a Ve MetroPCS AWS, LLC T-Mobile License LLC T-Mobile License LLC Cingular AWS, LLC T-Mobile License LLC MetroPCS AWS, LLC

Round of PWB* 16 15 14 14 18 17 15 15 19 14

Pops 50,058,090 49,999,164 58,178,304 49,676,946 50,058,090 50,058,090 40,343,960 49,999,164 58,178,304 49,999,164

PWB* (Net) ($) 1,335,374,000 894,590,000 615,923,000 572,446,000 552,694,000 472,553,000 470,290,000 362,757,000 356,780,000 355,726,000

PWB* (Gross) ($) 1,335,374,000 894,590,000 615,923,000 572,446,000 552,694,000 472,553,000 470,290,000 362,757,000 356,780,000 355,726,000

How Auction 66 worked?
On 9 August, bidding started in the auction of Advanced Wireless Services (AWS) licenses in the 1710-1755MHz and the 2110-2155MHZ bands (known as Auction 66). In total, 168 applicants qualified to participate and the auction was conducted through the simultaneous auction of a total of 1,122 licenses and lasted for 161 rounds.

Deutsche Bank AG/London

Page 155

The licenses are split into Cellular Market Areas (CMA). Economic Areas (EA/BEA) and Regional Economic Areas (REA/REAG).6 December 2006 Telecommunications Telecom for beginners 2007 Figure 276: AWS band plan Source: FCC Figure 277: AWS band plan (additional details) Source: FCC Spectrum and licenses In each geography there were multiple licenses (up to 6) with different spectrum allocations (either 20 MHz or 10 MHz). Page 156 Deutsche Bank AG/London .

754. Given New York is one of the key states in the auction.Otsego AW-CMA563-A New York 6 .000 New York-Newark.000 $236.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 278: Breakdown of AWS licenses Block A B C D E F Source: FCC Frequency Bands (MHz) 1710-1720 / 2110-2120 1720-1730 / 2120-2130 1730-1735 / 2130-2135 1735-1740 / 2135-2140 1740-1745 / 2140-2145 1745-1755 / 2145-2155 Total Bandwidth 20 MHz 20 MHz 10 MHz 10 MHz 10 MHz 20 MHz Geographic Area Type CMA EA EA REAG REAG REAG No.000 236.166 250.972. Although TMobile USA may choose to bid for a REAG license Block F.19m).000 $213.AW-CMA559-A Jefferson New York 2 .e.000 $286.AW-BEA010-B CT-PA-MA-VT NYC-Long Is.000 23. A bidding unit was effectively equivalent to $1 and based on the population in the license area.058.577 25. the cost of the bidding units). Deutsche Bank AG/London Page 157 .000 $67.331 476.000 $150.877.000 $23.000 $12.000 $67.134.152 355.613 230.000 $286. Figure 279: Summary of license options for New York and New York State Market Number CMA001 CMA559 CMA560 CMA561 CMA562 CMA563 CMA564 BEA010 BEA010 REA001 REA001 REA001 Source: FCC Description License Number Frequencies Channel Block (MHz) 1710-1720 / 2110-2120 1710-1720 / 2110-2120 1710-1720 / 2110-2120 1710-1720 / 2110-2120 1710-1720 / 2110-2120 1710-1720 / 2110-2120 1710-1720 / 2110-2120 1720-1730 / 2120-2130 1730-1735 / 2130-2135 1735-1740 / 2135-2140 1740-1745 / 2140-2145 1745-1755 / 2145-2155 A A A A A A A B C D E F Population 16.754. It is worth highlighting that the final license payments at the conclusion of the auction were net of the upfront payments (i.AW-CMA564-A Columbia NYC-Long Is.651 393. of Licenses 734 176 176 12 12 12 For example.754m bidding units. NY-NJ.000 $236.000 $138.972.000 47.000 $23. T-Mobile USA has bought sufficient bidding units to participate in all 12 license listed (150.19m units at a cost of $150.000 $47. it needs to have bought 47.000 $213.058. In Figure 280 we summarize how the US geography was spit by license type and the bidding units.134.712.000 $23. A bidding unit was required to participate in the auction for a license.000 $24.000 $24.577 50.000 $12. the company may decide it is more economic to win Block D. For example.972. NY-NJ.090 Bandwidth Bidding Units (MHz) 20 20 20 20 20 20 20 20 10 10 10 20 16.000 $23.877. in the New York area there are six routes to gaining spectrum and we summarize all the licenses that cover New York City and New York State in Figure 279.000 67.877.000 213.877.090 50.AW-CMA561-A Chautauqua New York 4 .486.000 12.000 23.877. AW-CMA001-A NY-NJ New York 1 .000 138.712.754.000 $47.000 150.000 Minimum Opening Bid $16.Yates AW-CMA562-A New York 5 .486.028 111.AW-BEA010-C CT-PA-MA-VT Northeast AW-REA001-D Northeast AW-REA001-E Northeast AW-REA001-F Bidding units In Figure 279 we highlight the bidding units in New York.486.058.000 $150.134.090 50.134.000 286.289 25.000 24.000 $138. for an operator to bid for a Block F license.000 Upfront Payment $16.877.AW-CMA560-A Franklin New York 3 . again referring to Figure 279.

000 $389.000 $259.000 $1.020.122 129.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 280: Summary of AWS licenses Market Area Total Number of licenses Cellular Market Area (CMA) Licenses Channel Block A (20 MHz) Economic Area (EA) (or Basic Economic Area (BEA)) Licenses Channel Block B (20 MHz) Channel Block C (10 MHz) Total EA Licenses Regional Economic Area Grouping (REAG) Licenses Channel Block D (10 MHz) Channel Block E (10 MHz) Channel Block F (20 MHz) Total REAG Licenses Total Source: FCC Totals By Channel Block* Total bidding units Total upfront payments Total of minimum opening bid amounts 734 259.332.672.000 $259.000 $129.342.672.342.167037.000 $129.000 $129.685.000 129.000 1.685.678.000 $389.678.037.500 $129.000 259.000 389.341.332.685. Page 158 Deutsche Bank AG/London .000 $259.342.000 $1.341.167.500 $259.000 $259.000 129.500 $129.500 176 176 352 259.037.500 $259.000 518.672.341.672.000 $518.020.678.672.332.167.672.020.500 In Figure 281 to Figure 283 we show the relevant market areas for each license and it highlights the spread in geographic breadth of each.000 12 12 12 36 1.000 $129.000 $518.

6 December 2006 Telecommunications Telecom for beginners 2007 Figure 281: Map of CMA licenses Source: FCC Deutsche Bank AG/London Page 159 .

6 December 2006 Telecommunications Telecom for beginners 2007 Figure 282: Map of EA licenses Source: FCC Page 160 Deutsche Bank AG/London .

6 December 2006 Telecommunications Telecom for beginners 2007 Figure 283: Map of REA licenses Source: FCC Deutsche Bank AG/London Page 161 .

The GSM 1800 licence expires in March 2021 Source: Vodafone 2006 annual report Page 162 Deutsche Bank AG/London . the earliest expires in June 2013 and the latest in March 2015 (4) There is an option to extend this licence for seven years (5) Vodafone New Zealand owns three GSM 900 licences (2x21MHz) and one GSM18000 licence (2x15MHz). respectively (2) Indefinite licence with a one yea notice of revocation (3) Date refers to 900MHz spectrum licence. July 2012 and September 2021. Vodafone Netherlands and Vodafone Spain also have separate 900MHz spectrum licences which expire in March 2010 and February 2020. The GSM900 licences expire in November 2011. Various licences are held for 1800MHz licences. which are issued by specific regional regulators.6 December 2006 Telecommunications Telecom for beginners 2007 Appendix D: License lives Figure 284: Vodafone: licenses and network infrastructure Country by region Germany Italy Spain UK License type License expiry date 2G December 2009 3G December 2020 2G January 2015 3G December 2021 2G July 2023 (1) 3G April 2020 2G See note (2) 3G December 2021 Other mobile operators Albania Australia Czech Republic Egypt Greece Hungary Ireland Malta Netherlands New Zealand Portugal Romania 2G June 2016 2G June 2017 (3) 3G October 2017 2G November 2020 3G February 2025 2G May 2013 2G September 2012 3G August 2021 2G July 2014 (4) 3G December 2019 2G December 2014 3G October 2022 2G September 2010 3G August 2020 2G February 2013 (1) 3G December 2016 2G See note (6) 3G March 2021 (5) 2G October 2006 3G January 2016 2G December 2011 3G March 2020 GSM GSM/GPRS W-CDMA GSM/GPRS W-CDMA GSM/GPRS GSM/GPRS W-CDMA GSM/GPRS W-CDMA GSM/GPRS W-CDMA GSM/GPRS W-CDMA GSM/GPRS W-CDMA GSM/GPRS W-CDMA GSM/GPRS W-CDMA GSM/GPRS W-CDMA Network type GSM/GPRS W-CDMA GSM/GPRS W-CDMA GSM/GPRS W-CDMA GSM/GPRS W-CDMA Notes: (1) Date relates to 1800MHz spectrum licence.

CDMA TDMA.8MHz) GSM 1800 MHz (2x5. GSM GSM. GSM.2020 before expiration Other Latam countries Mexico Mexico.2007. GSM CDMA. TDMA. CDMA EVDO. 2G 3G Germany 2G As above 31st December 2021 31st December 2016 GSM 900 MHz (2x16. Period CDMA. another 10 yr.Other Northern region Venezuela Colombia Perú Ecuador Chile Argentina Uruguay Panama Guatemala El Salvador Nicaragua 2G 2G 2G 2G 2G 2G 2G 2G 2G 2G 2G 2G 2G 2018/2025 2010 May 2011 March 2014 2011/2012 November 2008 2032/2033 Unlimited 2022/2024 February 2016 April 2014 2018/2019/2021 July 2013 20 years 20 years 10yrs+10yrs 20years 15 years 30 years 1900MHz 850MHz 850MHz 850/1900MHz 850MHz/1900MHz 850MHz 850MHz/1900MHz 850MHz/1900MHz 850MHz/1900MHz 850MHz 1900MHz 850MHz/1900MHz 850MHz 20years CDMA. CDMA CDMA/GSM CDMA/GSM TDMA.01.5 MHz paired) due to assignment of 2G 900 MHz GSM UMTS GSM GSM UMTS GSM UMTS 900 MHz (2x5 MHz paired) 2 GHz (2 x 9. GSM CDMA. CDMA 1XRTT.9 MHz paired) 900 MHz 1800 MHz 2100 MHz 2G 3G Ireland 2G 2G 3G Isle of man Source: Telefónica annual report 31st December 2016 31st December 2020 2011 2015 2022 2019 2019 2G 3G Deutsche Bank AG/London Page 163 . TDMA. 1X EVDO CDMA Czech Republic 2G 2G 3G 2016 2019 GSM GSM GPRS.2007 (2x17. GSM. GSM TDMA. CDMA 1XRTT.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 285: Telefónica: licenses and network infrastructure Country by region Spain License type 3G 2G 2G 2G Morocco 2G Fixed 3G Brazil License expiry date April 2020 February 2010 June 2020 July 2023 August 2024 April 2036 July 2006 Extension period 10 years 5 years 5 years 5 years 5years 5years 25years Network type UMTS GSM GSM DCS GSM WiMAx UMTS CDMA. CDMA 2GHz 850MHz Frequency 2GHz 900MHz (12 bands) 900MHz (4 bands) 1800MHz (2 bands) 900MHz Varies by region: between Must be solicited 30 months 2007 . 1X EVDO CDMA 900MHz 1800MHz O2 UK 2G None. GSM. TDMA CDMA/CDMA 1XRTT. Can be revoked with a minimum of one year's notice.5 MHz paired) until 31.8MHz) UMTS 2100 MHz (2x10 MHz + 5MHz unpaired) GSM 1800 MHz (2 x 22. CDMA 1XRTT. GSM GSM. GSM. CDMA 20years 15 years 20 years To be negotiated 2 yrs before end. from 01.02.

6 December 2006 Telecommunications Telecom for beginners 2007 Figure 286: France Telecom: licenses and network infrastructure Country by region France UK License type 2G 3G 2G 3G Spain 2G 2G 3G Poland 2G 3G Belgium Netherlands Romania Slovakia Switzerland Moldavia Egypt Botswana Cameroon Ivory Coast Madagascar Dominican Republic Senegal Mali Jordan Mauritius Austria Portugal Source: France Telecom annual report License expiry date March 2021 August 2021 Annual renewal December 2021 Extension period Network type GSM UMTS GSM Frequency 900MHz / 1800MHz 900MHz UMTS 10MHz (2 bands). 5MHz (1 band) GSM GSM 900MHz 1800MHz 900MHz 1800MHz April 2020 July 2014 August 2012 January 2023 UMTS GSM GSM UMTS GSM 900MHz / 1800MHz 900MHz / 1800MHz 900MHz 900MHz / 1800MHz 1800MHz 15MHz (2 bands) 900MHz 900MHz 900MHz 900MHz 900MHz / 1800MHz 900MHz 900MHz 900MHz / 1800MHz 900MHz 900MHz 900MHz / 1800MHz 2G 3G 2G 3G 2G 3G 2G 3G 2G 3G 2G 2G 2G 2G 2G 2G 2G 2G 2G 2G 2G 3G 3G November 2020 2015 December 2016 July 2022 December 2016 2011 March 2020 March 2021 UMTS GSM UMTS GSM UMTS GSM UMTS GSM UMTS GSM GSM GSM GSM GSM GSM GSM GSM GSM GSM GSM UMTS UMTS Page 164 Deutsche Bank AG/London .

TDMA GSM Figure 288: Deutsche Telekom: licenses and network infrastructure Country by region Germany License type 2G 2G 3G UK Austria 2G 3G 2G 2G 3G Netherlands Czech Republic 2G 3G 2G 2G 3G Hungary 2G 2G 3G Croatia Slovakia 2G 3G 2G 2G 3G USA Source: Deutsche Telekom annual report License expiry date December 2009 December 2009 December 2020 Annual renewal December 2021 December 2015 December 2019 November 2020 February 2013 December 2016 October 2024 April 2015 October 2024 June 2008 October 2014 December 2019 October 2009 October 2024 August 2011 July 2011 June 2022 Extension period Network type GSM GSM UMTS GSM UMTS GSM GSM UMTS GSM UMTS GSM UMTS UMTS GSM GSM UMTS GSM UMTS GSM GSM UMTS UMTS Frequency 900MHz (2 bands) 1800MHz (2 bands) 2GHz 900MHz 1800MHz 1800MHz 1800MHz 872MHz 900MHz 1800MHz 900MHz 900MHz 1800MHz 3G 15 year license (2006 auction) Deutsche Bank AG/London Page 165 .2018 Varies between 2012 . 20102025MHz Brazil TIM Celular Maxitel TIM Participaçoes Source: Telecom Italia annual report 2G 2G 2G Varies between 2016 .2013 GSM GSM.2013 Varies between 2012 . 19001920MHz. 21102170MHz.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 287: Telecom Italia: licenses and network infrastructure Country by region Italy License type 2G 2G 3G License expiry date December 2015 December 2015 December 2022 Extension period Network type GSM GSM UMTS Frequency 900MHz 1800MHz 1920-1980Mhz.

5 7950 62.75 182 4100 2800 205 4000 91 100 28.2 5100 85 31 21 3.6 December 2006 Telecommunications Telecom for beginners 2007 Appendix E: European IPOs Figure 289: Selected list of European telecoms IPOs Company name TDC Europolitan Vodafone Royal KPN Telewest Communication Ceske Radiokomunica Portugal Telecom Orange Plc Hellenic Telecom Netcom ASA Fibernet Group Deutsche Telekom Vodafone Portugal Mobilcom AG Magyar Telekom Energis Pls Drillisch SES Global Equant Swisscom Mobistar Telekomunikacja Vodafone Panafon Eesti Telekom Debitel AG Vodafone Libertel Eircom Kingston Communication Versatel Telecom Redstone Tiscali KPNQwest Thus Group PT Multimedia Jazztel Source: Bloomberg and company data Currency DKK SEK NLG GBp CZK PTE GBp GRD NOK GBp DEM PTE DEM HUF GBp DEM LUF $ CHF BEF PLN GRD EEK EUR EUR EUR GBp EUR GBp EUR EUR GBp EUR EUR Offering price 310 74 49.5 730 290 86 6000 27 340 1235 15.9 225 10 120 46 20 310 27 17 Date 28/04/1994 27/05/1994 13/06/1994 22/11/1994 01/03/1995 02/06/1995 27/03/1996 19/04/1996 03/05/1996 18/06/1996 18/11/1996 10/12/1996 10/03/1997 14/11/1997 09/12/1997 22/04/1998 06/07/1998 21/07/1998 05/10/1998 06/10/1998 18/11/1998 07/12/1998 11/02/1999 29/03/1999 15/06/1999 08/07/1999 12/07/1999 23/07/1999 25/10/1999 27/10/1999 09/11/1999 10/11/1999 15/11/1999 09/12/1999 Page 166 Deutsche Bank AG/London .

79 17.5 200 15 21 Date 24/02/2000 16/03/2000 28/03/2000 30/03/2000 19/04/2000 19/04/2000 02/05/2000 04/07/2000 11/07/2000 12/10/2000 21/11/2000 22/11/2000 04/12/2000 13/02/2001 06/11/2001 29/01/2004 19/03/2004 22/03/2004 21/07/2004 10/09/2004 11/10/2005 Deutsche Bank AG/London Page 167 .6 December 2006 Telecommunications Telecom for beginners 2007 Figure 290: Selected list of European telecoms IPOs continued Company name Carrier1 International Song Networks Holding Completel Europe Fastweb Eutelia QSC Sonaecom Pipex Communication Turkcell Ilesti Cosmote Mobile Telecom Telekom Austria Telefónica Móviles Telenor Orange SA Vanco Iliad eircom group Belgacom Virgin Mobile Smart Telecom Telenet Source: Bloomberg and company data Currency EUR SEK EUR EUR EUR EUR EUR GBp TRL GRD EUR EUR NOK Euro GBp EUR EUR EUR GBp GBp EUR Offering price 87 160.0 103 16.5 1.5 160 105 13 10 19 44000 3200 9 11 42 10.55 24.

3bn in new capital •Raises £494m in new capital •COLT is founded by Fidelity Investments 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 •Floated shares on LSE and NASDAQ •Raises £626m in new capital •Raises £724m in new capital •Changes domicile to Luxembourg and reporting into Euro Source: Deutsche Bank and company data Page 168 Deutsche Bank AG/London .6 December 2006 Telecommunications Telecom for beginners 2007 Appendix F: European operator key dates Operator time lines The following figures [Figure 291 to Figure 306] show the time lines for selected operators. where we highlight key factors in each company’s history. capital raisings/IPOs and M&A transactions. such as management changes. Figure 291: Belgacom’s time line •Belgacom created as a single standalone entity •Commences joint venture with Swisscom in the fixed-line business 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 •Shares floated on Brussel Euronext. which also marks the end of the state monopoly Source: Deutsche Bank and company data Figure 292: COLT’s time line •Raises £204m in new capital •Raises £1.

85bn •Divested both Telecom Argentina and CTE Salvador 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 •FT is floated •Internet subsidiary Wanadoo is floated •FT acquires the remaining stake of Global One •Acquired 35% Telekomunikacja Polska SA (Poland) •Acquires 28. Thierry Breton appointed CEO •Acquired minority interests of Orange S. T-Com. the systems division of Daimler Chrysler •Acquires Matav (Hungary) •Deutsche Telekom AG is formed.A.5% stake in Polska Telefonia Cyfrowa (Poland) •Acquires VoiceStream (US) and Powertel (US) •T-Online International is merged with Deutsche Telekom •Acquires tele. Rene Oberman (T-Mobile) and Mr. •Acquires 22. T-Mobile. FT and Sprint •Acquired 6. Thomas Haltorp (T-Online) •Mr. separated from the German Postal Service •Liberalization of German telecom market •Management reshuffle Mr.A.1% stake Equant by selling Global One to Equant •Acquiers Orange (UK) •Finished acquiring interests in NTL (UK) •13% of Orange is floated on Euronext Paris and LSE •Mr. Kai-Uwe Ricke elected as the new CEO. Lothar Pualy is named the new CEO of T-Systems •Revised 3-year business plan (Nov) 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 •DT is floated •Acquires One2One (UK). and Wanadoo S. Mr. T-Systems •T-Online is floated •Acquires Debis.4% stake in NTL •Increased capital by EUR14. Didier Lombard appointed Chairman and CEO of FT •Divested stake in Mobilcom •Acquired remaining stake of Equant •Sold a further 8% of Pages Juanes •Acquires 80% of Amena (Spain) France Telecom founded •Becomes public limited company •Global One was formed a joint venture between DT.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 293: Deutsche Telekom’s time line •Restructured into four major business line: TOnline.2% Mobilcom (Germany) •Mr.ring (Austria) •Profit warning and revised FCF focus (Aug) •Management and strategy changes (Nov and Dec) Source: Deutsche Bank and company data Figure 294: France Télécom ’s time line •Acquired 54. •Floated 36% of PagesJuanes •Michel Combes resigns as CFO Source: Deutsche Bank and company data Deutsche Bank AG/London Page 169 .

8bn in share issue Source: Deutsche Bank and company data Figure 296: OTE’s time line •Acquires Armentel (Armenia) •Acquires 35% in RomTelecom (Romania) •Third Public Offering. through Globul •Cosmote floated •Transfers management and control of Globul and Cosmofon to Cosmote •Transfers shares of Globul to Cosmote •Cosmote acquires Germanos Page 170 Deutsche Bank AG/London . also listing on NYSE •Founded Cosmote in corporation with Telenor •OTE floated •Cosmote established activities in FYR of Macedonia. Ad Scheepbouwer appointed CEO •Raises Euro 4.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 295: KPN’s time line •Acquires Netherlands and German UMTS licences •NTT Docomo acquires 15% of KPN Mobile for Euro 4bn •Demerged from PPT Post and becomes Royal KPN NV •Acquires Telfort Beheer BV (Netherlands) 1998 1999 2000 2001 2002 2003 2004 2005 2006 •Acquires E-Plus (Germany) •Issued Euro 4bn in new capital •Mr. later called Cosmofon •Increases stake in RomTelecom to 54% •Cosmote acquires from OTE stakes in Globul. Cosmorom (Romania) and Cosmofon 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 •Second Public Offering •Acquires 20% stake in Telekom Serbia Source: Deutsche Bank and company data •Cosmote acquires 80% stake in AMC (Albania) •Starts operations in Bulgaria.

Jens Alder is appointed CEO of Swisscom Group •Acquirers Debitel (Germany) •Became the third party in Unisource initially a joint venture between Telia and KPN •Acquires a 49% stake in Cinegrade AG •Acquires a 97. 24.99% stake in Antena Hungaria •Mr.6% stake in Global Telecom (Brazil) •Vivo acquired Tele Centro Oeste (Brazil) Source: Deutsche Bank and company data Figure 298: Swisscom’s time line •Unisource is broken up •Mr.com •PT acquires 100% of PTM.com.75% interest in Paginas Amarelas and 50% interest in Sportinveste Multimedia all from PT Multimedia •Joint venture with Telefónica Moviles in Brazil under the brand name Vivo 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 •Enters in a corporation agreement with Telefónica mainly concerning international investments in Latin America •PT Multimedia is formed •PT Multimedia acquires SAPO an internet portal •In a joint venture with Telefónica Moviles and other Moroccan business. PT won GSM licence in Morocco (Medi Telecom) •PT Multimedia acquires Lusomondo •PT Multimedia is floated on Euronext Lisbon •Acquires 81.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 297: Portugal Telecom’s time line •PTM.93% •Sistemas de Informacao is created •Floated on Lisbon and NYSE •Acquirers TCP (Brazil) •PT Multimedia acquirers PTM.com is floated on Eurronext Lisbon •Portuguese Government reduces its interest in TP to 6. Carsten Schloter appointed CEO 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 •Floated on Zurich Stock Exchange •Formed a partnership with Vodafone . which also bought 25% of Swisscom Mobile AG •Divested 95% of its stake in debitel •Attempts to buy Telekom Austria before Swiss/Austrian governments veto •Attempts to buy eircom before Swiss government veto Source: Deutsche Bank and company data Deutsche Bank AG/London Page 171 .

Telefónica Media •Telefónica Móviles floated •Telefónica Móviles wins UTMS licences Spain. which own 55% of TI •Launches nationwide mobile in Peru and Brazil •Seat Pagina Gialle completes a public exchange offer •Merged into Olivetti. Telefónica Datacorp. which is floated •Acquired remaining stake of TIM •Divest TIM Hellas (Greece) Source: Deutsche Bank and company data Figure 300: Telefónica’s time line •Tender offers for Telefónica Argentina.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 299: Telecom Italia’s time line •Telecom Italia is formed by merging five Italian telecom operators •TIM acquired 25% of mobilkom (Austria) •Merged into STET (Italy). Cesar Alierta appointed CEO •100m shares sold by government •Mr. the new group takes the name Telecom Italia •Olivetti acquires 55% of shares in TI •Olimpia (Italy) acquires 27. Germany. Terra. Telefónica de Peru.7% of Olivetti. Switzerland and Austria •Acquires outstanding Terra Network shares •Acquires outstanding Telefónica Contenidos •Acquires outstanding Terra Network shares •Acquires Cesky Telecom Source: Deutsche Bank and company data Page 172 Deutsche Bank AG/London . Telefónica Publidad e informacion (TPI).it (fully owned subsidiary) •SEAT Pagine Gialle spins off businesses non related to Yellow Pages into Telecom Italia Media. Telesp and Tele Sudeste •Acquires Lycos Inc •Mr. Italy. the new entity is called Telecom Italia •Divests its last stake in Telekom Austria •Mr Tronchetti Provera resigns as Chairman 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 •Telecom Italia Mobile (TIM) is founded and floated •Acquires assets in Brazil •Merges Seat Pagina Gialle and Tin. Juan Villalonga appointed CEO •Acquires Telesp (Brazil) •Forms Vivo joint venture in Brazil with Portugal Telecom •Acquires mediaways in Germany •Acquires some of Bell South's Latin American wireless assets •Acquires Telefónica Movil de Chile •Completes acquisition of Telefónica Móviles • Completes acquisition of O2 (UK) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 •Full privatization due to deregulation by EU •Reorganises group as Telefónica Móviles.

45% stake in ONE (Austria) •Acquires 29. Boris Nemsic is appointed CEO of Telekom Austria Group and CEO of mobilkom austria 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 •Telecom Italia Mobile acquires 25% of mobilkom •Acquires Czech Online SA •Floated on the Vienna Stock Exchange •Acquires the remaining 25% stake of mobilkom from Telecom Italia Mobile •Acquires 100% in Mobiltel Bulgaria Source: Deutsche Bank and company data Figure 302: Telenor’s time line •Acquires 75% of OAO Comicom (Russia) •Acquires 69.und Telekom Austria AG (PTA AG) •Acquired a 30% stake in VIPnet (Croatia) •New company Telekom Austria AG formed •Telecom Italia acquired a 25% stake in TA •Acquires controlling stake of 75% in Si.und Telegrafenverw altung (PTV): Post.91% stake in VimpelCom (Russia) •Acquires ComSat Mobile •Acquires DiGi.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 301: Telekom Austria’s time line •Independent company was created out of the Post.com (Malaysia) •Started operation in Sweden •Acquires Vodafone Sweden •Acquires Bredbandsbolaget (Sweden) and Cybercity (Denmark) Source: Deutsche Bank and company data Deutsche Bank AG/London Page 173 .51% stake of Kyivstar GSM (Ukraine) •Acquires the remaining stake in Pannon GSM (Hungary) •Mr.30% stake of DTAC (Thailand) •Acquires 53.mobil (Slovenia) •Acquires the remaining stake of VIPnet (Croatia) •Telecom Italia sells off its shares OIAG sells a part of its shares making their holding 30% •Mr. Jon Fredrik Baksaas is appointed CEO of Telenor •Acquires remaining stake in Sonofon (Denmark) •Acquires Mobil63 (Serbia) 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 •Acquires 17.3% stake in Sonofon (Denmark) •Acquires 25% stake of Pannon GSM (Hungary) •Started Telenor Mobil business in Norway •Acquires 56.

Anders Igel is appointed CEO of Telia •Divested Siris (part of Unisource) to Deutsche Telekom 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 •Acquires Netia Holdings (Poland) •Acquires NetCom ASA •IPO in June Source: Deutsche Bank and company data Page 174 Deutsche Bank AG/London .6 December 2006 Telecommunications Telecom for beginners 2007 Figure 303: TeliaSonera’s time line •Telia and Sonera merged and formed the new entity of Telia Sonera •Acquires Denmark Telecommunicati on operation of Orange SA •Acquires Xfera Móviles (Spain) •Acquires NextGenTel 1998 1999 2000 2001 2002 2003 2004 2005 2006 •IPO in November •Acquires UAB Omnitel (Lithuania) •Divested Com Hem AB (Sweden) to Private group lead by EQT •Acquires Volvik Gruppen Source: Deutsche Bank and company data Figure 304: Telia’s time line •Enters into an agreement with Sonera and CT Mobile to combine 8 local Russian carries into one nationwide carrier Megafon •Mr.

Fiji and Greece.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 305: Sonera’s time line •Acquires a 35% stake of International GSM Business of Fintur Holdings BV for EUR140m. Australia. Geo Cell (Georgia) and Mold Cel (Moldova) •Sonera participated in the forming of Turkcell.55% share in International GSM Business of Fintur Holdings BV Source: Deutsche Bank and company data Figure 306: Vodafone’s time line •Mr. Hong Kong and France. Enables VOD to buy licences in these markets Source: Deutsche Bank and company data •Acquires Mobifon S. and was one of the original owners 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 •Acquired 19. Arun Sarin appointed CEO •Acquires Telsim (Turkey) 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 •20% of Racal Telecoms Division is floated •Vodafone launches GSM net •Vodafone and Racal demerge fully •Launch PrePay service in UK •Acquires Mannesmann AG (Germany) •Divested Orange to France Telecom •Form partnerships in Germany. Fintur holds majority stakes in K Cell (Kazakhstan). Azercell (Azerbaijan).8% of Airtel Movil to up its stake to 91.6% •Vodadata is created •Acquires Packnet •Increases holding in Telecel and Libertel •New functions Group Marketing and Group technology and Business Integration are formed •Mr. Chris Gent appointed CEO •VOD is reorganized in three main components Vodafone Corporate.(Romania) and Oskar Mobile (Czech Republic) •Vodafone PLC merges with Air Touch Communications •Agrees to create a new wireless business network in USA in corporation with Bell South Atlantic •Acquires Vivendi's part in the joint venture Vizzavi •Gains 41% of SFR post merger with Cegetal Deutsche Bank AG/London Page 175 . Vodafone Retail and Vodafone Connect •Agreed to offer fixed-lined services through Energis •Acquires New Zealand GSM Network •Acquires Eircell •Acquires 25% of Swisscom Mobile •Acquires 17. Enables VOD buy licences in these markets •Form partnerships in Netherlands.4% of AOC (US) •Acquires an additional 23. South Africa.A.

Figure 308: Colt Event Type Founding IPO Capital Raise Capital Raise Capital Raise Capital Raise Capital Raise Source: Company data Year 1992 1996 1997 1998 1999 2000 2001 Description COLT is funded by Fidelity Investment Floated shares on LSE and NASDAQ Raises GBP 204m in new capital Raises GBP 626m in new capital Raises GBP 1. Acquires VoiceStream and Powertel for equity values of Euro 29bn and Euro 4bn. which also increased DTs Russian holdings.5% stake in Polska Telefonia Cyfrowa. Rene Oberman (T-Mobile) and Mr. Mr. T-Mobile. Management reshuffle Mr. Tele.ring (Austria) is acquired for EUR 1. Regulators liberalizes the German telecom market. T-Systems. Acquires 22. Thomas Haltorp (T-Online). which also marks the end of the state monopoly. Commenced joint venture with Swisscom in the fixed-line business.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 307: Belgacom Event Type Founding IPO Joint Venture Source: Company data Year 1987 2004 2005 Description Belgacom came to be as a single standing entity Shares are floated on Brussel Euronext. T-Online is floated as T-Online Holding AG. the systems division of Daimler Chrysler.3bn in new capital Raises GBP 724m in new capital Raises GBP 494m in new capital Figure 309: Deutsche Telekom Event Type Acquisition Restructuring IPO Liberalization Acquisition Acquisition Restructuring IPO Acquisition Acquisition Management Management Merger Acquisition Management Source: Company data Year 1993 1995 1996 1998 1999 1999 2000 2000 2000 2001 2002 2005 2006 2006 2006 Description Acquires Matav (Hungary). T-Online International is merged with Deutsche Telekom. Acquires British mobile operator One2One for EUR 7bn. Lothar Pualy is named the new CEO of T-Systems. T-Com. respectively. Restructured into four major business line: T-Online. DT is floated through a IPO. Rene Obermann replaces Kai-Uwe Ricke and instigates a wider change in management and strategy Page 176 Deutsche Bank AG/London . Deutsche Telekom AG is formed as a single standing shareholder company separated from the German Postal Service. Acquires Debis. Kai-Uwe Ricke is elected as the new CEO.3bn. Mr.

8bn to pay off debt NTT Docomo acquires 15% of KPN Mobile for EUR 4bn KPN Mobile acquires Netherlands and Germany UMTS License Mr.46bn. Proceeds were EUR 1.4bn. Ad Scheepbouwer appointed CEO NTT DoCoMo share in KPN Moblie was diluted to 2.5bn. Proceeds were EUR 440m.4% stake in NTL for EUR 1200m. Finished acquiring interests in NTL (UK) 13% of Orange is floated on Premier Marche on Euronext Paris and London Stock Exchange Mr. Internet subsidiary Wanadoo is floated on Paris Stock Exchange FT acquires the remaining stake of Global One. Acquires 35% Telekomunikacja Polska SA (Poland) Acquires 28. FT invested EUR 340m in the joint venture.A. The firms shares started trade at Euronext Paris and New York.2% Mobilcom (Germany) Acquires 54. through a secondary share offering. Raised EUR 22.1% stake Equant by selling Global one to Equant. Increased capital by EUR 14. FT and Sprint.16% KPN buys NTT DoCoMo share in KPN Mobile Acquires Telfort Beheer BV (Netherlands) for EUR 980m Deutsche Bank AG/London Page 177 .A. and Wanadoo S. Didier Lombard was appointed Chairman and CEO of FT.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 310: France Telecom Event Type Founding Separation Reformation Joint Venture IPO Acquisition IPO Acquisition Acquisition Acquisition Acquisition Acquisition Acquisition Floating Management Capital increase Divesture Acquisition Buy-Back IPO Management Divesture Acquisition Divesture Acquisition Source: Company data Year 1988 1991 1996 1996 1997 1999 2000 2000 2000 2000 2001 2001 2001 2001 2002 2003 2003 2004 2004 2004 2005 2005 2005 2005 2005 Description France Telecom is founded Became an autonomous provider of public service Became a public limited company Global One was formed a joint venture between DT. Acquired remaining stake of Equant for EUR 214 m.85bn. Divested both Telecom Argentina and CTE Salvador Exercised a option programme to up their stake in TPSA. Figure 311: KPN Event Type Founding Acquisition Transfer Capital Increase Acquisition Capital Increase Divesture Acquisition Management Dilution Acquisition Acquisition Source: Company data Year 1998 1999 1999 2000 2000 2000 2000 2000 2001 2002 2005 2005 Description Demerged from PPT Post and becomes Royal KPN NV KPN Mobile acquires 77. Bought back minority interests of Orange S.5bn Increased capital by EUR 4. Mr. Acquires 80% of Amena (Spain) for EUR 8.3bn in debt Acquires 15% of Hutchison for EUR 1. Divested its whole stake in Mobilcom EUR 265m . Acquired 6. Sold a further 8% of PagesJuanes. Thierry Breton is appointed CEO.49% of E-Plus (Germany) for EUR 19bn transferred all mobile operations to KPN Mobile. Floated 36% of PagesJuanes.for EUR 245m respectively EUR 1276bn. Acquires Orange (UK) for EUR 35.

93%. PT bid for a GSM license in Morocco and formed Medi Telecom.com. PT Multimedia acquires SAPO an internet portal. This also marks the beginning of the privatization process. including media. Acquires 100% of PT.com shares of the Euronext Lisbon exchange and delists the company. cinema. PTM. Sistemas de Informacao is created. which marked the beginning of PTs march into the media field. also listing on NYSE Founded Cosmote in corporation with Telenor Cosmote acquires 80% stake in AMC (Albania) for EUR 92m (USD 85. Portuguese Government ends its privatization campaign started in 1995 and reduces its interest in TP to 6. Cable vision and internet services. through Globul Cosmote floated Cosmote established activities in FYR of Macedonia. Enters in a corporation agreement with Telefonica mainly concerning international investments in Latin America. 24. which today is one of Portugal's largest companies in the consulting and information system sector. PT still retains majority interest.75% interest in Paginas Amarelas and 50% interest in Sportinveste Multimedia at the aggregate price of EUR 199m. Acquirers TCP (Brazil) PT Multimedia is formed. PT Multimedia is floated on Euronext Lisbon. PT Multimedia acquires Lusomondo.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 312: OTE Event Type IPO SEO Acquisition Acquisition Acquisition SEO Founding Acquisition Founding IPO Establishing Transferring Acquisition Transfer Acquisition Acquisition Acquisition Source: Company data Year 1996 1997 1997 1998 1998 1998 1998 2000 2000 2000 2001 2002 2003 2004 2005 2005 2006 Description OTE floated Second Public Offering Acquires 20% stake in Telekom Serbia Acquires Armentel (Armenia) for EUR 143m Acquires 35% in Romtelecom (Romania) for EUR 580m (USD 675m) Third Public Offering. The initial investment was EUR 182m (USD 166m).6m) Starts operation in Bulgaria. Acquires 81.COM. London and NYSE.5m) Cosmote acquires Germanos for Euro 1.6% stake in Global Telecom (Brazil) for EUR 337m (BRL 902. which later form the business unit PT.6m) PT Multimedia acquirers all PTM. Joint venture with Telefonica Moviles in Brazil under the brand name Vivo Acquisition Joint Venture IPO Privatization New Line IPO Acquisition Acquisition Acquisition Joint Venture Source: Company data Acquistion Page 178 Deutsche Bank AG/London .3bn Figure 313: Portugal Telecom Event Type IPO Alliance Acquisition New Line Year 1995 1997 1998 Business 1999 1999 1999 2000 2000 Business 2000 2001 2001 2001 2002 2002 2002 Description Stocks start trade at the Lisbon. later called Cosmofon Transfers management and control of Globul (Bulgaria) and Cosmofon (FYROM) to Cosmote Increases stake in Romtelecom to 54% for EUR 235m (USD 273m) Transfers the shares of Globul to Cosmote Cosmote acquires minority stakes of Globul for EUR 614m Cosmote acquires Cosmorom (Romania) and Cosmofon (FYR of Macedonia) for EUR 120m (ROL 4340505. In a joint venture with Telefonica Moviles and certain Moroccan entities.com is floated on Eurronext Lisbon.

Divest TIM Hellas (Greece) Mr Tronchetti Provera resigns as Chairman. delised shares. Formed a partnership with Vodafone .6 December 2006 Telecommunications Telecom for beginners 2007 Figure 314: Swisscom Event Type Joint Venture Acquisition IPO Divesture Management Partnership Acquisition Acquisition Divesture Acquisition Acquisition Management Source: Company data Year 1993 1998 1998 1999 1999 2001 2003 2004 2004 2005 2006 2006 Description Became the third party in Unisource initially a joint venture between Telia and KPN. Floated 20% stake of TI. Merged into STET (Italy). Attempts to buy eircom before Swiss government veto Acquires a 97. totalling its direct and indirect holdings to 74%. and was one of the original owners. Carsten Schloter is appointed CEO of the Swisscom Group Figure 315: Sonera Event Type Joint Venture IPO Acquisition Acquisition Acquisition Acquisition Source: Company data Year 1993 1998 1998 1998 2000 2002 Description Sonera participated in the forming of Turkcell. Divests its last stake in Telekom Austria Acquired remaining stake of TIM for EUR 13. the deal was completed in two moves.it (fully owned subsidiary) and then the entitiy is put into SEAT with a TI stake Olimpia (Italy) acquires 27.8bn. Unisource is broken up. Azercell (Azerbaijan). Mr. Acquired 50% plus one share interest UTA Telecom (Austria) The company is floated on Zurich exchange and also as ADS The joint venture between Telia.5% stake in UAB Omnitel (Lithuania) Acquired 19. Launches nationwide in Peru and Brazil SEAT Pagina Gialle completes a public exchange offer SEAT Pagine Gialle spins off busineses non related to Yellow Pages into Telecom Italia Media.99% stake in Antena Hungaria. Figure 316: Telecom Italia Event Type Founding Founding IPO Acquisition Merger Acquisition Acquisition Merger Acquisition Launches Divesting Spin off Merger Divest Acquisition Divest Management Source: Company data Year 1994 1995 1997 1997 1997 1998 1999 2000 2001 2001 2001 2003 2004 2004 2005 2005 2006 Description Telecom Italia is formed by merging five Italian telecom operators Telecom Italia Mobile (TIM) is founded and floated on the Milan Stock Exchange.7% of Olivetti. the initial investment was CHF 100m. Replaced by Mr Rossi. Merged into Olivetti. the new entity is called Telecom Italia. which is floated. Mr. Acquired a 27. Acquires an additional 23. Geo Cell (Georgia) and Mold Cel (Moldova). KPN and Swisscom. Fintur holds majority stakes in K Cell (Kazakhstan). with an investment of USD 200m Acquires a 35% stake of International GSM Business of Fintur Holdings BV for EUR 140m.4% of AOC (US). Shares starts to trade on Helsinki and also as ADS. TIM acquired 25% of mobilkom (Austria). which also bought 25% of Swisscom Mobile AG Acquires a 49% stake in Cinegrade AG Attempts to buy Telekom Austria before Swiss/Austrian governments veto Divested 95% of its stake in debitel for a price of CHF 1bn (EUR 640m). Jens Alder is appointed CEO of Swisscom Group.55% share in International GSM Business of Fintur Holdings BV. Deutsche Bank AG/London Page 179 . which own 55% of TI. the new group takes the name Telecom Italia Acquires assets in Brazil Olivetti acquires 55% of shares in TI Merges Seat Pagina Gialle and Tin.

Telefónica Móviles is floated Telefónica Móviles win UTMS license Spain. Telefonica Datacorp. and Austria (EUR 117m) tender offers for Telefonica Argetina. a joint venture in brazil with Portugal Telecom Acquires Iberola's Brazilian assets Telefónica Moviles acquires Norcel. Telefonica Publidad e informacion (TPI). Boris Nemsic is appointed CEO of Telekom Austria Group and CEO of mobilkom austria.5bn Acquires outstanding Terra Network shares for EUR 1bn. Acquires the remaining stake of VIPnet (Croatia) to make its stake 100% Telecom Italia sells off its shares in the company. while increasing its stake in VIPnet (Croatia) Acquires the remaining 25% stake of mobilkom form Telecom Italia Mobile.4bn Acquires Czech Online SA for EUR 231.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 317: Telefónica Event Type IPO Privatization Acquisition Reorganization IPO UMTS IPO Acquisition Joint venture Acquisition Acquisition Acquisition Acquisition Acquisition Acquisition Acquisition Acquisition Divesture Acquisition Acquisition Acquisition Acquisition Acquisition Source: Company data Year 1995 1997 1998 2000 2000 2000 2000 2000 2001 2001 2001 2001 2003 2003 2004 2004 2004 2004 2005 2005 2005 2006 2006 Description Floated 100m shares Full privatization due to deregulation by EU. Page 180 Deutsche Bank AG/London . With OIAG holding 44. Telespe and Tele Sudoeste Acquires Lycos Inc. Acquires outstanding Telefonica Contenidos (EUR 567. Germany (EUR 8471m).und Telekom Austria AG (PTA AG). Bajatel and Moviel (all Mexico) for USD 1.97% of O2 (UK) for EUR 1. Acquired a 30% stake in VIPnet (Croatia) The telecom market was fully liberalized and the new company Telekom Austria AG formed.5m).89bn Acquires media ways GMBH (Germany) for EUR 1. Acquirers Debitel (Germany) for CHF 3. while also OIAG sells a part of its share making their holding 30%.7bn Completes acquisition of Telefónica Móviles Acquires remaining stake of O2 (UK) for EUR 25. Forms Vivo.4% and Telecom Italia holding 29%. Acquires a 100% in Mobiltel Bulgaria.und Telegrafenverwaltung (PTV): Post.3bn Acquires 5% of China Netcom Group Corporation (China) for EUR 1. Telecom Italia acquired a 25% stake in TA. Acquires controlling stake of 75% in Si.3bn Acquires Cesky Telecom for EUR 3. Telecom Italia Mobile becomes a strategic partner and acquires 25% of mobilkom. Italy (EUR 3259m). Telefonica de Peru.5m and also expands its stake in VIPnet SA (Croatia) to 61%. for EUR 530m Divested Lycos Acquires 4. Acquires Telesp (Brazil) Reorgainises group as Telefonica Moviles. Cedetel. Switzerland (EUR 32.A. Merged with industrial holding company OIAG fully owned by the government. Terra.9bn Acquires Telefónica Movil de Chile for USD 1bn Acquires S. The shares of Austria Telekom are floated in an IPO on the Vienna Stock Exchange.mobil (Slovenia) for EUR 141m. Telefonica Media.4m) Acquires some of Bell South's Latin American wireless assets for USD 5.7bn Figure 318: Telekom Austria Event Type Founding Divesture Acquisition Liberalization partnership Acquisition Acquisition Merger IPO Acquisition Acquisition Acquisition Divesture Acquisition Management Source: Company data Year 1996 1997 1998 1998 1998 1999 2000 2000 2000 2001 2002 2004 2004 2005 2006 Description In 1996 an independent company was created out of the Post. for EUR 1214m Mr. which was later upped to 29%.

5bn (EUR 610ms) Acquires Volvik Gruppen for SEK 1.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 319: Telenor Event Type Acquisition New Operation Acquisition Acquisition Acquisition Acquisition Acquisition Acquisition Acquisition Acquisition New Operations Acquisition Management Acquisition Acquisition Acquisition Acquisition Source: Company data Year 1993 1993 1997 1998 1999 2000 2000 2000 2001 2001 2001 2002 2002 2004 2005 2005 2006 Description Acquires 25%% stake of Pannon GSM (Hungary) Commenced Telenor Mobil digital business in Norway Acquires 17. Figure 321: TeliaSonera Event Type Merger Acquisition Divested Acquisition Acquisition Acquisition Acquisition Acquisition Source: Company data Year 2002 2003 2003 2004 2005 2005 2006 2006 Description Telia and Sonera merged and formed the new entity of Telia Sonera the deal was valued at SEK 61bn (EUR 6. 1. The Cykorowa group instead seel a smaller share to Alfa Group (Russia). where the combined stake of Telia Sonera is 43.64bn) Acquires UAB Omnitel (Lithuania) for SEK 1bn (USD 117m).1bn Started operation in Sweden Acquires the remaining stake in Pannon GSM (HUN) for NOK 495m (HUF 308155m) Mr.com (Malaysia) for NOK 3. Mr. Divested Com Hem AB (Sweden) to Private group lead by EQT for Sek 2bn Acquires Denmark Telecommunication Operation of Orange SA for SEK 5.3bn Acquires Mobil63 (Serbia) for NOK 12bn (EUR 1.8%.513m).3% stake in Sonofon (Denmark) for USD 600m Acquires ComSat Mobile for NOK.9bn Attempts to additional 27% of Turkcell becoming the majority stakeholder. Acquires Netia Holdings (Poland) for SEK 1. Deutsche Bank AG/London Page 181 . TeliaSonera's bid was SEK 22bn.5bn Acquires 53.3bn (NOK 1.5bn (EUR 475m) Acquires NextGenTel for SEK 2.9bn). Jon Fredrik Baksaas is appointed CEO of Telenor. Acquires Xfera Moviles(Spain) for SEK 4.73bn) Enters into an agreement with Sonera and CT Mobile to combine 8 local Russian carries into one nationwide carrier Megafon.4bn (EUR 700m).6 bn (USD 171. Figure 320: Telia Event Type Divesting Acquisition Acquisition Acquisition Management Source: Company data Year 1999 2000 2000 2002 2002 Description Divested Siris (part of Unisource) to Deutsche Telekom for SEK 6.51% stake of Kyivstar GSM (Ukraine) for NOK 257m Acquires 29.45% stake in ONE (Austria) Acquires 56.91% stake in VimpelCom (Russia) Acquires 75% of OAO Comicom (Russia) for NOK 1.1bn Acquires 69.30% stake of DTAC (Thailand) for NOK 6. Acquires remaining stake in Sonofon Acquires Vodafone Sweden for NOK 11bn (EUR 1.1bn Acquires DiGi.5m) Acquires NetCom ASA for SEK 24 bn (GDP 1. Anders Igel is appointed CEO of Telia.345m) Acquires Bredbandsbolaget (Sweden) and Cybercity (Denmark) for NOK 4.5bn and NOK 1.

Enables To buy licenses in these markets.(Romania) and Oskar Mobile (Czech Republic) Acquires Telsim Mobil Telekomunikasyon Hizmetleri (Turkey) Page 182 Deutsche Bank AG/London . Fiji and Greece. Vodadata is created 20% of Racal Telecoms Division is floated Vodafone launches its GSM net Vodafone and Racal demerge fully Acquires Packnet Form partnerships in Germany. Form partnerships in Netherlands. Acquires Vivendi's part in the joint venture Vizzavi Acquires 41% of Cegetel.8% of Airtel Movile to up its stake to 91. Launch Pre-Pay service in UK Mr. Increases holding in Telecel and Libertel to 70. Chris Gent appointed CEO. Australia.A. Orange was before a part of Mannesmann Acquires Eircell Acquires 25% of Swisscom mobile Acquires 17.6%. Acquires Mannesmann AG (Germany) Divested Orange to France Telecom.6 December 2006 Telecommunications Telecom for beginners 2007 Figure 322: Vodafone Event Type Foundation Foundation IPO Launch De-merger Acquisition Partnerships Partnerships Launch Management Reorg Partnership Acquisition Merger Partnership Acquisition Divested Acquisition Acquisition Acquisition Acquisition Acquisition Acquisition New functions Acquisition Acquisition Source: Company data Year 1982 1987 1988 1991 1991 1992 1994 1994 1996 1997 1997 1997 1998 1999 1999 2000 2000 2001 2001 2001 2002 2002 2003 2003 2005 2006 Description Racal Telecoms Division is set up after winning bid for mobile license in UK. Enables VOD to buy licenses in these markets. Vodafone Retail and Vodafone Connect Agreed to offer fixed-lined services from Energis Acquires New Zealand GSM Network Vodafone PLC merges with Air Touch Communications Agrees to create a new wireless business network in the US in corporation with Bell South Atlantic. VOD is reorganized in three main components Vodafone Corporate.2% New functions Group Marketing and Group technology and Business Integration are formed Acquires Mobifon S. South Africa. Hong Kong and France. which implied a post merger with SFR.3% respectively 98.

6 December 2006 Telecommunications Telecom for beginners 2007 Appendix G: Government ownership Figure 323: Government shareholdings and overhang (Euro m) Company BELGACOM DEUTSCHE TELEKOM FRANCE TELECOM KPN OTE PORTUGAL TELECOM SWISSCOM TELECOM ITALIA TELEFONICA TELEKOM AUSTRIA TELENOR ASA TELIASONERA Source: Reuters sand company data Government stake 50.7% 0.423 15.0% 38.477 0 0 2.5% 0.7% 0.0% 5.1% 32.2% 4.7% 0.812 % of market cap 0.0% 56.312 721 13.7% Total overhang 0 18.0% 0.7% 0.0% 67.9% 32.0% 56.7% Lock up expiry 23 April 2007 Deutsche Bank AG/London Page 183 .0% 25.0% 17.0% 25.0% 0.5% 0.9% 32.934 0 543 0 2.0% 32.2% 54.

KKR.1x 3.6x 7.post synergies Saunalahti .6 December 2006 Telecommunications Telecom for beginners 2007 Appendix H: European M&A Figure 324: Recent European M&A multiples Date 10/12/2003 14/10/2004 29/10/2004 20/12/2004 26/04/2005 10/05/2005 31/05/2005 28/06/2005 29/06/2005 05/07/2005 06/07/2005 08/07/2005 18/07/2005 25/07/2005 28/07/2005 Operator Telenor Telefónica Móviles TDC UGC Orascom Telecom UGC Vodafone KPN Telecom Italia Telenor TeliaSonera Telenor Tele2 Eircom France Telecom Acquired asset Sonofon-Bell South 10 Latam assets Song Networks Chorus (Ireland) Wind NTL Ireland MobiFon/Oskar Telfort Turk telecom Cybercity Chess/Sense B2 Versatel Meteor Amena .6x 4.7x 5.0x 5.1x 6.5x 6.3x 7.1x 69.6x 6.1x 11.8x 9.0x 10.9x 7.8x 6.6x 6.6x 7.8x 12.5x 6. Permira.EV adjusted for tax asset 17/08/2005 20/09/2005 30/09/2005 17/10/2005 28/10/2005 31/10/2005 31/10/2005 02/11/2005 13/11/2005 30/11/2005 06/02/2006 29/03/2006 07/04/2006 03/05/2006 23/05/2006 02/08/2006 Median Source: Deutsche Bank estimates and company data Yr +1 8.0x 16.8x 6.6x 6.0x 5.9x 5.EV adjusted for tax asset 29/07/2005 10/08/2005 Ono Deutsche Telekom Auna Cable tele.gross EV Amena .1x 6. Blackstone.2x 6.0x 9.5x 4.4x 14.9x 9.4x 11.6x 9.9x 6.9x 12.0x 6.0x 8.5x 8.5x 4.2x 6.ring .3x Providence Portugal Telecom Telefónica Móviles Colombia Telecom Investcom Babcock & Brown Belgacom 7.2x 5.2x 8.8x 5.7x 7.8x 15.3x 7.7x 42.1x 10.9x Page 184 Deutsche Bank AG/London .3x 15.5x 8.5x 6.4x 7.8x 11.6x Inter-country consolidation Footprint expansion & inter-country consolidation Stake increase (Mobifon) and footprint expansion (Oskar) Intra-country consolidation.0x 8.6x 5.9x 7. inter-country 5.0x 7. 5th operator with market contracting to 4 network players Strengthening existing position Inter-country footprint (broadband in Denmark) Intra-country scale Inter-country footprint (broadband in Sweden) Inter-country consolidation Intra-country consolidation. Re-entering mobile market to offer integrated services Inter-country consolidation adding to existing broadband business.5x Footprint expansion & inter-country consolidation Enhance profile of corporate data services Footprint expansion & inter-country consolidation 7.0x 6.5x 6.0x 8.6x Private equity acquisition Minority buy-ins Intra-country consolidation in the UK Inter-country consolidation.8x 8.4x Global footprint expansion European footprint expansion European footprint expansion Global footprint expansion Global footprint expansion Private equity acquisition Subject to competition approval.7x Intra-country consolidation in Finland Intra-country consolidation Intra-country consolidation in Greece 11.0x 9.Gross EV tele. 3rd operator with market contracting to 4 network players Cable & Wireless Elisa Liberty Global TIM Hellas Vodafone Telefónica Telenor Vodafone Vodafone TDC Sonaecom Telefónica Telefónica MTN eircom Proximus Energis .3x 6.1x 6.3x 7.3x 10.8x 11.3x 6. Intra-country consolidation Minority buy-ins Latam footprint expansion Global footprint expansion 5.7x 7.9x 20. allowing proliferation of integrated services Intra-country consolidation 7.2x 8.4x 11.4x 13.pre synergies Energis .ring .5x 7.2x 14.1x 8.0x 3. 6.8x 7.9x Yr +2 Yr +3 Comment Assuming control.2x 6.4x 8.pre synergies Saunalahti .5x 22.post synergies Cablecom Q-Telecom Bharti Televentures O2 Vodafone Sweden Vodacom Telsim Apax.1x 6.5x 10.

France Esenet Netherlands Netherlands Germany France France Denmark 100.250 2000 Voice.570 100.825 75.100 255 675 288 1.300 100.0% 1.7 99.ON Tele2 Tele2 Liberty Global Tele2 AB Denmark Spain Switzerland Sweden 100.000 telephony subs in addition to BB subs 924 614 576 105 Subs includes fixed subs. - 355 3393 (broadband and fixed subs) 40 Source: Deutsche Bank estimates and company data .0% USD 1. EV/EBITDA?) N/a Reported purchase price of SEK 409 includes the obligation to assume debt of SEK 90m 625 Subs: Voice video & data 1-Feb-05 30-Sep-05 30-Sep-05 30-Jun-06 Tiscali Denmark Comunitel Cablecom E.0% 100.836 276 1.144 1.Video and data Customers 2.0% USD 3.000 dial-up internet subs come on board.Deutsche Bank AG/London Page 185 6 December 2006 Figure 325: Summary of recent broadband asset M&A multiples and details Date 14-Oct-04 Asset UTA Buyer Tele2 Country Austria Stake Price (Reported m) 100.7 257 1.0% EUR 20.10.8m 796 Additional 50.3m TV subscribers.96% EUR 257 100. Purchase price on a debt free basis 887 Reported multiple .France Altice and Cinven Cinven and Warburg Pincus KPN Telecom Italia (Hansenet) NeufCegetel SFR TDC France 100. Purchase price in cash on a debt free basis. Purchase price on a debt-free basis.0% 100. Cash position of UTA as at 31.0% CHF 2.600 1. 136.4 x 2006E (not specified what multiple.Aug 2004 Eur11.775 35 Telecommunications Telecom for beginners 2007 19-Jul-06 UPC .1% USD 319 20.0% USD 3.0% EUR 213 Price (Euro m) 213 Subs (000) Over 500.000customer s Price per sub Comments 426 On a debt-free basis with consideration consisting of cash and assumed debt.0% 100.100 500 8-Sep-06 15-Sep-06 19-Sep-06 22-Sep-06 3-Oct-06 15-Nov-06 Casema Tiscali Netherlands AOL Germany AOL France Tele2 .000 customers 26 N/a Over 2m customers Capacity 500.

Also called the local loop or "last mile. other than the local telephone company. it is possible to send a signal to a single subscriber and effect changes in the subscriber's level of service. Users include educational institutions and local municipal governments. Access Network Part of the carrier network. Access Line The telephone line from the telephone company central office to a point on the physical. These channels may be leased out on a non-discriminatory basis. but having a user create their music library in AAC files can commit them somewhat to iTunes. Addressable The ability to signal from hub in such a way that only the desired subscriber's receiving equipment is affected. it is the default codec for Apple’s iTunes software. which provides a connection between a customer location and a point of presence of the long-distance carrier. private premise. Fibre optic cable networks require less amplifiers. It is placed at 2000foot intervals in coaxial-based cable networks to maintain signal strength throughout the network. Analog (Analogue) Method of transmission employing a continuous (versus pulsed) electrical signal that continuously varies in amplitude or frequency in response to changes in sound impressed on a transducer in the sending device. until stations become available. Amplifiers A device which increases the strength of an electronic signal. Access Channels These are channels set aside by the cable operator generally for use on a non-commercial basis." See also Local Loop. Both pieces of software will read MP3 files. they lead to lower channel capacity. Importantly. If all stations are busy then a recorded messaged is activated and the call is put into a holding pattern. and carry higher installation and maintenance costs. while not included as a default in most versions of Microsoft’s Windows Media Player. In this manner. Advanced Intelligent Network (AIN) An advanced telephone network architecture that separates the computer programming that controls new telephone services from the programming that controls the switching equipment embedded in the network.6 December 2006 Telecommunications Telecom for beginners 2007 Glossary A AAC (or MP4) Advanced Audio Coding is a codec providing greater fidelity and compression than MP3. as conversion requires specialist software. which extends from the carrier's central office to individual homes/businesses. It provides access between the multiple hardware and applications "behind" the device. While amplifiers extend the practical length of traditional cable networks. Access Charge Refers to a fee charged by local exchange carriers to subscribers or other telephone companies for the use of their local exchange networks. (As opposed to digital. Alternative Access Provider A telecommunications firm. which varies only by being on or off.) Page 186 Deutsche Bank AG/London . ACD (Automatic Call Distributor) A telephone system that manages incoming calls and routes calls to the first available station in a predefined group. reduced signal quality. Access Concentrator An access device which integrates several data transmission signals into a single shared channel.

subAtlantic cables to which country-level transmissions are aggregated). i. "Antisiphoning" rules state that only movies no older than three years and sports events not ordinarily seen on television can be cable cast. This fixed-length 53-byte transmission technology allows users to exchange voice.0 Mbps downstream and between 16 and 640 Kbps upstream (only within 18. but backbone is a relative term. as distinct from the local roads.e. Attenuation A process by which electrical signals weaken. so there is no clear boundary that defines the backbone.4 Gbps. Information is organized into cells under Asynchronous Transfer Mode. ADSL Lite (sometimes known as G. such as caller ID or call waiting. Some examples of asymmetric connections are ADSL. so it performs a role analogous to the motorway network. between 1.g. ATV Forum A membership association founded in 2000 which promotes interactive TV. ADSL is an asymmetric connection type. Ancillary Charges Charges by telcos for optional services. and satellite downlinks. video. Financial measure used to evaluate performance in the cable industry.5 and 8.5 Mbps.000 feet of the central office). ARPU Average revenue per user.6 December 2006 Telecommunications Telecom for beginners 2007 Analog-to-Digital Conversion of a signal whose input is information in the analog form to output of the same information in digital form.Lite in the US) The most popular form of DSL for consumer use. Anti-Siphoning FCC rules which prevent cable systems from "siphoning off" programming for pay cable channels that otherwise would be seen on conventional broadcast TV. mixed with packets from multiple sources. data and video signals with a single connection to the network at speeds up to 2. and data signals) is compressed and sent over copper wires at high transmission rates. rather than to each other. The advantages of ADSL-Lite include its ability to co-exist with regular telephone service on a single twisted pair line without the aid of a splitter. A more advanced technology than ISDN. Backbone The backbone is the underlying central network that enables smaller networks to communicate. Standard definition has a 4:3 aspect ratio while High definition television uses a 16:9 aspect ratio. It is usually related to the distance that the signal must travel and is expressed in decibels. The most important backbone is probably the internet backbone. 56K modems. which may refer to any network that connects smaller networks together. B B Channel An ISDN B Bearer channel that can be used to carry voice or data connections at speeds of 56 or 64 bps. Asynchronous Transfer Mode (ATM) A process in which data is broken into packets of fixed length. The central nodes of networks connect into the backbone. the highbandwidth connections that handle massive traffic between smaller networks (e. ADSL-Lite can achieve downstream transmission speeds of up to 1. Aspect Ratio Refers to the ratio of width to height of a picture. Deutsche Bank AG/London Page 187 . and reassembled at their final destination. Asymmetric Digital Subscriber Line (ADSL) A process by which information (voice. Asymmetric Connection A connection where data flows in one direction at a much higher speed than in the other.

Baud A measure of the rate of data transmission. so video requires a lot of bandwidth. As in the decimal system. pages 38-39. Puerto Rico. To interpret it. Baseband Transmission technique utilizing a single digital transmission channel shared by all users. and that of spectrum. whereby each pixel is given a number to say what colour it should be. e. Bits are typically used to record transmission rates in networks measured in bits-per-second (bps). The bandwidth of a connection describes how fast it can transmit data. Guam. A string of bits that can be addressed as a group is called a byte. and one that is only suitable to load text fast enough to read. every second. the computer takes the first 24-bits to describe the first pixel. To represent the 26-letters of the alphabet.777. and the second to represent the second etc. Basic Trading Area (BTA) A US term for a geographic area. Puerto Rico. 123rd Edition. Kilo bps (Kbps)-one thousand bits per second. San Juan.6 December 2006 Telecommunications Telecom for beginners 2007 Backwards-compatible Many technologies are incrementally upgraded over time. taking 25 = 32 possible values. Baud Rate The speed at which a computer can transfer data through a modem. Each stream of 5-bits would represent one letter.216 different values. they can then be represented by the 5-digit binary number equivalents. such as the transmitters that constitute mobile networks. each digit can be thought of as representing a different power of the base. Bandwidth In telecommunications. 10101 means 1×24+0×23+1×22+0×21+1×20=16+4+1=21. we would take a 5-bit number. Giga bps (Gbps)-one billion bits per second. bandwidth is the thickness of that pipe. Base stations are generally linked into a backbone and constitute a wireless last-mile service. and is measured in multiples of bps.) Bit The smallest unit of data and the standard unit of memory. and numbering the alphabet. Mayaguez/Aguadilla-Ponce. Mega bps (Mbps)-one million bits per second. this means “U”. One byte is comprised of eight to ten bits. for a total of 493 BTAs. a video might need. A 24-bit image records each pixel’s colour as one of a possible 224=16. (Elements changed per second. especially in a cable network. A stream of such data can then encode a message such as text. and the United States Virgin Islands. Bandwidth is a crucial differentiator between telecommunications technologies. as applications require that different amounts of data be transmitted. Bits-per-second (bps) is the standard unit of measurement for data transmission. or an image. so as 21=2×101+1×100.g. with longer numbers meaning more variety in the colour values that can be assigned. This gives rise to two important concepts in telecommunications: the bandwidth of a connection. Base station A base station is a network node to which devices connect wirelessly. such as Microsoft Windows: backwards-compatibility is provision for applications designed for a previous version to work on the upgraded version: so XP is backwards-compatible with 2000 if programs created for 2000 work on XP. The United States is divided into 487 BTAs. computed in the number of elements changed per second. Bandwidth determines what applications a connection may have. usually with a binary value of 0 or 1. Page 188 Deutsche Bank AG/London . representing an on or off state in a digital system. Northern Mariana Islands. a band describes a hypothetical space in which data can be transmitted. primarily used for local area networks. used by the Federal Communications Commission to define the coverage of spectrum licenses for certain services. based on the Rand McNally 1992 Commercial Atlas & Marketing Guide. as there is a fundamental difference in the utility of a connection that can transmit high-quality real-time video. The Commission has further defined six other BTA-like areas: American Samoa. Numbering the letters 1-26. data describing 28 different full-screen images.

000 times faster than the standard computer modem. Bundled Rates A pricing metric whereby individual service rates are combined into one. Carrier's Carrier A telecoms company that provides services to other telecoms companies. Electronic devices can connect with each other when they are within 30 feet of each other. Broadband transmission media can generally carry multiple channels each at a different frequency.5 Mbps. Cable Termination The ends of all trunk and distribution cables are terminated with a 75ohm load to ground. 8 bits translate to 256 possible values. C Cable Modem A data transmission device connected to a computer that transmits data via coaxial cable rather than the traditional copper wire telephone lines. desktop computers and electronic organizers. Broadcaster’s Service Area Geographical area encompassed by a station’s signal. Such plants generally employ a downstream path in the range of 54 MHz on the low end to a high end in the 440 to 750 MHz range and an upstream path in the range of 5 to 42 MHz. Call Center A facility with operators. Deutsche Bank AG/London Page 189 . Byte A string of bits that can be addressed as a group is called a byte. FCC rules determine which signals cable systems must or may carry. Broadcasting It is sending signals to a large group or area. If this is not done. enough to describe any textual character. Carriage A cable system's procedure of carrying the signals of television stations on its various channels. cable and cable modem charges bundled together. Since the company does not provide services to the public. Cable modems transmit data at speeds up to 10 Mbps. it is faced with less stringent regulations.e. Cable Network The cable television plant typically used to carry data for cable services. Broadband Transmission medium that allows high speed data transfer. Cable Television Relay Services (CARS) Terrestrial microwave frequency band used to relay television. cablecasting and other band signals from the original reception site to the head-end terminal for distribution over cable. FM radio. In most computer systems. One byte may represent a character like a letter or a number. at the same time. which is 1. Capacity The highest transmission speed that can be carried on a channel. a byte consists of eight bits. serious signal distortion will result because RF frequency signals traveling in coaxial cable will reflect off any impedance that does not match the 75-ohm impedance of the cable. computers and client databases that field large numbers of calls (incoming/outgoing) . Bundling The grouping of various telecommunication services – wireline & wireless into a package to increase appeal to potential customers. Broadband includes any transmission rate above 1.6 December 2006 Telecommunications Telecom for beginners 2007 Bluetooth A short-range wireless standard that enables data connections between electronic devices like wireless phones. i. so 1 byte represents 1 character of data in a text file. Capacity can be expressed as either raw speed or net throughput.usually related to customer service and marketing.

which transmits data in small. 1xRTT CDMA Specifically.2 kbps. Cellular systems may also employ digital techniques such as voice encoding and decoding. It is the CDMA community's proposal for a system standard for 3G services. 1xRTT (otherwise known as 3G 1x) represents one times radio transmission technology with 1. cost of goods sold. Service coverage of a given area is based on an interlocking network of cells. This technology supports peak data speeds up to 144 kbps. each with a radio base station (transmitter/receiver) at its center. which uses code sequences as traffic channels within common radio channels – used for CDMA One (IS-95) air interface. A digital cellular standard used in some smart phones. Cell Relay Data transmission technology. CCPU (Cash Cost per User-Costs) Total cost (G&A. The technology assigns a code to each multiple access stream of bits. second-generation digital air interface technology developed by Qualcomm. transmits the data stream and then reassembles the data stream to the original format. Cell Splitting A process used to increase coverage and capacity in a wireless system by having more than one cell site in particular geography. Cellular systems employ techniques such as low transmitting power and automatic hand-off between base stations of communications in progress to enable channels to be reused at relatively short distances. CDPD Cellular digital packet data.6 December 2006 Telecommunications Telecom for beginners 2007 CATV (Community Antennae Television) A television served by cable and connected to a common antenna. Cell The basic geographical unit of a cellular communications system.35 MHz channels. etc. up to a doubling of voice capacity and improved standby time. Cellular System An automated high-capacity system of one or more multi-channel base stations designed to provide radio telecommunication services to mobile stations over a wide area in a spectrally efficient manner. CDMA One (IS-95) A narrowband. HDR or 1xEV CDMA A packet data solution that focuses on providing support for data-it does not support for voice. Transmission rates are limited to 19. Cellular Service Radio telecommunication services provided using a cellular system. See Cellular System. Page 190 Deutsche Bank AG/London . fixed-sized packets (or cells). The size of each cell is determined by the terrain and forecasted number of users.4 mbps. and time or code division multiple access in order to increase system capacity. Peak speeds are 2.) to run the network divided by total subscriber base. CDMA2000 A third generation standard evolved from CDMA One. data compression. error correction. CDMA (Code Division Multiple Access) The code division technology was originally developed for military use more than 30 years ago. CDMA is a multiple access technique. with each user in a loaded network expected to see speeds around 800 mbps. Permits data files to be broken into a number of packets and sent along idle channels of existing cellular voice networks.

e. Code Division Multiple Access Digital cellular technology in which signals are thinly spread out across a broad band spectrum of 1. The company cannot control message content. but rather the Deutsche Bank AG/London Page 191 . Coaxial Cable An insulated central wire (axis) within a metal cylinder. although they may also serve encryption functions.25 MHz. but it is not efficient. e. Codecs can be available freely or for purchase.6 December 2006 Telecommunications Telecom for beginners 2007 Central Office (CO) Telephone switching office that connects the local loop to the Public Switched Telephone Network (PSTN). as during periods of silence bandwidth is reserved but not utilised. a telephone company). Clustering The tendency of cable companies to operate in specific geographical locations in order to optimize economies of scale. A simple method of compression would be to represent a region of a picture in which each pixel is black by recording not a value for each pixel. not data sent. Circuit Switching Circuit-switching is the most intuitive way of designing a communications network: it means fixing a channel for each connection that is made. It means representing large amounts of information with less information. Typically. under government-mandated operating procedures (i. reserving a portion of bandwidth for communication between two people having a telephone conversation. circuit switching holds the network open for the duration of the call. The transmission medium widely used in the cable television industry. Churn Rate of measure used to describe the percentage of subscribers who leave or switch from a service provider. Community Antenna Relay Service (CARS) The 12. Compression Compression is a major factor in the ability to store and transmit large amounts of information digitally. as the amount of other traffic displaced is proportional to the time connected. and generally exist to compress data (they are also known as Compressor-Decompressors). Common Carrier A private company offering telecommunications service to the general public on a Non-discriminatory basis. due to bandwidth being reserved for the duration of the connection. This medium could increase existing cellular/analog subscriber capacity by as much as ten to twenty times. like knowing someone’s language. Additionally. the file may not be read. The public switched telephone network (PSTN) uses circuit switching. Circuit-switched connections are generally charged per second.75-12. the line from the home to the CO is constructed of twisted pair. Circuit-switching is relatively easy to organise. CLEC (Competitive Local Exchange Carrier) An alternate local telephone company which competes with existing local exchange carriers for local and access business. Collocation Allows competitive LECs and LD carriers to operation (house equipment) in local exchange carrier offices. Without the appropriate codec.g. Codec A Coder-Decoder (codec) is a piece of software that enables a piece of software to read or to write a particular type of file. Circuit-Switched Network A telephone network that transports information over a dedicated connection between two connected parties for the length of their call.95 GHz microwave frequency band which the FCC has assigned to the cable television industry for use in transporting television signals.

a process called attenuation. such as internet music downloading becoming a crucial issue for the music industry. Customer Acquisition Cost The average cost incurred by a carrier to sign up an individual subscriber. D Dark Fibre Refers to an optical fibre that is in place but not in use. and to decode it back to the full set of values at the receiving end. Convergence has been predicted to change business models. Convergence is a large issue in telecoms. Optical fibre utilizes pulses of light." Dark fibre can refer to fibre that has been installed but is not yet ready to be used. Copper Wire (Twisted Pair) Used by telephone companies to carry electrical signals via two copper wires twisted around each other. This can save huge amounts of bandwidth. The FCC prohibits television stations and telephone companies from owning cable systems in their service areas. including handset subsidies. such as the convergence of voice services and internet services in VoIP. telephones. that it would enable massive synergies between media owners and telecoms. Television networks are prohibited from owning cable systems anywhere in the U. CPGA-Cost Per Gross Add The average cost for a carrier to sign up a customer. as communications functionality has become important for many other services. Dense Wave Division Multiplexing (DWDM) A technology that dramatically increases the capacity of existing fibre optic networks by projecting multiple light beams of information onto a single glass fibre. Dedicated Line A communication cable dedicated to a specific application. to encode the data using the compression-technique at the sending end.e. Commonly used in the US. Also called a Private Line. The technology puts data from different sources together on an optical fibre. terminals. CPE (Customer Premise Equipment) Terminating equipment (i. marketing. One major drawback is that electrical signals degenerate over long distances.S. advertising and promotions. such as in the idea behind the AOL-TimeWarner merger. Converter Device attached between the television set and the cable system that increases the number of channels available on the TV. like a person who knows the complex instruction behind a relatively simple one. Modems).6 December 2006 Telecommunications Telecom for beginners 2007 boundaries of the region and its blackness. Covered POP The number of individuals in an area to which a wireless provider can provide service. as the software knows how to extrapolate a lot of information from the smaller amount it is sent. For example many cable companies and power companies have over built in the expectation of future use or to lease to other providers. Data-compression requires processing (and therefore potentially expensive hardware and energy) at both ends. Cross-Ownership Ownership of two or more kinds of communications outlets by the same individual or business. More recently. Page 192 Deutsche Bank AG/London . so fibre not in use is "dark. Convergence Convergence is the process by which different services or products come closer together. with designs for phones that migrate from the fixed to the mobile network as a user leaves their domestic point of access. Usually supplied by telephone companies-installed at customer sites and connected to the telephone company's network. convergence between fixed and mobile services has become an issue.

concern the ease to produce infinite copies of data. but when content providers want to charge users to access the data. which decodes the signals so that they can be processed by a TV or VCR. DRM uses encryption in order to control who can access content. Dim Fibre A fibre optic system which does not originate the optical signals on one or both ends. "always on" Internet access over standard twisted-pair telephone lines-allowing concurrent transmission of high speed data and voice. through. Digital Set Top Box A unit that converts a digital signal to analogue resulting in expanded channel capacity. In order to receive the service. and CD-quality music channels. Digital Cable A Cable TV product that takes advantage of the digital infrastructure of HFC networks to expand the range and variety of video programming services available to subscribers. The expanded capacity of the network allows MSOs to offer greater number of video programming channels. usually 1 or 0 in binary coding. advanced compression. representing textual characters with bytes. improved picture and sound quality on analogue TV. Digital Subscriber Line Access Multiplexer (DSLAM) A device (usually housed in a CO) used to aggregate data traffic from many DSL subscribers into one high-speed signal for hand off to the data communications network.6 December 2006 Telecommunications Telecom for beginners 2007 Digital A digital signal is encoded in a finite number of digits. which take discrete values. digital signals are the language of computers. Domain A unique name/locator that identifies a particular Internet site. offering. Direct Broadcast Satellite (DBS) A broadcasting technology which employs geostationary satellites to transmit broadcast signals directly to individual subscribers. for example. Secondly. Digital Subscriber Line (DSL) A data transmission technology that provides high-speed. These bits then can scale up to a complex message. Direct-To-Home or Direct Broadcast Satellite Same as Direct Broadcast Satellite. Digital signals have two key benefits: firstly. Digital Rights Management (DRM) is the process of safeguarding IPR on digital channels. usually to restrict this to those who have paid for it. typically consists of coaxial cable. which can greatly reduce the amount of data that it is necessary to store or transmit. a signal that can only take one of two values is less likely to get distorted.5 and 52 Mbps. for example. subscribers must have a small antenna or "dish" and a set-top receiver. However. DSL can achieve transmission speeds of between 1. including enhanced PPV and VOD offerings. Distribution cables make up approximately 40% of the cable system's total footage. Down Payment Each winning bidder in a typical auction must submit a down payment to the Federal Communications Commission with an amount sufficient to bring its total deposits up Deutsche Bank AG/London Page 193 . depending on the type of DSL used. Digital Video Broadcasting (DVB) The European Standard for digital television. as distortion from one extreme to the other would need to be very large. Many of the benefits in terms of cost and speed associated with digital distribution. but one for which the carrier provides regenerators. Distribution (Feeder) Cable The portion of the cable system that comes from the trunk cable and branches into the local neighbourhoods. advanced onscreen menus. transmission speeds degrade significantly if the subscriber's home is beyond a certain distance from the CO. Several MSOs report higher buy-in rates and lower churn with their digital cable offerings compared to their standard analogue service. this becomes problematic.

Encryption is also important in transmitting confidential user-generated data. this is typically done over an encrypted channel. Much media that is sold to a user will be encrypted. Extended Time Division Multiple Access (ETDMA) A variation of half-rate voiced TDMA (see TDMA). which is a piece of data or software that has been engineered to provide access to the data. Encrypted data requires a key to access it. It is mainly used for localized network Internet connections and is the most popular LAN technology in use today. with a key personalised to them or to their media viewer. Page 194 Deutsche Bank AG/London . DS-0 Basic North American 64 Kbps digitized voice channel. In certain auctions. DS-1 First level in North American digital hierarchy.544 Mbps signal consists of 24 DS0s multiplexed together. One erlang equals 3600 call seconds per hour or 36 CCS (call century seconds) per hour.g. Internet access. In cable systems the downstream channel occupies the 50 MHz and higher portion of the spectrum." or structure used to receive and/or transmit electromagnetic signals from or to a satellite. so that they may not distribute it. which may be an issue in lowerpower devices.. Ethernet A local data communications network that transmits data over shielded coaxial cable or over shielded twisted pair telephone wire. Encryption is the process of putting a message into a code in order to prevent unauthorised access to it. where installment payments were permitted. HFC networks have a more robust downstream capacity than traditional coax-based networks to support the increased upstream data flow required by digital cable. when credit card details are entered into a website. after satisfying any withdrawal payments and/or defaulted net high bid amounts due. e. e.6 December 2006 Telecommunications Telecom for beginners 2007 to 20 percent of its winning bid within ten business days following the release of a public notice announcing the close of bidding. Exclusivity is granted through contract provisions. Under FCC rules cable operators cannot carry distant signals which violate local television stations' exclusivity agreements. Encryption is a matter of degree.g. EDGE (Enhanced Data rates for Global Evolution) A radio based high-speed mobile data standard. gateway or Multipoint conference unit Erlang A statistic used in measuring the traffic in the cellular system equivalent to the average number of simultaneous calls. the 1. and generally any encrypted data may be decrypted by a sufficiently powerful computer with sufficient processing-time. Endpoint A terminal. and telephony. Upfront funds on deposit will be applied toward the down payment. bidders were able to break their initial down payment into two components: first and second down payments. It was formerly called GSM 384 and was initially developed for mobile network operators who did not win Universal Mobile Telephone System (UMTS) spectrum. Downstream Communications path in a cable network reserved for sending signals from head end to the subscriber's home. Encrypting data with sufficient sophistication that it may not be read by someone unauthorised requires a lot of processing power. E-GPRS (Enhanced GPRS) Another term for EDGE. Exclusivity The exclusive playback rights for the film or episode to a broadcast station in the market it serves. E Earth Station Refers to a "dish.

such as a DSL line into the back of a computer.S. In typical HFC networks. Home-networking via technologies such as Wi-Fi may enable roaming within the home. coaxial cable runs from the node to the subscribers' homes. government agency responsible for regulating interstate and international communications. Fibre-to-the-Curb (FTTC) Refers to the use of optical fibre cable directly to the curbs near homes or any business environment. Data travels via pulses of light that are sent through the fibre strand. Data travels via pulses of light that are sent through the fibre strand. Deutsche Bank AG/London Page 195 . Flexible (Drop) Cables The distribution cable is tapped by flexible "drop" cables as it runs past customers homes. Federal Communications Commission (FCC) The U. reviewing the winning bidder's long-form application. Fixed Wireless (or Fixed Cellular) This apparent contradiction in terms signifies a cellular network that is set up to supper fixed rather than mobile subscribers. and resolving any petitions to deny or other oppositions filed. Fibre-Optics A transmission medium composed of glass or plastic fibres. pulses of light are emitted from a laser-type source approximately the diameter of a strand of hair. but lack of roaming capability. where broadcast signals are received. Firewall Router or access server acting as a buffer between any connected public networks and a private network-ensuring the security of the private networks. Fixed wireless is increasingly being used as a fast and economic way to roll out modern telephone services. Final Payment After verifying receipt of the proper down payment. is generally the key disadvantage of fixed-line. A winning bidder that is not a small business will then have ten business days from the release of this public notice to submit the full balance of its winning bid.6 December 2006 Telecommunications Telecom for beginners 2007 F Facilities Based Carrier A carrier that uses its own facilities to provide service. the Federal Communications Commission will announce by public notice that the license is ready to be issued. Fidelity is the closeness of a reproduction to the original it reproduces File Transfer Protocol (FTP) A protocol used to move large files on the Internet. It offers greater capacity and speed than traditional co-axial cable. Fibre-to-the-Node (FTTN) A characteristic of modern cable networks in which optic fibre runs from the cable head-end. Fixed-line Telecoms are broadly divided between mobile and fixed line. to nodes located in neighbourhoods served by the network. since it avoids the need for fixed wires. Fixed-line services can usually offer faster and cheaper bandwidth than wireless services. Fibre-Optic Cable A strand of flexible glass approximately the diameter of a strand of hair. due to the need for wires. The flexible cable drops to the home comprise approximately 45% of the system's total footage. Fixed-line connections involve a physical connection between the network and the point of access. Assumes that coaxial cable or other medium will carry signals from curb to the user inside home/business Fibre-to-the-Home (FTTH) A network where the optical fibre runs from the switching station directly into a subscriber’s home.

It is a 2. Geostationary Satellites (GEOs) Orbit the earth at an altitude of 22. to support cross-border roaming. which can be simply understood as waves. and is well suited to the burst-laden demands of LAN environments. The relationship between speed. GSM uses TDMA air interface and has provision for text messaging and Subscriber Information Memory (SIM) cards.g. similar to X. Frame Relay A high-speed. GPRS (General Packet Radio Service) Wireless standard for high speed transmission of data packets over GSM networks. GEOs are geosynchronous.5G technology. or it may be the user’s point of access. and so gatekeepers may be able to take shares of revenues for content distributed through their gateways. though slower in some media. wavelength. e. GSM (Global System for Mobile Communications) Originally defined as a pan-European standard for a digital cellular telephone network. and is a general measure of presence (e. as maintaining constant speed requires travelling a long distance less often. or a short distance more often. Control of gateways means control of traffic. i. Frequency Telecommunications are carried out by sending signals via electro-magnetic radiation. Gigahertz (GHz) A measure of spectrum equal to one billion hertz or one thousand megahertz. its frequency. Front end The user-facing portion of any interface is referred to as the front end. and frequency makes sense if one imagines a particular point on the signal travelling the wavelength each time the wave repeats.25. However. GSM is now one of the world's main digital wireless standards. Gigabits per Second (Gbps) A measure of bandwidth capacity or transmission speed. Thus. Frame relay is a leading contender for LAN-to-LAN interconnect services. a portal is a gateway to the Internet.g. the extent of a retail network may be its footprint). so that it might allow two distinct networks to exchange traffic.6 December 2006 Telecommunications Telecom for beginners 2007 Footprint The footprint of a network is the area where it’s available. The orbit of the GEOs provides an advantage in that the satellite is relatively fixed above a point on earth and the end user can utilize a lower cost antenna or dish fixed on the satellite's location in orbit. relatively fixed above a point on earth. frequency = speed/wavelength. Fully Integrated System A cable television system which establishes the optimum amplifiercable relationship for best performance at lowest cost. Electromagnetic signals travel typically at or close to the speed of light. the GEOs do suffer from one major drawback: there is an audible time delay due to the distance the signal must travel. so wavelength and frequency are inversely proportional.300 miles. the wave will travel the wavelength once every second. G Gateway (GW) A gateway provides access to something. Page 196 Deutsche Bank AG/London . Geosynchronous Orbit Orbits the earth in the same amount of time it takes the earth to rotate. packet-switched data communications service. Frame Grouped information sent as a data link layer unit over a transmission medium. so footprint describes its reach. If frequency is one per second. It stands for a billion bits per second.e.

anything that exists in reality. so the number of hops is a crucial factor in determining speed. although there is no necessary standard for HDTV. so all numbers depend on what is chosen to broadcast. High Bit Rate Digital Subscriber Line (HDSL) A modulation method that enables T-1 and E1 signals to be delivered over two and three pairs of copper wire. The USA currently uses a system called NTSC. High Definition Television (HDTV) A television signal with greater detail and fidelity than the current TV systems used. there is not a clear channel established between communicating nodes. rather like a traveller using a chain of scheduled bus services to go from city to city.6 December 2006 Telecommunications Telecom for beginners 2007 H Hardware is physical computing. Hardware may be replaced in part or in whole. but in packet-switched networks. which is then the origination point for signals distributed to cable television subscribers. Handoff The process occurring when a wireless network automatically switches a mobile call to an adjacent cell site. Each node-to-node journey is a hop. Gigahertz (GHz) equals one billion cycles per second. where n is a whole number equal to two or more. all data is going from one end to the other end. HDTV is a coming offering across higher bandwidth distribution channels. respectively. A packet is redirected at each hop. The greater amount of information demands higher bandwidth to transmit it. Head-end End point of a broadband network. Stations transmit to the head-end. Packets travel by moving towards their destination from node to node. HDTV provides a picture with twice the visual resolution as NTSC as well as CD-quality audio High Frequency The entire subsplit (5-30 MHz) and extended subsplit (5-42 MHz) band used in reverse channel communications over the cable television network. such as handsets. HDTV (High Definition TV) is TV with a higher resolution than traditional systems. speakers. and so one HDTV channel may take the place of up to four other channels. Deutsche Bank AG/London Page 197 . House Drop The coaxial cable that connects each building or home to the nearest feeder line of the cable network. processors. Originally designed to bypass costly repeat installations required to provision T-1 and E-1 services to the far flung. Packets travelling the same wire distance will take different times if they travel a different number of hops. Kilohertz (KHz) equals one thousand cycles per second. Harmonic Distortion A form of interference involving the generation of harmonics according to the frequency relationship f=nf1 for each frequency present. HDSL is now being positioned in single-pair configurations that will deliver up to 768Kbps to residences. Homes Passed The total number of homes. It is also host to the CableCARD device. which have the potential for being hooked up to the cable system. as it requests the node it has reached to send it to the next node en route to its destination. Megahertz (MHz) equals one million cycles per second. typically around 5× the resolution. Host Device A set-top or receiver containing and executing the OpenCable Application Platform implementation. Hop In a circuit-switched connection. etc. although it is unclear what portion of TV will end up high definition. Hertz A unit for measuring frequency that equals one cycle per second. so it doesn’t need directing. but it is not mutable.

usually 90 seconds or more in length. i. While the voice system is "circuit-switched" (i. Integrated Digital Enhanced Network (iDEN) A Motorola Inc. "i-mode" is also a trademark and/or service mark owned by NTT DoCoMo. trunks. has the dominant position in the market. telephone. Interactive Cable Cable systems through which viewers are able to order movies and video games. Incumbent Local Exchange Carrier (ILEC) A local exchange carrier (LEC) which.6 December 2006 Telecommunications Telecom for beginners 2007 Hub A signal distribution point for part of an overall system. or edge-card connector. "always on. Hybrid Fibre/Coax (HFC) A cable network that consists of both fibre-optic lines and coaxial cable. Independent Operator Individually owned and operated cable television system. or links. the coding language of an Internet page. and request sales brochures and coupons from home. Hybrid Communications Network A communications network that uses a combination of line facilities.e. A hardware device that interconnects computers on a Local Area Network and acts as a central distribution point for the communications lines. i-mode is an overlay over NTT's ordinary mobile voice system.. Larger cable systems are often served by multiple hub sites. the original carrier in the market prior to the entry of competition. The typical ISA connection is a slot. and data transmission into one network." thus. Integrated Services Digital Network (ISDN) Technology that transmits data at speeds up to 128. with each hub in turn linked to the main headend with a transportation link such as fibre optics. HyperText Transport Protocol (HTTP) The protocol for transporting hypertext files through the Internet. text messaging. access library information. Industry Standard Architecture (ISA) An interface standard for connecting hardware expansion cards to a computer. i-mode is "packet-switched. Informercial A commercial. Technically." IMT-2000 The term used by the international Telecommunications Union for a family of standards and technologies targeted at increasing efficiency and improving the performance of mobile wireless networks for the projected third-generation wireless services. you need to dial-up).000 bits per second over the traditional copper wire. Page 198 Deutsche Bank AG/London . enhanced specialized mobile radio network technology that combines two-way radio.e. not affiliated with a Multiple System Operator. loops. I i-Mode i-mode is NTT DoCoMo’s mobile Internet access system.. coaxial supertrunk. some of which use only analog or quasi-analog signals and some of which use only digital signals HyperText TTP is the protocol defining communication between web browsers and web servers. designed to supply information about a product or service rather than to present a specific sales message. HyperText Markup Language (HTML) The coding (set of commands) used to create and format HyperText documents. or microwave. when competition begins. on the computer's motherboard allowing devices such as sound cards and telephone modems to be plugged in to the computer.

S. Deutsche Bank AG/London Page 199 . Inter-exchange Carrier (IXC) In U. including incumbents who own the entire network. markets. In Europe. networks. Asia. national and international networks into one global network. and have on-screen access to supplementary content about a program's content. like ISDN hardware. and Fax machines. IntraLATA Transportation within a LATA (voice. and the addressing scheme used to route a message to a different network or sub-network. a point of termination. InterWorking Unit (IWU) The network "modem" where all the digital to analogue (and vice versa) conversions take place within the digital GSM networks.g. packet-switched. International Telecommunications Union (ITU) A United Nations organization that establishes standards for telecommunications devices.g. Most networks combine IP with a higher-level protocol called Transport Control Protocol (TCP). data. and other nations around the world. regional. the local telco also serves as the major IXC in the country. Interdiction A method of receiving TV signals by jamming unauthorized signals but having all other signals received in the clear. also called datagrams. interconnection refers to the work of carrying the connection between the two ends. press zero for the operator. or video information). leased line. Interactive Voice Response System (IVR) The automated telephony systems that direct calls within a company or organization. Interface A point of connection between two systems. and travel in between. Currently in trials in several U. Interconnection is used to refer both to the technical interface and to the commercial arrangements between two network operators providing service. Interconnection A term that defines the inter-working of two separately owned and operated networks.. The Internet uses TCP/IP protocols (Transmission Control Protocol/Internet Protocol) which was originally designed for the UNIX operating system. They own varying amounts of the connections offered. e. be it voice or data. modems. “Please press one for customer service. Interconnection may well be carried out by entirely different parties than origination and termination. and also value-added services such as e-mail and technical support. Because the jamming is accomplished outside the home it does not require a set-top terminal in the home. and maybe then through the UK by BT etc. InterLATA Telecommunications services that originate in one and terminate in another LATA. and enhanced communications services.” Interconnection In a network connection. Internet Collection of local. press two for technical support. Internet Service Provider (ISP) Internet Service Providers (ISPs) provide consumers with connections to the internet. or devices. which establishes a virtual connection between a destination and a source.6 December 2006 Telecommunications Telecom for beginners 2007 Interactive TV A form of television in which the viewer is able to respond to and/or manipulate onscreen images. IP(Internet Protocol) Specifies the format of packets. an IXC is a long-distance telecommunications provider that offers a range of circuit-switched. terminology.S. a call from a customer of a regional US operator to one of a regional Swedish operator could be carried across the Atlantic by AT&T. e. any company that provides communications services between exchanges on a long haul basis. there is a point of origination. and brands who don’t even own the lines into the internet.

but its core functionality remains. Deutsche Bank AG/London . and it is kept backwards-compatible. ISDN Digital Subscriber Line(IDSL) IDSL is a 128 Kbps standard proposed by the Ascend Corporation for providing low cost. using Internet protocol technology. Usually controlled by a network operator. the sector has a particular focus on KPIs. video. Packets bound for that system are addressed to its IP address. Kilobits per Second (Kbps) A measure of bandwidth capacity or transmission speed. and is a data-service often offered by telecoms companies.6 December 2006 Telecommunications Telecom for beginners 2007 IP stands for Internet Protocol: the underlying system that organises the internet. Intellectual Property is data or content with an owner. and marked with that of their origin. which identifies it uniquely. rather than just pure financial data. and are often released more regularly than financials. ISDN employs high-speed. IPVPN A Virtual Private Network (VPN) is a network which uses encryption to emulate the performance of a closed private network. IPVPN offers VPNs using IP. This technology can transmit data at speeds up to 128. so packets are simply passed between nodes via the quickest route available at the time. dedicated 128 Kbps data service using telephone lines and central office switch facility space leased from the telephone company. copyrighted or patented. without which it couldn’t really exist. such as the rights of a record company to sell copies of an artist’s back catalogue. until they reach their destination. L Page 200 LAN (Local Area Network) A high-speed data network intended to serve a small area.7 to 12. or IPR. It is sometimes referred to as IP. K Ka-Band 33 to 36 GHz frequency band used by satellites. Intellectual Property Rights. It uses standard point-to-point ISDN signalling techniques to link the customer to the central office head-end. a thousand bits per second. by speaking in code. IP Number The unique address of every computer on the Internet. IP is occasionally upgraded. such as an office network. imaging and fax over several multiplexed communications channels.g. In IP. just like mailed parcels. over open public channels. the band of satellite downlink frequencies from 11. refer to the rights that a particular owner or owners in general have in respect of their IP. Kilohertz (KHz) A measure of spectrum equal to one thousand hertz. IP Telephony An alternative to standard circuit switched telephony in which voice signals are placed via computer over the Internet. KPIs can drive valuations significantly. so that their customers may establish private networking between remote locations. out-of-band signalling protocols that conform to international standards. each system on the network is assigned an IP address. though the degree and regularity of disclosure vary significantly.000 bits per second over the traditional copper wire. data. IP is packet-switched. The effect is analogous to having private conversations whilst communicating across in a crowded public space. which may be e. such as a building. to accommodate the changing needs of the network. Ku-Band Microwave frequencies within the 12 to 18 GHz band. Key Performance Indicators (KPIs) Due to the complexity of valuing telecoms businesses. ISDN-Integrated Services Digital Network A switched network providing end-to-end digital connectivity for the simultaneous transmission of voice. without installing closed physical channels.2 GHz.

or near. however. FCC rules establish priority for carrying stations that lie outside a cable system's service area. but access to it is controlled).400 bits per second. LFAs have been at the centre of the debate over open access. and if the commission chooses to auction the spectrum. Leapfrogging Cable television operators' practice of skipping over one or more of the nearest TV stations to bring in a further signal for more program diversity. Coverage cells have a range of approximately three miles.g. which solves the terrain and one-way limitations faced by MMDS. deregulation of telecommunications. home or office) and the provider's central office servicing this customer. the copper PSTN wires into houses.S. costs will rise dramatically Local Number Portability (LNP) A system that allows subscribers to change local phone companies without experiencing a change in phone numbers. Local Exchange Carrier (LEC) One of the U. the visible part of the spectrum. Local Loop The connection between the customer's premises (e.g. The FCC has not allocated this spectrum for use.S. Line or Loop An analog or digital access connection from a user terminal which carries user media content and telephony access signalling Line Speed The rate at which individual bits are transmitted on a telephone connection. Local to Local The retransmission of local TV signals by DBS back into their local broadcast markets Deutsche Bank AG/London Page 201 . including all points served by a local phone company within a particular area. Local Area Network (LAN) is a closed network (it may connect to the internet. Laser A device that generates coherent electromagnetic radiation in. however. Local Franchise Authorities (LFAs) Authorities which grant licenses to cable companies to operate within their jurisdictions usually for a share of revenues. Historically. Local Multipoint Distribution Systems (LMDS) A line-of-sight wireless technology which delivers two-way audio and video signals via microwaves. Last Mile This describes the connection between large-scale networks and individual users: e. telephone access and service providers that resulted from the U. pricing. Lit Fibre activated or equipped with the requisite equipment needed to use the fibre for transmission. this has been a wireline connection. and network organization purposes to organize the public telephone network into distinct regions. an ISDN line at 64. System operates at 28 GHz spectrum level. the greater number of coverage cells required increases the cost over traditional MMDS. A modem’s line speed may be set at 14. such as an office network. Also referred to as "the last mile" (even though the actual distance can vary). wireless options are increasingly available for local loop capacity.000 bits per second.6 December 2006 Telecommunications Telecom for beginners 2007 LATA (Local Access and Transport Area) A contiguous local exchange area. typically operating at very high speeds Local Access and Transport Area (LATA) A geographical area used for regulatory.

There are 52 MEAs. and also technically.6 December 2006 Telecommunications Telecom for beginners 2007 Low Earth Orbiting Satellites (LEOs) Orbit the earth at an altitude between 400 and 1. a method of compressing audio data. Multichannel Multipoint Distribution System (MMDS) A line-of-sight wireless technology that delivers audio and video signals one way.000+ miles. As with LEOs. MPEG (Moving Pictures Experts Group) The group that defined the standards for compressed video transmission. Due to the LEO's low orbit. MP3 produces CD-quality sound at a data-rate of around 1MBps. unlike GEOs. Megahertz (MHz) A measure of spectrum equal to one million hertz or one thousand kilohertz. usually above 890 MHz. including 46 in the continental United States and 6 covering Alaska. Modulator An electronic equipment that combines video and audio signals from a studio and convert them to radio frequencies (RF) for distribution on a cable system. Guam and the Northern Mariana Islands. Mobile Telephone Switching Office (MTSO) Monitors all cellular phone traffic signal strength and. then converts or modulates it into an analog signal. LEOs have a shorter lifespan and are less powerful than GEOs. such as voice traffic migrating from the PSTN to mobile and VoIP. Trees and buildings distort or block the signal. Virgin Islands. Microbrowser A Web browser optimized to run in the low-memory and small-screen environment of a Net device. a million bits per second. Medium Earth Orbit Satellites (MEOs) Orbit the earth at an altitude of 10. transfers a call from one cell site to another. Microwave frequencies require direct line-of-sight to operate. when services migrates from technology to technology. Megabits Per Second A measure of bandwidth capacity or transmission speed. MPEG also refers to the format itself. Hawaii.500 miles. Proposed MEO networks would consist of approximately twelve satellites. MEOs transmit signals with no perceptible time delay. to homes via microwaves. Modem A data communications device that accepts a digital signal. they must travel at high speeds in order to maintain their altitude. This occurs in mobile networks. Puerto Rico and the U. LEOs transmit signals with no time delay. M Major Economic Area (MEA) A geographic area established and used by the Federal Communications Commission to define the coverage of spectrum licenses for certain services.S. Many cable television systems receive some television signals from a distant antenna location via microwave relay. that another modem can convert back or demodulate into digital form again. Line-ofsight. where a mobile device migrates from base station to base station as the user moves around. Coverage cells have Page 202 Deutsche Bank AG/London . MP3 is formally Motion Picture Experts Group Audio Layer 3. which offers a large marketing advantage compared with the GEO. which only keeps them in the line-of-sight of a fixed terrestrial antenna for ten minutes. Migration Something migrates when it connects to something different. point-to-point transmission of signals at high frequency. However. at appropriate times. Microwaves High-frequency radio waves used for telecommunications transmission.

each of which carries a different line of programming. Heavy noise is sometimes called "snow. which reduces the number of users per node. by renting network capacity from others. Must Carry Refers to the 1992 Cable Act. where there is a risk of traffic loss or service degradation. Node Transition point in networks where signals travelling over optical fibre are converted into radio signals and distributed to homes and businesses via standard coaxial cable. Multipoint Access User access in which more than one piece of terminal equipment is supported by a single network termination. data. At least initially. fax. OC-3. Refers to random spurts of electrical energy or interference. typically at 64Kbps or less. Near Video on Demand (NVOD) An entertainment and information service that broadcasts a common set of programs to customers on a scheduled basis. a service that may combine voice. Noise The word "noise" is a carryover from audio practice. It is a direct SONET optical signal. OC-48. paging. for example). OC-192 OC-1 stands for Optical Carrier. N Narrowband Medium that is capable of carrying voice. level 1.g. The capacity of high frequency networks can be increased by constructing additional nodes. subscribers. MVNO Mobile Virtual Network Operators run a mobile phone service without owning a network of their own. Narrowcasting is sending signals to a small and select group of users. All higher levels are direct multiples of OC-1. graphics and video information. NVOD services are expected to focus on delivery of movies and other video entertainment. Made possible by digital compression technology. Network Congestion A state of overload within a network. O Deutsche Bank AG/London OC-1. transmitting at 51. Multimedia In the context of mobile communications.6 December 2006 Telecommunications Telecom for beginners 2007 a range of approximately thirty-five miles. e. Page 203 . NVOD typically features a schedule of popular movies and events offered on a staggered-start basis (every 15 to 30 minutes. Current analog systems will be upgraded to digital thereby increasing channel capacity from 30 channels to 120 channels. Multiplexing Enables cable operators to offer on a given service multiple feeds. See also Video on Demand. which requires Cable TV operators to carry local commercial and non-commercial broadcast channels in areas where the cable companies provide service." Number Portability The possibility for individuals and corporations to retain the same phone number and same quality of service when switching to a new local service provider. Nodes in modern high frequency networks serve approximately 750 homes. Network Interface Card (NIC) A hardware interface card that connects a computer to the network cabling. though this number is higher in older networks.840 Mbps. Multiple Service Operator (MSO) A term applied to cable TV companies that hold certificates of franchises allowing them to provide cable TV service in several different cities or geographic locations. and relatively slow-speed data (not full video applications).

OpenNET An advocacy group co-founded by AOL to lobby congress. a channel would be assigned to the user-webpage connection. This means that traffic is allocated wherever there is free bandwidth.g. The parasitic equivalent would involve messages being handed between connected people. and be reassembled into the original data later on. A parasitic network is one in which each node is hierarchically equal. it doesn’t maintain channels according to connections. and these are then transmitted in highvolume to another central location. from which they are then distributed to their destinations. and uses other nodes indiscriminately to make its connections.000 times the information possible with traditional copper wire. rather traffic fills the empty space. The postal system is a traditional network. they download a lot of data when first accessing the site. flexible thread of pure glass. Any amount of data can be split up into packets. dormant as long as the user requested no new data. what portion they contain. and then sends packets mixed together. When users access websites. In a packet system. and those which require that their whole route be cleared in advance. the FCC and Local Franchise Authorities to force cable companies to open up their networks to competing ISPs. In a circuit-switched system. performance. which may then travel independently. whereby users send their messages to a central post office. Page 204 Deutsche Bank AG/London .6 December 2006 Telecommunications Telecom for beginners 2007 On-Demand Service A type of telecommunication service in which the communication path is established almost immediately in response to a user request brought about by means of a user-network signaling. of a certain length. the data is sent to the user in packets. fault. Not many such connections could be maintained. In contrast to circuitswitching. The issue is currently under review by the FCC. Operation Systems Support (OSS) The back office software used for configuration. Optical Fibre An extremely thin. accounting and security management. Open Systems Interconnection (OSI) A framework of the International Organization for Standardization (ISO) standards for communication between different systems made by different vendors. Packet-Switched Network (PSN) A network which transports information by breaking up the information stream into addressable digital "packets" that are transmitted independently and then reassembled in the correct sequence at the destination. Open Access A term describing the view advocated by AOL and other members of the openNET coalition that MSOs should be forced to open their cable systems to competing ISP's. and bandwidth is never reserved and empty. but then very little whilst reading it. P Packet is a discrete piece of data. able to carry 1. given limited bandwidth. Parasitic networking is a way of decentralising networking. without space reserved for them in advance. This is analogous to the difference between cars that travel after each other along roads. These networks allow "sharing" of communications links and are more efficient than circuit-switched networks. Packet Switching Packet-switching is the underlying principle of IP. each of which travels independently along the quickest route. The volume of data able to travel in a packet-switched network is vastly greater than if each required a dedicated channel. Packet-switching is much more efficient. and thus more can be sent. Packets often contain meta-data concerning e. rather than relying on central nodes and a backbone (although parasitic networks may access the backbone). Overbuild The construction of a second cable TV system in a franchise area where a system already exists. but rather chops data into discrete packets.

or a third-party such as TiVo. and the likely device through which IPTV will be accessed. a handheld device of which the primary function is to display the user’s data. This is distinct from market share. In most cases. Personal/Digital Video Recorder (PVR/DVR) record TV onto a hard drive in digital format (some will convert analogue signals). Penetration describes the ability of a technology or service to reach people. each of which is a particular colour. PDC (Personal Digital Cellular) The digital wireless standard used in Japan.6 December 2006 Telecommunications Telecom for beginners 2007 in the direction of their intended recipient.. PVRs offer both competition to IPTV functionality in their current form. using cheap spare capacity in their ability to transmit and to receive. PDC uses TDMA air interface.g. so that programmes may be played back when they aren’t live. 100% penetration means being available to everyone. broadly. Offers less flexibility than Video on Demand. and may be offered either by a television service provider such as Sky. Pixel Digital images are made of grids of discrete dots. Handheld) were originally designed as electronic personal organisers. Pay Programming Programming that is available to cable customers for a fee in addition to basic subscriber fee. Sophisticated PVRs will regularly record users’ favourite programmes. Pay-Per-View A service that enables subscribers to purchase films and other programming on a onetime basis. as well as recording to DVD. There is convergence between some mobile phones and PDAs. Deutsche Bank AG/London Page 205 . no central network need be installed. PVRs usually incorporate an electronic programme guide for browsing. Pocket PC. and fast-forwarding (only as far as the live feed). and the line between the two is unclear. PPV programs are aired according to a schedule set by the cable operator. meaning a single-dot in a digital picture. as connectivity enhances mobile computing. PCS cover the 1. or rewinding (typically retaining in memory the last few minutes of what is being watched). with each node’s connectivity parasitic on the connections of the nodes to which it is connected. and nodes may be automatically parasitic on each other. PCS systems operate at higher frequencies than analog cellular systems. voice and data) that enable wireless communication independent of location. Bandwidth constraints have been the main barrier to offering subscribers the added convenience of more flexible programming schedules. Personal Digital Assistant (PDA. so that they may watch what they want at any time. the PSTN has near-100% penetration.e. but as technology has advanced they have become more sophisticated. Pixel is a contraction of picture element. or music. and now offer functionality such as internet access. but a PDA is. They can also offer features such as pausing live television. e. as availability doesn’t compel people to pay for something. Parasitic networks are potentially very powerful because the number of distributing nodes on a parasitic network (everyone involved) may be exponentially greater than in a traditional network. the network is automatically dynamically distributed according to users.9 gigahertz (GHz-one billion cycles per second) or 1900 MHz spectrum in the United States (1800 MHz in Europe and 1500 MHz in Japan). Personal Communications Services (PCS) A broad range of telecommunications services (i. Per-Inquiry Advertising Type of advertising where the cable network running the commercial is paid based on number of responses received rather than air time used.

PSTN Public Switched Telephone Network. whose portals may be loaded by default when customers connect to the internet. Cards that are read by holding them near to readers. Pre-pay accounts include no commitment to future spending. and transmit using power gained from the reader’s signal. typically every month. When the user has used up their credit. and report back data when requested by readers. such as the MSN homepage. with usage in excess of services-included being chargeable. Popular portals can influence heavily the content that users access. users need help navigating through it. R Radio Frequency Identification (RFID) RFID tags are small electronic chips that are attached to something to track it. Post-paid (Contract) A post-paid account (sometimes referred to as contract). It may be (physically) located in rented space (from a large telco) and houses routers. and reading and writing data. they must top-up their account. Premium Cable Additional cable programming services for which subscribers pay a fee in addition to a basic cable charge. Plastic Optical Fibre (POF) A plastic cable used as a substitute to more expensive fiber optic cable. one person is equal to one POP. and are often owned by ISPs and mobile phone service providers. A certain amount of service is often (especially in mobiles) included in the regular subscription fee. With huge amounts of content available. meaning that they will be sure to terminate. wired telephone network. to offer them personalised content based on past usage and purchase patterns. and bills them regularly. allows the user credit. Plain Old Telephone Service (POTS) Refers to analog voice telephone services provided over the public switched telephone network. and providing extra revenue. compression. Program Non-Duplication Refers to the rules by FCC to the black out of programming by a cable operator of a distant television station program it carries when a local station also carries the same programming leading to problems with duplication. Point of Presence (POP) A measure of population covered. end-of-message notification. etc. and received notification.g. in order to be able to purchase more services. governing error-checking. Active tags contain their own power source. e. and so the account simply lapses by dormancy. Can be used for only short distances. Passive tags contain no power source. such as longer-range transmission. servers. These typically will transmit only their unique Deutsche Bank AG/London Page 206 . Users may be locked into a post-paid contract for a minimum period. and will continue to be charged until they cancel the contract. with the conditions under which lapse will occur specified in the terms of contract. Protocol A protocol is a set of rules governing communication between network nodes. to provide feedback from a sensor system. Portals may be customised to the user (as is the case with the Amazon internet shopping front page). which are then paid for from this credit. such as the London Underground Oyster Card. Prepaid A pre-paid account is one whereby a user pays for credit prior to accessing services. with links to different categories and items.6 December 2006 Telecommunications Telecom for beginners 2007 POP (Point of Presence) A POP is the location of an access point to the network. contain RFID chips. Regular fees mean that contracts guarantee revenue regardless of usage. The number of POPs an ISP has is usually indicative of its size. The traditional. and portals provide this by organising what may be of interest. Portal is a central access-point through which a user accesses content. and usually therefore have greater functionality.

Revenue Generating Units (RGU) Refers to every additional cable subscription unit. When users connect outside their home network. and is crucial. passive devices and sometimes the cable. during a connection. Pervasive wireless networks provide connectivity over a wide area by allowing users to hop between base stations with overlapping cells. Roll-out can involve heavy investments. and continues until it can reach the whole market (i. Roll-out is the process of implementing a new technology or service in its target area. However. Resellers Carriers which purchase services from other carriers and than resell them to end users. there are now four RBOCs-SBC.S. Modems can be designed to select their connection speed at train-up. Passive RFID tags may replace barcodes. telephone companies that resulted from the break up of AT&T. Roaming use involves the ability to stay connected to a network whilst moving around. so roll-out starts when the product is first offered in the market. as people can’t buy services that have not been rolled out to them. Deutsche Bank AG/London Page 207 . through consolidation. Wal-Mart and the US Department of Defence have demanded that all their suppliers begin to label all shipments with RFID.000 feet. Rebuild The physical upgrade of a cable system. it counts as two RGUs. has full penetration). Verizon and Qwest. and most technologies (especially innovations) have a limited shelf-life. Roaming may also be offered over a small area. Unlike fixed rate ADSL modems. being embedded in products to allow product-tracking. Reciprocal Compensation Payment from telecoms providers to one another in exchange for providing terminals for each other's exchange traffic. Rate Adaptive Digital Subscriber Line (RADSL) ADSL modems that are able to adjust to varying lengths and qualities of lines are said to be rate adaptive. For example if a customer signs up for both digital video and high-speed internet access. so lost revenues will not be replaced. Real-Time Communications A communication service (usually two-way) in which the information sent is received instantly by the other party in a continuous stream.e. hardware and subscriber unit. so that as they begin to go out of range of one. RFID is hard to predict. often involving the replacement of amplifiers. The router will examine an incoming document (packet-switched) and forward it to the appropriate address. such as building new networks of mobile base stations. as everything everywhere reported itself back to its owner or vendor. this is also roaming use. but extreme scenarios could involve a massive amount of extra data travelling across telecommunications networks. power supplies. these modems will connect over varying lines at varying speeds. strand. making them a good choice for service providers attempting to deploy ADSL past 18.6 December 2006 Telecommunications Telecom for beginners 2007 identifier. The RBOCs were created in 1984. or upon signal from the central office. but are extremely small and cheap (prices have been projected to drop to €0.05 by one manufacturer). they come into range of another. Regional Bell Operating Company (RBOC) One of (originally) seven U. Router A computer system that connects two or more networks. and universal product-tagging. BellSouth. such as a Wi-Fi base station that offers a user wireless connectivity throughout their home. Telephone calls and videoconferencing are real-time: database access and e-mails are not. Far off proposals for RFID include person-specific tags that would enable ID authentication.

a sound to digital. a binary equivalent to decimal places. often geostationary. With a bit-rate of 10. which receives transmissions from separate points on the earth and retransmits them to cable systems. e. so as not to miss any waves. (Works with GSM networks. Shared Tenant Services (STS) The provision of centralized telecommunications services to tenants with in the same building(s). when combined with 306 Metropolitan Statistical Areas (MSAs). The rate at which values are recorded is the sampling rate. Satellite A device in orbit above the earth. Mobile service providers can sell SIMs to users without handsets. having values at regular intervals.) Subscriber Identity Module (SIM) SIMs are 25 × 15 mm cards. S Sampling Analogue signals are continuous. This model is extremely low-cost. for e. To convert an analogue signal. Many service providers sell SIM-locked handsets that won’t accept another SIM without entry of a code. digital or digital broadcast television to a standard frequency for display on a standard analog television set. with low input and transportation costs.1% accuracy. and others over a wide area. comprise the 734 cellular geographic service areas. so a sampling rate of 1 kHz (1000 times per second) means that 1000 values are set for each second of audio. etc.g. allowing the user to source the handset themselves (users may have a spare phone. Satellite Dish Antenna A device or system which receives broadcast signals from a satellite. Used by some satellite TV vendors to provide a high-speed feed for receiving data from the Internet. Newer phones often have appreciable internal storage. digital pictures have separate values for each pixel. hotel. typically as twice the highest frequency wished to be represented. Set-Top Box A device which coverts. outbound email. such as a dial-up modem connections to a local ISP. containing the details unique to a mobile phone user. it is SIM data that represents their account. A phone’s SIM can be changed by the user. and cheap to manufacture. as SIMs are commoditised. Sampling rates are set appropriate to context. varying constantly. which. whilst digital signals are discrete. Quality is a combination of sampling frequency and the number of bits in each value. which guards against Page 208 Deutsche Bank AG/London . Short Message Service (SMS) A service available on digital networks allowing users to send/receive short alphanumeric messages.) must be sent through more conventional means. A signal sampled at 1 kHz with a bit-rate of 10 would be roughly 10kbps with no compression. displays data from analog.6 December 2006 Telecommunications Telecom for beginners 2007 Rural Service Area (RSA) A geographic area used by the Federal Communications Commission to define coverage of spectrum licenses in certain services in the US.g. When a user connects to a network. There are 428 RSAs. DBS.g. utilizing one central antenna to pick up broadcast and/or satellite signals. but older phones stored most data on the SIM. media content and SMS archives. for transmission to home or system use. Data sent to the Internet (Web page requests. Satellite Master Antenna Television System (SMATV) Systems that serve a concentration of TV sets such as an apartment building. equivalent to measuring with 0. Satellite Downlink A data service that broadcasts data from an orbital satellite to terrestrial receivers. it is sampled at regular intervals. Satellite Home Viewers Improvement Act-Legislation signed by President Clinton in November 1999 that authorizes the retransmission of local network signals to DBS subscribers under terms similar to those that govern the retransmission of local signals by cable companies. e. etc. each value is recorded in a 1024 (2^10) range. or buy SIM-free).

Streaming A stream is a continuous flow of data: when content is streamed. the user does not download it all at once prior to use. live television. describes different wavelengths and frequencies of electromagnetic radiation. and our eyes are blind to other waves. e. as unless the user has some way of recording streaming content. these systems have provided one-to-many and many-to-one voice communications service-also known as mobile dispatch services. This range is the spectrum. such as microwaves. If two separate signals were trying to use exactly the same part of the spectrum. and is allocated as licenses to transmit a particular strength of signal in a particular bandwidth in a particular area. Slamming violates FCC rules. This makes bandwidth requirements less intensive. Streaming allows access to content that is still being recorded. i. so interference is not a massive issue. Streaming can also make piracy harder. communication could not take place. all we can see. but rather accesses it continuously. this technology increases the number of users that can access an existing wireless phone or data. Subscriber Line Charge (SLC) A fee charged to compensate the local telephone company for part of the cost of installation and maintenance of the local loop (i. These systems are operated by commercial entities. and reduces requirements on the user’s system. they never obtain a full copy. we need to control access to bandwidth. by a company. in order that signals are not broadcast together. Deutsche Bank AG/London Page 209 . Specialized Mobile Radio (SMR) Also known as Trunked Radio System-Wireless radio communications systems which employ either conventional or trunking technology. of visible light. waves of a restricted wavelength are considered. Historically. Light cannot travel through most things. and we get the correct signal when we listen to a particular frequency. Spatial Division Multiple Access (SDMA) A complement (not an alternative) to CDMA and TDMA. which needn’t have capacity to load more than a small amount of data at a time. The switch opens and closes circuits. as they would interfere with each other. Streamed content is often music or video.g. or bandwidth. Spectrum The electromagnetic spectrum. by which the call is then routed. with only a small buffer loaded in advance to cope with flow fluctuations. on which all radio communication takes place. It uses a "self-healing" ring architecture that is able to reroute traffic if a line goes down. is a massive restriction on telecoms.6 December 2006 Telecommunications Telecom for beginners 2007 thieves and customers who don’t intend to use their account: but unlocking is available relatively widely on the grey market. SONET speeds range from 51 megabits to multiple gigabits per second. including radio waves of 10m and more and gamma waves 10-14 that size.e.e. although the same amount of data is transferred eventually. but for waves intended to permeate over large areas. although an information ticker may provide streamed data. whereby not everything is available initially for download. this comprises waves in the restricted range of 4-7 millionths of a meter. wires and poles). and all the rest ignored. SONET (Synchronous Optical Network) A fiber-optic transmission system for high-speed digit traffic. When we see visible light. The SLC is paid by subscribers monthly. otherwise known as service providers that are in the business to resell their services to other entities for a profit. When an electromagnetic signal is interpreted. which can be important when a host is distributing the same content to a large number of users simultaneously. Slamming The unauthorized switching of customers from one long distance company to another. with no theoretical limit. Switch A computer that receives instructions from a caller via a telephone number. Bandwidth on the radio spectrum then. or selects the path/circuits to be used for transmission.

The 1996 act adds "local competition provisions" for local and long-distance telephone companies. Time Division Multiple Access (TDMA) Digital cellular technology that sends signals over a single channel. The 1996 Act amends the definition of "cable service" to include interactive services. equivalent to 24 channels). Title IV A section of the Telecommunications Acts of 1934 and 1996. now called ANSI-136. full-motion video. known as T1 (1.) T1 A digital transmission line capable of up to 1. such as PacketCable NCS. This medium could increase existing cellular/analog subscriber capacity by as much as three times. used in the Americas. T T-Carrier System A digital transmission system that takes analog voice circuits and converts them to digital for transmission using time division multiplexing. Time Division Multiplexing Technique where data from multiple channels may be allocated bandwidth on a single wire pair based on time slot assignment. the T-0 carrier system was designed to operate at different rates. that customer’s service provider). A termination fee typically is paid to the company providing this connection (i.e.6 December 2006 Telecommunications Telecom for beginners 2007 Symmetrical Digital Subscriber Line A DSL connection that provides equivalent upstream and downstream transmission rates.544 Mbps. ETSI has historically been focused primarily on H. TDMA services can be delivered in the 800 MHz and 1900 MHz frequency bands.736 Mbps. (Without compression.323-based systems. TCP/IP-(Transmission Control Protocol and Internet Protocol) Refers to the collection of protocols that define the basic working of the internet. The 1996 Act opened the way for long-distance companies to enter local markets and vice versa and removed cable-telecom cross-ownership restriction that set the stage for AT&T's entry into the cable business. Title II A section of the Telecommunications Acts of 1934 and 1996 that outlines obligations of "common carriers" such as telephone companies. TDMA (ANSI-136) "TDMA" has been adopted as the new name for the "Digital AMPS" (DAMPS) mobile standard. concerning the final connection to the receiving party on a call.176 Mbps.312 Mbps. Amendment to the Telecommunications Act of 1934. Telecommunications & Internet Protocol Harmonization Over Network (TIPHON) A project within the European Telecommunications Standards Institute (ETSI) aimed at enabling systems level interoperability for Voice-Over IP technologies. T2 (6. the project recently has become interested in MGCP-based technologies. a 64 Kpbs channel carries a single voice conversation. equivalent to 96 channels). Telecommunications Act of 1996 (US) Landmark legislation aimed at deregulating the domestic telecommunications market.032 channels). termination has a rather friendly meaning. however. Tiered Programming Refers to different levels of programming for which customers are charged different fees. A T3 connection will allow fullscreen. T3 A digital transmission line capable of up to 45 Mbps. Termination In telecoms. equivalent to 672 channels). equivalent to 4. Asia Pacific and other areas.5 Mbps. Page 210 Deutsche Bank AG/London . T3 (44. and T4 (274.

This capability is used by customers to order movies and music and to interact in other ways with the broadband network. U Ultra-High Frequency (UHF) Referring to channels in the 470 MHz-806 MHz band. Trunk Cable The portion of the cable system architecture that transports the cable signal from the head-end to the neighbourhood node. SMS and fax messages from any phone. UNEs include local loops. you have UNE-P. The six elements that must be provided under UNE-P regulatory guidelines are: 1) loops. trunks generally consist of fibre optic cables in order to maintain the signal integrity. Two-Way Capacity A cable television system with two-way capacity can conduct signals to the head-end as well as away from it. 2) network interface devices. Used to connect telephone customers to the central office. UNE-P Unbundled Network Elements Platform-When UNEs are combined to provide a complete end-to-end circuit.e. Two-way or bi-directional systems now carry data. Two-Way System The ability to receive TV programming through the broadband network and send information back through the same network. switch ports. Can be either coaxial or fibre Due to the long distances travelled. Unified Messaging Software technology that allows carriers and Internet service providers to manage customer e-mails. Universal Licensing System (ULS) The new Wireless Telecommunications Bureau program under which electronic filing of license applications and reports of changes to licenses creates a database that can be accessed remotely for searches. pay cable. 4) dedicated and shared transport. i. PC.. transport facilities. and superstations.6 December 2006 Telecommunications Telecom for beginners 2007 Top-100 Market Ranking of largest television broadcast areas by size of market. It shows household rating and share delivery by daypart in both the DMA (total market) and cable household universe for all program sources. or information device. Upstream Communications path in a cable network reserved for sending signals from the subscriber's home to the headend. and 6) operation support systems. basic cable. they may eventually carry full audio and video television signals in either direction. Transponder The part of a satellite that receives signals and transmits communications signals back to earth. Total Activity Report (TAR) A quarterly Nielsen report which lists all the television activity during a sweep including broadcast stations. 5) signalling and call-related databases. Twisted Pair Insulated pairs of copper wire twisted around each other in order to reduce cross talk or electromagnetic induction between pairs of wires. UNE (Unbundled Network Elements) The Telecommunications Act of 1996 requires that the ILECs unbundled network elements and make them available to competitors based on incremental cost. Used in FCC rulemaking and in selling of airtime to advertisers. the upstream channel occupies the 5 MHz to 42 MHz portion of the spectrum and is used principally for Deutsche Bank AG/London Page 211 . Trunks make up approximately 15% of a cable system's total footage. 3) local circuit switching. Unbundling The separation and discrete offering of components of the local telephone service. In coax-based cable systems. etc. number of viewers and TV households.

Video Telephony The ability to view real-time video communications on a two-way or multipoint basis. a number of systems enable creation of networks using the Internet as the medium for transporting data. several MSOs are currently conducting VOD trials.9 to 52. compared with MP3. UTMS (Universal Mobil Telecommunications standardization for third-generation cellular systems. Internet access. Voice Frequency In telephony. Similarly to iTunes users being committed to iTunes if they Page 212 Deutsche Bank AG/London . Although the service is not yet commercially available. Windows Media Audio (WMA) is a proprietary Microsoft audio codec. This technology is optimized to allow very highspeed multimedia services such as full-motion video. for wideband wireless access to support third generation services. These systems use encryption and other security mechanisms to ensure that only authorized users can access the network and that the data cannot be intercepted. It offers superior compression and fidelity. System) Europe's approach to V Value-added Reseller Distributors that provide other services such as systems integration. typically the range is from zero to four KiloHertz. network management. HFC networks have a more robust upstream capacity than traditional networks to support the increased upstream data flow required by digital cable. W WAP (Wireless Access Protocol) A global. WAN (Wide Area Network) A circuit or network that connects sites that are at a considerable distance from each other. used by its Windows Media Player software. open standard for on-line service access from small-screen mobile phones.000 feet of 24-gauge twisted pair. Very Small Aperture Terminal (VSAT) A satellite dish usually 4-6 feet in diameter used to receive high and low speed data transmissions. Very High Data Rate DSL (VDSL) Modem for twisted pair access operating at data rates from 12. Very High Frequency (VHF) Refers to channels in the 54-88 MHz and 174-216MHz range. Violence Chip (V-Chip) A microchip which will permit parental control over rated television programs.8 Mbps with corresponding maximum reach ranging from 4.6 December 2006 Telecommunications Telecom for beginners 2007 communication with set top converters. Internet access and video-conferencing. WCDMA (Wideband CDMA) The air interface technology selected by the major Japanese mobile communications operators. For example. Also called videoconferencing. and in January 1998 by ETSI.500 feet to 1. Wavelength See Frequency. Video-on-Demand (VOD) A service that offers truly customizable viewing schedules for films and other programming by enabling subscribers to order films and other kinds of programming for home viewing. and telephony. Virtual Private Network A network that is constructed by using public wires to connect nodes. but now mainly competes with AAC.

Symmetric DSL." and "V. where the "x" can be replaced with any of a number of letters.""S. X xDSL A generic term for the suite of DSL services." "RA." "M. as some software. Rate Adaptive DSL. and other wireless terminals. Ericsson. WAP primarily facilitates text or tabular data. instructional television and information retrieval service that wired services can provide. Wired City The concept of television and other communications data. including "A. WML (Wireless Markup Language) The markup language used in the Wireless Application Protocol (WAP). Broadcast services must. and Very High Data Rate DSL.6 December 2006 Telecommunications Telecom for beginners 2007 let it encode into AAC. but it can support monochrome bitmap graphics. wired services have theoretically unlimited channel capacity. won’t play WMA. Wireless Application Protocol (WAP) An evolving worldwide standard for providing Internet communications optimized for mobile phones. such as iTunes. Deutsche Bank AG/London Page 213 ." See also Asymmetrical DSL. Motorola. WAP Forum was established in 1997 by Nokia." "H. digital assistants.com Wireless Cable Uses microwaves frequencies to transmit programming to a small antenna at a subscriber's home. educational material. pagers. be limited by scarce spectrum space. of necessity. High Bit Rate DSL. and Phone. Moderate Speed DSL. Windows Media Player users may become committed if they let it encode into WMA.

UK. Telecom Equipment.gronlund@db.00100 FINLAND Audrey Wiggin Telecom Specialist Sales Telephone: +44 20 754 50707 Fax: +44 20 754 51788 E-mail: audrey.khanna@db. Switzerland Telephone: +44 20 754 72905 Fax: +44 20 754 51788 E-mail: vivek.com Winchester House 1 Great Winchester Street London EC2N 2DB ENGLAND Jonathan Smith Telecom Specialist Sales Telephone: +44 20 754 74383 Fax: +44 20 754 51788 E-mail: jonathan-d.com Al. Greece. Wireline Thematics Telephone: +44 20 754 58490 Fax: +44 113 336 1299 E-mail: guy.com Via Santa Margherita 4 Milan 20121 ITALY Gareth Jenkins Vodafone. Austria.com Winchester House 1 Great Winchester Street London EC2N 2DB ENGLAND Page 214 Deutsche Bank AG/London .Kaczmarczyk@db.smith@db.com Kaivokatu 10 A PO Box 650 Helsinki FIN .com Winchester House 1 Great Winchester Street London EC2N 2DB ENGLAND Carola Bardelli Italy Telephone: +39 02 8637 9708 Fax: +39 02 8637 9786 E-mail: carola.jenkins@db.com Winchester House 1 Great Winchester Street London EC2N 2DB ENGLAND Alexei Yakovitsky Russian Telecoms Telephone: +7 501 9673727 Fax: +7 501 7253770 E-mail: ayakovitsky@ufg.com 10 Povarskaya Street 121069 Moscow RUSSIA Krzysztof Kaczmarczyk Central and Eastern European Telecoms Telephone: +48 22 579 8732 Fax: +48 22 579 8701 E-mail: Krzysztof. Wireline Thematics Telephone: +44 20 754 58163 Fax: +44 20 754 51788 E-mail: matthew. Wireless Thematics Telephone: +44 20 754 75849 Fax: +44 20 754 73085 E-mail: gareth. Eurasia.wiggin@db.com Winchester House 1 Great Winchester Street London EC2N 2DB ENGLAND Vivek Khanna Nordic.6 December 2006 Telecommunications Telecom for beginners 2007 European Telecoms Research Team Guy Peddy Germany.bloxham@db.bardelli@db. Iberia.com Winchester House 1 Great Winchester Street London EC2N 2DB ENGLAND Matthew Bloxham France.peddy@db. Benelux. Armii Ludowej 26 Focus Building Warsaw 00-609 POLAND Pontus Gronlund Finnish Telecoms Telephone: +358 9 2525 2552 Fax: +358 9 2525 2585 E-mail: pontus.

please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm. Sell: Expected total return (including dividends) of -10% or worse over a 12-month period. Equity rating dispersion and banking relationships 400 300 200 100 0 45% 50% 34% 31% 5% 21% Buy Companies Covered Hold Sell Cos.6 December 2006 Telecommunications Telecom for beginners 2007 Appendix 1 Important Disclosures Additional information available upon request For disclosures pertaining to recommendations or estimates made on a security mentioned in this report.db. Notes: 1. Published research ratings may occasionally fall outside these definitions. Guy Peddy/Matthew Bloxham/Gareth Jenkins/Vivek Khanna/Carola Bardelli/Pontus Grönlund/Divij Ruparelia Equity rating key Buy: Expected total return (including dividends) of 10% or more over a 12-month period. the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report.com). in which case additional disclosure will be included in published research and on our disclosure website (http://gm. Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject issuers and the securities of those issuers.db.com. w/ Banking Relationship European Universe Deutsche Bank AG/London Page 215 . Hold: Expected total return (including dividends) between 10% and 10% over a 12-month period. 2. In addition. Newly issued research recommendations and target prices always supersede previously published research.

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