50% 40% 60% building the gigabit society

Building the gigabit society The rising pressure on telco CAPEX

European Telco research team

Justin Funnell

[email protected]

+44 207 888 0268

Jakob Bluestone

Paul Sidney

Henrik Herbst

Spec. Sales

Jan-Willem Brand

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Sweden Spain Portugal Norway Denmark Neths Switz Italy France Ireland Germany UK Belgium

Homes passed by fibre to the home (end 2015)

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, 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.

07/09/2016

Credit Suisse European Telecoms

07/09/2016 Slide 2

We are republishing this report to update FTTc/FTTH data-points on slides 29 / 95 /148-159 relating to

the Irish broadband market. These updates have no material impact on our forecasts, investment ratings

or valuation for stocks under our coverage.

FTTc has ‘worked’ Kroes Recommendation for light-touch regulation of

FTTc has stimulated investment and strong demand

High speed broadband demand now at 40%+ in

leading markets e.g. UK

This has driven a turn-around in wireline revenue,

CFROI and stock-performance

Share prices of basket of FTTc telcos (BT, DT, TI,

Proximus) are up c. 100%

In contrast, stocks building FTTH have relatively

underperformed – (although this not all down to FTTc vs FTTH economics)

Summary

Source: Credit Suisse Equity research, Credit Suisse HOLT

BT’s CFROI

FTTc has outperformed FTTH so far

Source: Credit Suisse Equity research, Datastream

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 Q313 Q413 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16

BT Retail FTTC* DT FTTC TEF FTTH KPN FTTH

Orange FTTH Talk Talk Fibre TI NGN PT FTTH

>30mbps broadband as % of broadband lines

Source: Credit Suisse Equity research


07/09/2016 Slide 3

But how long will FTTc last?

There are growing pressures on telcos to build

FTTH rather than FTTc/VDSL/G.Fast

1. Rising demand for faster speeds

2. Falling cost to build FTTH

3. Increasing private investment in FTTH

4. Increasing public investment in FTTH

= increasing investment in FTTH by challengers

5. New EC regulation to now focus on minimum

100Mbps+ speeds and incentives to build 1Gbps

6. Cable upgrading to 1Gbps+

7. Mobile targeting1Gbps+ on mm-wave 5G

Summary


Source: TalkTalk

07/09/2016 Slide 4

Demand is rising: More fibre than DSL lines in Sweden

Build costs are falling

Source: PTS, Credit Suisse Equity research

Summary


Source: Company data, Credit Suisse Equity Research

07/09/2016 Slide 5

FTTc has been working fine e.g. at BT, DT, KPN, Proximus

But FTTH is starting to pay-off for Telefonica and Orange

Whilst being over-built by FTTH is clearly a problem – TDC, PT, Telenor and Telia,

5.2%4.3% 4.1%

1.4%

0.4% 0.3%0.1%

0.0% -0.2%

-1.2% -1.4%-1.9%

-3.2%

-4.1%-5.0%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

TEF PROX OTE BT Average DT ORA TELIA KPN SCOM TA TNOR PT TI TDC

4Q15 1Q16 2Q16

Incumbent wireline revenue growth y/y

The pressure to build FTTH is growing…

…. but gradually

Challenger build of FTTH is often in infancy

Cable tends to maximise ARPU

mm-wave 5G is still some years away and not

economic outside dense metro areas

Still some big VDSL gains to come from

vectoring and deepening fibre

The regulatory debate has only just started

EC proposals look complex, and create

uncertainty until finished (2018)

VDSL-style solutions are still much quicker

to build

Building our FTTH could take 15-20 years in

UK and Germany

Suggesting a pragmatic approach continuing at

the national level

Leaving the political pressure to spend more on

fibre outside VDSL areas (the last 10-20%)

Summary


07/09/2016 Slide 6

Source: Credit Suisse Equity Research

Spain

Portugal

DenmarkNorway

Sweden

SwitzNeths

FranceItaly

IrelandGermany

UK

FTTH net adds in W.Europe

For the Telco stocks:

The pressure on telcos to build FTTH is growing

Most telcos are likely to prefer a gradual approach,

deepening fibre in combination with vectoring

– Extending from this to FTTH on a risk/reward basis

This will maintain pressure on CAPEX

– e.g. at DT, BT, TI and PROX,

– And impact ROCE: FTTH IRRs << FTTc IRRs

And runs the risk of ‘leaving it too late’ (eg TNOR)

Whilst CAPEX may fall at telcos that have built

FTTH/cable e.g. TEF, Telia, TDC

So whilst FTTc Telcos have generally outperformed

this may reverse at some point

For other telecoms segments

New fibre alt-nets will generate the best returns,

with projects likely to meet penetration targets – Most are privately owned currently

Utility-owned fibre netcos of increasing value

ULL - Unbundlers will find life harder, as

regulation shifts to reward co-investment

Cable - FTTH is a threat to pricing power, but the

risk is long term and varies by market – and can be mitigated by participating in FTTH roll-out

Summary


07/09/2016 Slide 7


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%


Homes passed by FTTH (end 2015)

EV/EBITDA if built FTTH to 75% coverage


07/09/2016

Building the Gigabit Society: The rising pressure on telco CAPEX

Slide 8



07/09/2016 Slide 9

Telco investment

in high speed

broadband

Challengers

building

FTTH Cable

1Gbps via

Docsis3.1

5G

mm-wave

1Gbps

Rising

demand for

speed

Falling

Cost to

Build FTTH

Increasing

public investment

In broadband

Private

investment in

infrastructure

Regulation

to target 100Mbps+ (?)

The pressure on Telcos to build high speed broadband is rising

Pressure on Telcos to build high speed broadband is rising

FTTH net adds accelerating – 1m in Q4 15 alone

Fibre now 50% of broadband lines in Sweden

Telenor getting 55% take-up in its FTTH build in Norway

Telia now getting >50% take-up in its FTTH build in Sweden – Telia Sweden COO citing ‘astonishing’ levels of demand now

– Even with customers paying SEK20,000 to connect

Start-ups getting the 30-40% minimum uptake needed for new build in markets such

as the UK (Hyperoptic, Gigaclear) and Germany (KKR)

VirginMedia getting 25%+ uptake after 9 months on Project Lightning

1. Increasing demand for high speed broadband


Source: PTS, Credit Suisse Equity research

07/09/2016 Slide 10

Broadband lines in Sweden FTTH net adds in W.Europe


>30Mbps as % of broadband lines



07/09/2016 Slide 11

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 2Q 14 3Q 14 4Q 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16

Austria Belgium Denmark Finland FranceGermany Norway Portugal Spain SwedenUK Netherlands Italy

FTTH demand approaching critical mass Achieving break-even penetration rates of 40%+ looks feasible within a 5 year period

Adoption rates can be particularly high where current broadband speeds are low


Source: Credit Suisse estimates. Note no forecast for Ireland as FTTH market is relatively new

07/09/2016 Slide 12

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%


Homes passed by FTTH % Take-up rate (FTTH subs relative to homes passed)

% of homes passed by FTTH and % of FTTH subs relative to homes passed

Few apps really require more than 30Mbps

currently – Streaming is replacing downloading

So download times are less relevant now

– For streaming UHD, Netflix recommends 25Mbps

Multi-device households need <100Mbps currently

Reasons for rising demand


07/09/2016 Slide 13

But FTTH demand is rising anyway. Reasons for demand cited include: – Customer seeing fibre as an investment

Its equivalent to ‘home improvement’ – increases the home’s sale value

People want to future-proof their connectivity.

– Internet access is becoming vital – so people want the best

– Viral effects – FTTH becoming the norm e.g. in Sweden and Norway

– High GDP per capita in some cases, but not all (Romania, Portugal)

Other possible reasons: – xDSL speeds tend to be 50% of those promised, and less in peak periods

– Other weaknesses in the xDSL customer experience (modem, WiFi signal).

– Some countries are providing households a subsidy to connect (e.g. rural areas)

– Working from home – rising demand for 100% reliability and faster upload speeds

– CableCo’s focus on ARPU allows FTTH to challenge on price as well as speed

0

5

10

15

20

25

30

SD HD UHD

Netflix view of broadband speed needed to stream different picture quality (Mbps)

Interest in fibre slowly building (Google trends, since 2004)


Source: Google trends. Search interest in local word for “fibre” (e.g. “Fiber” in Sweden and Norway, Super Fibra in Italy, Glasfaser in Germany)

07/09/2016 Slide 14

UK

Germany

Italy

Sweden

Spain

Norway


07/09/2016 Slide 15

SE

ES

NO

DK PT

NL

CH

IT

FR DE

UK

R² = 0.1038

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000

Take-up rate for FTTH across country

(2015)

GDP per capita (€)

GDP is not a barrier to FTTH adoption in W.Europe


Penetration may lag somewhat in lower GDP markets,

but should be able to be offset by fewer planning constraints and consumer subsidies

FTTH is now at 25% coverage (W.Europe) and growing


Source: Credit Suisse equity research

07/09/2016 Slide 16

2. Falling cost to build FTTH


Source : atpableplough

07/09/2016 Slide 17

Mole ploughing in action

Micro-trenching in action

Source : TalkTalk

Sharing of physical infrastructure

Source : BT.co.uk

Romania in top ten global markets for peak speeds


Source: Akamai ‘State of the Internet’ Q1 2016 white paper Source: Pizarros (Creative Commons)

07/09/2016 Slide 18

Average peak download speed

Fibre network in Bucharest

Civil engineering has traditionally been 70-80% of the cost of new-build

Planning controls make a big difference – Horizontal

Digging or aerial?

Digging: Ducts vs micro-trenches

– Verticals

External (Romania, Spain) or internal (Italy, Germany)

Self-install? Enabling ‘self-digging’ has helped take-up rates in Norway

– Without any planning and access restrictions, FTTH build would be much cheaper and probably

already built across most of Europe

EU has regulated to lower build costs – EU Directive 2014/61/EU on lowering broadband build costs

Encourages sharing of existing and new infrastructure, including telcos and utilities (“obligation to meet reasonable

requests for access to deploy high speed broadband”

Right to negotiated co-ordination of civil works

Faster granting of build permits.

Easier access in new buildings

– These are incremental improvements to build costs

But planning is ultimately a national and local issue and currently varies significantly

Planning


07/09/2016 Slide 19

Analysys Mason calculated £1500-4000 FTTH cost per home

passed with mole-trenching in rural areas – £1000-3000 if use BT PIA offer as well

– They concluded funding FTTH in rural areas could be challenging

But if the demand is there, customers become willing to improve

economics by committing to the project and paying an upfront fee – Swedish consumers paying SEK20,000 for fibre to be connected

– Gigaclear charging £100 connection fee + £125 installation fee

Rising demand improves build cost economics


07/09/2016 Slide 20

Self-build PIA +

geotype 6b 7b 6b 7b

Cost per home passed (£) 1570 2400 1055 1710

Cost per home connected (£) 2840 3970 1910 2820

Payback periods >10 yrs >10 yrs >10 yrs >10 yrs

IRR <<10% <<10% <10% <10%

Source: Analysis Mason, 2012

Cost per home passed in rural areas (geotypes 6 and 7)

“Sourcing adequate amounts of capital for NGA infrastructure in

final third [i.e. rural] areas could prove to be challenging” Analysys Mason, 2012

Source : Gigacler

Fibre net-cos are potentially attractive, high multiple infra-assets – Low churn, rising long term demand, “future proof” infrastructure

Similar network assets trade on 15-20x EV/EBITDA (eg tower cos)

Such FTTH assets are also of strategic value to competing telcos over time

Private investment is re-emerging, 20 years after the “alt-net” boom-bust of the

1990s – KKR 60% funding Deutsche Glasfaser, Warburg Pincus funding Inexio

– CityFibre listed. Gigaclear raising funds from the likes of Woodford Invt. Fund.

– CIF funding FTTH build in Neths

– Entrepreneurs backing challengers in some rural areas in France

3. Private investment in fibre networks is re-emerging


Source: Thomson Reuters, CS research

07/09/2016 Slide 21

-0.5

0.5

1.5

2.5

3.5

4.5

5.5

6.5

7.5

10 y

ear

gove

rnm

ent b

ond

yiel

d (%

)

France Germany Italy Spain UK

Falling bond yields have driven up interest in infrastructure assets



07/09/2016 Slide 22

Netco returns assuming eu20/m wholesale ARPU

Netco (charges wholesale price for ISPs to sell its passive infrastructure)

Penetration (customers relative to homes passed) 0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

Netco ARPU (eu) per month 20 20 20 20 20 20 20 20 20 20 20

Gross margin 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Maintenance cost pa (relative to build cost) 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

Leverage 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60%

Pre tax cost of debt 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%

Tax rate 30% 30% 30% 30% 30% 30% 30% 30% 30% 30% 30%

Post-tax cashflow per home passed per annum annum (eu)

Net* cost per home passed (eu) 250 -9 8 25 41 58 75 92 109 125 142 159

500 -18 -1 16 33 49 66 83 100 117 133 150

750 -27 -10 7 24 40 57 74 91 108 124 141

1000 -36 -19 -2 15 32 48 65 82 99 116 132

1500 -54 -37 -20 -3 14 30 47 64 81 98 114

2000 -71 -55 -38 -21 -4 13 29 46 63 80 97

2500 -89 -72 -56 -39 -22 -5 12 28 45 62 79

3000 -107 -90 -74 -57 -40 -23 -6 11 27 44 61

ROE post tax

Net* cost per home passed (eu) 250 <0 7.9% 24.7% 41.5% 58.3% 75.1% 91.9% 108.7% 125.5% 142.3% 159.1%

500 <0 <0 7.9% 16.3% 24.7% 33.1% 41.5% 49.9% 58.3% 66.7% 75.1%

750 <0 <0 2.3% 7.9% 13.5% 19.1% 24.7% 30.3% 35.9% 41.5% 47.1%

1000 <0 <0 <0 3.7% 7.9% 12.1% 16.3% 20.5% 24.7% 28.9% 33.1%

1500 <0 <0 <0 <0 2.3% 5.1% 7.9% 10.7% 13.5% 16.3% 19.1%

2000 <0 <0 <0 <0 <0 1.6% 3.7% 5.8% 7.9% 10.0% 12.1%

2500 <0 <0 <0 <0 <0 <0 1.2% 2.8% 4.5% 6.2% 7.9%

ROE of 8% at 40% demand and eu1000 per home passed

Low risk as churn likely to be low and infrastructure is ‘future proof’

Returns in first 5-10 years also boosted by low maintenance costs and tax benefits

Telcos are also now investing in fibre – Vodafone is investing in FTTH in Portugal, Ireland (with ESB) and Italy (with

Enel) and trialling FTTH build in UK (using BT ducts and poles)

– Liberty Global UK new build: 4m homes for £3bn over 5 years

And continuing to examine other markets

Other telcos are also now investing in fibre


Source: Vodafone .it website Source: Virgin Media .co.uk website

07/09/2016 Slide 23

Vodafone Italy – Enel Super Fibra Virgin Media – Cable my street !

Local municipalities have been funding FTTH for many years in some markets – Sweden, Norway, Denmark, some German cities

– Sweden is a notable success: the first country in Europe to develop a broadband policy (1999) and

now has the widest FTTH network roll-out and highest level of take-up

Public funding is now expanding elsewhere in Europe, particularly where NGA

development is slow and build costs appear to be high

4. Rising public investment



07/09/2016 Slide 24

FTTH

coverage

(end 2015)

Public

construction

Netwoork

construction

subsidy

Public

finance

Vouchers Tax credits Note

Sweden 83% ✔ ✔ Public utility projects

Spain 82% All privately funded and built

Portugal 65% All privately funded and built

Norway 58% ✔ Public utility projects

Denmark 55% ✔ Public utility projects

Neths 33% All privately funded and built

Switz 28% ✔ JV between Swisscom (60%) and local utilities (40%)

Italy 25% ✔ ✔ ✔ Public utility (Metroweb) and now public funding for private build

France* 20% ✔ ✔ ✔ Public support for local projects in non-dense

Ireland 10% ✔ Public funding for private build

Germany 5% ✔ City networks

UK 1% Public funding focused on 10Mbps currently

Belgium 0%

Summary of public investment initiatives

More EU countries are developing national bband plans


Source: CS European equity research

07/09/2016 Slide 25

Cluster Description Cities Popul-

ation

No of

buildings

Pops Target Expected

investment

cost**

Coverage

today

Government support

A Top cities 15 15% 0.57 9.4 100Mbps eu1bn 30Mbps FTTc access to debt and tax relief

B Conditions don’t guarantee acceptable returns 1120 45% 4.50 28.2 100Mbps eu6.1bn 30Mbps FTTc access to debt, tax relief and some limited grants

C Marginal areas of market failure* 2650 25% 3.50 15.7 100Mbps eu4.2bn ADSL access to debt, tax relief and bigger grants

D Areas of widespread market failure*. Especially in the south of Italy 4300 15% 2.30 9.4 100Mbps eu1bn ADSL eu12.3m of public subsidy required

* market failure means failure of market to build 100Mbps by 2020

** based on Italian government broadband plan

Italy national broadband plan

Ireland national broadband plan UK 10Mbps USO

EFSI Facility aims to mobilise eu315bn investment across the EU

97 projects approved to date, providing eu13.5bn financing

192 agreements to fund start-ups and small enterprises by eu6.8bn

EC estimates eu116bn investment triggered, 12% in digital projects

EIB has recently funded Enel Open Fibre in Italy and also Hyperoptic in UK

EU ‘Junker’ plan eu315bn available for infrastructure


Source: EC, The Investment Plan for Europe – State of Play: Digital Sector, August2 016

07/09/2016 Slide 26

EU investments in Digital Sector to date

Public funded networks are also likely to benefit from asymmetric regulation – no

SMP obligation, easier access to public physical infrastructure, easier permitting,

acceptance of low ROE

EC investments are meant by law to avoid crowding out – but EC applied only a 3 –

year test in case of Italy– ie subsidy ok if no private entity was planning to build FTTH

in the area concerned within the next 3 years – This is too short a horizon to avoid significant crowding-out

– FTTH has taken 15 years to build in Nordics and is still not complete

The economics of a second FTTH network are much more challenging, due to scale

economics and low churn

This creates an incentive for the telco to ramp FTTH plans and a land-grab – this is

the state of play in Sweden and Italy currently

But once the publicly funded network is actually being rolled-out, it is likely to crowd

out competing networks, including the incumbent telcos - this is negative for the

telco and its re-sellers too (as the public-funded network will have fewer access

obligations)

(worth remembering why European copper-network telcos ended up being owned

by the state anyway)

Publicly funded projects likely to benefit from asymmetry


07/09/2016 Slide 27

In the past, FTTH build by challengers has been limited to utilities and

municipalities in a few markets – Norway since 2009, Sweden since 1995, Denmark by 2005

– Some cities in Germany. Metroweb in Milan.

– Co-investment with Swisscom

FTTH build by challengers is now accelerating – More cities and utilities are getting involved

E.g. Enel Open Fibre, Towns in France, City of York, ESB Ireland

– New entrepreneurial FTTH ‘alt-nets’ are emerging

UK – Cityfibre, Gigaclear, Hyperoptic

Germany – Deutsche Glasfaser, Inexio

Neths – CIF (institutional-investor backed infrastructure fund)

– LibertyGlobal is investing in new build – e.g. UK (5m), Germany (1-2m)

– Vodafone is co-investing – e.g ESB Ireland, EOF Italy

4. As a result of (1) to (3): Challengers are building FTTH and putting increasing pressure on the telco to do the same


07/09/2016 Slide 28

An increasing number of companies are building FTTH


07/09/2016 Slide 29

Market Company Type of Company FTTH Build ('000 of HH Passed) Comment

Current Target

(estimate)

Denmark TDC Incumbent telco 160 Not announced Aims to deploy FTTH primarily in low-speed DSL areas and white spots

Denmark SE Utility challenger 235 Not announced Formerly a member of WAOO, now operates a cable network independently

Denmark WAOO Utility challenger 1,100 Not announced Coalition of 7 Danish utilities

France Orange Incumbent telco 5,061 14,000 by 2020 Leading FTTH deployment in France

France SFR National challenger 500 Not announced Operates a much larger high-speed cable network as well

France Iliad National challenger 2,500 9,000 by 2018 French fibre regulation allows it to co-invest/co-finance in FTTH w/ Orange

France Bouygues National challenger 1,500 Not announced French fibre regulation allows it to co-invest/co-finance in FTTH w/ Orange

Germany Deutsche Telekom Incumbent telco 500 Not announced No public plans of further build post-2015

Germany NetCologne Local challenger 282 Not announced Deploys FTTH and other high-speed BB in Cologne and Aachen

Germany M-Net Local challenger 400 Not announced Deploys FTTH in central Munich

Germany wilhelm.tel Local challenger 460 Not announced Deploys FTTH in areas around Hamburg

Germany Deutsche Glasfaser Local challenger 100 600 by 2018 KKR-backed rural FTTH operator

Germany EWETel Local challenger 68 Not announced FTTH provider based in Lower Saxony

Ireland Eircom Incumbent telco 28 1.9m homes with a mix of FTTc and FTTH

Ireland SIRO Utility challenger 125 500 by 2018 JV between Vodafone and utility ESB

Ireland Magnet Networks Local challenger 15 Not announced Small private operator

Ireland Enet Infrastructure operator N/A N/A Creates carrier-neutral open-access networks

Italy Telecom Italia Incumbent telco 564 5,000 by 2020 Launched JV "FibreFlash" with Fastweb in 2016 to cover 3m homes w/ FTTH

Italy Fastweb National challenger <2,000 5,000 by 2020 Launched JV "FibreFlash" with Telecom Italia in 2016 to cover 3m homes w/ FTTH

Italy Enel Open Fibre Utility challenger N/A 9,500 by 2021 Backed by utility Enel and service providers Wind, Vodafone and Tiscali

Netherlands Reggefiber Infrastructure operator 2,160 Not announced Owned by KPN

Netherlands CIF Infrastructure operator 301 Not announced Infrastructure fund

Norway Telenor Incumbent telco 190 Not announced Aims to deploy FTTH primarily in low-speed DSL areas and white spots

Norway Altibox Utility challenger 509 Not announced Coalition of 35 Norweigan utilities

Portugal Portugal Telecom Incumbent telco 2,500 4,000 by 2020 Leading FTTH deployment in Portugal

Portugal Vodafone National challenger 2,200 2,750 by 2016

Portugal NOS National challenger 358 Not announced Deploys FTTH in white spots of its much larger high-speed cable network

Spain Telefonica/Movistar Incumbent telco 13,800 17,000 by 2020 Leading FTTH deployment in Spain

Spain Orange/Jazztel National challenger 8,400 14,000 by 2020 Sold off a portion of its FTTH network to acquire Jazztel in 2015

Spain Vodafone Portugal National challenger 1,100 1,500 by 2017 Also operates high-speed cable network through Ono

Spain MasMovil National challenger 750 2,250 by 2018 Acquired part of Orange's FTTH in 2015

Sweden Telia Incumbent telco 1,530 1,900 by 2018 Acquired FTTH operators Zitius and Riksnet in 2013-14

Sweden Telenor National challenger 1,500 2000 in "next few years"

Sweden IP-Only National challenger N/A Not announced Private Equity owned infrastructure company

Sweden Bahnhof National challenger N/A N/A Service-provider only

Sweden Bredband2 National challenger N/A N/A Service-provider only Source: Credit Suisse Equity research

Competitor FTTH build slowly accelerating



07/09/2016 Slide 30

Challenger FTTH build would be typically c. 33% by 2021 based on our estimates


Source: Credit Suisse Equity Research estimates

07/09/2016 Slide 31

EC to publish draft Framework Review on

21 September

Early draft document suggests EC will

shift to focus on NGA speeds of at least

100Mbps

New target of 100% coverage of 100

Mbps+ by 2025

….gigabit speeds to schools, business

parks and other ‘socio-economic targets’ – vs Neelie Kroes target of 100% 30Mbps+

coverage and 50% uptake of 100Mbps by 2020

EC also wants all urban areas to have 5G

coverage by 2025

The EC estimates 49% 100Mbps

coverage today and eu155bn of new

investment needed to reach its 2025 goals

5. EU regulation to target 100Mbps+


Source: Credit Suisse research

07/09/2016 Slide 32

Proposed change in wholesale access regime Based on draft documents and opinions seen to date.



07/09/2016 Slide 33

SMP No

Yes

Unregulated e.g.cable

>30Mbps

Yes

No Cost-based regulation

3 tests

-competitive

constraint -Equivalence -economic replicability

Yes

Access obligation But not cost regulated

Current regime - simplified

SMP

Very high speed

broadband*?

Yes

No

Duct access +

Wholesale only, or

Co-investment

Non-replicable assets?

Yes

No access regulation

No Unregulated

Yes

No

Possible proposed regime - simplified

* not clear what this speed

threshold in Mbps will be

FTTc/VDSL

Current EU rules allows retail-minus

regulation of >30Mbps speeds (e.g. FTTc,

VDSL) under three conditions – Competitive constraint (e.g. ULL, cable)

– Equivalence of input

– Margin squeeze test

Current draft of new EU framework appear

to keep this in place – NGA Recommendation will become primary EU

Telecoms law

– But the detail remains unclear

Does the NGA definition move to 30mbps to

something faster? 100Mbps?

– And proposals await input from Parliament as well as

Member States

Regulation of FTTH vs FTTc/VDSL


07/09/2016 Slide 34

FTTH Proposed new rules suggest no access obligation

for “very high speed broadband” networks under 2

conditions

– Duct access and either

Wholesale-only business model, or

Co-investment

We believe no integrated telco would voluntarily

elect to choose wholesale-only model as too risky – Hard to quantify impact on retail business being spun-off

– Benefits of less regulation dependent on demand

Type of co-investment contemplated not yet

clear – Favourable for telco investment: Spain – quid pro quo

– Favourable for telco investment: Portugal – duct

sharing

– Unfavourable for telco investment: France – co-invest

or rent (i.e. no need for OLO to risk-share)

Key issue: On what terms can a telco turn-down

co-investors and block wholesale access in FTTH?

The current NGA regulation (margin

squeeze test) may be a better deal for the

telco to invest in FTTH

EC proposals are the biggest review of

EU telecoms law for 10 years

EC proposes new law but subject to

approval of both – European Council (Member States)

– European Parliament

– And with input from BEREC

This could take 18 months+ to complete

Last major EC initiative (Neelie Kroes) in

telcos was watered down

The new EU proposals will be subject to

revision and create uncertainty near term – But ultimately the EC, Member States and

Parliament are likely to find agreement about

stimulating investment in high speed broadband

Member States are also likely to continue

to pursue their own fibre strategies in the

mean time

Regulatory process is likely to drag on



07/09/2016 Slide 35

BEREC European

Commission

European

Parliament

Rapporteurs

Oettinger – DG DigEc

Vestager – DG Comp

Ansip Vice Pres

European

Council

President

Co-decision making process

28 Member States

28 NRAs

Wholesale regulation of netco and alternatives is key



07/09/2016 Slide 36

* i.e. assuming eu1000 cost per hp, 50% take-up, 60% leverage, maintenance cost of 3% pa

FTTH economics is highly dependent on pricing E.g. for a market entrant the FTTH network will need to be able to command

eu20/m wholesale price to offer sufficient potential returns to be funded

Lowering <100Mbps services to eu10/m cost-based pricing would undermine this

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

0 5 10 15 20 25 30

ROE at different Netco wholesale prices *

ROE

Netco wholesale access price per month (eu)

ULL BSA VULA Sub-ULL

The biggest issue for Telco valuations is how current 30Mbps+ NGA returns will be

treated post 2020 ie how long will light-touch regulation of 30-100Mbps last?

A lot of Telco market cap hangs on regulatory minutiae



07/09/2016 Slide 37

30Mbps

2020 100Mbps

2025

10

20

30

ULL

VULA

BSA

Higher returns for investment

in 30Mbps+ (e.g. FTTc)

were sanctioned by Neelie Kroes

Typic

al w

hole

sale

price

fro

m in

cum

bent te

lco in

euro

per

month

Lowering <100Mbps prices would impact >100Mbps prices


07/09/2016 Slide 38

30Mbps

2020 100Mbps

2025

10

20

30

wholesale price (ex VAT)

retail price (ex VAT)

wholesale price

Price

in e

uro

per m

onth

Regulating sub-100mbps NGA on a cost basis would lower sub-100Mbps pricing This would lower

what networks can charge for 100Mbps+ and undermine FTTH investment incentives

Lower

<100Mbps retail

prices would

undermine retail

prices for

>100Mbps

Old retail price

New retail price

New wholesale price*

Old wholesale price s

*unregulated wholesale

price for >100Mbps


The utility of extra speed diminishes above a threshold, e.g 50Mbps today – This threshold will move higher (to the right), but only gradually over decades

– WIK’s view that 30% of users “will want” 1Gbps by 2025 is debatable. For most users for some time to

come, 50-100Mbps will be an alternative to 1Gbps speeds

So sub-100 Mbps pricing will impact pricing of 1Gbps as well – This anchoring effect is generic to transport economics (e.g. toll-roads vs A roads, postage 1st class

vs 2nd class, economy vs business class etc)

The fixed line market operates with a de facto pricing ladder, with all high speed

prices impacted by the price of slower speed alternatives

Pricing for 1Gbps also impacted by <100Mbps prices



07/09/2016 Slide 39

30Mbps 100Mbps 1Gbps

Euros

per month

Utility = demand

Diminishing marginal utility

6. Cable to upgrade to 1Gbps+ through Docsis3.1


Source: Comcast media release

07/09/2016 Slide 40

Cable can upgrade to 1Gbps+ speeds, using LTE technology (OFDMA)

Comcast announced world’s first Docsis3.1 launch in Feb 2016

European cable operators to upgrade in coming years


Source: Telegeography

07/09/2016 Slide 41


Cable operator Docsis3.1 status Details Fastest current offer

(download speed

advertised)

FTTH coverage

ComHem Will start deployment by the end of 2016 Planning to offer 9Gbps 500 Mbps 83%

KDG (Vodafone) 400 Mbps 5%

UnityMedia (LBTY) Plans first commercial launch in 2018 400 Mbps 5%

YouSee (TDC) Currently rolling out 300 Mbps 54%

Ono (Vodafone) Started deployment throughout Spain 300 Mbps 82%

NOS 200 Mbps 45%

Ziggo (LBTY) 300 Mbps 33%

Virgin Media (LBTY) 200 Mbps 1%

Telenet (LBTY) Started network upgrade in mid 2014 Will invest eu500m over 2014-9 200 Mbps 1%

Current timetable for Docsis3.1 roll-out in Europe

ITU targeting 1Gbps average

speeds on 5G

Partly by using higher (mm-wave)

frequencies

Build likely to be after 2020 – 5G spectrum decided in 2019

Build will start in most dense

areas first

Wider build is likely in time

7. 5G will increase wireless speeds, in time


Source: Credit Suisse Equity Research : 5G – Vison vs Reality

07/09/2016 Slide 42

ITU 5G targets

Current and future potential spectrum bands

Source: ITU

Elisa recently announced they had successfully tested 1.9 Gbps in a 4G cell

using Huawei equipment, a new world speed record

4G technologies are also improving



07/09/2016 Slide 43

Spectrum refarming, carrier-aggregation and higher-rate MiMo all

increase 4G speeds significantly



07/09/2016 Slide 44

Telco investment

in high speed

broadband

Challengers

building

FTTH Cable

1Gbps via

Docsis3.1

5G

mm-wave

1Gbps

Rising

demand for

speed

Falling

Cost to

Build FTTH

Increasing

public investment

In broadband

Private

investment in

infrastructure

Regulation

to target 100Mbps+ (?)

The pressure on Telcos to build high speed broadband is rising

Pressure on Telcos to build high speed broadband is rising

FTTc telcos having to react


Source: Telecom Italia Q2 2016 results presentation

07/09/2016 Slide 45

e.g. TI recently announced faster investment in FTTH, and new cooperation with Fastweb


07/09/2016

Telcos are likely to respond gradually

Slide 46

Regulation is shifting, complex and wont be clear for a while



07/09/2016 Slide 47

SMP No

Yes

Unregulated e.g.cable

>XXMbps*

Yes

No Cost-based regulation

3 tests

-competitive

constraint -Equivalence -replicability

Yes

Access obligation But not cost regulated

Current regime - simplified

SMP

Very high speed

broadband*?

Yes

No

Duct access +

Wholesale only, or

Co-investment

Non-replicable assets?

Yes

No access regulation

No Unregulated

Yes

No

Possible proposed regime - simplified

* not clear where these

speed threshold will be

FTTc has been the much quicker way to build NGA France (FTTH) started NGA build first but is now last



07/09/2016 Slide 48

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Proximus Swisscom(Q4 15)

Telefonica BT KPN (Q415)

TDC DT Telenor TelecomItalia

Telia Orange

FTTc coverage FTTH coverage Coax coverage

It would take 15-20 years for BT and DT to build FTTH



07/09/2016 Slide 49

Spain

Portugal

Denmark Norway

Sweden

Switz Neths

France Italy

Ireland Germany

UK

Build is fast (10pp of homes per annum) where local loop ducts already exist (Spain, Portugal)

Roughly half this speed (5pp per annum) where utilities are building the fibre (Nordics)

Even slower where incumbent is digging new ducts – Orange built 20% in 8 years

Also slow where build is driven by newcos –e.g. Italy and Germany

DT local loop is buried so build would be very slow. BT has some poles but not everywhere.

Years taken to reach current FTTH coverage - averaged

Peak build rates



07/09/2016 Slide 50

Spain has peaked at c. 30pp in 12 months (local ducts plus easy vertical build)

Sweden and Norway adding 10pp per annum now that incumbents are also building FTTH

Build in France has accelerated to >5pp per annum now

Spain

Portugal

Denmark

Switz

Norway

Sweden

Italy

Germany

France Ireland

UK

Neths

Years taken to reach current FTTH coverage - not averaged

Vectoring and pair bonding present a viable interim solution


Source: ispreview

07/09/2016 Slide 51

DT strategy


Source: DT investor presentation , 2012

07/09/2016 Slide 52

Modular build is best for speed of delivery and risk/reward Gradually deepening fibre allows the network to grow with demand


07/09/2016 Slide 53

30Mbps 100Mbps 1Gbps

Euros 2016 demand

Fibre to the…. …Central office

…Street cabinet

…Last Node*

…Home

2030 demand

Cost to build

* last point of loop aggregation in the network e.g. the “distribution point” in BT’s case

To get the average home above 100Mbps the telco has to increasingly build fibre beyond the cabinet (on average)

500Mbps


Leaves a big opportunity for others to cherry-pick the market – UK: VirginMedia, Gigaclear, CityFibre, Hyperoptic….

– Germany: Deutsche Glassfibre, Ixione, city networks….

– Utilities and unbundlers may coalesce, as seen in Italy and Ireland

Demand for FTTH is likely to reach a tipping point i.e. be non-linear – There is a risk to the telco of mis-judging how quickly demand grows

– e.g. Telenor – now having to build FTTH to catch-up with utilities

National government support can flip quite quickly – e.g. Italy – Renzi’s strong support for Enel’s fibre build

– e.g. Australia – which funded a national fibre roll-out

– UK focus is on universal broadband coverage and Openreach debate

– Germany supportive of DT VDSL/vectoring build currently

– Risk that politicians in FTTc/Gfast markets decide one day that they are getting ‘left behind’

FTTc Telcos need to prepare for a dynamic environment where at some point in the next 10

years, FTTH demand is likely to rise to a point where FTTH IRRs work and/or politicians are

demanding it is built.

This suggests FTTc telcos deepening fibre faster – e.g. For BT : building FTT-distribution point sooner

– e.g. For DT : building fibre in the areas not addressed by vectoring

This suggests ongoing pressure on CAPEX for FTTc telcos in medium term

This gradual approach will still leave big opportunities for fibre alt-nets – which will probably be

the best place to invest (though most are privately owned currently)

This does however mean a risk of ‘leaving it too late’


07/09/2016 Slide 54

The original alt-nets boomed, then bust – The Death of distance (and therefore Worldcom, Energis,

KPN Qwest etc)

– Over-exuberance, over-investment, over-leverage

TMT bust led to telco credit crunch

– 2002 EC regulation of incumbent local loop undermined

rewards to all network owners and prospective investors

Rewards went to unbundlers

The new alt-net opportunity looks more solid – Rising demand for high speed broadband

– Governments now more focused on network investment

and infrastructure investment

This creates a trade-off for regulators when they

consider cost-based regulation of incumbent

– Incumbent telcos likely to react to rising demand

gradually

– Low yields suggest high valuation of network assets

– Netco assets also of increasing strategic value

Likely to be bought by telcos in the end

– Current fibre start-ups offer good risk/reward

– Significant unrealised value in municipally owned fibre

networks and ducting

Main long-term risk is regulation undermining

wholesale prices through incumbent regulation

A new alt-net opportunity


Source: Inexio, June 2016

07/09/2016 Slide 55

0

200

400

600

800

1000

1200

1400

1600

30/12/1994 30/12/1998 30/12/2002 30/12/2006 30/12/2010 30/12/2014

SXKP, net return index (net dividends reinvested)

SXKP returns

Source: Datastream, Credit Suisse research


07/09/2016 56

Implications for telco stocks

FTTc Telco CAPEX won’t fall after 2018



07/09/2016 Slide 57

Most telcos haven’t yet guided beyond the

typical 2015-2018 FTTc build plan

But the sector bull-case has built-in a hope of

CAPEX easing after FTTc and a payback

period. This looks unlikely

Cable CAPEX expectations have already

gone through a process of upward revision

Bull case

More realistic scenario Peak of FTTc build

Incu

mbent w

irelin

e C

AP

EX

/sale

s

DT CAPEX guidance CMD2015

TI old CAPEX guidance Feb-2016

Source: DT

Source: TI

FTTc has helped turn-around sector returns


Source: Credit Suisse HOLT

07/09/2016 Slide 58

European incumbent telecoms sector returns (CFROI) – 1995 to 2015

BT returns (CFROI) – 1995 to 2015

Even with favourable regulation of 2020 NGA continuing, ROCE trends would worsen as telcos invest in >100 Mbps



07/09/2016 Slide 59

Returns on NGA investment, assuming no change in wholesale or retail market share

FTTc

Demand 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cost per home passed (eu) [1] 100 100 100 100 100 100 100 100 100 100 100

Incremental monthly wholesale price (eu ex VAT) [2] 7 7 7 7 7 7 7 7 7 7 7

Incremental monthly operating costs (eu) 0 0 0 0 0 0 0 0 0 0 0

Tax rate 30% 30% 30% 30% 30% 30% 30% 30% 30% 30% 30%

Post tax ROCE 0.0% 5.9% 11.8% 17.6% 23.5% 29.4% 35.3% 41.2% 47.0% 52.9% 58.8%

FTTH

Demand 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


Incremental wholesale price (eu ex VAT) [3] 10 10 10 10 10 10 10 10 10 10 10

Incremental monthly operating costs (eu) [4] -3 -3 -3 -3 -3 -3 -3 -3 -3 -3 -3

Tax rate 30% 30% 30% 30% 30% 30% 30% 30% 30% 30% 30%

Post tax ROCE 0.0% 1.5% 2.9% 4.4% 5.8% 7.3% 8.7% 10.2% 11.6% 13.1% 14.6%

G.Fast/FTTnode

Demand 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


Incremental wholesale price (eu ex VAT) [5] 3 3 3 3 3 3 3 3 3 3 3

Incremental monthly operating costs (eu) 0 0 0 0 0 0 0 0 0 0 0

Tax rate 30% 30% 30% 30% 30% 30% 30% 30% 30% 30% 30%

Post tax ROCE 0.0% 1.7% 3.4% 5.0% 6.7% 8.4% 10.1% 11.8% 13.4% 15.1% 16.8%

[1] net of up-front connection fees charged to end-customer

[2] relative to status quo (ie DSL-ULL rate)

[3] relative to status quo (i.e VDSL rate)

[4] we assume some network opex savings from new FTTH vs legacy copper

[5] relative to status quo (i.e. VDSL rate)

So as well as the extra CAPEX, the sector multiple might also de-rate

FTTH build today



07/09/2016 Slide 60

Homes passed by FTTH, end 2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%


Risk to telcos from FTTH challengers today Nordics most exposed, though their cable networks reduce the risk at TDC and TNOR

Telefonica, Portugal Tel, Swisscom and KPN are in a strong position

Low risk to DT and BT currently due to low challenger build

Source: Credit Suisse Equity Research, Note: challenger fibre is the average of challengers in the market


07/09/2016 Slide 61

Risk to telcos from FTTH challengers in future Italy and Ireland become more exposed by 2021 due to build by Enel and ESB

– Both backed by Vodafone

BT exposed to Liberty Global new build

Tef, PT, Swisscom and KPN remain in a strong position



07/09/2016 Slide 62

Telco share price FTTH risk/reward European telco stocks do not price in relative FTTH build at all

DT

Ora

TEF

TI

BTKPN

Telenor

Telia

TDC

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Homes passed by Telco with FTTH or cable (end 2015)

20

16

E a

dju

sted e

quity

FC

F y

ield



07/09/2016 Slide 63

Valuation if every telco built FTTH/cable* to 75% coverage

* i.e. assuming telcos increased their current high speed broadband (FTTH and cable) to

75% by building more FTTH, assuming eu1000 net cost per home passed

0

2

4

6

8

10

12

BT DT KPN Proximus Swisscom TI Telia TEF Ora TDC Telenor

EV/EBITDA EV/EBITDA including future FTTH build cost

Pro

port

ionate

2016E

EV

/EB

ITD

A

TEF goes from being relatively expensive to relatively cheap



07/09/2016 Slide 64

Current NGA strategy

Currently at 90% FTTc/VDSL coverage

BDUK build continues – targeting

95%+ coverage beyond 2017

Planning GFast build to 10m premises

by December 2020 – c.£1.5bn over 4 years, £150 per hp (CS est.)

– Focused where loop lengths are short

‘Majority of premises’ to be covered by

2025

FTT-premise for 2m offices and homes

(inc new build)

Our view

BT, in our view, is likely to need to address

sooner the other 20m premises in the UK not

covered by its 2020 G.fast plan

This suggests to us potential upwards

pressure on CAPEX

BT.L – Neutral


07/09/2016 Slide 65

Competition

Size of VirginMedia build constrained by

need for LBTY to generate FCF

Start-ups are unlikely to big enough to

prompt a big change by BT on their own – But a sign the economics is starting to stack up

Finance available for fibre infrastructure

investment will grow. And

Vodafone/TalkTalk/Sky are a big threat if

they can agree to pool their interests.

Regulation

Political and Ofcom focus has been on

Openreach and coverage

Brexit + new fiscal debate in UK is likely

to increase political interest in

infrastructure investment, inc fibre

User frustration with Openreach

broadband speeds is also likely to grow

over time, whether justified or not


Focus on FTTc+vectoring – Reflects DT’s dense street-cabinet design

– 380,000 cabinets, 300m average loop length

DT at 65% VDSL coverage. 80% by 2018

Already rolling out vectoring (100Mbps) – Building 250Mbps ‘super vectoring’ in cable area by 2018

Launched VDSL/LTE modem

G.Fast is an option beyond 2018 – But DT also has some pair bonding opportunities first

Broadband in other 20% remains an issue

DTEG.F - Outperform


Source: DT Investor presentation, 2012

07/09/2016 Slide 66

DT’s Integrated Network Strategy (INS)

Regulation

Govt and BNA supportive

EC queried vectoring decision of BNA – Compromise reached, but not fully resolved

– BNA VULA update this autumn

Little debate over FTTH inside German

government currently

DT seeing mostly demand for 50Mps rather

than higher-priced 100Mbps currently.

Competition is less of a concern currently

New build is ‘waking up’ but still quite

small relative to size of the market – Deutsche Gaslfaser, Inexio

– Unity to plan 1-2m new homes passed in DE

Unbundlers are shifting to BSA

Cable tends to price maximise

Utilities are local and lack scale

So new-build is relatively minor currently

Current German govt likely to resist push

from EC. But FTTH coverage is expanding

in other EU markets. Germany has a

general wish to stay ahead (e.g.

Industrie4.0) and therefore the political

consensus on consumer broadband could

shift at some point.

DTEGn.F - Outperform


07/09/2016 Slide 67

Our view

There is no immediate pressure on DT

But political and consumer demands likely to

change at some point

DT will likely speed up vectoring+bonding in

80% area and consider deepening fibre

DT may consider FTTH projects in ‘other 20%’

where VDSL isn’t viable and willingness to pay

for higher speeds is strong.

This suggests continued high levels of DT

Germany CAPEX beyond 2018



~80% combined FttC and FttH

coverage by end 2016

– From 65% at the end of 2015

(36% FttC & 29% FttH)

– delivering 85% coverage of

100Mbps

Vectoring & Pair bonding to improve

FttC speeds to up to 400Mbps

FttH build costs also falling

KPN.AS - Neutral


Source: KPN Capital Markets Day, 7 March 2016

07/09/2016 Slide 68

Competition

CIF, an infrastructure fund that entered the

FTTH market in 2011 with its own proprietary

FTTH network, but lacks scale

Vodafone-Ziggo JV having a relatively low cost

route to build 1Gbps over Docsis 3.0 or 3.1

Regulation

In 2015 KPN signed commercial wholesale

agreements with Tele2, M7 and Vodafone for

a period of 7 years

− ACM provided consent to agreements

Allows KPN to further upgrade its copper

network

Our view

We believe there is a relatively small risk of

KPN CAPEX rising over the next few years

from more FttH build but this is likely to be

somewhat mitigated, in our view, by pair

bonding/vectoring option (up to 400Mbps)

and falling cost of FttH

KPN’s fibre build costs are coming down

FTTH overbuild is generally negative for cable

companies, leading to a loss of pricing power

OTT remains a medium term risk

In key markets Liberty is still mainly competing

against FTTc, e.g. Germany, UK, Belgium and the

Netherlands

– These telcos likely to compete with a

gradualistic approach rather than building FTTH

everywhere

On the current Docsis 3.0 technology Liberty

believe it can offer up to 500Mbps (doing this in

Switz currently)

With a Docsis 3.1 software upgrade speeds up to

10Gbps has been trialled

– Liberty likely to be investing in D3.1 by H2 2017

So Liberty is likely to be able to maintain a speed

premium demanded by consumers in the

foreseeable future

And LBTY’s strategy of new build is likely to ‘work’,

tapping into the rising demand for faster broadband

in areas it doesn’t currently cover

LBTYA.OQ – Liberty Global


07/09/2016 Slide 69

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Proximus Swisscom (Q4 15) BT KPN (Q4 15) DT

FTTc coverage FTTH coverage

Telco fibre coverage in LBTY’s top 5 markets


French fibre among laggards so far but

targets would put it in lead LT for HSBB – Ora passes 6m homes (24%), target 80% in 2022

– SFR 8.5m (34%) inc cable, target 90% in 2022

– Iliad 3.1m (12%) inc via co-fin, target 80% in 2022

– ByTel 1.6m (6%) FTTH, plus 8m via cable. No target

Co-financing model favourable OLOs if they

invest as allows them to – participate later (no 1st-mover advantage for Ora)

– allows significant saving on payments to Orange (~€2-

5 payment to Ora vs ~€9 with ULL on copper)

But Orange currently improving KPIs (bb

subs and line loss) and revenue trends with

FTTH rollout – Competitors slow to participate so far

– Competitors slow to roll out horizontal fibre in VDZ

– Orange has offered a large discount initially on FTTH

with €20 for first 12M

So for Orange FTTH is currently a positive

for the stock.



07/09/2016

ORAN.PA - Neutral

-10.0%

-9.0%

-8.0%

-7.0%

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

1Q16

Orange BB market share of net adds (LHS) Consumer line loss (y/y; RHS)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Orange SFR Iliad ByTel

Q2 16 HSBB coverage 2022 HSBB coverage

n/a

Slide 70

PROX.BR - Neutral


07/09/2016 Slide 71


Mostly FttC build out currently

covering most of Belgium

Targeting 100Mbps to 60% of

households by end 2018

– FTTH in greenfield sites

– FTTH in selected brownfield

projects

Shorten loop lengths by moving

distribution nodes closer to premise

Beyond 2018 plans to use ultra-

vectoring to deliver targeted speeds

of up to 250Mbps

Competition

Telenet average broadband speed now

>100Mbps (Source: Telenet CMD, April

2016)

Telenet aiming to offer 1Gps by 2020 through

combination of increasing spectrum and node

splitting

Telenet can choose to deploy FTTH when it

makes sense e.g. greenfield sites

Regulation

Belgian regulator has been more focused

on increasing competition over past few

years e.g. cable wholesale offer

Our view

Proximus likely to need to continue to

deepen fibre over time, in our view

This suggests to us potential upwards

pressure on CAPEX

Swisscom has rolled out more FTTC/S/H

than most markets in Europe – 2.9m of 4.3m premises (66%) passed by >50Mbps BB

– Of these 1.1m >100Mbps

– 1.0m with FTTH

– The rest covered by mix of FTTS/B and FTTC/vectoring

FTTH rollout model has split rollout cost – Rollout cost is typically split ~60% Swisscom /40%

utility

– 2 lines owned by Swisscom and 2 lines owned by utility

– Swisscom has shared cost with utilities in main cities, ie

for 800k homes, ie 80%

So far fibre has been a tailwind for Swisscom as – utilities have had close to zero traction in retail market

and little in wholesale market

– There’s no fibre regulation in Switzerland

=> FTTH economics have been favourable to

Swisscom till now

Swisscom won’t rollout FTTH for >1m homes – Near-/mid-term no competitive pressure to do more

– Other technologies (FTTS/B, G.fast) can offer high

speeds for other 70% with speeds of 100Mbps+, and in

some places 500Mbps


07/09/2016

But longer term stopping FTTH rollout could

leave Swisscom with one of lower FTTH

coverage ratios in Europe

Unclear if rollout decision will eventually have

to be revisited

SCMN.S - Underperform

Source: Swisscom

Slide 72

Utilities have rolled out a lot of FTTH (>40%)

… but with low take-up (<30%) due to – Lack of consistency in rollout

– Lack of strong retail brand

– Lack of direction in Waoo consortium

Waoo has ambitious plans but push has

stopped as several utilities left consortium and

biggest utility (SE) focused on cable with

purchase of #2 cable operator Stofa

TDC has little fibre (bought DONG in

Copenhagen and agreement with Trefor)

Instead TDC has cable network covering ½

country.

But the old cable brand Yousee was under-

developed with only 1/3rd of TDC’s subs on

cable and 2/3rd on DSL

TDC has now merged TDC/Yousee brands so

we expect it to become stronger again in high-

speed broadband


Source: TDC

07/09/2016

TDC.CO - Outperform

TDC plans to increase coverage of

>100Mbps BB (cable + fibre) from 65%

in 2018 to 70% 2018

This is done by rolling out fibre outside

the existing footprint

Of 30% w/o fibre planned, one-third has

utility fibre so TDC might need to do more

Slide 73

Enel planning overbuild TI with FTTH – Supported by Vodafone and Wind

– Initial phase is to pass 7.5m homes with FTTH

Horizontal build. Vertical is demand-led

Initial commitment is to 1.5m homes in 10

cities. Of which 1m by end 2016

– Using utility ducts and smart-metre in-home

wiring

This obviously threatens TI’s high

wholesale market share

But utility fibre build takes time – Nordics

– Ireland (SIRO launched 2 years ago)

In the mean time, broadband

penetration is accelerating – Investment in FTTc is stimulating demand

– Line loss is likely to slow before Enel impacts -

Like PT in 2008

TLIT.MI - Neutral



07/09/2016 Slide 74

TI outlook similar to PT c. 2008

-6%

-4%

-2%

0%

2%

4%

6%

8%

Q1 15 Q2 15 Q3 15 Q4 15 Q1 16

Fixed line service revenues Total lines (eir+UPC) Total bband lines (eir+UPC)

No impact of SIRO (Vod-ESB) on eir yet


Telefonica well positioned from a FTTH point

of view

– 15m homes passed = 84%

– 2.7m FTTH subs = 18% penetration

Growing c. 250k per quarter

– 68% retail market share of FTTH

– Relatively attractive wholesale terms

Unregulated in X% of homes passed

Euxx per month in rest of network

– Potential for CAPEX to decline in FY17+

– This reduces some of the b/sheet risk

TEF has built competitive advantage through

FTTH and F-M bundles

– Tef Spain is essentially ‘fixed’

– Line loss has slowed, revenues are

rising

TEF’s investment in FTTH is likely to be a

driver of relative outperformance over time

TEF.MC - Neutral


* CS estimates for H1 16, following move to new segmental reporting

07/09/2016 Slide 75

-8.0%

-7.0%

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

TEF SPA

-14.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

TEF

Line loss – Tef and Spain

Tef wireline revenue growth*


1800

300

160

800

0

200

400

600

800

1000

1200

1400

1600

1800

2000

ADSL VDLS FTTH HFC

Telenor footprint

Utility FTTH rollout in Norway has been one

of the most successful challenger FTTH

rollouts in Europe – Utilities have had >50% take-up and have taken over

20% fixed broadband market share

– This is on the back of >10 years investment by

wealthy utilities

– Lyse has been main utility building out in oil-producing

part of Norway originally.

It is biggest utility fibre

It owns stakes in other utility fibre projects (inc

Viken)

It has developed shared platform (Altibox) used by

other utilities

Telenor was slow to react, potentially due to

focus on GEM/mobile – As a result Telenor’s fixed-line trends are among the

weakest in Europe

high line loss

Broadband market % down 5% in 4 years (43.0%

2014 vs 48.1% 2011)

This also forced discounting on its DSL at Telenor


07/09/2016

Recently Telenor has stepped up its FTTH

investments and stemmed market share loss

Telenor and utilities both likely to continue to

roll out extensive FTTH

We expect stable market share with high

capex at Telenor as it seeks to defend

TEL.OL - Underperform 48.1

46.6

45.0

43.0

40.0

41.0

42.0

43.0

44.0

45.0

46.0

47.0

48.0

49.0

2011 2012 2013 2014

Fixed bb subs %

Slide 76



TELIA.ST - Telia Company


07/09/2016 Slide 77

Telia is on track to hit its target of 1.9m

homes (c.41% of total homes) covered with

FTTH in 2018

Uptake has been strong >50% despite

customers in SDUs paying >€2k to get fibre

installed

Telia is however facing competition from

other telcos building fibre eg Telenor and

also independent fibre infrastructure

providers such as IP-only and local utility

companies

Challenger fibre has driven line loss at Telia

Telia also has a relatively low 29% retail fibre

market share vs 37% retail overall

broadband market share due to challenger

fibre build

Wholesale regulation is set to be further

relaxed at the end of 2016 with the current

price regulation replaced by a margin

squeeze test

Source: Telia Company

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

1H 2011 2H 2011 1H 2012 2H 2012 1H 2013 2H 2013 1H 2014 2H 2014 1H 2015 H2 2015

Telia voice lines (retail+wholesale)*, y/y Swedish market voice lines, y/y

Source: PTS, Telia, Credit Suisse research, *Telia retail voice lines+PSTN

wholesale+ULL

Telia voice line loss has materially underperformed

market voice line loss, likely a result of challenger fibre

Fixed line is already contributing 1.5pp to

Vodafone organic growth in Europe And this extra contribution from fixed line is expanding

Fixed line represents a significant growth

opportunity for Vodafone Vod has low fixed line market share

And the balance sheet to fund fibre investment

Vodafone is already funding fibre build in Portugal,

Ireland, Spain and Italy

Vodafone has opportunity to invest more Could build out a lot more in Spain

Big opportunity is the UK (duct&pole trial ongoing)

Also potential to build gaps in KDG footprint

However the dividend payout ratio at Vodafone

constrains Vodafone’s options to a degree

Vodafone may prefer JV solutions e.g. EOF, ESB

Vodafone may also be more comfortable buying FTTH

project companies as they mature

And Vod is likely to want to keep the LBTY option open

Vod-Ziggo and Ora-Jazztel remedies suggest

overlapping network assets have to be sold

So Vodafone likely to take a step-by-step approach, at

least until the Liberty question is resolved on way or

another (in our view)

VOD.L - Outperform



07/09/2016 Slide 78

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

Q1 13/14 Q2 13/14 Q3 13/14 Q4 13/14 Q1 14/15 Q2 14/15 Q3 14/15 Q4 14/15 Q1 15/16 Q2 15/16 Q3 15/16 Q4 15/16

Organic growth (mobile and fixed line) Organic growth (mobile)

Vodafone Europe – fixed line adding 1.5pp to growth

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%


Homes passed by fibre to the home (end 2015)

Vodafone mobile markets


For the unbundlers, the end of the free ride



07/09/2016 Slide 79

Broadband speed <30Mbps >30Mbps >100Mbps

Technology DSL VDSL FTTH/G.Fast

Wholesale regulation Cost-plus Retail-minus No access

without co-

investment

euros per month

Typical wholesale cost (ex VAT) 9.0 17.0 ?

Typical incumbent price (ex VAT) 30.0 33.0 ?

Arbitrage for reseller to attack 21.0 16.0 0

Gross margin assuming 25% reseller discount 13.5 7.8 negative

Resellers may have no access rights unless they co-invest

Co-investment also covers a range of scenarios, some very negative for unbundlers

that haven’t invested and won’t invest – Bad for unbundlers:

Portugal model – just duct access – ‘invest or die’ (anyone remember Novis?)

Spain model – quid pro quo wholesale access (squeezed Vod and Orange)

– Good for unbundlers: France model – access rights + ‘right to buy’

The caveat – if the EC or NRAs first lower incumbent wholesale price for <100Mbps

to cost-plus, this would stimulate one last gold-rush for the remaining unbundlers

(e.g. in UK and Germany), with lack of FTTH only hurting them longer-term

Unbundler economics becoming more challenging

Cable has maintained share in the Nordics



07/09/2016 Slide 80

Denmark broadband market share Sweden broadband market share

Norway broadband market share

Cable has managed to maintain share

in Nordic markets that have developed

FTTH – Though it has fallen slightly in Sweden

– And market share growth in Norway stalled

Partly helped by cable’s historically

strong MDU position in the region – Cable in UK, Neths and Spain more focused on SDU

– German cable also gets 50% of revenue from SDU

Cable has lost some share to fibre

in Spain, although this has stopped

recently following Vodafone’s

acquisition of Ono

FTTH in Europe is growing slowly

and not yet impacted cable

broadband share

Cable not yet impacted much in other markets



07/09/2016 Slide 81

Spain broadband market share

W.Europe broadband market share

Cable could lose pricing power as fibre is built out The extent depends on fibre wholesale regulation


07/09/2016 Slide 82

High FTTH

overbuild

Low FTTH overbuild

Fibre would also exacerbate the OTT risk, by undermining competitive advantage


Source: Credit Suisse Equity research, 4 Sept 2015 “European Cable: what risk from OTT and the skinny bundle?”

07/09/2016 Slide 83

One way to offset the risk is to participate in the FTTH /new-build market e.g.

LBTY building past 5m homes in UK and 1-2m in Germany

NOS building FTTH outside cable area in Portugal

Com Hem reselling passive FTTH outside cable area in Sweden


07/09/2016

Analysis of FTTH build by market and Credit Suisse estimates for FTTH build out to 2021

Slide 84


07/09/2016 Slide 85

Sweden Spain Norway Denmark Portugal Netherlands Switzerland Italy France Ireland Germany UK

2015A 83.0% 82.0% 59.0% 54.4% 45.0% 33.5% 28.2% 24.6% 20.0% 9.6% 5.1% 1.4%

2021E 95.0% 95.1% 78.3% 86.7% 90.8% 37.5% 28.2% 70.8% 72.1% 75.1% 9.3% 9.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

% of Households Passed by FTTH - 2015 vs 2021

2015A 2021E


Telenor Com HemOrange/Jaz

ztelVodafone/O

noMasMovil Altibox WAOO SE

VodafonePortugal

NOS CIFEnel Open

FibreSFR Iliad Bouygues SIRO NetCologne M-Net wilhelm.tel

DeutscheGlasfaser

EWETel Hyperoptic Gigaclear

Sweden Spain Norway Denmark Portugal Netherlands Italy France Ireland Germany UK

2015A 30.4% 8.7% 45.9% 6.0% 4.1% 22.1% 42.3% 9.2% 53.7% 8.7% 4.0% 0.0% 1.8% 8.9% 5.4% 7.4% 0.7% 1.0% 1.1% 0.2% 0.2% 0.8% 0.1%

2021E 43.5% 21.7% 82.0% 12.6% 16.4% 32.3% 65.4% 10.2% 79.3% 13.8% 7.2% 39.9% 35.7% 56.3% 19.3% 51.5% 1.3% 1.6% 1.7% 2.6% 0.2% 3.0% 0.8%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

% of Households Passed by FTTH - 2015 vs 2021 (Challengers Only)

2015A 2021E

Telia Telefonica Telenor TDC PT KPN Swisscom TI Orange Eir DT BT

2015A 28.9% 75.4% 8.3% 6.2% 61.0% 28.8% 28.2% 2.4% 18.1% 1.4% 1.2% 0.8%

2021E 50.4% 90.4% 14.8% 11.9% 98.2% 29.6% 28.2% 25.8% 64.3% 22.4% 1.2% 4.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

% of Households Passed by FTTH - 2015 vs 2021 (Incumbent Only)

2015A 2021E

FTTH deployment is being led by challengers in a few markets (Norway and Denmark)


30/09/2016 Slide 86


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

Sweden Spain Norway Denmark Netherlands Switzerland Italy France Germany UK Ireland Portugal

The number of households passed by FTTH is forecast to rise

30/09/2016 Slide 87



0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

Sweden Spain Norway Denmark Netherlands Switzerland Italy France Germany UK Ireland Portugal

8 markets to have over 50% of households passed by FTTH in 2021

30/09/2016 Slide 88




07/09/2016 Slide 89

SE

ES

NO

DK

PT

NL

CH

IT

FR

IE

DE

UK

R² = 0.2293

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0%

% of HH passed by FTTC (2015)

% of HH passed by FTTH (2015)

Current FTTH coverage vs FTTc coverage



07/09/2016 Slide 90

SE

ES

NO

DK

PT

NL

CH

IT

FR

IE

DE

UK

R² = 0.4347

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

% of HH currently passed by FTTC (2015)

% of HH projected to be passed by FTTH in 2021

Forecast FTTH coverage vs current FTTc coverage



07/09/2016 Slide 91

SE

ES NO

DK

PT

NL CH

PT

FR

IE

DE

UK

R² = 0.1101

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

% of HH covered by cable

broadband

% of HH covered by FTTH

Forecast FTTH coverage vs current cable broadband coverage



07/09/2016 Slide 92

SE

ES

NO DK

PT NL

CH

IT

FR

IE

DE

UK

R² = 0.0739

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

Incumbent Broadband Market

Share

Projected (2021) % of HH covered by FTTH

Forecast FTTH Deployment vs current Incumbent broadband Market Share



07/09/2016 Slide 93

R² = 0.7443 0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

Projected (2021) % of HH covered

by FTTH (all providers)

Projected (2021) % of HH covered by FTTH (Challengers only)

Forecast FTTH build vs Projected Challenger FTTH build



07/09/2016 Slide 94

CS forecasts for FTTH market by market

FTTH players by market


07/09/2016 Slide 95


Current Target

(estimate)

Denmark TDC Incumbent telco 160 Not announced Aims to deploy FTTH primarily in low-speed DSL areas and white spots

Denmark SE Utility challenger 235 Not announced Formerly a member of WAOO, now operates a cable network independently

Denmark WAOO Utility challenger 1,100 Not announced Coalition of 7 Danish utilities

France Orange Incumbent telco 5,061 14,000 by 2020 Leading FTTH deployment in France

France SFR National challenger 500 Not announced Operates a much larger high-speed cable network as well

France Iliad National challenger 2,500 9,000 by 2018 French fibre regulation allows it to co-invest/co-finance in FTTH w/ Orange

France Bouygues National challenger 1,500 Not announced French fibre regulation allows it to co-invest/co-finance in FTTH w/ Orange

Germany Deutsche Telekom Incumbent telco 500 Not announced No public plans of further build post-2015

Germany NetCologne Local challenger 282 Not announced Deploys FTTH and other high-speed BB in Cologne and Aachen

Germany M-Net Local challenger 400 Not announced Deploys FTTH in central Munich

Germany wilhelm.tel Local challenger 460 Not announced Deploys FTTH in areas around Hamburg

Germany Deutsche Glasfaser Local challenger 100 600 by 2018 KKR-backed rural FTTH operator

Germany EWETel Local challenger 68 Not announced FTTH provider based in Lower Saxony

Ireland Eircom Incumbent telco 28 1.9m homes with FTTc and FTTH

Ireland SIRO Utility challenger 125 500 by 2018 JV between Vodafone and utility ESB

Ireland Magnet Networks Local challenger 15 Not announced Small private operator

Ireland Enet Infrastructure operator N/A N/A Creates carrier-neutral open-access networks

Italy Telecom Italia Incumbent telco 564 5,000 by 2020 Launched JV "FibreFlash" with Fastweb in 2016 to cover 3m homes w/ FTTH

Italy Fastweb National challenger <2,000 5,000 by 2020 Launched JV "FibreFlash" with Telecom Italia in 2016 to cover 3m homes w/ FTTH

Italy Enel Open Fibre Utility challenger N/A 9,500 by 2021 Backed by utility Enel and service providers Wind, Vodafone and Tiscali

Netherlands Reggefiber Infrastructure operator 2,160 Not announced Owned by KPN

Netherlands CIF Infrastructure operator 301 Not announced Infrastructure fund

Norway Telenor Incumbent telco 190 Not announced Aims to deploy FTTH primarily in low-speed DSL areas and white spots

Norway Altibox Utility challenger 509 Not announced Coalition of 35 Norweigan utilities

Portugal Portugal Telecom Incumbent telco 2,500 4,000 by 2020 Leading FTTH deployment in Portugal

Portugal Vodafone National challenger 2,200 2,750 by 2016

Portugal NOS National challenger 358 Not announced Deploys FTTH in white spots of its much larger high-speed cable network

Spain Telefonica/Movistar Incumbent telco 13,800 17,000 by 2020 Leading FTTH deployment in Spain

Spain Orange/Jazztel National challenger 8,400 14,000 by 2020 Sold off a portion of its FTTH network to acquire Jazztel in 2015

Spain Vodafone Portugal National challenger 1,100 1,500 by 2017 Also operates high-speed cable network through Ono

Spain MasMovil National challenger 750 2,250 by 2018 Acquired part of Orange's FTTH in 2015

Sweden Telia Incumbent telco 1,530 1,900 by 2018 Acquired FTTH operators Zitius and Riksnet in 2013-14

Sweden Telenor National challenger 1,500 2000 in "next few years"

Sweden IP-Only National challenger N/A Not announced Private Equity owned infrastructure company

Sweden Bahnhof National challenger N/A N/A Service-provider only

Sweden Bredband2 National challenger N/A N/A Service-provider only Source: Credit Suisse Equity research

FTTH players by market


07/09/2016 Slide 96


Current Target

(estimate)

Switzerland Swisscom Incumbent telco 1,025 N/A Does not intend to deploy any further FTTH

Switzerland Sunrise National challenger N/A N/A Service-provider only

Switzerland Fiber7 National challenger N/A N/A Service-provider only

United Kingdom BT Incumbent telco 200 (CSe) 1,000 by 2020

United Kingdom Hyperoptic National challenger N/A 500 over next few years Specialises in urban areas and MDUs

United Kingdom Gigaclear National challenger ~30 (CSe) >40 by end 2016 Specialises in rural areas

United Kingdom CityFibre Infrastructure operator N/A N/A Deploys passive fibre infrastructure

United Kingdom UFO Local challenger 11 20 at end of Phase One JV between TalkTalk, Sky and CityFibre

United Kingdom KCOM Local challenger 39 150 by 2017 Deploys 90% FTTH/10% FTTC in Hull

United Kingdom B4RN Local challenger 2 Not announced Deploys FTTH in the rural north of England


Current Target

(estimate)

Not covered

Austria Telekom Austria Incumbent telco N/A N/A Deploys a hybrid FTTC-wireless technology

Belgium Proximus Incumbent telco N/A N/A Deploys DOCSIS 3.1

Greece OTE Incumbent telco N/A N/A Has only deployed FTTC


FTTH Market Summary - Denmark


07/09/2016 Slide 97

Danish FTTH is highly driven by utility networks

Originally led by WAOO, an association of 7 local utilities

across Denmark (formerly 14) – WAOO originally committed DKK10bn (€1.3bn) to cover over half

of Danish households with FTTH

– Responsible for over 75% of the Danish homes passed by FTTH,

as well as ~80% of overall FTTH subs at its peak

WAOO’s largest partner Syd Energi left the association in

2013 following its acquisition of cable network Stofa – It has set up its own Jutland-based network which combines cable in

concentrated cities and FTTH in South Jutland

– It attracted two further utility companies from WAOO (Verdo and Sydfyns

Elforsyning)

TDC is the third largest player for FTTH with ~11% share of

FTTH passed and ~6% share of FTTH subs. – TDC’s cable network (formerly YouSee/TDC Cable) remains TDC’s

main NGA asset

– TDC’s official entry to the FTTH market came with acquisition of DONG

Energy’s Fibernet in 2009

– TDC signed wholesale agreement with TREFOR (95k homes) in 2015

– WAOO has agreement to provide wholesale services on TDC’s network

TDC and Syd Energi (SE) have largely deployed FTTH to

cover white spots outside TDC/Stofa cable footprint

Take-up of FTTH lags other Nordic markets due to

competition from cable and weaker marketing of FTTH

Source: tjekditnet.dk

Denmark >=500Mbps fibre coverage

Penetration c. 26% due to cable and util ity ownership


07/09/2016 Slide 98

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Total Households 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600

We assume~140k additional homes passed by FTTH per

year

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Total FTTH Passed 824 1,049 1,274 1,414 1,554 1,694 1,834 1,974 2,114 2,254

Change 225 225 140 140 140 140 140 140 140

% Change 27.3% 21.5% 11.0% 9.9% 9.0% 8.3% 7.6% 7.1% 6.6%

% of all HH 31.7% 40.3% 49.0% 54.4% 59.8% 65.1% 70.5% 75.9% 81.3% 86.7% ('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Total FTTH Subs 250 359 357 371 421 471 521 571 621 671

Change 109 -2 14 50 50 50 50 50 50

% Change 43.7% -0.6% 3.9% 13.5% 11.9% 10.6% 9.6% 8.8% 8.1%

Take-up rate 30.4% 34.3% 28.0% 26.2% 27.1% 27.8% 28.4% 28.9% 29.4% 29.8%

0

500

1,000

1,500

2,000

2,500

3,000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

FTTH Passed FTTH Subs Total Households

Source: Credit Suisse estimates, TDC, FTTH Council Europe, Telegeography, Huawei. Note WAOO data includes some of the departed utilities but excludes SE

Homes Passed (CS forecasts)


07/09/2016 Slide 99

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

WAOO 700 800 1000 1100 1200 1300 1400 1500 1600 1700

TDC 113 129 144 160 185 210 235 260 285 310

Total FTTH Passed 824 1,049 1,274 1,414 1,554 1,694 1,834 1,974 2,114 2,254

Change 225 225 140 140 140 140 140 140 140

% Change 27.3% 21.5% 11.0% 9.9% 9.0% 8.3% 7.6% 7.1% 6.6%

% of all HH 31.7% 40.3% 49.0% 54.4% 59.8% 65.1% 70.5% 75.9% 81.3% 86.7%

We view TDC as likely to remain a minor player in

deploying pure FTTH. Its overall high-speed network coverage including cable will continue to exceed that of the

utilities including WAOO

0

500

1000

1500

2000

2500

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

WAOO TDC SE



07/09/2016 Slide 100

% of households passed (CS forecasts)

Projected to reach ~77.3%

coverage by 2021, assuming utilities

adds 100k additional homes passed

per year

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

WAOO HH Passed 700 800 1000 1100 1200 1300 1400 1500 1600 1700

WAOO % of HH

passed 26.9% 30.8% 38.5% 42.3% 46.2% 50.0% 53.8% 57.7% 61.5% 65.4% SE HH Passed N/A N/A 232 235 240 245 250 255 260 265

SE % of HH passed 8.9% 9.0% 9.2% 9.4% 9.6% 9.8% 10.0% 10.2% TDC HH Passed 113 129 144 160 185 210 235 260 285 310

TDC % of HH

passed 4.3% 5.0% 5.6% 6.2% 7.1% 8.1% 9.0% 10.0% 11.0% 11.9%

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

WAOO TDC SE



07/09/2016 Slide 101

% of all fixed-line subs (CS forecasts)

FTTH’s overall share of fixed-line

subs projected to remain under

25% based on current subscriber

data, where both operators

reported a combined 334k FTTH

subs in 2015 (of a total 2.3m

fixed-line)

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

WAOO Subs 230 300 275 304 334 364 394 424 454 484

WAOO % of BB subs 10.0% 13.0% 12.0% 13.2% 14.5% 15.8% 17.1% 18.4% 19.7% 21.0% SE Subs 70 75 84 86 88 89 91 93

SE % of BB subs 3.0% 3.3% 3.7% 3.7% 3.8% 3.9% 4.0% 4.0% TDC Subs 5 9 15 20 30 40 50 60 70 80

TDC % of BB subs 0.2% 0.4% 0.6% 0.9% 1.3% 1.7% 2.2% 2.6% 3.0% 3.5%

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Total BB Subs 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

WAOO TDC SE


WAOO


07/09/2016 Slide 102

A coalition of originally 14 utilities across Denmark,

which quickly expanded, with 1m homes passed in

2014 and 304k subscribers in 2015

It promotes itself above other providers on two key

selling points: 1. Low “price per megabit”, ie not the cheapest in the

market but even entry-level 75mbps is priced at €26

per month

2. A “speed warranty” across the entire portfolio of

offerings

Future expansion assumed to be 100k homes

passed per year (vs historical 2010-15 average of

200k per year)

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

WAOO FTTH Passed 700 800 1000 1100 1200 1300 1400 1500 1600 1700

Change 100 200 100 100 100 100 100 100 100

% Change 14.3% 25.0% 10.0% 9.1% 8.3% 7.7% 7.1% 6.7% 6.3%

% of all HH 26.9% 30.8% 38.5% 42.3% 46.2% 50.0% 53.8% 57.7% 61.5% 65.4%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

WAOO FTTH Subs 230 300 275 304 334 364 394 424 454 484

Change 70 -25 29 30 30 30 30 30 30

% Change 30.4% -8.3% 10.5% 9.9% 9.0% 8.2% 7.6% 7.1% 6.6%

Take-up rate 32.9% 37.5% 27.5% 27.6% 27.8% 28.0% 28.1% 28.3% 28.4% 28.5%

Share of overall FTTH subs 92.0% 83.5% 77.0% 81.9% 79.3% 77.3% 75.6% 74.3% 73.1% 72.1%


0

200

400

600

800

1000

1200

1400

1600

1800

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

FTTH Passed FTTH Subs


Syd Energi


07/09/2016 Slide 103

0

50

100

150

200

250

300

2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Formerly a partner to WAOO, SE split off in 2013

following its acquisition of cable provider Stofa – Stofa had a customer base of 500k (TV and internet), compared

to WAOO’s customer base of 240k

Its FTTH footprint is therefore limited to South

Jutland (max 290k homes according to 2015 annual

report)

It has completed two further partnerships for its

FTTH network through Verdo (11k subscribers) and

Sydfyns Elforsyning (9k subscribers)

(‘000) 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Syd Energi FTTH Passed 232 235 240 245 250 255 260 265

Change 3 5 5 5 5 5 5

% Change 1.3% 2.1% 2.1% 2.0% 2.0% 2.0% 1.9%

% of all HH 8.9% 9.0% 9.2% 9.4% 9.6% 9.8% 10.0% 10.2%

(‘000) 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Syd Energi FTTH Subs 70 75 84 86 88 89 91 93

Change 5 9 2 2 2 2 2

% Change 7.8% 12.0% 2.1% 2.0% 2.0% 2.0% 1.9%

Take-up rate 30.0% 31.9% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%

Share of overall FTTH subs 70 75 84 86 88 89 91 93

Source: Credit Suisse estimates, TDC, FTTH Council Europe, Telegeography, Huawei

TDC


07/09/2016 Slide 104

In our view, FTTH currently a

supplementary technology for TDC

to its DSL and cable networks – Expansion is largely limited to white spots

of coverage

– TDC bought DONG’s fibre business and

has a wholesale deal with TREFOR utility

(95k homes)

Last reported 160k homes passed

in 2015 with 20k subscribers,

indicating a low take-up rate of

12.5% in the areas where deployed

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

TDC FTTH Passed 113 129 144 160 185 210 235 260 285 310

Change 16 16 16 25 25 25 25 25 25

% Change 13.8% 12.2% 10.8% 15.6% 13.5% 11.9% 10.6% 9.6% 8.8%

% of all HH 4.3% 5.0% 5.6% 6.2% 7.1% 8.1% 9.0% 10.0% 11.0% 11.9%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

TDC FTTH Subs 5 9 15 20 30 40 50 60 70 80

Change 4 5 5 10 10 10 10 10 10

% Change 84.6% 58.3% 36.8% 50.0% 33.3% 25.0% 20.0% 16.7% 14.3%

Take-up rate 4.4% 7.2% 10.1% 12.5% 16.2% 19.0% 21.3% 23.1% 24.6% 25.8%


0

50

100

150

200

250

300

350

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Source: Credit Suisse estimates, TDC, FTTH Council Europe, Telegeography, Huawei

Pricing Plans


07/09/2016 Slide 105

TDC (YouSee) – prices in DKK (€1 = DKK7.4) WAOO – prices in DKK (€1 = DKK7.4)

SE (Stofa) – prices in DKK (€1 = DKK7.4)

Source: SE

Source: WAOO

Source: TDC

FTTH Market Summary - France


07/09/2016 Slide 106

A split market, dominated by large telcos (Orange, SFR, Iliad, Bouygues Tel to lesser extent) in

the denser regions and public-private partnerships in rural areas – Denser regions are rapidly becoming well covered by FTTH (we forecast near-full coverage of Very Dense Areas by

2018) whilst the one-third of homes in rural areas are less extensively covered

Orange the leader for FTTH deployment, with 6m homes passed (2Q16) and 1.1m subscribers

(~18% take-up rate) – French fibre regulation allows competitors to rent Orange’s FTTH network (typically €5-15 per line/month), effectively

making homes passed by one operator (eg Orange) representative of all operators (albeit at the trade-off of smaller

margins for rental operators)

– Regulation also allows for co-investment with leading investing operator in FTTH (eg Orange, where the partner owns

an adjacent FTTH line) or co-financing (where the partner pays for wholesale access)

SFR operates a “pure FTTH” network alongside its hybrid fibre-coax network (fibre-to-the-last-

amplifier/FTTLA, ie the old Numericable cable network), in theory giving it the largest HSBB

footprint (~8m homes) but a smaller “pure” FTTH footprint (CSe ~500k homes) – In our view, SFR is likely to prioritise the high-speed upgrade of its cable network initially to its full capacity of 10m

(CSe by 2017)

Iliad has set an ambitious target of 9m homes passed by 2018 (vs current footprint 2.5m) – The size of the step-up suggests it will co-invest/co-finance or rent Orange’s network to achieve this in two years

In rural areas (non-dense/PIN zones), deployment has been accelerated by partnerships

between municipalities and private network operators (eg Axione, Altitude) – These areas may be beneficiaries of planned increases in European Investment Bank finance through the EFSI

(Juncker Plan), as already seen with the planned investment in Alsace’s open-access network

Overview of Market Structure


07/09/2016 Slide 107

Market effectively bifurcated in the short-term

Tres Haut Debit (THD) initiative aims to cover France with >30mbps speeds by 2022 in line with the European Digital Agenda

The picture that emerges is of two different contests being fought by (largely) two different sets of operators

– We believe this is likely to remain the status quo for the time being as the big four focus on denser areas

– However we also believe that it only seems a matter of time until the largely untapped (still 91% unpassed) market of non-dense areas

becomes more attractive, potentially pressing independent ISPs

-> Big four national operators

financing/co-financing the build and

operation of FTTH

• Regulated but receive little public subsidies

• Orange currently the main player, covering 90% of

the overall homes passed by FTTH and 70% of the

overall share of subscribers

-> State, municipal and European

aid/investment has helped build FTTH – the

big four operators are less active

• Building of FTTH networks is largely handled by four

large network operators (Altitude, Axione, Covage and

Tutor), who then wholesale these services to ISPs

• Over 20 independent ISPs who typically agree deals with

single/multiple network operators to provide FTTH

services on the entire network(s)

• Interestingly, this means that ISPs are often fighting

amongst each other over the same footprint


07/09/2016

Current Coverage vs Full Coverage (company projections)

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Very Dense 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000

Less Dense 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000

Mon Dense 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000

Total Premises 28,000 28,000 28,000 28,000 28,000 28,000 28,000 28,000 28,000 28,000

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Total FTTH Passed 2,165 2,973 4,065 5,599 8,356 10,961 13,416 15,674 17,932 20,190

Change 808 1,092 1,534 2,757 2,606 2,455 2,258 2,258 2,258

% Change 37.3% 36.7% 37.7% 49.2% 31.2% 22.4% 16.8% 14.4% 12.6%

% of all HH 7.7% 10.6% 14.5% 20.0% 29.8% 39.1% 47.9% 56.0% 64.0% 72.1%

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Total FTTH Subs 323 558 920 1,410 2,766 4,766 6,604 8,442 10,280 12,118

Change 235 362 490 1,356 2,000 1,838 1,838 1,838 1,838

% Change 73% 65% 53% 96% 72% 39% 28% 22% 18%

Take-up rate 15% 19% 23% 25% 33% 43% 49% 54% 57% 60%

Based on company projections, France

should reach >70% coverage by 2021

Near-full coverage of Very Dense Areas

(such as Paris, Lyon and Marseille) due by 2018

Source: Credit Suisse estimates, ARCEP. Note figures show FTTH and exclude SFR infrastructure via cable

0

2000

4000

6000

8000

10000

12000

14000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

less dense very dense non dense

0

5000

10000

15000

20000

25000

30000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Total Homes Passed Total Subs Full Coverage

Source: Credit Suisse estimates, ARCEP. Note figures show FTTH and exclude SFR infrastructure via cable

108

Homes Passed (company projections)


07/09/2016 Slide 109

HH Passed ('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Orange 1,669 2,573 3,642 5,061 6,664 9,687 12,000 14,000 16,000 18,000 SFR (ex FTTLA) 250 300 350 500 1,033 2,000 4,000 6,000 8,000 10,000 Bouygues 501 772 1,093 1,500 2,000 2,906 3,600 4,200 4,800 5,400 Iliad-Free 500 1,167 1,833 2,500 4,667 6,833 9,000 11,250 13,500 15,750


Change 808 1,092 1,534 2,757 2,606 2,455 2,258 2,258 2,258 % Change 37.3% 36.7% 37.7% 49.2% 31.2% 22.4% 16.8% 14.4% 12.6% % of Households 7.7% 10.6% 14.5% 20.0% 29.8% 39.1% 47.9% 56.0% 64.0% 72.1%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Orange SFR Iliad Bouygues

Source: Credit Suisse estimates, Orange, Bouygues, Iliad, Globe Newswire. Note figures show FTTH and exclude SFR infrastructure via cable. Many homes passed via co-financing/-investment so are overlapping


07/09/2016 Slide 110


HH Passed ('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Orange 1,669 2,573 3,642 5,061 5,331 7,750 9,600 11,200 12,800 14,400 SFR (ex FTTLA) 250 300 350 500 1,033 2,000 4,000 6,000 8,000 10,000 Bouygues 501 772 1,093 1,500 2,000 2,906 3,600 4,200 4,800 5,400 Iliad-Free 500 1,167 1,833 2,500 3267 4783 6300 7875 9450 11025

Total FTTH Passed 2,165 2,973 4,065 5,599 6,685 8,769 10,733 12,539 14,346 16,152 Change 808 1092 1534 1086 2085 1964 1806 1806 1806 % Change 37.3% 36.7% 37.7% 19.4% 31.2% 22.4% 16.8% 14.4% 12.6% % of Households 7.7% 10.6% 14.5% 20.0% 23.9% 31.3% 38.3% 44.8% 51.2% 57.7%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Orange SFR Iliad Bouygues

In this illustration we assume

− Orange hits 80% of its guidance

− Iliad hits 70% of its guidance

We therefore scale down our forecast for FTTH across France by around 20%

− This implies around 60% of French households are covered by FTTH by 2021, instead of 72.1%

We use these more conservative forecasts as the basis of our analysis



07/09/2016


HH Passed (‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Orange 1,669 2,573 3,642 5,061 5,331 7,750 9,600 11,200 12,800 14,400

Orange % HH Passed 6.0% 9.2% 13.0% 18.1% 19.0% 27.7% 34.3% 40.0% 45.7% 51.4%

SFR (ex FTTLA) 250 300 350 500 1,033 2,000 4,000 6,000 8,000 10,000

SFR % HH Passed (ex FTTLA) 0.9% 1.1% 1.3% 1.8% 3.7% 7.1% 14.3% 21.4% 28.6% 35.7%

Bouygues 501 772 1,093 1,500 2,000 2,906 3,600 4,200 4,800 5,400

Bouygues % HH Passed 1.8% 2.8% 3.9% 5.4% 7.1% 10.4% 12.9% 15.0% 17.1% 19.3%

Iliad-Free 500 1,167 1,833 2,500 3267 4783 6300 7875 9450 11025

Iliad-Free % HH Passed 1.8% 4.2% 6.5% 8.9% 11.7% 17.1% 22.5% 28.1% 33.8% 39.4%

Total HH passed by FTTH 2,165 2,973 4,065 5,599 6,685 8,769 10,733 12,539 14,346 16,152

Total % of HH Passed 7.7% 10.6% 14.5% 20.0% 23.9% 31.3% 38.3% 44.8% 51.2% 57.7%


We expect the big four operators will each have full

coverage of very-dense areas before 2021

Given the French fibre regulations around co-

investment, it seems likely that expansion will be built

around Orange, with SFR deploying to an extent too

We assume nearly 100% coverage of Very & Less

Dense Areas by 2022

Due to operators deploying multiple fibre lines (up to

4 to each home in VDA), cumulative reported

coverage will exceed 100%

0%

10%

20%

30%

40%

50%

60%

2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

SFR Bouygues Iliad Orange


Slide 111 111

FTTH Subscriptions (CS forecasts)


07/09/2016 Slide 112

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

FTTH Subscribers (‘000)

Orange SFR Free/Iliad Bouygues

FTTH Subs (‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Orange 176 319 563 960 1,420 2,183 2,947 3,710 4,473 6,000

SFR (ex FTTLA) 97 197 260 304 504 704 904 1,104 1,304 1,504

Bouygues 30 63 95 128 185 241 297 353 409 465

Iliad-Free 30 60 90 200 833 1,467 2,100 2,733 3,367 4,000

Total FTTH Subs 323 558 920 1,410 2,766 4,766 6,604 8,442 10,280 12,118

Change 235 362 490 1,356 2,000 1,838 1,838 1,838 1,838

% Change 73% 65% 53% 96% 72% 39% 28% 22% 18%

Take-up rate 15% 19% 23% 25% 33% 43% 49% 54% 57% 60%

Source: Credit Suisse estimates, Orange, SFR, Iliad, ARCEP, UniversFreebox. Excludes SFR subs on its cable infrastructure

FTTH Subs (‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Orange 176 319 563 960 1,420 2,183 2,947 3,710 4,473 6,000

Orange % of BB subs 1% 1% 2% 4% 5% 8% 10% 12% 14% 18%

SFR (ex FTTLA) 97 197 260 304 504 704 904 1,104 1,304 1,504

SFR % of BB subs (ex FTTLA) 0% 1% 1% 1% 2% 2% 3% 4% 4% 5%

Bouygues 30 63 95 128 185 241 297 353 409 465

Bouygues % of BB subs 0% 0% 0% 0% 1% 1% 1% 1% 1% 1%

Iliad-Free 30 60 90 200 833 1,467 2,100 2,733 3,367 4,000

Iliad-Free % of BB subs 0% 0% 0% 1% 3% 5% 7% 9% 11% 12%

FTTH % of BB subs 1% 3% 4% 6% 11% 16% 21% 26% 30% 36%

Total BB subs 23980 24940 25969 26964 27958 28953 29947 30942 31936 32931


07/09/2016

% of all fixed-line subs (CS forecasts) FTTH is likely to play a significant role in

the overall French broadband market,

increasing from 6% to 36% of all

broadband subs by 2021

Orange is likely to retain its dominant

position in FTTH operator. We assume it

will retain ~18% of the overall BB subs

through FTTH alone

SFR will migrate a large % of its subs to

high-speed BB, but many of them will

likely be on cable not just FTTH

0%

5%

10%

15%

20%

25%

30%

35%

40%

2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

Orange SFR Free/Iliad Bouygues

Source: Credit Suisse estimates, Orange, SFR, Iliad, ARCEP, UniversFreebox. Excludes SFR subs on its cable infrastructure

Slide 113 113

Orange is clearly the dominant force in

France’s FTTH market, particularly in the

construction of the network itself – ~18% of the 28m homes in France are currently

passed by Orange’s FTTH (~5m), twice as many as its

nearest competitor Iliad at 2.5m (part of which is also

using Orange’s network)

Orange has pledged €4.5bn capex on its

between 2015-18

We see upside risks to Orange capex

Orange (CS forecasts)


07/09/2016

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Orange FTTH passed 1,669 2,573 3,642 5,061 5331 7750 9600 11200 12800 14400

Change 904 1,069 1,419 270 2418 1850 1600 1600 1600

% Change 54.2% 41.5% 39.0% 5.3% 55.3% 39.0% 31.4% 29.4% 30.0%

% of homes passed 6.0% 9.2% 13.0% 18.1% 19.0% 27.7% 34.3% 40.0% 45.7% 51.4%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Orange FTTH subs 176 319 563 960 1,420 2,183 2,947 3,710 4,473 6,000

Change 143 244 397 460 763 763 763 763 763

% Change 81.3% 76.5% 70.5% 47.9% 71.0% 64.6% 59.1% 54.4% 53.8%

Take-up rate 10.5% 12.4% 15.5% 19.0% 26.6% 28.2% 30.7% 33.1% 34.9% 41.7%

% of overall FTTH subs 54.5% 57.2% 61.2% 68.1% 51.3% 45.8% 44.6% 43.9% 43.5% 49.5%

Based on CS forecasts not company projections, Source: Credit Suisse estimates, Orange, ARCEP

0

2000

4000

6000

8000

10000

12000

14000

16000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Orange Passed Orange Subs

Slide 114 114

Numericable bought SFR in Dec 14 (and rebranded newco to

SFR). It runs FTTH and FTTLA (cable) alongside each other

– FTTLA replaces the coaxial cable with fibre except for the final

distance to the home from the last amplifier, where costs are

highest and therefore coaxial is retained

SFR reports combined coverage/subs. We expect FTTLA

expansion will cap at 10m (the size of the old cable footprint), by

FY17, thereafter switching to FTTH-only expansion

– This would be logical given FTTLA can cope with present-day

speed demands (up to 200mbps) and can be upgraded quickly

and relatively cheaply

– This gives SFR a short-term fix to actively compete with Orange

and further avoid wholesale costs where possible, whilst giving the

flexibility to migrate its users to FTTH in the future

SFR (CS forecasts)


07/09/2016

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

SFR FTTH passed (ex FTTLA) 250 300 350 500 1,033 2,000 4,000 6,000 8,000 10,000

Change 50 50 138 533 967 2,000 2,000 2,000 2,000

% Change 20% 17% 39% 107% 94% 100% 50% 33% 25%

% of homes passed 1% 1% 1% 2% 4% 7% 14% 21% 29% 36%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

SFR FTTH subs (ex FTTLA) 97 197 260 304 504 704 904 1104 1304 1504

Change 100 63 44 200 200 200 200 200 200

% Change 103% 32% 17% 66% 40% 28% 22% 18% 15%

Take-up rate 39% 66% 74% 61% 49% 35% 23% 18% 16% 15%

% of overall subs 30% 35% 28% 22% 18% 17% 17% 16% 16% 16%

0

2000

4000

6000

8000

10000

12000

2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)

SFR FTTH Passed SFR FTTH Subs SFR FTTLA Passed

Source: Credit Suisse estimates, SFR

Slide 115

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Iliad FTTH passed 500 1167 1833 2500 3267 4783 6300 7875 9450 11025

Change 667 667 667 767 2,823 3,904 5,044 6,183 7,758

% Change 133.3% 57.1% 36.4% 30.7% 86.4% 81.6% 80.1% 78.5% 82.1%

% of homes passed 1.8% 4.2% 6.5% 8.9% 11.7% 17.1% 22.5% 28.1% 33.8% 39.4%

Il iad (CS forecasts)


07/09/2016

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Iliad FTTH subs 30 60 90 200 833 1467 2100 2733 3367 4000

Change 30 30 110 633 633 633 633 633 633

% Change 100% 50% 122% 316.7% 176.7% 122.6% 93.8% 76.0% 76.0%

Take-up rate 6% 5% 5% 8% 17.9% 21.5% 23.3% 24.3% 24.9% 25.4%

% of overall subs 9% 11% 10% 14% 30.1% 30.8% 31.8% 32.4% 32.7% 33.0%

Iliad began its FTTH rollout as early as 2006/7 with a rollout across 250k homes in Paris

− This was part of an ambitious plan to cover 4m homes with FTTH by 2012

Iliad’s current target is 9m homes covered by 2018 (in large part via co-financing/-investment). This is a big step-up vs 2015 footprint 2.5m homes

− We conservatively assume this is scaled down 30%

Its FTTH subscriber base is relatively small at 8% of its homes passed

Longer term targets would shift its position as would imply Iliad could be second-largest FTTH network in France by 2021

− This could be achieved by greater co-investment and co-financing

− Investment coincides with launch of Italy mobile and rollout of 4G network in France

Based on CS forecasts not company projections Source: Credit Suisse estimates, Iliad, Global Newswire, Broadband TV News, UniversFreeBox

0

2000

4000

6000

8000

10000

12000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Free/Iliad Passed Free/Iliad Subs

Slide 116

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Bouygues FTTH passed 501 772 1093 1500 2000 2906 3600 4200 4800 5400

Change 271 321 407 500 906 694 600 600 600

% Change 54% 42% 37% 33% 45% 24% 17% 14% 13%

% of homes passed 2% 3% 4% 5% 7% 10% 13% 15% 17% 19%

Bouygues (CS forecasts)

07/09/2016

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Bouygues FTTH subs 30 63 95 128 185 241 297 353 409 465

Change 33 33 33 56 56 56 56 56 56

% Change 109% 52% 34% 44% 30% 23% 19% 16% 14%

Take-up rate 6% 8% 9% 9% 9% 8% 8% 8% 9% 9%

% of overall subs 9% 11% 10% 9% 7% 6% 5% 5% 5% 5%

Bouygues is the smallest and least active of the big four operators so far, with a relatively unambitious short-term target of 2m homes passed by 2016 and 6.5m “in the medium-term”

Most of Bouygues’ current coverage is restricted to very-dense areas

New expansion is through co-investment/leasing with SFR in very-dense areas (co-investing horizontally, leasing vertically) and Orange in less-dense areas

Long term Bouygues has access to the footprint of Orange and other FTTH via French regulation

Also increasingly active in less dense areas

Likely to remain #4 operator in fibre

Source: Credit Suisse estimates, Bouygues, La Fibre Optique, Telecompaper

0

1000

2000

3000

4000

5000

6000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Bouygues Passed Bouygues Subs


Slide 117

Pricing Plans


07/09/2016

Orange – 500Mbps/200Mbps Free – 1Gbps/200Mbps

Bouygues – 1Gbps/250Mbps

SFR – 1Gbps/40Mbps

Source: SFR

Source: Bouygues

Source: Iliad

Source: Orange

Slide 118

The big four operators are less active in

these areas at present, particularly in the

build of the infrastructure itself

– However all four operators are partners

with some of the main infrastructure

owners, implying that there is likely

some FTTH coverage as an ISP

These areas are largely served by a

partnership between four main infrastructure

owners, numerous ISPs and the

state/municipality

– This partnership stretches to funding,

co-ordination of the build and long-term

operation of the network

These partnership areas are formally

recognised as a Reseaux d’initiative Publique

(RIP), with over 100 RIPs existing across

France

Non-Dense Areas


07/09/2016

Source: Orange

Slide 119

For non-dense areas, the French government has earmarked €3.3bn in long-term (over 40 years) low-interest

loans to supplement local authority spending on builds

– Subsidies are awarded based on the quality of projects submitted by local authorities, including

aspects such as the scale of the build and the level of co-ordination with the inter-municipalities

Essentially requires local authorities to take the initiative to apply for funding (to top-up their own budget) and

gives priority of funding to well-organised projects which have a high likelihood of succeeding and benefit the

maximum number of people

The components paid for by state subsidies typically include:

– Fibre backhaul

– FTTH local loop

– B2B connections

– Funding for studies into FTTH deployment

In addition, RIP projects have begun to receive European Investment Bank funding, including as a part of the

EFSI (Juncker Plan)

– In Dec 12, the EIB directly invested €36m into an RIP in the Savoie region

– In Dec 14, the EIB mobilised €750m for deployment of “superfast broadband” in France (ie not

exclusively for FTTH or for any one region)

– In Apr 16, the EIB & EFSI approved a €62.5m investment into a THD in Alsace

Subsidies and European support


07/09/2016 Slide 120

Infrastructure operators agree deals with

local authorities to build fibre in non-dense

(RIP) areas

These operators specialise in building,

operating and maintaining the network, and

then wholesale out to ISPs

The four largest independent infrastructure

operators currently are Altitude, Axione (part

of the Bouygues Group), Tutor and Covage

An implication of this structure is that multiple

ISPs can sign a deal with a single

infrastructure operator to use part/all of its

network – eg Altitude has Comcable, K-Net, Ozone, Wibox,

Nordnet and many local operators using its network

– This can lead to competition amongst these ISPs in

certain areas

The role of infrastructure operators


07/09/2016 Slide 121

An example of one infrastructure operator’s

RIP network (Altitude Infrastructure)

Source: ZDNet

http://www.zdnet.fr/actualites/des-reseaux-d-initiative-publique-en-difficulte-exemple-dans-les-pyrenees-atlantiques-39773703.htm

List of known RIPs (a non-exhaustive list)


07/09/2016

Source: Credit Suisse Research

Slide 122

The availability of open-access networks with

regulated costs has allowed regional and

local ISPs to gain a foothold in the FTTH

market

There are over 20 alternative operators, with

a handful (such as K-Net, Kiwi Fiber and

Ozone) having a large, sometimes

overlapping footprint

– Others, such as Polymag Briey, have a

very small reach (Briey municipality only)

B2B operators in these areas heavily

outnumber B2C operators

These ISPs are dependent on the supply of

open access networks, and clearly cannot

expand beyond the existing footprint of fibre

– This also means that alt-operators may fight

amongst themselves in a number of these

rural markets, potentially driving prices down

ISPs


07/09/2016 Slide 123

An example of the Infrastructure Operator-ISP relationship


07/09/2016 Slide 124

Altitude’s national fiber footprint K-Net’s coverage

Source: Altitude webpage Source: .lafibreoptique.fr/k-net/


07/09/2016

Conclusions

~72% of homes to be passed with FTTH by 2021 on company projections – We revise this downwards to 57% coverage

We expect FTTH to form >25% of the overall BB subscriber base

The incumbent Orange holds a dominant lead which is unlikely to have been

significantly eroded by 2021

– The incumbent is also the key driver of growth in the FTTH footprint, a situation which is

unlikely to change substantially

A key event will likely be the full coverage of the 6m people living Very-Dense Areas,

likely to occur in 2018

– This may prompt a change in regulation/incentives by the state and cause national

operators to reconsider the appeal of rolling out FTTH in Non-Dense Areas

– A July 2016 press release by ARCEP indicated that “it plans on making adjustments and

additions to the existing regulatory framework governing very high density areas”

Iliad’s planned expansion of FTTH (9m homes passed by 2018) seems highly

ambitious, but if realised would likely present the greatest threat to Orange

Slide 125

FTTH Market Summary - Germany


07/09/2016 Slide 126

Dominated by regional challengers, a number of which are utility-

owned (eg M-Net, NetCologne, wilhelm.tel) – These are concentrated in large cities, eg M-Net in Munich, NetCologne in

Cologne and wilhelm.tel in Hamburg

New privately owned challengers emerging – Deutsche Glasfaser – backed by KKR. 100,000 homes passed. 40% take-

up

– Ixione- backed by Warburg Pincus and BAG

Challengers enjoy a higher than national average (25%) take-up

rate (eg NetCologne with 37% and M-Net with 26%, both as of

2013)

DT has a wide but thinly-spread FTTH footprint across 500,000

homes (of a 2015 total of 2.1m FTTH homes passed) and

suffers from a low subscription rate (6% in 2013) – DT ramped up to 500k between 2011-15 but has effectively flat-lined

rollout since

– Only major cities covered are Hannover and Dresden, as the bulk of DT’s

FTTH is spread amongst small towns of under 100,000 people

Conclusion: – Competition from challengers building FTTH is growing but not strong

enough yet to impact DT materially

– DT likely to continue to focus on vectoring and bonding where viable

– But DT also likely to consider FTTH in more rural areas where vectoring is

not viable and also gradually deepen fibre coverage inside 80% vectoring

footprint.

Source: Vodafone investor presentation, June 2013

Current Coverage vs Full Coverage


07/09/2016 Slide 127

Source: Credit Suisse estimates, Point-Topic, Telecompaper, Golem.de, FTTH Council Europe

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Current FTTH

coverage (and subs) far below theoretical full coverage of ~40m households

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)

FTTH Passed FTTH Subs All Households

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Change 338 338 400 300 300 300 300 300 300

% Change 32.9% 24.8% 23.5% 14.3% 12.5% 11.1% 10.0% 9.1% 8.3%

% of all HH 2.6% 3.4% 4.3% 5.1% 5.9% 6.6% 7.3% 8.0% 8.8% 9.3%

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Total FTTH Subs 166 275 384 492 600 675 750 825 900 975

Change 109 109 109 108 75 75 75 75 75

% Change 65.7% 39.5% 28.3% 22.0% 12.5% 11.1% 10.0% 9.1% 8.3%

Take-up rate 16.2% 20.2% 22.6% 23.4% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%



07/09/2016 Slide 128

0

200

400

600

800

1000

1200

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)

Deutsche Telekom NetCologne M-Net wilhelm.tel Deutsche Glasfaser EWETel

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Deutsche Telekom 230 320 430 500 501 502 503 504 505 506

NetCologne 240 240 240 282 324 366 408 450 492 534

M-Net 150 350 400 400 446 492 538 584 630 676

wilhelm.tel 340 380 420 460 500 540 580 620 660 700

Deutsche Glasfaser 0 25 50 100 267 433 600 767 934 1101

EWETel 60 63 65 68 71 74 77 80 83 86


Change 338 338 400 300 300 300 300 300 300

% Change 32.9% 24.8% 23.5% 14.3% 12.5% 11.1% 10.0% 9.1% 8.3%

% of all HH 2.6% 3.4% 4.3% 5.1% 5.9% 6.6% 7.3% 8.0% 8.8% 9.3%

Deutsche Glasfaser’s Capex guidance of €450m over “the

next few years”

Deutsche Telekom’s minimal

planned FTTH expansion

Source: Credit Suisse estimates, Point-Topic, Telecompaper, Golem.de, FTTH Council Europe, EWETel, PC-Magazin, Telegeography, Reuters, Westfallsche Nachrichten


07/09/2016 Slide 129


We expect cumulative FTTH

coverage of households to remain

under 9%, with the majority

comprised of non-DT FTTH

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Deutsche Telekom % of

HH passed 0.6% 0.8% 1.1% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2%

NetCologne % of HH

passed 0.6% 0.6% 0.6% 0.7% 0.8% 0.9% 1.0% 1.1% 1.2% 1.3%

M-Net % of HH passed 0.4% 0.9% 1.0% 1.0% 1.1% 1.2% 1.3% 1.4% 1.5% 1.6%

wilhelm.tel % of HH

passed 0.9% 1.0% 1.1% 1.1% 1.2% 1.3% 1.4% 1.5% 1.6% 1.7%

Deutsche Glasfaser % of

HH passed 0.0% 0.1% 0.1% 0.2% 0.7% 1.1% 1.5% 1.9% 2.3% 2.6%

EWETel % of HH passed 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)


Source: Credit Suisse estimates, Point-Topic, Telecompaper, Golem.de, FTTH Council Europe, EWETel, PC-Magazin, Telegeography, Reuters, Westfallsche Nachrichten



07/09/2016 Slide 130

0

200

400

600

800

1000

1200

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)


FTTH Subs (‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Deutsche Telekom 12 18 43 50 50 50 50 50 51 51

NetCologne 84 88 88 99 113 128 143 158 172 187

M-Net 38 90 100 100 112 123 135 146 158 169

wilhelm.tel 34 45 63 69 75 81 87 93 99 105

Deutsche Glasfaser 0 10 20 40 107 173 240 307 374 440

EWETel 6 6 7 7 7 7 8 8 8 9

Total FTTH Subs 166 275 384 492 600 675 750 825 900 975

Change 109 109 109 108 75 75 75 75 75

% Change 65.7% 39.5% 28.3% 22.0% 12.5% 11.1% 10.0% 9.1% 8.3%

Take-up rate 16.2% 20.2% 22.6% 23.4% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%

Barring an unexpected rise in

FTTH demand, subscriptions are

forecast to remain below 1m

Source: Credit Suisse estimates, Telecompaper, Golem.de, FTTH Council Europe, Telegeography, Tariftip


07/09/2016 Slide 131


Deutsche Glasfaser’s growing

share of BB subs is assuming

their 40% sign-up threshold prior

to deployment continues

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)


(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Deutsche Telekom % of

BB subs 0.0% 0.1% 0.1% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%

NetCologne % of BB subs 0.3% 0.3% 0.3% 0.3% 0.4% 0.4% 0.5% 0.5% 0.6% 0.6%

M-Net % of BB subs 0.1% 0.3% 0.3% 0.3% 0.4% 0.4% 0.4% 0.5% 0.5% 0.5%

wilhelm.tel % of BB subs 0.1% 0.2% 0.2% 0.2% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% Deutsche Glasfaser % of

BB subs 0.0% 0.0% 0.1% 0.1% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4%

EWETel % of BB subs 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Total BB Subs 28,000 29,000 30,000 30,000 30,000 30,000 31,000 31,000 31,000 32,000

Source: Credit Suisse estimates, Telecompaper, Golem.de, FTTH Council Europe, Telegeography, Tariftip

DT has rolled out FTTH to 21

locations, 14 of which are small

towns of under 100,000 people – Only 2 major cities covered by DT’s

FTTH

– Refrained from providing fibre in the

majority of large cities (Berlin, Munich,

Frankfurt, Leipzig, Cologne)

Deutsche Telekom


07/09/2016 Slide 132

Source: Credit Suisse estimates, DT

DT’s current FTTH footprint


07/09/2016 Slide 133


Deutsche Telekom


07/09/2016 Slide 134

Source: Credit Suisse estimates, Golem.de, Tariftip, Eurocomms

DT has struggled for subscribers since its initial

pilot build in 2011-15, which we estimate covers

~500k homes

– Tariftip last reported only 18k subscribers as of

2013 (an estimated 6% subscription rate)

In our view this may be attributable to DT’s

targeting of small towns

– DT’s current FTTH footprint does not cover any of

the five most populous cities in Germany

Given no public expansion plans for FTTH, DT is

assumed to expand their footprint at 1% YoY until

2021

Assuming a € 1250 per home cost of build, DT’s

pilot cost around €625m to complete

0

100

200

300

400

500

600

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)


(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

DT FTTH Passed 230 320 430 500 501 502 503 504 505 506

Change 90 110 70 1 1 1 1 1 1

% Change 34.4% 16.3% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%

% of all HH 0.6% 0.8% 1.1% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

DT FTTH Subs 12 18 43 50 50 50 50 50 51 51

Change 7 25 7 0 0 0 0 0 0

% Change 56.5% 138.9% 16.3% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%

Take-up rate 5.0% 5.6% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%


Overview of All Challengers


07/09/2016 Slide 135

RWE FiberNet is one key national utilities provider of fibre

A collection of local utilities and municipalities (“Stadtwerkes”)


EWETel


07/09/2016 Slide 136

Subsidiary of EWE AG, a utility in NW Germany and

Brandenburg/Rugen

EWE Tel Founded in 1996

Also owns stakes in other regional telcos BREKOM

(Bremen), Telta (Eberswalde) and nordcom (Oldenburg) – Acquired in 2001-2002

Provides telecom and IT services to residential and

business customers

Has spent over eu180m expanding its network

Aim to cover 1m households by end 2016

38,000 km network end-15, – 60% fibre,

– 40% VDSL, including renting DT’s sub-loop

Provides a combined offer of power, natural gas and

telecoms (SMART bei EWE)

615 000 customers (end-15) receive telecom products

from the Group, according to the EWE annual report

Where EWE is active in telecoms

Source: EWE Tel

Has operated in Cologne and

surrounding areas since 2006 – Also offers some cable and DSL services

Owned by local utilities company SW

Koln, has a 3500km fibre network – Also resells VDSL

c.400k subscribers

Invested €350m to date

Capex stable at €25-30m per year

Expansion planned (right, in red)


07/09/2016 Slide 137

NetCologne

Source: NetCologne

NetCologne


07/09/2016 138

NetCologne’s current FTTH footprint is smaller than

DT’s pilot build

– NC has 240k homes passed as of 2014 vs 500k for

DT in 2015)

– However this footprint is more concentrated and

enjoys a higher subscription rate (around 88k subs in

2013/37% of homes passed vs 18k in 2013/6%)

Given recent Capex spending of under €30m and

assuming a minimum cost of €750 per home, implied

footprint expansion has been forecast as 40k

additional homes per year

It is worth noting that NetCologne begun deploying

vectoring from August 2015, which may cut FTTH

expansion further

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

NetCologne FTTH Passed 240 240 240 282 324 366 408 450 492 534

Change 0 0 42 42 42 42 42 42 42

% Change 0.0% 0.0% 17.5% 14.9% 13.0% 11.5% 10.3% 9.3% 8.5%

% of all HH 0.6% 0.6% 0.6% 0.7% 0.8% 0.9% 1.0% 1.1% 1.2% 1.3%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

NetCologne FTTH Subs 84 88 88 99 113 128 143 158 172 187

Change 4 0 11 15 15 15 15 15 15

% Change 4.8% 0.0% 12.2% 14.9% 13.0% 11.5% 10.3% 9.3% 8.5%

Take-up rate 35.0% 36.7% 36.7% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%


0

100

200

300

400

500

600

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)


Source: Credit Suisse estimates, Digiworld Summit (2011), VDSL Tarifvergleich, Golem.de

Began rollouts of FTTH in 2009

across Bavaria

Owned by municipality

(Stadtwerke Munchen)

Currently has over 100,000

FTTH connections, mostly in

central Munich

Plans to expand into the rest of

Munich and cover 70% by 2021

Expansion focused on densely-

populated areas where FTTH is

economically viable


07/09/2016 Slide 139

M-Net

Source: M-net

https://www.swm.de/privatkunden/info/m-net.html

M-Net


07/09/2016 Slide 140

Source: Credit Suisse estimates, Telegeography, Glasfaser-Internet, Glasfasern-Bieter, European Commission, Teltarif

M-Net is a serious challenger in

Munich with an already extensively

deployed FTTH network (400k homes

passed as of 2014) – We believe it is well-positioned to capture a rise in

demand for FTTH in coming years, given its

central footprint (located in the Middle Ring of

Munich) and spare capacity (currently only about

20% of homes passed are subscribers)

Given its guidance for 260k additional

homes by 2020, its implied footprint

growth is 46k homes per year

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

M-Net FTTH Passed 150 350 400 400 446 492 538 584 630 676

Change 200 50 0 46 46 46 46 46 46

% Change 133.3% 14.3% 0.0% 11.5% 10.3% 9.3% 8.6% 7.9% 7.3%

% of all HH 0.4% 0.9% 1.0% 1.0% 1.1% 1.2% 1.3% 1.4% 1.5% 1.6%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

M-Net FTTH Subs 38 90 100 100 112 123 135 146 158 169

Change 53 10 0 12 12 12 12 12 12

% Change 140.0% 11.1% 0.0% 11.5% 10.3% 9.3% 8.6% 7.9% 7.3%

Take-up rate 25.0% 25.7% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%


0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)


Second foray into German FTTH

market by KPN, as minority investor

alongside KKR

Set up in 2012 (following KPN’s

acquisition of BORNet)

Follows demand-aggregation route

of 40% sign-ups

Mainly concentrated in rural areas

where no cable and little VDSL

Often has support of local

municapility

Has passed 100,000 homes as of

2015, with a planned investment of

€450m over the next few years – Has recently announced plans to go

“nationwide”


07/09/2016 Slide 141

Deutsche Glasfaser

Source: Deutsche Glasfaser

Deutsche Glasfaser


07/09/2016 Slide 142

At face value, DG could be a challenger for

FTTH subscribers – Despite being the most recently founded

challenger, its intention is to have the largest

FTTH footprint (600k homes) by 2018

Given its stated 40% sign-up requirement,

this could see it with around 240k

subscribers by 2018 (vs the next closest

with NetCologne’s 160k)

DG has already committed €450m to an

FTTH expansion over the next few years,

which we view as between 300-600k

additional homes passed (depending on

additional home cost)

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

DG FTTH Subs 0 10 20 40 107 173 240 307 374 440

Change 10 10 20 67 67 67 67 67 67

% Change 100.0% 100.0% 166.7% 62.5% 38.5% 27.8% 21.8% 17.9%

Take-up rate 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0%


(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

DG FTTH Passed 0 25 50 100 267 433 600 767 934 1101

Change 25 25 50 167 167 167 167 167 167

% Change 100.0% 100.0% 166.7% 62.5% 38.5% 27.8% 21.8% 17.9%

% of all HH 0.0% 0.1% 0.1% 0.2% 0.7% 1.1% 1.5% 1.9% 2.3% 2.6%

0

200

400

600

800

1000

1200

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)


Source: Credit Suisse estimates, Telegeography, Reuters, Westfallsche Nachrichten

Provides fibre to business and residential customers

mostly in Rhineland-Palantine, Bavaria, Baden-

Wurttemburg and Saarland

5,500kom of fibre, 6 data centres, 4000 business

customers and 65,000 residential customers (mix of

MDU and SDU)

Revenue growing 34% CAGR since 2011

Warburg Pincus (MD Rene Obermann) and DBAG

recently invested eu250m to expand network

Aim to take a lead in consolidating the industry

Inexio


07/09/2016 Slide 143

Source: Inexio

Operates as both wholesale partner (under

RWE Fibernet) and end-service ISP (under

RWE HighSpeed) – Wholesale partner to ISPs in Cologne (NetCologne) and rural

areas (Filiago)

– ISP operating in Essen

Acquired 15% of fibreglass infrastructure

business Vitronet in 2011 to aid with expansion

RWE


07/09/2016 144

Current FiberNet

“partners”

Source: RWE


07/09/2016 Slide 145

ISP owned by SW Norderstedt (based in

Norderstedt, near Hamburg), established in

1999

Fibre network cost €43m to construct,

resulted in heavy losses as recently as

2003 which were absorbed by parent

company

Began to turn a profit in 2006

Covers 95% of Norderstedt and has

expanded into Hamburg and surrounding

regions

Co-operates heavily with housing

association SAGA GWG – since 2009

nearly every new home is connected to

wilhelm.tel’s fibre network

wilhelm.tel


07/09/2016

Pricing Plans

Deutsche Telekom

Deutsche Glasfaser EWETel

Slide 146

Source: Deutsche Glasfaser

Source: DT

Source: EWETel

Pricing Plans


07/09/2016 Slide 147

NetCologne

M-Net wilhelm.tel

Source: NetCologne

Source: M-Net Source: wilhelm.tel

FTTH Market Summary - Ireland


07/09/2016 Slide 148

Ireland has one of the smallest potential markets in Europe

with ~1.8m households, making a full-scale FTTH rollout

relatively cheap – The incumbent Eir and SIRO’s FTTH rollout plans could potentially cover

between 30-50% of Irish households, depending on degree of overlap

Within the next year, the Irish Govt will announce who is

awarded the National Broadband Plan funding to rollout

FTTH – The plan is a gap-funding model which makes FTTH viable for over

757k rural homes and businesses, as well as allowing the winning telco

to own the network after 25 years

– Both Eir and SIRO are already likely to cover urban and commercially

viable areas, but the winner of the funding is likely to gain a lead in FTTH

coverage across the rest of Ireland

The three remaining names on the shortlist all propose

different business models to deploy FTTH The incumbent telco Eir proposes to use its existing FTTC network

SIRO exploits the utility ESB’s infrastructure & ducts

Enet intends to deploy a neutral open-access network built around

offering wholesale products to service providers

Broadband map of Ireland, with blue areas indicating “non-intervention areas” (where FTTH is economically viable) and amber areas indicating “intervention areas”, likely to be covered by the National Broadband Plan funding

Source: dccae.gov.ie

https://www.siliconrepublic.com/comms/national-broaband-plan-critical-endgame

Current Coverage vs Full Coverage (CS forecasts)


07/09/2016 Slide 149

Source: Credit Suisse estimates

('000) 2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E


Projected FTTH passed, based on CS forecasts and not

accounting for any NBP decision

('000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Total FTTH Passed 12 13 14 168 296 442 588 733 879 1025

Change 1 1 154 128 146 146 146 146 146

% Change 8.3% 7.7% 1,100.0% 76.2% 49.3% 33.0% 24.8% 19.9% 16.6%

% of all HH 0.7% 0.8% 0.8% 9.9% 17.4% 26.0% 34.6% 43.1% 51.7% 60.3%

('000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Total FTTH Subs 5 5 6 66 118 177 235 293 352 410

Change 0 0 0 60 53 58 58 58 58 58

% Change 7.1% 8.3% 7.7% 1071% 80.5% 49.3% 33.0% 24.8% 19.9% 16.6%

Take-up rate 40.0% 40.0% 40.0% 39.3% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0%

0

200

400

600

800

1000

1200

1400

1600

1800

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)


0

100

200

300

400

500

600

700

800

900

1000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)

Magnet eir SIRO

Homes Passed (company projections)


07/09/2016 Slide 150

Source: Credit Suisse estimates, Eir, ESB, IDATE, Silicon Republic

HH Passed (‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Magnet Networks 12 13 14 15 16 17 18 19 20 21

eir 0 0 0 28 100 156 212 268 324 380

SIRO 0 0 0 125 250 375 500 625 750 875


Change 1 1 154 198 182 182 182 182 182

% Change 8.3% 7.7% 1,100.0% 117.9% 49.7% 33.2% 24.9% 20.0% 16.6%

% of all HH 0.7% 0.8% 0.8% 9.9% 20.3% 30.4% 38.4% 48.0% 57.6% 67.2%



07/09/2016 Slide 151



Magnet Networks 12 13 14 15 16 17 18 19 20 21

eir 0 0 0 28 80 125 170 214 259 304

SIRO 0 0 0 125 200 300 400 500 600 700


Change 1 1 154 128 146 146 146 146 146

% Change 8.3% 7.7% 1,100.0% 76.2% 49.3% 33.0% 24.8% 19.9% 16.6%

% of all HH 0.7% 0.8% 0.8% 9.9% 17.4% 26.0% 34.6% 43.1% 51.7% 60.3%

We forecast that:

− SIRO only achieve 80% of their stated build targets

We therefore scale down our forecast for FTTH across Ireland by 20%

− This implies only 60.3% of Irish households are covered by FTTH by 2021, instead of 67.2%

We use these forecasts from here onwards as the basis of our analysis

0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Magnet eir SIRO


07/09/2016 Slide 152


Could potentially vary significantly

depending whether Eir or SIRO are

awarded NBP funding


Magnet 12 13 14 15 16 17 18 19 20 21 Magnet % of HH

passed 0.7% 0.8% 0.8% 0.9% 0.9% 1.0% 1.1% 1.1% 1.2% 1.2%

eir 0 0 0 28 80 125 170 214 259 304

eir % of HH passed 0.0% 0.0% 0.0% 1.6% 4.7% 7.3% 10.0% 12.6% 15.2% 17.9%

Vodafone/ESB 0 0 0 125 200 300 400 500 600 700 Vodafone/ESB % of

HH passed 0.0% 0.0% 0.0% 7.4% 11.8% 17.6% 23.5% 29.4% 35.3% 41.2%

('000) 2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E


0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Magnet eir SIRO




07/09/2016 Slide 153

FTTH Subs (‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Magnet 5 5 6 6 6 7 7 8 8 8

eir 0 0 0 10 32 50 68 86 104 122

Vodafone/ESB 0 0 0 50 80 120 160 200 240 280

Total FTTH Subs 5 5 6 66 118 177 235 293 352 410

Change 0 0 0 60 53 58 58 58 58 58

% Change 7.1% 8.3% 7.7% 1,071.4% 80.5% 49.3% 33.0% 24.8% 19.9% 16.6%

Take-up rate 40.0% 40.0% 40.0% 39.3% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0%

Given no current subscriber data,

we assume a 40% take-up rate for

FTTH

0

100

200

300

400

500

600

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)

Magnet eir SIRO



07/09/2016 Slide 154


Assuming a 40% take-up rate

across individual operators, we

forecast the overall share of FTTH

within fixed-line subscriptions

would be ~31.5% by 2021

FTTH Subs (‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Magnet 5 5 6 6 6 7 7 8 8 8

Magnet % of BB subs 0.4% 0.4% 0.4% 0.5% 0.5% 0.5% 0.6% 0.6% 0.6% 0.6%

eir 0 0 0 10 32 50 68 86 104 122

eir % of BB subs 0.0% 0.0% 0.0% 0.7% 2.5% 3.8% 5.2% 6.6% 8.0% 9.4%

Vodafone/ESB 0 0 0 50 80 120 160 200 240 280 Vodafone/ESB % of

BB subs 0.0% 0.0% 0.0% 3.8% 6.2% 9.2% 12.3% 15.4% 18.5% 21.5%


('000) 2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

Total BB Subs 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Magnet eir SIRO

Eir


07/09/2016 Slide 155

Source: Credit Suisse estimates, Eir

Eir has announced it plans to pass 1.9m

homes with a mix of FTTc and FTTH. 28k

homes were passed with FTTH at end

2015.

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Eir FTTH Passed 0 0 0 28 80 125 170 214 259 304

Change 52 44.8 44.8 44.8 44.8 44.8

% Change 185.7% 56.0% 35.9% 26.4% 20.9% 17.3%

% of all HH 0.0% 0.0% 0.0% 1.6% 4.7% 7.3% 10.0% 12.6% 15.2% 17.9%

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Eir FTTH Subs 0 0 0 10 32 50 68 86 104 122

Change 0 0 0 10 22 18 18 18 18 18

% Change 233.3% 56.0% 35.9% 26.4% 20.9% 17.3%

Take-up rate 32.0% 32.0% 32.0% 32.0% 32.0% 32.0%

Share of overall FTTH subs 27.0% 28.2% 28.9% 29.2% 29.5% 29.7%

0

50

100

150

200

250

300

350

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


SIRO


07/09/2016 Slide 156

Following national utility-provider ESB’s

open tender in 2012 for a partner in a fibre

JV, Vodafone was announced in 2014 as a

50:50 shareholder in SIRO

SIRO has committed €450m to its initial

build target of 500k homes passed by 2018 – We scale this down by 20% in our forecast

The deployment of FTTH will use ESB’s

overground poles and underground ducts,

reducing build costs (by ~20-30%)

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

SIRO FTTH Passed 0 0 0 125 200 300 400 500 600 700

Change 125 75 100 100 100 100 100

% Change 60.0% 50.0% 33.3% 25.0% 20.0% 16.7%

% of all HH 0.0% 0.0% 0.0% 7.4% 11.8% 17.6% 23.5% 29.4% 35.3% 41.2%

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

SIRO FTTH Subs 0 0 0 50 80 120 160 200 240 280

Change 0 0 0 50 30 40 40 40 40 40

% Change 60.0% 50.0% 33.3% 25.0% 20.0% 16.7%

Take-up rate 40.0% 12.0% 10.7% 8.0% 6.4% 5.3% 4.6%

Share of overall FTTH subs 76.2% 67.6% 67.9% 68.1% 68.2% 68.2% 68.3%

Source: Credit Suisse estimates, ESB

0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Following (in our view) a similar model to the UK’s

CityFibre, Enet has helped build and administer

“metro-fibre rings” (known as Metropolitan Access

Networks) across towns and cities – These are then linked to commercial premises, businesses

and public buildings

– Enet currently operates 94 MANs

Enet remain one of the three shortlisted to acquire

NBP funding – They intend to use funding to build a wholesale open-access

network

– “CEO Conal Henry said that Enet’s position as a pure-play

wholesale provider with no retail interests align it perfectly

with the National Broadband Plan in terms of creating a fair

and open network for other operators to access fibre and

compete for business” – Silicon Republic, Jan 2016


07/09/2016 Slide 157

Enet

Source: dccae.gov.ie An example of Enet’s MAN in Kilkenny City, notably passing through all business parks and retail centres (shaded red)

Magnet Networks


07/09/2016 Slide 158

One of the earliest entrants into the

Irish FTTH market, building a small

proprietary FTTH network of 12k

homes passed by 2012

Now specialises in B2B services,

listing Amazon, Adobe, Lidl and

Centra as clients

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Magnet FTTH Passed 12 13 14 15 16 17 18 19 20 21

Change 0.8 1 1 1 1 1 1 1 1 1

% Change 7.1% 8.3% 7.7% 7.1% 6.7% 6.3% 5.9% 5.6% 5.3% 5.0%

% of all HH 0.7% 0.8% 0.8% 0.9% 0.9% 1.0% 1.1% 1.1% 1.2% 1.2%

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Magnet FTTH Subs 5 5 6 6 6 7 7 8 8 8

Change 0 0 0 0 0 0 0 0 0 0

% Change 7.1% 8.3% 7.7% 7.1% 6.7% 6.3% 5.9% 5.6% 5.3% 5.0%

Take-up rate 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0%


0

5

10

15

20

25

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)


Source: Credit Suisse estimates, IDATE, Silicon Republic

Conclusions


07/09/2016 Slide 159

Ireland shows how different FTTH models could

be scaled up to countries such as Germany and

the UK – Its diversity in dense and rural areas makes it more comparable than

densely-populated Asian markets such as Japan or South Korea

– Its market structure of a single dominant telco currently providing FTTC-only

is similar to BT in the UK or DT in Germany

It currently faces an active competition between an

incumbent, a utility-led JV and potentially an open-

access provider

The government’s impending decision on which

provider to award NBP funding to will likely be the

key catalyst to which provider dominates the FTTH

market

Source: thejournal.ie

Italy


07/09/2016 Slide 160

1. FTTH Market Summary & Overview of Market Structure

2. Current Coverage vs Full Coverage

3. Homes Passed & % of Homes Passed 4. FTTH subscribers & FTTH subscribers as a % of fixed-line subscribers

5. Telecom Italia 6. Fastweb

7. Enel Open Fibre

8. Demand-side considerations

9. National Broadband Plan 10.European funding

11.Conclusions

Potentially one of the most FTTH markets in Europe, following the recent entry of national Italian utility Enel as

a network provider (under Enel Open Fibre)

– Enel has declared a target of 9.5m homes passed by 2021 (revised upwards from 7.5m following their

acquisition of Metroweb)

– Partnerships already established with service providers Vodafone, Wind and Tiscali

Telecom Italia & Fastweb’s reponse has been the announcement of a JV named “FiberFlash”, intended to act

as a network provider challenger to EOF

– FiberFlash is funded 80% by Telecom Italia

– FiberFlash aims to cover 5m homes by 2020 (a net addition of 3m homes)

EOF enjoys the advantage of utilising Enel’s existing utility infrastructure, which has been estimated to reduce

build cost by ~20%

However FiberFlash has an established FTTH platform to build upon, with TI and Fastweb already passing

over 2.5m homes with FTTH (excluding overlap)

A further complication is the increased funding made available through the EIB and EFSI (Juncker Plan),

though this is typically reserved for coverage of white spots

– The EFSI has already agreed to a €500m loan for TI’s overall high-speed broadband program (not

FTTH exclusively)

– Telecompaper reported in June ‘16 that Enel executives have also met with the EIB regarding funding


07/09/2016

FTTH Market Summary - Italy

Slide 161

Homes Passed (Company guidance)


07/09/2016

There is a theoretical scenario of ~14.5m Italian homes

passed by 2020-21 (9.5m by EOF 2021 and 5m by

FiberFlash 2020) – However with overlap, the mean coverage is likely to be much

lower

It is currently unclear whether TI and Fastweb will commit

entirely to expanding FiberFlash’s network or will continue

to expand their own networks

– A 5m HH target footprint is larger than the existing

network of both TI (564k) or Fastweb (2m)

– However it is unclear how the access to FF’s network

will be allocated, therefore our assumption is that both

operators have full access to FF’s overall network NB: • TI and Fastweb are represented separately for historic reasons, however will largely share a common network under FiberFlash from 16-17 onwards • Enel Open Fibre subs refers to service providers operating under the EOF network (eg Vodafone, Tiscali, Wind)

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Telecom Italia 46 455 510 564 1,709 2,854 3,998 4,499 5,000 5,000

Fastweb 1800 1,800 1,867 1,933 2,000 2,750 3,500 4,250 5,000 5,000

Enel Open Fibre 0 0 0 0 0 1,900 3,800 5,700 7,600 9,500


Change 120 1,864 1,000 1,000 2,000 2,000 2,000 2,000 2,000

% Change 4.2% 62.3% 20.6% 17.1% 29.2% 22.6% 18.4% 15.6% 13.5%

% of all HH 12.1% 12.6% 20.4% 24.6% 28.8% 37.2% 45.6% 54.0% 62.4% 70.8%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)

Telecom Italia Fastweb Enel Open Fibre

Source: Credit Suisse estimates, Telecom Italia, European Commission, AdvancedTV, NMHH Conference (2013), BMI Research, TotalTele, GPOND, ZDNet

Slide 162



07/09/2016

NB: • TI and Fastweb are represented separately for historic reasons, however will largely share a common network under FiberFlash from 16-17 onwards • Enel Open Fibre subs refers to service providers operating under the EOF network (eg Vodafone, Tiscali, Wind)

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Telecom Italia 46 455 510 564 1367 2283 3199 3599 4000 4916

Fastweb 1800 1,800 1,867 1,933 2,000 2200 2800 3400 4000 4600

Enel Open Fibre 0 0 0 0 0 1520 3040 4560 6080 7600


Change 120 1,864 1,000 800 1,600 1,600 1,600 1,600 1,600

% Change 4.2% 62.3% 20.6% 13.7% 24.0% 19.4% 16.2% 14.0% 12.3%

% of all HH 12.1% 12.6% 20.4% 24.6% 28.0% 34.7% 41.4% 48.1% 54.9% 61.6%


We forecast that:

− Both FiberFlash (Telecom Italia and Fastweb) and EOF will only achieve 80% of their stated build targets

We therefore scale down our forecast for FTTH coverage across Italy by 20%

− This implies only 61.6% of Italian households are covered by FTTH by 2021, instead of 70.8%

We use these forecasts from here onwards as the basis of our analysis

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Slide 163


07/09/2016

('000) 2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E


(HH Passed, ‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Telecom Italia 46 455 510 564 1,367 2,283 3,199 3,599 4,000 4,916 % of all HH 0.2% 1.9% 2.1% 2.4% 5.7% 9.6% 13.4% 15.1% 16.8% 20.7%

Fastweb 1800 1,800 1,867 1,933 2,000 2,200 2,800 3,400 4,000 4,600 % of all HH 7.6% 7.6% 7.8% 8.1% 8.4% 9.2% 11.8% 14.3% 16.8% 19.3%

Enel Open Fibre 0 0 0 0 0 1,520 3,040 4,560 6,080 7,600 % of all HH 0.0% 0.0% 0.0% 0.0% 0.0% 6.4% 12.8% 19.2% 25.5% 31.9%



0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Slide 164

Take-up rate assumed to be 30%

across all three providers


07/09/2016


NB: • TI and Fastweb are represented separately for historic reasons, however will largely share a common network under FiberFlash from 16-17 onwards • Enel Open Fibre subs refers to service providers operating under the EOF network (eg Vodafone, Tiscali, Wind)

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Telecom Italia 5 46 51 56 410 685 960 1,080 1,200 1,475

Fastweb 360 540 560 580 600 660 840 1,020 1,200 1,380

Enel Open Fibre 0 0 0 0 0 152 608 1,368 1,824 2,280

Total FTTH Subs 370 586 611 636 1,010 1,497 2,408 3,468 4,224 5,135

Change 216 25 25 374 487 911 1,060 756 911

% Change 58.2% 4.3% 4.2% 58.7% 48.2% 60.8% 44.0% 21.8% 21.6%

Take-up rate 12.9% 19.6% 12.6% 10.9% 15.2% 18.1% 24.4% 30.3% 32.4% 35.0%


0

1,000

2,000

3,000

4,000

5,000

6,000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E



Slide 165

2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

Total BB Subs ('000) 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000


07/09/2016

% of all fixed-line subs Very little visibility on future levels of FTTH subs

− All three providers are assumed to have a 30% take-up rate

With no threat from cable, it is assumed that migration from DSL and older technologies will be towards faster connections will benefit FTTH

However generally low levels of broadband demand (even at current low speeds) suggests to us that a 30% take-up rate for FTTH is fair

(Subs, ‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Telecom Italia 5 46 51 56 410 685 960 1,080 1,200 1,475 % of BB

Fastweb 360 540 560 580 600 660 840 1,020 1,200 1,380 % of BB

Enel Open Fibre 0 0 0 0 0 152 608 1,368 1,824 2,280 % of BB


0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E



Slide 166

TI have thus far focused on FTTC expansion, in

line with the goals of the European Digital Agenda

– It rejected previous attempts in 2014 and

2015 by the Italian Govt to elicit investment

into FTTH through partial subsidisation

The rapid expansion of its FTTH network is likely to

come from access to Fastweb’s existing 32,000km

network through FiberFlash

Telecom Italia


07/09/2016

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

TI FTTH Passed 46 455 510 564 1367 2283 3199 3599 4000 4916

Change 409 55 55 803 916 916 401 401 916

% Change 889.1% 12.0% 10.7% 142.4% 67.0% 40.1% 12.5% 11.1% 22.9%

% of all HH 0.2% 1.9% 2.1% 2.4% 5.7% 9.6% 13.4% 15.1% 16.8% 20.7%

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

TI FTTH Subs 5 46 51 56 410 685 960 1,080 1,200 1,475

Change 41 5 5 354 275 275 120 120 275

% Change 889.1% 12.0% 10.7% 627.1% 67.0% 40.1% 12.5% 11.1% 22.9%

Take-up rate 10.0% 10.0% 10.0% 10.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0%

Share of overall subs 1.2% 7.8% 8.3% 8.9% 40.6% 45.8% 39.9% 31.1% 28.4% 28.7%

Source: Credit Suisse estimates, Telecom Italia, ZDNet, GPOND, AdvancedTV

0

1,000

2,000

3,000

4,000

5,000

6,000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Homes Passed Subs

Slide 167

Fastweb


07/09/2016

Fastweb have had the vast majority of the FTTH

market to themselves until recently

– Its FTTH network currently passes ~2m

homes, compared to TI’s ~564k homes

Its build has been concentrated in densely-

populated areas such as Milan, Rome and Bologna,

with the majority of build locations in Northern Italy

Fastweb also operates an FTTS (fibre-to-the-street)

network, which reduces the copper loop used to

250m and it claims can reach an additional 20% of

Italian households with 100mbps

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Fastweb FTTH Passed 1800 1,800 1,867 1,933 2,000 2200 2800 3400 4000 4600

Change 67 67 67 200 600 600 600 600

% Change 0.0% 3.7% 3.6% 3.4% 10.0% 27.3% 21.4% 17.6% 15.0%

% of all HH 7.6% 7.6% 7.8% 8.1% 8.4% 9.2% 11.8% 14.3% 16.8% 19.3%

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Fastweb FTTH Subs 360 540 560 580 600 660 840 1,020 1,200 1,380

Change 180 20 20 20 60 180 180 180 180

% Change 50.0% 3.7% 3.6% 3.4% 10.0% 27.3% 21.4% 17.6% 15.0%

Take-up rate 20.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0%


Source: Credit Suisse estimates, Fastweb, NMHH Conference (2013), AdvancedTV

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Homes Passed Subs

Slide 168

http://www.capacitymedia.com/Article/3089433/Fastweb-to-invest-400-million-in-fibre.html

http://www.capacitymedia.com/Article/3089433/Fastweb-to-invest-400-million-in-fibre.html

Enel Open Fibre


07/09/2016

EOF intends to act as a network provider to its service partners

It enjoys a cost advantage through Enel’s existing power

infrastructure providing the equivalent of duct access

EOF strengthened its expertise and network scope by acquiring

Metroweb for €714m, adding an additional 2m homes passed

onto its initial 7.5m target

The EOF venture has a commitment of €3.7bn between 2016-21,

of which 70% is expected to be debt-financed

– Given this and the ownership structure (where Metroweb

owns 50%) Enel itself is only likely to provide €300-400m of

equity financing to EOF

Enel has also expressed some interest in rolling out FTTH in other

countries where it owns infrastructure (Spain and some Latin

American countries)

(‘000) 2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

EOF FTTH Passed 0 0 0 0 0 1520 3040 4560 6080 7600

Change 1,520 1,520 1,520 1,520 1,520

% Change 100.0% 50.0% 33.3% 25.0%

% of all HH 0.0% 0.0% 0.0% 0.0% 0.0% 6.4% 12.8% 19.2% 25.5% 31.9%

(‘000) 2012A 2013A 2014A 2015A 2016E 2017E 2018E 2019E 2020E 2021E

EOF FTTH Subs 0 0 0 0 0 152 608 1,368 1,824 2,280

Change 152 456 760 456 456

% Change 300.0% 125.0% 33.3% 25.0%

Take-up rate 0.0% 0.0% 0.0% 0.0% 0.0% 10.0% 20.0% 30.0% 30.0% 30.0%


0

1000

2000

3000

4000

5000

6000

7000

8000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

FTTH Homes Passed FTTH Subs

Source: Credit Suisse estimates, Enel guidance

Slide 169

Goals are set at: – 100% of citizens to have at least 30mbps speed by 2020

– 85% of citizens to have at least 100mbps speed by 2020

The total amount pledged by various state actors is ~€4-5bn (quoted at €4.9bn in November

2015)

The plan includes: – subsidies to aid private investment in “market failure” areas;

– vouchers for end users;

– tax credits for infrastructural works;

As in France, the Italian plan is built around a division of Italy into various clusters (based on

population density and current internet access) – Approximately 50% of funding will go to Clusters A (Italy’s 15 most populous and industrial areas) and B (over 1,100

towns currently covered by at least 30mbps connections) – in Cluster A funding is only for vouchers whilst in Cluster B

funding can also subsidise up to 70% of private investment

– The remainder is allocated to Cluster C (where speeds are under 30mbps) and Cluster D (4,300 municipalities with the

slowest internet access), where funding can take the form of subsidies, vouchers and tax credits as required

The allocation of this funding to private investors is still unclear, particularly in Clusters C and D

where a neutral bidding process is expected to occur during 2016

Italian National Broadband Plan


07/09/2016 Slide 170

As a European nation with one of the slowest

average internet speeds in Europe, our view is that

Italy will be one of the likely recipients of European

Investment Bank funding and any infrastructure-

related aid

TI has already received a €500m loan for an

acceleration of their overall high-speed network

build

Enel executives are also in talks with the EIB for

additional funding

This additional funding is likely to be heavily

allocated to covering white spots, typically in

Southern Italy (as with TI’s loan where 30% is ring

fenced for the South)

Ultimately this funding does present some upside to

the homes passed targets presented by each

venture

European Funding/ Aid


07/09/2016

Source: EIB.org

Source: Telecompaper

EIB’s approved funding for TI’s next-gen network build

Slide 171

KPN-owned network operator Reggefiber the

dominant provider (>80%) of FTTH access to

16 different service providers

– Service providers on Reggefiber’s network

comprise 90% of the overall FTTH subscribers in

Netherlands

The main challenger to Reggefiber is CIF, an

infrastructure fund that entered the FTTH

market in 2011 with its own proprietary FTTH

network

– Currently owns ~12% of the overall Dutch FTTH

network and its service providers have up to 10%

of the overall NethsFTTH subscriber base


07/09/2016

FTTH Market Summary - Netherlands

Source: KPN

KPN’s FTTH homes passed additions slowed in 2015

Slide 172



07/09/2016 Slide 173

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Change 469 331 260 50 50 50 50 50 50

% Change 32.3% 17.2% 11.6% 2.0% 2.0% 1.9% 1.9% 1.8% 1.8%

% of all HH 19.3% 25.6% 30.0% 33.5% 34.1% 34.8% 35.5% 36.1% 36.8% 37.5%

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Total FTTH Subs 483 656 750 900 1,100 1,175 1,197 1,220 1,242 1,265

Change 173 94 150 200 75 23 23 23 23

% Change 35.8% 14.3% 20.0% 22.2% 6.8% 1.9% 1.9% 1.8% 1.8%

Take-up rate 33.3% 34.2% 33.3% 35.9% 43.0% 45.0% 45.0% 45.0% 45.0% 45.0%

We estimate take-up rate will

continue to climb from 35.9% to 45% by 2017

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E



Homes Passed and % of HH passed


07/09/2016 Slide 174

Source: Credit Suisse estimates, BTVNews

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Reggefiber Network 1,303 1,688 2,003 2,160 2,170 2,180 2,190 2,200 2,210 2,220

CIF Network 116 192 270 301 341 381 421 461 501 541


Change 469 331 260 50 50 50 50 50 50

% Change 32.3% 17.2% 11.6% 2.0% 2.0% 1.9% 1.9% 1.8% 1.8%

% of all HH 19.3% 25.6% 30.0% 33.5% 34.1% 34.8% 35.5% 36.1% 36.8% 37.5%

Assuming little/no overlap in fibre

builds, CIF to form a greater share of the overall Dutch FTTH network

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Reggefiber Network % of

HH passed 17.4% 22.5% 26.7% 28.8% 28.9% 29.1% 29.2% 29.3% 29.5% 29.6% CIF Network % of HH

passed 1.5% 2.6% 3.6% 4.0% 4.5% 5.1% 5.6% 6.1% 6.7% 7.2%

0

500

1,000

1,500

2,000

2,500

3,000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Reggefiber Network CIF Network

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


FTTH Subscriptions & % of all fixed-line subs


07/09/2016 Slide 175

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Reggefiber Network 386 500 572 722 880 940 958 976 994 1,012

CIF Network 82 136 156 151 187 200 203 207 211 215

Total FTTH Subs 483 656 750 900 1,100 1,210 1,314 1,417 1,520 1,623

Change 173 94 150 200 110 103 103 103 103

% Change 35.8% 14.3% 20.0% 22.2% 10.0% 8.5% 7.9% 7.3% 6.8%

Take-up rate 33.3% 34.2% 33.3% 35.9% 39.7% 40.0% 40.0% 40.0% 40.0% 40.0%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Reggefiber Network % of

BB subs 5.6% 7.2% 8.3% 10.5% 12.8% 13.6% 13.9% 14.1% 14.4% 14.7%

CIF Network% of BB subs 1.2% 2.0% 2.3% 2.2% 2.7% 2.9% 2.9% 3.0% 3.1% 3.1%


0

200

400

600

800

1000

1200

1400

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Reggefiber Network


07/09/2016 Slide 176

Open-access network provider,

founded in 2005 and fully acquired by

KPN in 2014 – Passed over 2m homes at the time of its acquisition,

giving it 89% of the overall Neths FTTH network

KPN FTTH build slowed in 2015

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Reggefiber FTTH Passed 1,303 1,688 2,003 2,160 2,170 2,180 2,190 2,200 2,210 2,220

Change 385 315 157 10 10 10 10 10 10

% Change 29.5% 18.7% 7.8% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5%

% of all HH 17.4% 22.5% 26.7% 28.8% 28.9% 29.1% 29.2% 29.3% 29.5% 29.6%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Reggefiber FTTH Subs 386 500 572 722 990 1,057 1,077 1,098 1,118 1,138

Change 114 72 150 268 67 20 20 20 20

% Change 29.4% 14.4% 26.2% 37.1% 6.8% 1.9% 1.9% 1.8% 1.8%

Take-up rate on Reggefiber’s network 29.7% 29.6% 28.6% 33.4% 45.6% 48.5% 49.2% 49.9% 50.6% 51.3%


Source: Credit Suisse estimates, KPN, BTVNews

0

500

1,000

1,500

2,000

2,500

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


CIF Network


07/09/2016 177

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

CIF FTTH Passed 116 192 270 301 341 381 421 461 501 541

Change 76 78 31 40 40 40 40 40 40

% Change 65.4% 40.7% 11.6% 13.3% 11.7% 10.5% 9.5% 8.7% 8.0%

% of all HH 1.5% 2.6% 3.6% 4.0% 4.5% 5.1% 5.6% 6.1% 6.7% 7.2%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

CIF FTTH Subs 82 136 156 151 77 82 84 85 87 89

Change 54 19 -4 -74 5 2 2 2 2

% Change 66.0% 14.1% -2.9% -49.0% 6.8% 1.9% 1.9% 1.8% 1.8%

Take-up rate on CIF’s network 70.8% 71.0% 57.6% 50.1% 22.6% 21.6% 19.9% 18.5% 17.3% 16.4%


Infrastructure fund founded in 2008 and

rolling out FTTH since 2011

CEO previously worked at Eurofiber

Currently has partnerships with just 4

service providers, of whom one also uses

Reggefiber’s network

Currently holds a minor stake in

Netherlands’ FTTH market, however with

Reggefiber slowing its expansion, we feel it

has an opportunity to slowly gain market

share


0

100

200

300

400

500

600

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Pricing Plans


07/09/2016 Slide 178

Reggefiber operators Caiway (CIF operator)

Source: reggefiber

Source: Caiway

FTTH Market Summary - Norway


07/09/2016 Slide 179

Small market of 2.4m homes, but with relatively high FTTH coverage of 59%

as of 2015, and impressive take-up of c.47%

Lyse Energi’s Altibox platform, in partnership with ~35 Norwegian utilities, is

the clear market leader with over twice as many homes passed as the

incumbent Telenor

Telenor said at its 2015 Norway presentation that it sees a viable business

case for FTTH (with ~61% higher ARPU than FTTC and a 6-year payback

period)

– It has continued with a cross-technology approach that leverages its

existing DSL network

– It builds FTTH in greenfield sites and areas with low-speed DSL as well as

densifying existing FTTH coverage

There is also ~20-30% of FTTH coverage provided by dozens of local

operators and utilities unaligned to Altibox

– This includes NextGenTel, formerly owned by Telia

– Smaller names include Tafjord, Eidsiva and Broadnet

Altibox has a significant cost advantage over Telenor, with average build cost

estimated at ~€2,500 per home (vs €3,400 for Telenor)

– Achieved through a 60% sign-up requirement in an area (ensuring density

of connections) and allowing customers to dig their own trench, reducing

build costs further

Source: Altibox, Credit Suisse research, easymapmaker.com

CS forecasts for FTTH in Norway


07/09/2016 Slide 180

Source: Credit Suisse estimates, European Commission, Telenor, Lyse Energi, NextGenTel, FTTH Council Europe, InsideTelecom

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


% of households

passed by FTTH forecast to rise from

~59% in 2015 to ~78% by 2021

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Change 200 229 229 100 100 100 100 100 100

% Change 28.6% 25.4% 20.2% 7.4% 6.9% 6.4% 6.0% 5.7% 5.4%

% of all HH 30.4% 39.1% 49.1% 59.0% 60.7% 64.9% 69.0% 70.3% 74.3% 78.3%

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Total FTTH Subs 380 414 526 638 738 838 938 1038 1138 1238

Change 34 112 112 100 100 100 100 100 100

% Change 8.9% 27.0% 21.3% 15.7% 13.6% 11.9% 10.7% 9.6% 8.8%

Take-up rate 54.3% 46.0% 46.6% 47.0% 50.6% 53.8% 56.6% 59.1% 61.3% 63.2%

0

500

1000

1500

2000

2500

3000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E




07/09/2016 Slide 181

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Telenor 100 130 160 190 220 250 280 310 340 370

Altibox 352 360 455 509 559 609 659 709 759 809

Other 248 410 513 658 678 698 718 738 758 778


Change 200 229 229 100 100 100 100 100 100

% Change 28.6% 25.4% 20.2% 7.4% 6.9% 6.4% 6.0% 5.7% 5.4%

% of all HH 30.4% 39.1% 49.1% 59.0% 60.7% 64.9% 69.0% 70.3% 74.3% 78.3%

The incumbent passes less than half of the number of

homes as Altibox

0

200

400

600

800

1000

1200

1400

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Telenor Altibox

Source: Credit Suisse estimates, Telenor, FTTH Council Europe, InsideTelecom


07/09/2016 Slide 182


Excluding other providers, Telenor

and Altibox have passed ~30% of all

households as of 2015, projected to

rise to ~47% by 2021

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Telenor HH Passed 100 130 160 190 220 250 280 310 340 370

Telenor % of HH

passed 4.3% 5.7% 7.0% 8.3% 9.2% 10.4% 11.7% 12.4% 13.6% 14.8%

Altibox HH Passed 352 360 455 509 559 609 659 709 759 809

Altibox % of HH

passed 15.3% 15.7% 19.8% 22.1% 23.3% 25.4% 27.4% 28.3% 30.3% 32.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Telenor Altibox

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Source: Credit Suisse estimates, Telenor, FTTH Council Europe, InsideTelecom

Set up in 2002, with €264m of investment up to 2014

Currently forms partnerships with 36 different

Norwegian utilities, primarily in the South-West of

Norway

Covers 500k homes (25% of market) with very high

take-up rate

The development of Altibox as a utility-partnership was

largely driven by deregulation in the power sector, with

utilities providing a triple-play service to sell to their own

energy customers

Requires 60% of potential subscribers to sign-up

before deploying FTTH in an area

Has a significant cost advantage over Telenor, with

average build cost estimated at ~€2,500 per home (vs

€3,400 for Telenor)

Altibox allows customers to dig their own trenches to

further reduce costs and increase commitment

Synergies with Lyse’s own utilities arm and smart home

subsidiary Smartly

Altibox


07/09/2016


Slide 183

Altibox has lowered costs by encouraging self-digging


Source: altibox

07/09/2016 Slide 184

Digging saves ~€350 in cost, and according to a 2010 report 80% of customers choose to dig themselves

Altibox


07/09/2016 Slide 185

With Altibox’s 60% minimum sign-up

requirement, it is likely that FTTH

deployment will be relatively slow but

take-up rate should remain high

– Assume 50k additional homes

passed per year (~average of

2012-14 annual growth)

With an assumed 80% take-up rate,

Altibox’s total FTTH subs should track

closely to its overall deployment

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Altibox FTTH Passed 352 360 455 509 559 609 659 709 759 809

Change 8 95 53 50 50 50 50 50 50

% Change 2.2% 26.5% 11.7% 9.8% 9.0% 8.2% 7.6% 7.1% 6.6%

% of all HH 15.3% 15.7% 19.8% 22.1% 23.3% 25.4% 27.4% 28.3% 30.3% 32.3%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Altibox FTTH Subs 282 319 364 407 447 487 527 567 607 647

Change 37 46 43 40 40 40 40 40 40

% Change 13.1% 14.3% 11.7% 9.8% 9.0% 8.2% 7.6% 7.1% 6.6%

Take-up rate 80.0% 88.6% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0%


Source: Credit Suisse estimates, Lyse Energi

0

100

200

300

400

500

600

700

800

900

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Homes Passed Subs

With ownership of a cable network, FTTH

has been relatively neglected by Telenor till

recently

– Currently 13% of Telenor’s fixed line

subs base (vs 51% DSL, 36% cable)

The result has been significant line loss to

FTTH built by utilities

Telenor now trying to partly catch-up by

building FTTH in low density areas not

covered by utilities. Telenor has a high take-

up rate, but small footprint currently

Telenor


Source: Telenor

07/09/2016

0.1%

-0.7%

-1.5%

-2.3% -2.3%-2.7%

-2.8%-3.5%

-4.4%-4.7%

-5.7%

-6.6%

-9.5%

-13.1%-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

ORA TA KPN DT BT TEF Europeincumbent

access linesy/y

PROX TDC PT TI SCOM TELIA TNOR

Q415 Q116 Q216

Telenor continues to suffer high line loss


Slide 186

Telenor


07/09/2016 Slide 187

Telenor reported 160k homes passed by

FTTH in 2014, with 101k subscribers

Given its preference to build in

rural/greenfield areas we assume it passes

an additional 30k homes passed per year

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Telenor FTTH Passed 100 130 160 190 220 250 280 310 340 370

Change 30 30 30 30 30 30 30 30 30 30

% Change 30.0% 23.1% 18.8% 15.8% 13.6% 12.0% 10.7% 9.7% 8.8%

% of all HH 4.3% 5.7% 7.0% 8.3% 9.2% 10.4% 11.7% 12.4% 13.6% 14.8%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Telenor FTTH Subs 52 78 101 126 151 176 201 226 251 276

Change 26 23 25 25 25 25 25 25 25

% Change 50.0% 29.5% 24.8% 19.8% 16.6% 14.2% 12.4% 11.1% 10.0%

Take-up rate 52.0% 60.0% 63.1% 66.3% 68.6% 70.4% 71.8% 72.9% 73.8% 74.6%


Source: Credit Suisse estimates, Telenor

0

50

100

150

200

250

300

350

400

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Homes Passed Subs

NextGenTel


07/09/2016 Slide 188

Service provider (with no proprietary

network) spun off from Telia in 2012

Has set up a number of agreements with

Telenor and other local/regional network

providers for wholesale access

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

NGT FTTH Subs 4 6 10 14 24 34 44 54 64 74

Change 2 4 4 10 10 10 10 10 10

% Change 50.0% 66.7% 40.0% 71.4% 41.7% 29.4% 22.7% 18.5% 15.6%


Source: Credit Suisse estimates, NextGenTel

0

10

20

30

40

50

60

70

80

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

FTTH Subs

Source: Credit Suisse estimates, NextGenTel

Source: NextGenTel

Pricing Plans


07/09/2016 Slide 189

Altibox – prices in NOK (€1 = NOK9.2)

Telenor – prices in NOK (€1 = NOK9.2)

NextGenTel – prices in NOK (€1 = NOK9.2)

Source: Altibox

Source: Telenor

Source: NextGenTel

https://lyse.altibox.no/privat/priser

https://www.telenor.no/privat/bredband/fiber/

https://www.nextgentel.no/fiber/fosen/produkter.php

FTTH Market Summary - Portugal


07/09/2016 Slide 190

Portugal currently has ~66% of its households covered by FTTH, making it third behind

Sweden (83%) and Spain (82%) for households passed in 2015

– Despite very weak macro trends in last ten years

PT’s target to pass ~4m homes by 2020 and having already begun to switch off its

copper network indicates how advanced Portugal is relative to Europe

It also operates as a relatively crowded market, with two independent FTTH builds by

Portugal Telecom and Vodafone as well as a combination of DOCSIS3 and FTTH by

NOS

Portugal Telecom’s substantial investment is partly driven by light wholesale regulation

(according to the FTTH Council Europe), particularly in urban areas where Portuguese

regulator ANACOM has entirely deregulated wholesale pricing

– PT currently holds ~75% of FTTH subscribers

Over-build by Vodafone and NOS driven by regulation focus on duct-access rather than

wholesale access

Vodafone’s has aggressively expanded into FTTH through a combination of proprietary

FTTH build and co-investment with PT



07/09/2016 Slide 191

Source: Credit Suisse estimates, ANACOM, Company data

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


PT’s comments about

switching off its copper network by 2020 (source) indicate to us that near-universal

coverage is not far off

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Change 221 167 450 450 450 450 450 450 100

% Change 11.8% 8.2% 20.5% 16.7% 14.5% 12.9% 12.4% 11.6% 2.5%

% of all HH 45.5% 49.6% 53.7% 65.9% 75.6% 85.4% 88.6% 94.3% 97.6% 98.2%

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Total FTTH Subs 358 472 586 700 840 957 1015 1050 1200 1240

Change 114 114 114 140 117 58 35 150 40

% Change 31.8% 24.2% 19.5% 20.0% 13.9% 6.1% 3.4% 14.3% 3.3%

Take-up rate 19.2% 23.2% 26.6% 25.9% 27.1% 27.3% 27.9% 27.2% 30.0% 30.8%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)


http://www.totaltele.com/view.aspx?ID=493077



07/09/2016 Slide 192

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Portugal Telecom 1,767 1,933 2,100 2,500 2,900 3,300 3,533 3,767 4,000 4,025

Vodafone Portugal 450 975 1,500 2,200 2,750 2,850 2,950 3,050 3,150 3,250

NOS 0 0 84 358 564 564 564 564 564 564


Change 221 167 450 450 450 450 450 450 100

% Change 11.8% 8.2% 20.5% 16.7% 14.5% 12.9% 12.4% 11.6% 2.5%

% of all HH 45.5% 49.6% 53.7% 65.9% 75.6% 85.4% 88.6% 94.3% 97.6% 98.2%

PT and Vodafone are currently on relatively even standing

(2.5m homes passed vs 2.2m in 2015), however PT’s guidance of 4m homes by 2020 (against Vodafone’s lack

of post-2017 guidance) puts it ahead after five years

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)

Portugal Telecom Vodafone Portugal NOS



07/09/2016 Slide 193


There is likely to be high overlap

across networks, particularly as PT

and Vodafone explicitly agreed in

2014 to co-invest and network share

for 450k homes (~11% of all homes)

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

PT HH Passed 1,767 1,933 2,100 2,500 2,900 3,300 3,533 3,767 4,000 4,025 PT % of HH passed 43.1% 47.2% 51.2% 61.0% 70.7% 80.5% 86.2% 91.9% 97.6% 98.2%

Vodafone HH Passed 450 975 1,500 2,200 2,750 2,850 2,950 3,050 3,150 3,250 Vodafone % of HH

passed 11.0% 23.8% 36.6% 53.7% 67.1% 69.5% 72.0% 74.4% 76.8% 79.3%

NOS HH Passed 0 0 84 358 564 564 564 564 564 564 NOS % of HH

passed 0.0% 0.0% 2.0% 8.7% 13.8% 13.8% 13.8% 13.8% 13.8% 13.8%

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E





07/09/2016 Slide 194

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Portugal Telecom 290 372 466 585 686 829 972 1115 1258 1401

Vodafone Portugal 73 92 151 195 260 312 369 444 519 594

NOS 0 0 4 56 109 134 154 156 158 160

Total FTTH Subs 363 459 622 835 1055 1275 1495 1715 1935 2155

Change 123 123 123 214 220 220 220 220 220 220

% Change 52.0% 33.9% 26.8% 34.3% 26.3% 20.8% 17.2% 14.7% 12.8% 11.4%

Take-up rate 19.4% 22.6% 28.3% 30.9% 25.0% 30.0% 30.0% 35.0% 35.0% 40.0%

In our view, PT’s head-start on

subscribers for FTTH is forecast to

continue by 2021

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E



Portugal Telecom


07/09/2016 Slide 195

PT has benefited from wholesale

deregulation in urban areas of Portugal

(such as Lisbon and Porto), where

there are 3 or more competitors

Its initial FTTH build was 1m homes

passed in its first year of deployment

(2008-09)

Its targets are 3.3m homes passed by

2017 and 4m by 2020, with an end

goal of gradually discontinuing its

copper network from 2017 onwards

(source)

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

PT FTTH Passed 1,767 1,933 2,100 2,500 2,900 3,300 3,533 3,767 4,000 4,025

Change 167 167 400 400 400 233 233 233 50

% Change 9.4% 8.6% 19.0% 16.0% 13.8% 7.1% 6.6% 6.2% 1.3%

% of all HH 43.1% 47.2% 51.2% 61.0% 70.7% 80.5% 86.2% 91.9% 97.6% 98.2%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

PT FTTH Subs 290 372 466 585 686 829 972 1115 1258 1401

Change 101 82 94 118 101 143 143 143 143 143

% Change 53.3% 28.3% 25.4% 25.4% 17.3% 20.8% 17.2% 14.7% 12.8% 11.4%

Take-up rate 16.4% 19.2% 22.2% 23.4% 23.7% 25.1% 27.5% 29.6% 31.5% 34.8%


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Source: Credit Suisse estimates, Company data, Anacom

http://www.totaltele.com/view.aspx?ID=493077

Vodafone Portugal


07/09/2016 Slide 196

Vodafone’s FTTH deployment began

in 2011 and was relatively slower

compared to PT, only passing its

millionth home after 2-3 years

(compared to PT’s 1 year)

It has however accelerated, with an

additional 1.25m homes set to be

passed between 2015-17

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Vodafone FTTH Passed 450 975 1,500 2,200 2,750 2,850 2,950 3,050 3,150 3,250

Change 525 525 700 550 100 100 100 100 100

% Change 116.7% 53.8% 46.7% 25.0% 3.6% 3.5% 3.4% 3.3% 3.2%

% of all HH 11.0% 23.8% 36.6% 53.7% 67.1% 69.5% 72.0% 74.4% 76.8% 79.3%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Vodafone FTTH Subs 73 92 151 195 260 312 369 444 519 594

Change 25 19 60 43 66 52 57 75 75 75

% Change 53.3% 26.5% 65.1% 28.5% 33.8% 20.0% 18.2% 20.3% 16.9% 14.4%

Take-up rate 16.1% 9.4% 10.1% 8.8% 9.5% 11.0% 12.5% 14.6% 16.5% 18.3%


Source: Credit Suisse estimates, Analysis Mason, EandT

0

500

1000

1500

2000

2500

3000

3500

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E



NOS


07/09/2016 Slide 197

NOS’ FTTH build is largely

supplementary to its wider

HFC/DOCSIS3 network, which

already covers 3.2m homes in

Portugal (making it even larger than

PT’s 2015 footprint)

NOS’ FTTH build is exclusively in

white spots not reached by HFC – In our view, this is set to cap at ~564k

homes, at which point its overall high-speed

network will reach ~3.8m of Portugal’s ~4.1m

homes

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

NOS FTTH Passed 0 0 84 358 564 564 564 564 564 564

Change 0 84 274 206 0 0 0 0 0

% Change 326.2% 57.5% 0.0% 0.0% 0.0% 0.0% 0.0%

% of all HH 0.0% 0.0% 2.0% 8.7% 13.8% 13.8% 13.8% 13.8% 13.8% 13.8%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

NOS FTTH Subs 0 0 4 56 109 134 154 156 158 160

Change 52 53 25 20 2 2 2

% Change 1300.0% 94.6% 22.9% 14.9% 1.3% 1.3% 1.3%

Take-up rate 4.8% 15.6% 19.3% 23.8% 27.3% 27.7% 28.0% 28.4%


Source: Credit Suisse estimates, NOS


0

100

200

300

400

500

600

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Pricing Plans


07/09/2016 Slide 198

Portugal Telecom

Vodafone Portugal

NOS

Source: Vodafone

Source: NOS

Source: PT Source: PT

A rapidly expanded FTTH market in under 5 years, going from ~5.5% coverage in 2012 to ~82% by 2015

– The rate of coverage expansion has been rapid, with 5,000 new homes covered a day during 2015

The rapid deployment of FTTH has been largely accomplished by Telefonica, which expanded its network

from 1m homes passed to 16.2m between 2012-16

The pace of Telefonica’s expansion has forced its two closest rivals (Orange and Vodafone) to turn to

acquisitions of existing high-speed operators in order to keep up

– Vodafone acquired Ono’s DOCSIS3 network (of 7.2m homes passed) in 2014 for €7.2bn

– Orange acquired Jazztel’s FTTH network (of 1.2m homes passed) in 2015 for €3.4bn

Spanish regulator CNMC approved Orange’s acquisition of Jazztel under the condition that it divested a

substantial portion of its overlapping fixed line (ULL) network (~750k homes passed), which was bought by

MasMovil to become a fourth operator

Despite the efforts of its competitors, Telefonica has remained committed to passing “97% of all Spanish

municipalities with over 1,000 people” (in our view a 90+% coverage rate) by 2020

Take-up for FTTH has so far been unable to keep pace with the rapid expansion of networks

– Take-up rate across Spain currently stands at ~20%

– However with build-rate slowing as Spain approaches full market coverage, this is likely to climb


07/09/2016

FTTH Market Summary - Spain

Slide 199



07/09/2016

Telefonica’s guidance indicates that Spain will

move towards full coverage of all municipalities

with more than 1,000 residents by 2020 – In our view this is >90% FTTH coverage (~17m homes)

Given that Orange and Vodafone networks are

largely overbuilds (using the same ducts), by

2021 there are forecast to be 2.1m homes

(~16%) covered by all 4 operators

NB:

• Vodafone’s “homes passed” figure includes its acquired DOCSIS3 network (as Vodafone do not disclose the split of their network between FTTH, DOCSIS3 and

cable). However its subs figure on the next slide has been corrected to account for DOCSIS3 connections.

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

FTTH Passed 1,200 5,500 13,849 15,000 16,400 16,600 16,800 17,000 17,200 17,400

Change 4,300 8,349 1,151 1,400 200 200 200 200 200

% Change 358% 152% 8.3% 9.3% 1.2% 1.2% 1.2% 1.2% 1.2%

% of all HH 6.6% 30.1% 75.7% 82.0% 89.6% 90.7% 91.8% 92.9% 94.0% 95.1%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)

Telefonica/Movistar Orange/Jazztel Vodafone/Ono MasMovil

Source: Credit Suisse estimates, CNMC, Jazztel, MasMovil, Telefonica, ATV, Diffraction Analysis

Slide 200


07/09/2016 Slide 201


0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Telefonica/Movistar Orange/Jazztel Vodafone/Ono MasMovil


We believe, subscriber growth is likely to remain

strong, pushing overall subscribers up to ~11.5m

by 2021 – This would require ~25% subscriber growth Y-o-Y between 2016-

21, against a recent average of ~113% Y-o-Y growth between

2012-15

We assume 1.6m new subscribers per year

between 2016-18, followed by a slowdown to 1.2m

between 2019-21 – Subscriber increase between 2014-15 was 1.55m


07/09/2016 Slide 202


NB:

• Vodafone’s “homes passed” figure includes its acquired DOCSIS3 network (as Vodafone do not disclose the split of their network between FTTH, DOCSIS3 and

cable). However its subs figure on this slide has been corrected to account for DOCSIS3 connections.

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

FTTH Subs 333 615 1,563 3,114 4,714 6,314 7,914 9,114 10,314 11,514

Change 282 948 1551 1,600 1,600 1,600 1,200 1,200 1,200

% Change 84.7% 154.1% 99.2% 51.4% 33.9% 25.3% 15.2% 13.2% 11.6%

Take-up rate 27.8% 11.2% 11.3% 20.8% 28.7% 38.0% 47.1% 53.6% 60.0% 66.2%

0

2000

4000

6000

8000

10000

12000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)

Telefonica/Movistar Orange/Jazztel Vodafone MasMovil


(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E Telefonica FTTH Passed 1,000 4,000 10,000 13,800 16,200 16,400 16,600 16,800 17,000 17,200

Change 3,000 6,000 3,800 2,400 200 200 200 200 200

% Change 300% 150% 38.0% 17.4% 1.2% 1.2% 1.2% 1.2% 1.2%

% of all HH 5.5% 21.9% 54.6% 75.4% 88.5% 89.6% 90.7% 91.8% 92.9% 94.0%

Telefonica


07/09/2016 Slide 203

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)


(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Telefonica FTTH Subs 323 598 1,316 2221 3121 4,021 4,921 5,596 6,271 6,946

Change 275 718 905 900 900 900 675 675 675

% Change 85.1% 120.1% 68.8% 40.5% 28.8% 22.4% 13.7% 12.1% 10.8%

Take-up rate 32.3% 15.0% 13.2% 16.1% 19.3% 24.5% 29.6% 33.3% 36.9% 40.4%


Telefonica has managed to cover over 80%

of Spain with FTTH in under 5 years – Its coverage is so broad that it has begun decommissioning its

copper network, having ended copper connections in 38

municipalities since 2015

Its market share in FTTH subscriptions has

dropped since the entries of Orange and

Vodafone between 2014-15, but it still

enjoys a ~71% share as of 2015, and in our

views is likely to retain over 60% of the

market by 2021


Orange/ Jazz tel


07/09/2016 Slide 204

0

2000

4000

6000

8000

10000

12000

14000

16000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)


(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Orange/Jazztel FTTH Subs 0 7 100 809 1209 1609 2009 2309 2609 2909

Change 7 94 709 400 400 400 300 300 300

% Change 1439% 709% 49.4% 33.1% 24.9% 14.9% 13.0% 11.5%

Take-up rate 0.5% 4.5% 9.6% 12.1% 14.6% 16.7% 17.8% 18.6% 19.4%


(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Orange/Jazztel FTTH Passed 0 1,200 2,200 8,400 10,000 11,000 12,000 13,000 14,000 15,000

Change 1,200 1,000 6,200 1,600 1,000 1,000 1,000 1,000 1,000

% Change 83.3% 281.8% 19.0% 10.0% 9.1% 8.3% 7.7% 7.1%

% of all HH 0.0% 6.6% 12.0% 45.9% 54.6% 60.1% 65.6% 71.0% 76.5% 82.0%

Orange’s acquisition of Jazztel in 2015 saw it

forced to divest some of its FTTH network and

other assets in order to allow for a viable fourth

Spanish telco – MasMovil bought an independent network of 750k homes

Despite this, it has set a target of 14m homes

passed by 2020, which would give it ~77%

coverage of all Spanish households – This is

Orange reported 809k subscribers in 2015,

which is we forecast to grow by 400k between

2016-18 before slowing to 300k from 2019-21


Vodafone/ Ono


07/09/2016 Slide 205

0

500

1000

1500

2000

2500

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)


(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Vodafone FTTH Passed 100 300 900 1,100 1,300 1,500 1,700 1,900 2,100 2,300

Change 200 600 200 200 500 200 200 200 200

% Change 200% 200% 22.2% 18.2% 38.5% 13.3% 11.8% 10.5% 9.5%

% of all HH 0.5% 1.6% 4.9% 6.0% 7.1% 8.2% 9.3% 10.4% 11.5% 12.6%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Vodafone FTTH Subs 10 10 147 187 247 307 367 427 487 547

Change 59 59 59 60 60 60 60 60 60

% Change 590% 590% 40.1% 32.1% 24.3% 19.5% 16.3% 14.1% 12.3%

Take-up rate 10.0% 3.3% 16.3% 17.0% 19.0% 20.5% 21.6% 22.5% 23.2% 23.8%


Vodafone’s FTTH plans have become secondary

following its acquisition of Ono’s cable network

We believe Vodafone’s primary aim is to expand

and upgrade its cable network to DOCSIS3,

whilst building FTTH in areas where cable has

little or no reach – This currently stands at expanding the cable network from

7.2m to 10m homes passed, whilst restricting its FTTH rollout

to just 1.5m homes passed by 2017

– In our view, future FTTH expansion is likely to remain low


Pricing Plans


07/09/2016 Slide 206

MasMovil

Orange

Telefonica/Movistar

Vodafone

Source: MasMovil

Source: Vodafone

Source: Orange

Source: Telefonica

Sweden has a relatively well-developed FTTH market – coverage is at 81% of all households and

take-up is at ~34% of homes passed

Fibre builds began in Sweden in the mid-90s and were municipally-driven, leading to a vast network

of publicly-owned open-access networks

Government subsidises customer installation costs with a tax rebate on 50% of installation costs

over SEK8,000 (to a maximum of SEK5,000 per property)

Grants were also made available to encourage fibre build in less dense areas

Multi-player competition at the service-layer has led to attractive fibre prices

Large telcos such as Telia and Telenor can compete at fewer levels of the FTTH value chain,

typically only as either a network & service provider or a pure service provider (depending on the

municipality)

Telia and Telenor currently exist as the top-two FTTH service providers with a combined 50% of

the subscriber base

Most areas are now covered (particularly MDUs), with a land-grab going on for what is left

Telia seeing at least 50% take-up in remaining new build areas with high speed broadband

becoming a necessity


07/09/2016

FTTH Market Summary - Sweden

Slide 207

Sweden has a particularly high involvement of

municipalities and a large number of open-

access networks

– Of the 290 municipalities in Sweden, 175

have been involved in deploying municipal

fibre

– 93% of these networks are publicly-owned,

and 75% of them either turn a profit or

break even

This public investment in FTTH has also taken

place over a long period of time, with some

networks (such as Stokab) having begun

construction in the mid-1990s

Coverage of MDUs is particularly high, with

SDU coverage rapidly catching up and offering

the best scope for expansion


07/09/2016

Current State of FTTH Build

Stockholm

Source: European Commission/Point Topic

Source: Telia CMD 2016

Slide 208

A 3 latyer model – Passive

– Network operator

– Service provider

Divides the rollout of FTTH between:

– The municipality’s provision of passive physical

infrastructure (high CAPEX, low OPEX)

– The private provision of the network and/or the

service itself (low CAPEX, high OPEX)

For those in MDUs, telcos will largely be acting purely

as service providers

By contrast in SDUs telcos also play the role of

network provider

– Therefore for those living in SDUs, there still

exists a one-off connection charge

– For Telia, this is quoted being between 15000-

25000SEK (~1500-2500eu)

For the incumbent telco, this has four implications:

– Capex savings (by not having to set up the passive

infrastructure) and therefore lower barriers to entry

– Loss of potential wholesale revenue

– Higher Opex

– A crowded marketplace and loss of pricing power


07/09/2016

Open Access Network Model

Slide 209

e.g. Fibre to the villa (FTTH build in less dense areas)


Source: Swedish local fibre alliance presentation

07/09/2016 Slide 210

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Sw

edis

h fix

ed b

road

band

sub

scrib

ers

('000

)

xDSL broadband Fibre broadband Cable

Fibre overtook copper in 2014 Fibre the leading broadband technology in Sweden


07/09/2016

Bahnhof10%

Bredband29%

ComHem5%

Telenor27%

TeliaSonera29%

Others20%

Retail fibre bb subscriber market share: The fibre

broadband market is fragmented with 40% of subs with

smaller operators (incl Bredband2 and Bahnhof)

Bahhof5%

Bredband25%

ComHem19%

Telenor18%

TeliaSonera37%

Others16%

Fixed bb retail subscriber market share: Telia is under

indexing on fibre with a 29% retail fibre bb subscriber share

vs 37% total market share

Sources all charts: PTS, Company data

Slide 211


07/09/2016


Projected to reach 95% coverage by 2021, with

~64% of all homes being subscribers to an FTTH connection

('000) 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Total Households 4,600 4,600 4,600 4,600 4,600 4,600 4,600 4,600 4,600 4,600 4,600

('000) 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

FTTH Passed 2,285 2,162 2,668 3,220 3,818 3,910 4,140 4,232 4,324 4,370 4,370

Change -123 506 552 598 383 230 92 92 46 0

% Change -5.4% 23.4% 20.7% 18.6% 10.0% 5.9% 2.2% 2.2% 1.1% 0.0%

% of all homes 49.7% 47.0% 58.0% 70.0% 83.0% 85.0% 90.0% 92.0% 94.0% 95.0% 95.0%

FTTH Subs 891 1,034 1,221 1,435 1,711 1,916 2,121 2,326 2,531 2,736 2,941

Change 143 187 214 276 205 205 205 205 205 205

% Change 16.0% 18.1% 17.5% 19.2% 12.0% 10.7% 9.7% 8.8% 8.1% 7.5%

% of passed 39.0% 47.8% 45.8% 44.6% 44.8% 49.0% 51.2% 55.0% 58.5% 62.6% 67.3%

% of all homes 19.4% 22.5% 26.5% 31.2% 37.2% 41.7% 46.1% 50.6% 55.0% 59.5% 63.9%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Slide 212

Source: Credit Suisse estimates, Company data, PTS

Homes Passed


07/09/2016

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Homes Passed ('000)

Telia Telenor All Homes

HH Passed ('000) 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Telia 475 525 640 1,100 1,330 1,530 1,710 1,900 2,040 2,180 2,320

% of homes passed 21% 24% 24% 35% 31% 31% 33% 35% 36% 38% 40%

Telenor 1,100 1,100 1,200 1,300 1,400 1,500 1,600 1,700 1,800 1,900 2,000

% of homes passed 48% 51% 45% 41% 33% 30% 31% 31% 32% 33% 34%

Total 2,285 2,160 2,687 3,157 4,296 4,970 5,164 5,408 5,658 5,798 5,937

Change -125 527 470 1,139 503 194 244 250 140 140

% Change -5% 24% 18% 36% 12% 4% 5% 5% 2% 2%

% of all homes 50% 47% 58% 70% 84% 95% 96% 98% 100% 100% 100%

Sweden is closest amongst European

countries to achieving full FTTH coverage

− Currently at 84% of HH passed, with

only largely SDUs in rural areas

remaining

− Even with coverage growth slowing,

would be reasonable to assume 95%

coverage by 2021

Based on respective targets, would be

likely that Telia becomes the market leader

in both homes passed and subscribers

over the next five years

Slide 213



07/09/2016


FTTH Passed (‘000) 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Telia 475 525 640 1,100 1,330 1,530 1,710 1,900 2,040 2,180 2,320

% of all HH passed 10% 11% 14% 24% 29% 33% 37% 41% 44% 47% 50%

Telenor 1,100 1,100 1,200 1,300 1,400 1,500 1,600 1,700 1,800 1,900 2,000

% of all HH passed 24% 24% 26% 28% 30% 33% 35% 37% 39% 41% 43%

Total Households 4,600 4,600 4,600 4,600 4,600 4,600 4,600 4,600 4,600 4,600 4,600

In spite of high national FTTH coverage,

individual coverage of each provider still

relatively low

− Likely due to high levels of

competition and disjointed nature of

open-access networks across Sweden

Also worth considering that each provider

is likely to be overlapping its footprint

significantly with its rivals 0%

10%

20%

30%

40%

50%

60%

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Telia Telenor

Slide 214



07/09/2016


FTTH Subs

('000) 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Telia 183 238 306 421 509 591 672 754 835 917 998

% of overall subs 21% 23% 25% 29% 30% 31% 32% 32% 33% 33% 34%

Telenor 193 256 281 417 423 472 588 653 719 785 851

% of overall subs 22% 25% 23% 29% 28% 27% 28% 28% 28% 29% 29%

ComHem 1 8 35 57 77 96 115 134 153 172 191

% of overall subs 0% 1% 3% 4% 5% 5% 5% 6% 6% 6% 6%

Bahnhof 83 89 102 128 179 203 227 251 275 299 323

% of overall subs 9% 9% 8% 9% 10% 11% 11% 11% 11% 11% 11%

Bredband2 100 99 117 134 157 171 186 200 214 228 243

% of overall subs 11% 10% 10% 9% 9% 9% 9% 9% 8% 8% 8%

Total FTTH Subs 891 1,034 1,221 1,435 1,711 1,916 2,121 2,326 2,531 2,736 2,941

Change 143 187 214 276 205 205 205 205 205 205

% Change 16% 18% 18% 19% 12% 11% 10% 9% 8% 7%

% of passed 39% 48% 45% 45% 40% 39% 41% 43% 45% 47% 50%

% of all homes 20% 23% 26% 32% 34% 37% 39% 42% 45% 47% 50%

Likely that Telia and Telenor will be able to

break away from the crowded ISP market

through mainly a larger FTTH footprint

Closest three challengers (resale and

ULL) likely to split the remainder of the

market between them

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Telia Telenor ComHem Bahnhof Bredband2 Total

Slide 215



07/09/2016


FTTH Subs ('000) 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Telia 183 238 306 421 509 591 672 754 835 917 998

Telia % of BB subs 6% 8% 10% 13% 15% 17% 19% 21% 23% 24% 26%

Telenor 193 256 281 417 423 472 588 653 719 785 851

Telenor % of BB subs 6% 8% 9% 13% 13% 14% 17% 18% 19% 21% 22%

ComHem 1 8 35 57 77 96 115 134 153 172 191

ComHem% of BB subs 0% 0% 1% 2% 2% 3% 3% 4% 4% 5% 5%

Bahnhof 83 89 102 128 179 203 227 251 275 299 323

Bahnhof % of BB subs 3% 3% 3% 4% 5% 6% 6% 7% 7% 8% 8%

Bredband2 100 99 117 134 157 171 186 200 214 228 243

Bredband2 % of BB subs 3% 3% 4% 4% 5% 5% 5% 6% 6% 6% 6%

Total FTTH Subs 891 1,034 1,221 1,435 1,711 1,916 2,121 2,326 2,531 2,736 2,941

% of BB subs 29% 34% 39% 44% 51% 56% 60% 64% 68% 72% 76%

All BB Subs 3,027 3,073 3,147 3,281 3,366 3,450 3,535 3,620 3,704 3,789 3,874

FTTH already forms a majority of BB subs in Sweden, at ~51% as of 2015

− With demand for speed and

bandwidth increasing annually as

well as FTTH coverage still

expanding, this is only likely to become larger

− Forecasted to rise to ~76% by 2021

0%

10%

20%

30%

40%

50%

60%

70%

80%

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

TeliaSonera Telenor Com Hem Bahnhof Bredband2

Source: Credit Suisse estimates, Telia, Telenor, ComHem, Bahnhof, Bredband2, MyNewsDesk

Slide 216


Telia are currently the market leader in

subscribers, with over 500k subscribed

to FTTH as of 2015

– Target of 1.9m homes passed by

2018 (would be ~34% of all HH)

Telia’s stake in the FTTH market

increased in 2013-14 with the

acquisition of Zitius and Riksnet (adding

~55k subscribers from Zitius and ~80k

from Riksnet)


07/09/2016

Telia

('000) 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Telia FTTH

Passed 475 525 640 1,100 1,330 1,530 1,710 1,900 2,040 2,180 2,320

Change 50 115 460 230 200 180 160 140 140 140

% Change 10.5% 21.9% 71.9% 20.9% 15.0% 11.8% 9.4% 7.4% 6.9% 6.4%

% of all HH 10.3% 11.4% 13.9% 23.9% 28.9% 33.3% 37.2% 41.3% 44.3% 47.4% 50.4%

Telia FTTH Subs 183 238 306 421 509 591 672 754 835 917 998

Change 55 68 115 88 82 82 82 82 82 82

% change 30.1% 28.6% 37.6% 20.9% 16.0% 13.8% 12.1% 10.8% 9.8% 8.9%

Take-up rate 38.5% 45.3% 47.8% 38.3% 38.3% 38.6% 39.3% 39.7% 40.9% 42.0% 43.0%

% of overall subs 20.5% 23.0% 25.1% 29.3% 29.7% 30.8% 31.7% 32.4% 33.0% 33.5% 33.9%

0

500

1,000

1,500

2,000

2,500

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Slide 217


Telia has lost l ine share as a result of challenger fibre


07/09/2016

Telia voice line loss has materially underperformed market voice line loss,

likely a result of challenger fibre

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

1H 2011 2H 2011 1H 2012 2H 2012 1H 2013 2H 2013 1H 2014 2H 2014 1H 2015 H2 2015

Telia voice lines (retail+wholesale)*, y/y Swedish market voice lines, y/y

Source: PTS, Telia, Credit Suisse research, *Telia retail voice lines+PSTN wholesale+ULL

Slide 218

('000) 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Telenor FTTH

Passed 1,100 1,100 1,200 1,300 1,400 1,500 1,600 1,700 1,800 1,900 2,000

Change 100 100 100 100 100 100 100 100 100 100

% Change 9.1% 9.1% 8.3% 7.7% 7.1% 6.7% 6.3% 5.9% 5.6% 5.3%

% of all HH 23.9% 23.9% 26.1% 28.3% 30.4% 32.6% 34.8% 37.0% 39.1% 41.3% 43.5%

Telenor FTTH

Subs 193 256 281 417 456 522 588 653 719 785 851

Change 63 25 136 6 16 66 66 66 66 66

% change 32.6% 9.8% 48.4% 9.4% 14.4% 12.6% 11.2% 10.1% 9.1% 8.4%

Take-up rate 17.5% 23.3% 23.4% 32.1% 32.6% 34.8% 36.7% 38.4% 39.9% 41.3% 42.5%

% of overall subs 21.7% 24.8% 23.0% 29.1% 26.7% 27.2% 27.7% 28.1% 28.4% 28.7% 28.9%

Telenor


07/09/2016

0

500

1,000

1,500

2,000

2,500

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


Telenor offers FTTH through internet

provider Bredbandsbolaget, which it

acquired in 2005

Currently passes 1.5m homes with

FTTH (2Q16)

− Targets “2m homes in the next few

years”, which we assume to be a

five-year target

Slide 219


FTTH Subs ('000) 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Bahnhof 83 89 102 128 179 203 227 251 275 299 323

Change 6 13 26 51 24 24 24 24 24 24

% change 7.2% 14.6% 25.5% 39.8% 13.4% 11.8% 10.6% 9.6% 8.7% 8.0%

% of overall subs 9.3% 8.6% 8.4% 8.9% 10.5% 10.6% 10.7% 10.8% 10.9% 10.9% 11.0%

Bredband2 100 99 117 134 157 171 186 200 214 228 243

Change -1 18 17 23 14 14 14 14 14 14

% change -1.0% 18.2% 14.5% 17.2% 9.1% 8.3% 7.7% 7.1% 6.7% 6.2%

% of overall subs 11.2% 9.6% 9.6% 9.3% 9.2% 8.9% 8.7% 8.6% 8.5% 8.3% 8.2%

Total FTTH Subs 891 1,034 1,221 1,435 1,711 1,916 2,121 2,326 2,531 2,736 2,941

Change 143 187 214 276 205 205 205 205 205 205

% Change 16.0% 18.1% 17.5% 19.2% 12.0% 10.7% 9.7% 8.8% 8.1% 7.5%

% of passed 39.0% 47.8% 45.8% 44.6% 44.8% 49.0% 51.2% 55.0% 58.5% 62.6% 67.3%

% of all homes 19.4% 22.5% 26.5% 31.2% 37.2% 41.7% 46.1% 50.6% 55.0% 59.5% 63.9%

Smaller operators - Bahnhof & Bredband2


07/09/2016

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Total Subs Bahnhof Bredband2

Both wholesale operators have been providing FTTH services as early as

2008, holding ~19% of the FTTH subscriber base between them

Slide 220


Pricing Plans


07/09/2016

Bredband2 (for Stockholm)

Bahnhof (for Stockholm)

Telenor

Com Hem

Telia

Slide 221

Source: Telenor

Source: Bahnhof

Source: Com Hem

Source: Telia

Source: Bredband2

Until now, Swisscom has been the leader for FTTH

deployment, launching a nationwide utility-partnership in which

it funded ~60% of the cost of FTTH deployment

Swisscom’s announcement earlier this year that it would end

FTTH further deployment for the foreseeable future is likely to

halt FTTH’s expansion in Switzerland beyond its current

position of 1m homes passed (around 30% coverage)

It announced that all “economically viable” areas had been

covered by FTTH (mainly bigger cities), signalling its move

towards cheaper FTTS (fibre-to-the-street) and the copper-

based G.fast technology for deploying HSBB elsewhere – This is broadly in line with Swisscom’s overall goal of 85% of

Switzerland being covered by +100mbps by 2020, which is

achievable through cheaper technologies

Whilst the growth in FTTH coverage may end for now, we

believe this still leaves scope for up-selling to FTTH – Given a current take-up rate of 20-25%, this suggests that there is

still considerable growth left in migration to FTTH in existing

footprint

FTTH deployment was done with each house receiving four

fibre lines (two of which was owned exclusively by Swisscom),

so there is scope for third-parties to acquire wholesale access – So far the main third-party entrants have been Sunrise and Fiber7,

although their combined share of FTTH subscriptions is estimated to

be <10%


07/09/2016

FTTH Market Summary - Switzerland

Source: Swisscom

Broadband deployment in Switzerland, Swisscom 2014

Slide 222

Homes Passed/ % of HH passed (CS forecasts)


07/09/2016

NB:

• Swisscom’s FTTH network effectively represents Switzerland’s overall network

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

FTTH Passed 420 750 921 1,015 1,015 1,015 1,015 1,015 1,015 1,015

Change 330 171 94 0 0 0 0 0 0

% Change 78.6% 22.8% 10.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

% of all HH 11.7% 20.8% 25.6% 28.2% 28.2% 28.2% 28.2% 28.2% 28.2% 28.2%

0

200

400

600

800

1000

1200

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)

Households Passed by FTTH ('000)

Swisscom/All

('000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E


0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

% of households passed by FTTH

FTTH Passed

Slide 223

Source: Credit Suisse estimates, Swisscom, FTTH Council Europe

~90% of FTTH subscribers are with

Swisscom (138k subscribers reported in

2014) – The remaining 10% are assumed to be split

between Sunrise and Fiber7

Take-up rate has been slowly growing up to

~20% in 2015, and is assumed to reach ~44%

by 2021


07/09/2016 Slide 224


(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

FTTH Subs 22 74 154 198 248 293 338 395 417 451

Change 52 80 45 50 45 45 56 23 34

% Change 233.3% 107.9% 29.0% 25.3% 18.2% 15.4% 16.7% 5.7% 8.1%

Take-up rate 5.3% 9.8% 16.7% 19.5% 24.4% 28.9% 33.3% 38.9% 41.1% 44.4%

0

50

100

150

200

250

300

350

400

450

500

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)

Swisscom Sunrise Fiber7



07/09/2016 Slide 225


2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Total BB Subs ('000) 3,400 3,400 3,400 3,400 3,400 3,400 3,400 3,400 3,400 3,400

(Subs, ‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Swisscom 20 68 138 183 223 264 305 355 376 406

Swisscom % of all BB subs 2.5% 4.7% 10.2% 17.2% 24.0% 30.9% 37.6% 42.7% 47.5% 52.6%

Sunrise 2 6 12 16 20 23 27 32 33 36

Sunrise % of all BB subs 0.0% 0.1% 0.8% 6.3% 9.3% 12.4% 15.3% 17.6% 19.8% 22.0%

Fiber7 0 1 3 4 5 6 7 8 8 9

Fiber7 % of all BB subs 0.1% 0.1% 1.1% 1.4% 1.9% 2.4% 2.8% 3.3% 3.7% 4.1%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Swisscom Sunrise Fiber7


Swisscom


07/09/2016

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Swisscom FTTH

Subs 20 68 138 183 223 264 305 355 376 406

Change 48 71 45 41 41 41 51 20 30

% Change 237.5% 104.7% 32.2% 22.2% 18.2% 15.4% 16.7% 5.7% 8.1%

Take-up rate 4.8% 9.0% 15.0% 18.0% 22.0% 26.0% 30.0% 35.0% 37.0% 40.0%


Swisscom’s exclusive ownership of 2 of the

4 fibre lines laid to each house gives it

proprietary access without needing to

negotiate wholesale pricing (FTTH is

unregulated in Switzerland)

Despite effectively sharing the same

coverage as all other providers, Swisscom

currently has a ~92% share of all FTTH

subscriptions

− We assume that Swisscom continues to

retain the vast majority of FTTH subs

0

50

100

150

200

250

300

350

400

450

500

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)

Total FTTH Subs Swisscom FTTH Subs

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Total FTTH Subs 22 74 154 198 248 293 338 395 417 451

Slide 226


Sunrise & Fiber7


07/09/2016

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Sunrise FTTH Subs 2 6 12 16 20 23 27 32 33 36

Change 4 6 4 4 4 4 5 2 3

% Change 233% 108% 29.0% 25.3% 18.2% 15.4% 16.7% 5.7% 8.1%

Take-up rate 0.4% 0.8% 1.3% 1.6% 2.0% 2.3% 2.7% 3.1% 3.3% 3.6%

Share of all FTTH subs 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%

Sunrise and Fiber7 are both service

providers that wholesale FTTH

Sunrise wholesales both from Swisscom

and from local utilities (SFN and

independents). The choice of which

provider depends on the locality (eg local

utilities strong in Geneva/Zurich)

Despite being priced competitively, their

market share is under 10% combined

− Sunrise is assumed to have an 8% share,

whilst Fiber7 is assumed at 2%

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Fiber7 FTTH Subs 0 1 3 4 5 6 7 8 8 9

Change 1 2 1 1 1 1 1 0 1

% Change 233% 108% 29.0% 25.3% 18.2% 15.4% 16.7% 5.7% 8.1%

Take-up rate 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 0.8% 0.9%

Share of all FTTH subs 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%

0

5

10

15

20

25

30

35

40

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

(‘000)

FTTH Subs (‘000)

Sunrise Fiber7

Slide 227



07/09/2016

Pricing Plans

Swisscom – prices in CHF (€1 = CHF1.09)

Fiber7– prices in CHF (€1 = CHF1.09)

Sunrise – prices in CHF (€1 = CHF1.09)

Slide 228

Source: Swisscom Source: Fiber7

Source: Sunrise

https://www.swisscom.ch/en/residential/internet/offers.html

https://www.fiber7.ch/en/

https://www1.sunrise.ch/is-bin/INTERSHOP.enfinity/WFS/Sunrise-Residential-Site/en_CH/-/CHF/ViewRateplanBundleConfigurator-

https://www1.sunrise.ch/is-bin/INTERSHOP.enfinity/WFS/Sunrise-Residential-Site/en_CH/-/CHF/ViewRateplanBundleConfigurator-

Very low levels of FTTH coverage, ~2% at present. But a number of new challengers are emerging.

May 5th 2016 commitment by BT to rollout 2m FTTH premises by 2020 (as well as 10m G.fast homes) will

increase coverage to ~7.5%

– At a CS estimated cost of £1000 per home, build would cost potentially ~£2bn over 4 years

Hyperoptic likely to be the largest challenger on current forecast, in our view, with 500k homes passed targeted by

over the next few years

– Recent £21m loan from European Investment Bank in July ’16

– Indicates possible small upside to targets if future European policy dictates greater funding to FTTH e.g.

through EFSI (Juncker Plan)

Gigaclear demonstrating strong demand for FTTH in slow broadband areas

Also worth observing TalkTalk, Sky and CityFibre’s JV in York (UFO), which has shown promising early results and

we believe has the potential to expand over time due to CityFibre’s growing network of 37 cities

Vodafone is reportedly still trialling an FTTH pilot in Norfolk using BT’s ducts and poles infrastructure, although

there is no indication yet of any further deployment

Ultimately we believe FTTH roll-out likely to remain relatively low with higher bandwidth demands met by BT’s

G.fast (330-500Mbps) and Virgin Media’s Project Lightning (200Mbps)

This leaves a substantial opportunity for the new FTTH challengers


07/09/2016

FTTH Market Summary - UK

Slide 229

Homes Passed (CS estimates)


07/09/2016

BT/Openreach the leader in the FTTH

market, with its target of passing 2m

premises with FTTH by 2020 (we assume

~1m households and ~1m business)

We assume an average of ~350k additional

UK homes passed annually with FTTH

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

BT/Openreach (CS estimates) 95 128 160 200 300 475 650 825 1,000 1,175

Hyperoptic (CS estimates) 20 35 100 200 300 400 500 600 700 800

Gigaclear (CS estimates) 1 10 20 25 40 100 150 200 250 300

Gigler (CS estimates) 21 21 21 21 21 21 21 21 21 21

UFO (CS estimates) 0 0 0 11 20 20 20 20 20 20

KCOM (CS estimates) 14 15 29 39 70 150 170 190 190 190

B4RN (CS estimates) 0 0 1 2 5 8 12 15 18 22

Total FTTH Passed 199 209 331 502 756 1,174 1,523 1,871 2,199 2,528 Change 10 122 171 254 418 348 348 328 328 % Change 5.1% 58.3% 51.7% 50.5% 55.3% 29.7% 22.9% 17.6% 14.9% % of all HH 0.8% 0.8% 1.2% 1.9% 2.9% 4.4% 5.7% 7.1% 8.3% 9.5%

0

500

1,000

1,500

2,000

2,500

3,000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Homes Passed ('000)

BT/Openreach Hyperoptic Gigaclear Gigler UFO KCOM B4RN

Source: Credit Suisse estimates, BT, Hyperoptic, Gigaclear, CityFibre, KCOM, Lightreading, ThinkBroadband, ISPreview,

Slide 230

We believe that Hyperoptic’s deployment in

densely-populated areas and MDUs leads to

a higher take-up rate, whilst BT’s build may

be more thinly spread including some rural

areas where the take-up rate is lower

FTTH Subscriptions (CS estimates)


07/09/2016 Slide 231

0

100

200

300

400

500

600

700

800

900

1000

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

FTTH Subscribers ('000)

BT/Openreach Hyperoptic Gigaclear Gigler UFO KCOM B4RN

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

BT/Openreach (CS estimates) 7 13 16 30 60 119 195 248 300 353

Hyperoptic (CS estimates) 8 9 10 30 90 120 150 180 210 240

Gigaclear (CS estimates) 0 4 7 11 14 35 53 70 88 105

Gigler (CS estimates) 0 0 1 1 2 2 3 3 4 4

UFO (CS estimates) 0 0 0 1 2 3 4 4 5 6

KCOM (CS estimates) 3 4 9 16 26 36 46 56 66 76

B4RN (CS estimates) 0 0 1 1 4 6 9 11 14 16

Total FTTH Subs 17 29 43 90 198 321 459 572 686 800 Change 12 20 47 108 123 138 113 114 114 % Change 73.1% 68.0% 108.4% 120.6% 62.4% 42.9% 24.7% 19.9% 16.6% Take-up rate 8.5% 14.1% 13.0% 17.8% 26.2% 27.3% 30.1% 30.6% 31.2% 31.6%

Source: Credit Suisse estimates, BT, Hyperoptic, Gigaclear, CityFibre, KCOM, Lightreading, ThinkBroadband, ISPreview,

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

BT FTTH Homes

Passed 95 128 160 200 300 475 650 825 1,000 1,175

Change 33 33 40 100 175 175 175 175 175

% Change 34.2% 25.5% 25.0% 50.0% 58.3% 36.8% 26.9% 21.2% 17.5%

% of all HH 0.4% 0.5% 0.6% 0.8% 1.1% 1.8% 2.5% 3.1% 3.8% 4.4%

BT/ Openreach


07/09/2016

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

BT FTTH Subs 7 13 16 30 60 119 195 248 300 353

Change 6 3 14 30 59 76 53 53 53

% Change 82.1% 25.5% 87.5% 100.0% 97.9% 64.2% 26.9% 21.2% 17.5%

Take-up rate 7.4% 10.0% 10.0% 15.0% 20.0% 25.0% 30.0% 30.0% 30.0% 30.0%


BT’s strategy towards high-speed broadband has focused around a wide coverage of more economical technologies (FTTC and G.fast) over FTTH

− It currently covers >91% of the UK with high-speed broadband (most of which is FTTC)

Openreach has offered an “On Demand” FTTH product since 2013, priced from ~£1000

Its May 5th 2016 commitment to 1m FTTH homes passed (as well as a further 1m business premises passed) would make it the clear market leader in FTTH

− In our view, the choice of build locations suggests a focus towards business coverage over household coverage

On August 16th 2016, BT began its FTTP rollout to premises in London using “micro cables” designed to fit through crowded ducts

− confirmed 3k premises connected in Mayfair already, with 360k more premises targeted in London by 2018

0

200

400

600

800

1,000

1,200

1,400

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Homes Passed Subs

Source: Credit Suisse estimates, BT, ThinkBroadband, ISPreview,

Slide 232

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Hyperoptic FTTH Homes

Passed 20 35 100 200 300 400 500 600 700 800

Change 15 65 100 100 100 100 100 100 100

% Change 75.0% 185.7% 100.0% 50.0% 33.3% 25.0% 20.0% 16.7% 14.3%

% of all HH 0.1% 0.1% 0.4% 0.8% 1.1% 1.5% 1.9% 2.3% 2.6% 3.0%

Hyperoptic


07/09/2016

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Hyperoptic FTTH Subs 8 9 10 30 90 120 150 180 210 240

Change 1 1 20 60 30 30 30 30 30

% Change 9.4% 10.2% 211.1% 200.0% 33.3% 25.0% 20.0% 16.7% 14.3%

Take-up rate 40.0% 25.0% 9.6% 15.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0%


London-based provider offering FTTH to 12

major cities in the UK

targeting 500k homes passed over the next few

years

Uses a demand aggregation model, where a

certain threshold of interest is needed before

initiating deployment to the building

Recently received a £21m loan from the EIB in

July 2016

0

100

200

300

400

500

600

700

800

900

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Homes Passed Subs


Slide 233

(‘000) 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Gigaclear FTTH Homes Passed

(CS estimates) 1 10 20 25 40 100 150 200 250 300

Change 10 10 10 10 60 50 50 50 50

% Change 1975.0% 95.2% 48.8% 32.8% 150.0% 50.0% 33.3% 25.0% 20.0%

% of all HH 0.0% 0.0% 0.1% 0.1% 0.2% 0.4% 0.6% 0.8% 0.9% 1.1%

Gigaclear


07/09/2016

0

50

100

150

200

250

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Homes Passed Subs

(‘000) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Gigaclear FTTH Subs (CS

estimates) 0 4 7 11 14 35 53 70 88 105

Change 4 3 3 3 21 18 18 18 18

% Change 1975.0% 70.8% 48.8% 32.8% 150.0% 50.0% 33.3% 25.0% 20.0%

Take-up rate 40.0% 40.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%


In contrast to Hyperoptic, Gigaclear focuses on rural areas – currently in Gloucestershire, Berkshire and Essex

Received an £18m loan from the EIB in Jan ‘16

Targeting 40k homes passed by end 2016

− We believe this could rise to 200k by 2019

− potential market of well over 1m homes, in our view

Source: Credit Suisse estimates, BT, Gigaclear, ThinkBroadband

Slide 234

CityFibre operates as a carrier-neutral

infrastructure operator, similar to the

business model of Metroweb (Italy) or

Enet (Ireland), in our view

City-by-city approach, building “fibre

rings” with an anchor tenant (typically

business or public sector) de-risking the

initial build cost – Acts as an enabler for FTTH service providers

but does not provide FTTH outside of

Bournemouth

Now covers 37 cities, with potential to

use BT’s poles and ducts in the future

CityFibre


07/09/2016 Slide 235

Source: Cityfibre

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

UFO FTTH Homes Passed 0 0 0 11 20 20 20 20 20 20

Change 0 0 11 9 0 0 0 0 0

% Change 81.8% 0.0% 0.0% 0.0% 0.0% 0.0%

% of all HH 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%

UFO


07/09/2016

(‘000) 2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E 2021E

UFO FTTH Subs 1 3 4 5 6 6 6

Change 1 2 1 1 1 0 0

% Change 172.7% 33.3% 25.0% 20.0% 0.0% 0.0%

Take-up rate for 10.0% 15.0% 20.0% 25.0% 30.0% 30.0% 30.0%

Share of overall subs 1.2% 1.5% 1.2% 1.1% 1.0% 0.9% 0.8%

2015-16 pilot build launched by TalkTalk and

Sky in partnership with CityFibre, currently

covering ~11k homes in York

− Phase One (aimed to finish in 2016) to

cover 20k homes

~12% of those covered have opted to

subscribe, with TalkTalk claiming in its Q2

results that half of those churned from rivals

Build cost estimated at ~£500 per home

(therefore at the cheaper end of FTTH builds)

Could potentially expand through CityFibre’s

existing network in the future

0

5

10

15

20

25

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Homes Passed Subs

Slide 236

Source: Credit Suisse estimates, TalkTalk, Lightreading

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

KCOM FTTH Subs 3 4 9 16 26 36 46 56 66 76

Change 1 5 7 10 10 10 10 10 10

% Change 20.0% 150.0% 75.6% 64.6% 38.5% 27.8% 21.7% 17.9% 15.2%

Take-up rate 22.2% 23.5% 31.3% 40.8% 37.0% 24.0% 27.1% 29.5% 34.7% 40.0%


KCOM


07/09/2016

0

20

40

60

80

100

120

140

160

180

200

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Homes Passed Subs

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

KCOM FTTH Homes Passed 14 15 29 39 70 150 170 190 190 190

Change 2 14 10 32 80 20 20 0 0

% Change 13.3% 88.2% 34.4% 81.4% 113.7% 13.3% 11.8% 0.0% 0.0%

% of all HH 6.8% 7.7% 10.7% 10.3% 9.4% 10.9% 8.5% 7.2% 5.8% 4.9%

Telco based in Hull (Yorkshire), where it is

the sole provider of broadband services

Has been building 90% FTTH & 10% FTTC

across Yorkshire since 2011

− Aims to pass 150k homes by 2017, with

a full market saturation at 190k homes

Its network assets (ducts and fibre) outside

of Hull were acquired by CityFibre as part of

a £90m acquisition

Source: Credit Suisse estimates, KCOM, ISPreview

Slide 237

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

B4RN FTTH Homes Passed 0 0 1 2 5 8 12 15 18 22

Change 0 1 1 3 3 3 3 3 3

% Change 50.0% 225.0% 69.2% 40.9% 29.0% 22.5% 18.4%

% of all HH 0.0% 0.0% 0.4% 0.4% 0.7% 0.6% 0.6% 0.6% 0.6% 0.6%

B4RN


07/09/2016

0

5

10

15

20

25

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

Homes Passed Subs

(‘000) 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E

B4RN FTTH Subs 0 0 1 1 4 6 9 11 14 16

Change 0 1 0 3 3 3 3 3 3

% Change 66.7% 265.6% 69.2% 40.9% 29.0% 22.5% 18.4%

Take-up rate 60.0% 66.7% 75.0% 75.0% 75.0% 75.0% 75.0% 75.0%


In our view a conceptually similar project to

Gigaclear, with FTTH targetted at rural areas

(in the North vs Gigaclear which is largely

based in the South)

Has so far connected just 1,500 homes in

Lancashire over 2 years

Enjoys a high take-up rate of up to 90% in

some areas

However is worth observing as it is being

considered by Ofcom to be granted code

powers to more easily expand its network

Source: Credit Suisse estimates, ISPreview

Slide 238

Vodafone trialling FTTH for 6 weeks in

King’s Lynn, Norfolk to assess the

viability of an FTTH build

The trial uses BT’s ducts and poles,

with data on their availability and ease

of use fed to Ofcom

– Reports indicate difficulties with

blocked access and lack of map

availability

– We believe this may be a more

strategic move to highlight the

difficulty of using BT/Openreach’s

infrastructure as a challenger and

push for greater Openreach

independence

No indication of any further build plans

at this stage

Vodafone


07/09/2016

Excerpt from Daily Telegraph article, July 2016

Slide 239

Pricing Plans


07/09/2016

BT/Openreach Hyperoptic

KCOM

UFO

Slide 240

Source: UFO

Source: Hyperoptic Source: BT

Source: KCOM


07/09/2016

Pricing Plans B4RN

Gigler

Gigaclear

Slide 241

Source: Gigaclear

Source: Gigler

Source: B4RN


07/09/2016 Slide 242

Companies Mentioned (Price as of 06-Sep-2016)

Altice (ATCA.AS, €15.44) BT Group (BT.L, 392.65p) Bouygues (BOUY.PA, €28.82) Com Hem Holding (COMH.ST, Skr72.5) Deutsche Telekom (DTEGn.F, €15.06) Elisa Corporation (ELISA.HE, €31.74) Iliad (ILD.PA, €187.85) KPN (KPN.AS, €2.91) Liberty Global (LBTYA.OQ, $32.84) NOS (NOS.LS, €6.21) Orange (ORAN.PA, €13.66) Orange Belgium (OBEL.BR, €20.7) Proximus (PROX.BR, €27.77) SFR (SFRGR.PA, €25.54) Sunrise (SRCG.S, SFr69.1) Swisscom (SCMN.S, SFr477.3) TDC (TDC.CO, Dkr37.66) TalkTalk (TALK.L, 199.6p) Tele2 AB (TEL2b.ST, Skr72.15) Telecom Italia (TLIT.MI, €0.82) Telefonica (TEF.MC, €9.34) Telefonica Deutschland (O2Dn.DE, €3.65) Telekom Austria (TELA.VI, €5.15) Telenet (TNET.BR, €43.4) Telenor (TEL.OL, Nkr146.6) TeliaSonera (TELIA.ST, Skr38.86) Vodafone Group (VOD.L, 227.1p)

Disclosure Appendix

Important Global Disclosures

Justin Funnell, Jakob Bluestone, Paul Sidney and Henrik Herbst each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S . and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector , with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non -Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12 -month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equa l to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time.

Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:

Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 55% (52% banking clients)

Neutral/Hold* 28% (25% banking clients)

Underperform/Sell* 17% (53% banking clients)

Restricted 0%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.

Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html

Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

See the Companies Mentioned section for full company names

The subject company (KPN.AS, LBTYA.OQ, SCMN.S, TEF.MC, TDC.CO, TLIT.MI, TELIA.ST, BT.L, DTEGn.F, ORAN.PA, PROX.BR, BOUY.PA, ATCA.AS, COMH.ST, ILD.PA, O2Dn.DE, OBEL.BR, SFRGR.PA, TALK.L, TELA.VI, TNET.BR, VOD.L) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided investment banking services to the subject company (KPN.AS, LBTYA.OQ, SCMN.S, TEF.MC, TLIT.MI, DTEGn.F, ATCA.AS, ILD.PA, O2Dn.DE, SFRGR.PA, TELA.VI, TNET.BR) within the past 12 months.

Credit Suisse has managed or co-managed a public offering of securities for the subject company (KPN.AS, SCMN.S, TLIT.MI, DTEGn.F, ATCA.AS) within the past 12 months.

Credit Suisse has received investment banking related compensation from the subject company (KPN.AS, LBTYA.OQ, SCMN.S, TEF.MC, TLIT.MI, DTEGn.F, ATCA.AS, ILD.PA, O2Dn.DE, SFRGR.PA, TELA.VI, TNET.BR) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (KPN.AS, LBTYA.OQ, SCMN.S, TEL.OL, TEF.MC, TDC.CO, TLIT.MI, TELIA.ST, BT.L, DTEGn.F, ORAN.PA, PROX.BR, BOUY.PA, ATCA.AS, COMH.ST, ILD.PA, NOS.LS, O2Dn.DE, OBEL.BR, SFRGR.PA, TALK.L, TEL2b.ST, TELA.VI, TNET.BR, VOD.L) within the next 3 months.

As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (SFRGR.PA).

As of the end of the preceding month, Credit Suisse beneficially own between 1-3% of a class of common equity securities of (SCMN.S).

Credit Suisse beneficially holds >0.5% long position of the total issued share capital of the subject company (TLIT.MI).

Credit Suisse beneficially holds >0.5% short position of the total issued share capital of the subject company (BOUY.PA).

Credit Suisse has a material conflict of interest with the subject company (LBTYA.OQ) . "Credit Suisse is acting as joint bookrunner to Liberty Global in its financing arrangements in relation to its share acquisition of Cable & Wireless Communications.”

Credit Suisse has a material conflict of interest with the subject company (DTEGn.F) . Detusche Telekom AG - Wulf Bernotat, a Senior Advisor of Credit Suisse, is a supervisory board member of Deutsche Telekom AG (DTE)

For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

For a history of recommendations for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to https://rave.credit-suisse.com/disclosures/view/report?i=246815&v=1u9mvcyqd4mhv6ajalu6wbe0x .

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events.

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.

For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html.

Credit Suisse Securities (Europe) Limited (Credit Suisse) acts as broker to (TALK.L).

The following disclosed European company/ies have estimates that comply with IFRS: (KPN.AS, SCMN.S, TEL.OL, TEF.MC, TDC.CO, TLIT.MI, TELIA.ST, BT.L, DTEGn.F, ORAN.PA, PROX.BR, BOUY.PA, ELISA.HE, ILD.PA, OBEL.BR, TALK.L, TEL2b.ST, TELA.VI, VOD.L).

Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (KPN.AS, SCMN.S, TLIT.MI, ATCA.AS) within the past 3 years.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.


07/09/2016 Slide 243

This research report is authored by:

Credit Suisse International ...................................................................................... Justin Funnell ; Jakob Bluestone ; Paul Sidney ; Henrik Herbst

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Credit Suisse International ...................................................................................... Justin Funnell ; Jakob Bluestone ; Paul Sidney ; Henrik Herbst

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

This report is produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who-we-are This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates.The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk.

This report is issued and distributed in European Union (except Switzerland): by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Germany: Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). United States and Canada: Credit Suisse Securities (USA) LLC; Switzerland: Credit Suisse AG; Brazil: Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; Mexico: Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); Japan: by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau ( Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association; Hong Kong: Credit Suisse (Hong Kong) Limited; Australia: Credit Suisse Equities (Australia) Limited; Thailand: Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, having registered address at 990 Abdulrahim Place, 27th Floor, Unit 2701, Rama IV Road, Silom, Bangrak, Bangkok10500, Thailand, Tel. +66 2614 6000; Malaysia: Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch; India: Credit Suisse Securities (India) Private Limited (CIN no.U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India as Research Analyst (registration no. INH 000001030) and as Stock Broker (registration no. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777; South Korea: Credit Suisse Securities (Europe) Limited, Seoul Branch; Taiwan: Credit Suisse AG Taipei Securities Branch; Indonesia: PT Credit Suisse Securities Indonesia; Philippines: Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Additional Regional Disclaimers Hong Kong: Credit Suisse (Hong Kong) Limited ("CSHK") is licensed and regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong Kong, which differ from Australian laws. CSHKL does not hold an Australian financial services licence (AFSL) and is exempt from the requirement to hold an AFSL under the Corporations Act 2001 (the Act) under Class Order 03/1103 published by the ASIC in respect of financial services provided to Australian wholesale clients (within the meaning of section 761G of the Act). Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Malaysia: Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. Singapore: This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by Credit Suisse AG, Singapore branch to overseas investors (as defined under the Financial Advisers Regulations). By virtue of your status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore branch is exempted from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the "FAA"), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse AG, Singapore branch may provide to you. UAE: This information is being distributed by Credit Suisse AG (DIFC Branch), duly licensed and regulated by the Dubai Financial Services Authority (“DFSA”). Related financial services or products are only made available to Professional Clients or Market Counterparties, as defined by the DFSA, and are not intended for any other persons. Credit Suisse AG (DIFC Branch) is located on Level 9 East, The Gate Building, DIFC, Dubai, United Arab Emirates. EU: This report has been produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division This research may not conform to Canadian disclosure requirements. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-US customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. US customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the US. Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority or in respect of which the protections of the Prudential Regulation Authority and Financial Conduct Authority for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials,management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. Copyright © 2016 CREDIT SUISSE AG and/or its affiliates. All rights reserved.

Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments.

When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only

50% 40% 60% building the gigabit society

Documents