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Long live voice!
The Voice over DSL Opportunity
Michel Paulin
SVP, Network Division
November 20, 2003
LDCOM Mission and History
From infrastructure builder to full-service wholesaler to integrated telco
Mission: To be the
leading alternative fixedline telecommunications
operator in France, and
an enduring alternative to
France Telecom
Apr. 1998

to

2000
2000

Launch of the network service activities
 Bandwidth
 IP connectivity and networks
 Switched voice services
 ...

Growth by consolidation of the
alternative telecommunications retail
sector
• Kertel (January 2001)
• Fortel (Squadran) (May 2001)
• Kaptech (December 2001)
• Belgacom France (March 2002)
• FirstMark France (May 2002)
• 9 Telecom (August 2002)
• Ventelo France (October 2002)
• Siris (May 2003)
to
Strategy
• Serve the client with
innovative, high-quality
offers at the best prices
• Continue to invest to ensure
the best network, reaching
closer and closer to the end
user
• Maintain a solid financial
position through controlled,
profitable growth
Early 2001
Early 2001
to
Present
Creation of LDCOM by the Louis
Dreyfus Group
Launch of the infrastructure activity
 National and metro fiber networks
 Colocation and hosting centers
2
LDCOM is now active in all segments
# of
custs
.
Exam
ples
Network
Operators
Large
accounts
Enterprise
Residential
Hosting
200
500
70 000
1 200 000
2 000
Channel partners
include:
3
LDCOM is financially strong
Growing revenue and profitability, decreasing investment, asset-rich,
strong net cash position
(all amounts in millions of Euros )
1998
1999
3
38
2000
2001
2002
2003E
111
182
551
1,000
9
11
42
18
90
118
548
415
105
120
-
149
183
539
400
145
698
1,100
1,232
1,230
21
62
66
45
Selected elements of P&L and cash flows
Revenue
EBITDA
Capital expenditures
18
Selected elements of balance sheet (EoY)
Cash
Net PP&E (fixed assets)
Asset-backed financing
Deferred revenue
Employees
18
-
-
12
62
288
641
630
600
25
150
500
500
2,200
2,200
4
French fixed-line market is growing
slightly thanks
speed internet
Frenchto
fixedhigh
telco market
25
CAGR
(‘03-’08)
billions of Euros
20
19%
-3%
4%
15
-3%
10
5
Broadband internet
Dial-up internet
Leased lines & other data
Voice (incl. special numbers)
Subscriptions
Sources: ART, Oddo Securities
2%
0
1998
1999
2000
2001
2002 2003e 2004e 2005e 2006e 2007e 2008e
Voice is still the biggest piece, followed by subscriptions
unbundled DSL allows new entrants to attack both!
5
Competition is still not a reality
FT holds ~75% of market and ~90% of value via ownership of
access and subscriptions
New entrants
2002 French fixed
telco market: 20 B€
Mkt. share Revenue
Data & Internet
3.5 B€
20%
Voice
(incl. dial-up @ mins.)
35%
0.7
France Telecom
Margin
Value
60%
0.4
Mkt. share Revenue
80%
3.9
50%
65%
3%
0.2
70%
Value
100%
0.3
2.8
100%
2.0
7.2
100%
0.1
5.2
1.9
11.1 B€
Access & Subscriptions
5.4 B€
2.8
Margin
7.2
0.1
98%
5.2
4.8
2.4
15.2
17.6
(24%)
(12%)
(76%)
(88%)
SOURCES: ART, LDCOM ESTIMATES
Unbundled ADSL can change this situation
6
Brief history of unbundling
1998
: opening of the French telephony market to competition
Impact is immediate as prices are roughly cut in half
No significant new product development
Customers still obliged to pay monthly subscription to FT
2000
: ADSL trials and unbundling negotiations with FT and ART
2002
: extension of competition to access market
Summer 2002: start of deployment with first DSLAMs installed
19 December 2002 : LDCOM has unbundled 2,000 lines for our ISP
customers (Claranet, Nerim, Oreka, Maiah, ICT and 9 Online)
End 2002 : 50 million Euros invested
2003
March : contract signed with Club Internet
First quarter: total investment by LDCOM reaches 100 million Euros
June : Tele2 and la Poste/FirstStream select LDCOM as supplier of ADSL
September: Connecting 1,000 new lines per day
Investment to date stands at 150 million Euros
7
With 600 installed DSLAMs, LDCOM has most
aggressive deployment in France after F
LDCOM Unbundled ADSL coverage
80%
600
URAs
Residential
Enterprise
500
70%
60%
URAs
50%
400
40%
300
30%
200
20%
100
% of internet market
700
10%
0
Se
0%
No Ja
Ma Ma Ju
Se No Ja
Ma Ma Ju
n
n
llppv
v
02 - 02 -03 r -03 y- 03 03
03 - 03 -04 r -04 y- 04 04
8
Driven by unbundled ADSL,
LDCOM access business is exploding
LDCOM access lines
160,000
140,000
120,000
Unbundled ADSL
100,000
Other ADSL
80,000
Other technologies
(WLL, LL, etc.)
60,000
40,000
20,000
Dec02
Jan03
Feb03
Mar03
Apr03
May03
Jun- Jul-03 Aug03
03
Sep03
Oct03
Currently provisioning 6,000 unbundled lines per week
9
A deep fiber network is critical
to profitability in unbundled DSL
Example: LDCOM Paris region network
10
Large-scale unbundling and deep fiber network
allow high-speed internet at very low prices
ADSL subscriptions
80
80
70
60
Euros/month
Price trend
50
45.52
44.99
40
39.9
(100%
driven by
unbundlers!
)
49.9
40
32
29.99 *
30
30
20
20
28
24.95
29.99*
27
9Online
AOL France
Club-Internet
Free
Tele2
Tiscali
Wanadoo
9Online (with voice)
23
18.95
10
0
128/64
512/128
Speed in kbps (Downstream/upstream)
1024/256
* = only in areas unbundled by Free
Source: SVM
11
Voice over DSL is also now a reality
Unbundling
ATM
IP
TDM
Moving toward an all-IP architecture
12
Without VoDSL, an aggressive NATIONAL offer
WITH VoDSL, a major shift in value for price
13
VoDSL selling points





A 2nd line
Additional numbers are possible
Total unbundling will allow number portability if preferred
Two pricing alternatives
Unlimited local/national calls for 40€/month
Local/national calls at 0.01€/minute for 27€/month
Calls to other Tout9 customers are always free
Bundle price is lower than France Telecom price for
ADSL 1024 (or even 512!) alone
Allows simultaneous calls and internet access
14
Tout 9 enables future services today
Modem is triple-play ready
• Enhanced voice services
• TV broadcast
• WiFi
15