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