• Intrigue continues over a possible Dutch–Swiss tower tie‑up with Spain’s Cellnex Telecom.
  • Tower management remains a focus area for future Group cost and network improvement plans.

Deutsche Telekom (DT) Chief Executive (CEO) Timotheus Höttges gave a seemingly unscripted hint that the Group has expanded its Swiss tower management tie-up with Cellnex Telecom to the Netherlands.

Speaking during DT’s latest results conference call for the quarter to 31 March 2018 (Q1 FY18), Höttges flagged eagerness to expand the Group’s third-party tower rental business, adding that “we are working already with the Sunrise people in Switzerland on this equation, in the Netherlands”.

He then went on to indicate that German tower arm Deutsche Funkturm (DFMG) — which is already undergoing an expansion and modernisation programme, to help enable Telekom Deutschland’s 5G plans — is in line to become a regional entity, encompassing the tower operations of other European businesses within DT (including its Dutch assets).

Höttges noted “tendencies” within the Group to “Europeanise” DFMG and expand it “beyond the footprint it has today”. “Wherever we get the opportunity to manage under the DFMG roof more assets and [create] economies-of-scale and productivity gains, we will be open to look at this”, he said.

Time for phase two

Höttges’ reference to the “Sunrise people” is a clear (but slightly wayward) nod to Swiss Towers, the former wholly-owned infrastructure arm of Swiss operator Sunrise Communications. Deutsche Telekom Capital Partners (DTCP), DT’s main investment unit, was part of a consortium to buy out the business during 2016, in an evident quarantined try-out of infrastructure outsourcing arrangements, safely away from the Group’s own networks (Deutsche Telekomwatch, #54).

Cellnex, an expansive Spanish passive infrastructure player, is DT’s senior partner in that venture, and has previously indicated an interest in broadening the tie-up to cover other European territories. In February 2018, Cellnex CEO Tobías Martínez stressed that the Swiss partnership with DT was “strategic” and intimated it could pre-empt a managed services relationship with the Group, although he stated that no further commitments had been made by either party at that point (Deutsche Telekomwatch, #71).

Going Dutch seems both a plausible next step for the Cellnex-DT alliance, and possible precursor to a more dramatic German expansion, bringing in DFMG. DT is now spinning out the tower assets of T-Mobile Netherlands (TMNL) as part of its pending merger with Tele2 Netherlands (Deutsche Telekomwatch, #69). Further, DFMG, DTCP, and TMNL all sit within DT’s M&A-focused Group Development division, following recent years’ internal manoeuvring, so a meld would have common management and not be a major distraction to Europe segment leadership or other NatCos. Group Development would also be the natural in-Group manager of any accompanying asset sale to Cellnex.

DT is understood to have considered and engaged with other tower management specialists, as potential regional infrastructure buddies, but it seems Cellnex is in pole position for this role.

Neither Cellnex nor DT returned Deutsche Telekomwatch‘s request for clarification of Höttges’ comments.

As DT displays enthusiasm for towers at strategic and infrastructure levels, its UK investment BT Group is vaguely rumoured to be considering the sale of its own tower portfolio in a UKP £1.5bn (EUR1.8bn) exercise positioned to release funds for network re-investment and other purposes. This raises the intriguing possibility that DT could become a contender to scoop these up, in a move that might also play into the larger scenario of further bringing BT under its wing.

All in the execution

Elsewhere in the Q1 call, Chief Financial Officer Thomas Dannenfeldt echoed earlier signals that DT is seeking for DFMG to become more “professionally managed”, having in 2017 been brought under the stewardship of former Group Chief Technology Officer Bruno Jacobfeuerborn.

Jacobfeuerborn is bidding to modernise DFMG’s operations and accelerate its rate of tower deployment to expand rural coverage and improve signal for key urban sites and transport links. This mirrors the typical story of DT strategy under the Höttges and Dannenfeldt double act — aggression on raising capital expenditure while attacking operating costs. This twin-track approach is something that opens up numerous opportunities for Group partners and suppliers, but has evidently proved challenging to manage at some businesses.

With DFMG’s move under Group Development, DT has begun releasing more detail on its financials. Despite Dannenfeldt’s claims of a need to improve efficiency and extract more value from the operation, the tower arm appears a high-profitability business (at least on an operational level). DFMG produced EUR187.1m in rental revenue during Q1 — a rise of 3.1%. Core earnings margin was 60%, up three percentage points. At 31 March 2018, DFMG had around 28, 200 towers, which, under the expansion programme, it is mooted to be planning to grow beyond 40, 000 (Deutsche Telekomwatch, #63).

Image: Meffre Emmanuel / Flickr CC BY-ND 2.0.

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Contents

EXECUTIVE BRIEF

Q1 FY18

Management update

DT readies pitch for “Trans-Atlantic platform” [p6]

  • DT turns eyes beyond Europe, self-defines as “Trans-Atlantic”
  • Table 1: Deutsche Telekom strategy, FY14 versus FY17
  • Money pressures to weigh on strategic update; TMUS cost hand-off up in air
  • Table 2: Deutsche Telekom, financial summary, Q1 FY18

Headline data: an untimely fall off the boil [p8]

  • Out in the regions: Europe slowly regaining mojo, but drag has hurt DT

GROUP

M&A

Group begins push to make New T-Mobile dream a reality [p11]

  • Table 3: DT and TMUS advisory team
  • Figure 1: Revenue comparison, New T-Mobile, versus US majors, year to 31 December 2017
  • Figure 2: New T-Mobile ownership structure

Sprint-TMUS: out of giants’ shadow, and room to grow [p15]

  • A power-play across the Atlantic, too

Buckle-up: DT is testing the limits [p16]

  • Figure 3: Revenue comparison, Deutsche Telekom plus Sprint, versus US majors, year to 31 December 2017
  • Money manoeuvring ratchets up pressure on US delivery
  • Table 4: DT funding support to TMUS, 31 March 2018
  • Can DT find the $18bn pot at the end of the rainbow?
  • Table 5: Projected New T-Mobile free cash flow

Masayoshi Son: Can DT crack the enigma? [p19]

  • Embarrassment and shame

The approval effort: ingratiation mode selected [p21]

  • A few fences to mend
  • Table 6: New T-Mobile cost synergy ambitions

Four-year integration programme: main elements [p22]

The New T-Mobile network masterplan [p23]

  • 5G: this is how we do it
  • Figure 4: Nationwide split of available mmWave spectrum (%)
  • 5G FWA… hmm, perhaps not a bad idea after all

Huge partner opportunity for 5G thrust and IT meld [p27]

  • Ecosystem reaction
  • Table 7: Sprint vendor/partner agreements, where publicised, 2008-2018

Euro tower power: Cellnex-DT tower linkup ‘expands to Netherlands’ [p30]

  • Time for phase two
  • All in the execution

ngena continues to share network love [p32]

  • Building the future
  • Table 8: ngena ecosystem, May 2018
  • ngena: “like-minded” carriers sought; stuffy traditionalists need not apply

Legal and regulatory

DT joins chorus of criticism against EU digital reforms [p35]

  • Cracking the Code
  • Can’t ETNO satisfaction
  • Table 9: People movement highlights

Technology & Innovation

DT’s IP migration initiative hits two-year delay [p39]

  • Figure 5: Deutsche Telekom, European IP migration progress, FY15-FY17 (% of lines)
  • Being IP doesn’t yet square
  • Bumps in the road
  • Copper retirement now on agenda

DT welcomes prospect of fronthaul RAN disruption [p41]

  • Revamping the RAN
  • Katti remarks
  • A game of ‘Os’ and ‘Xs’

DT’s immmr rules out full UK launch [p43]

  • World domination takes back seat

GERMANY

Deals

Pressure on rise as Vodafone-Unitymedia deal agreed [p46]

  • Housing associations shun TDE at front door
  • Vodafone, Liberty focus fire on DT
  • Höttges risks being cast as the broadband bogeyman

Network

TDE deploys 5G antennae as standard in Berlin [p48]

  • BuyIn making a mark in Group 5G buying
  • Big in Berlin
  • 5G pieces falling into place?
  • Beyond Germany

EUROPE

Croatia

Hrvatski Telekom joins NB-IoT gang [p52]

  • Table 10: NB-IoT rollouts to date across the DT footprint
  • NB-IoT rollout gathering steam

USA

Legal and regulatory

TMUS lands huge fine over rural call dodge [p56]

Network

TMUS beefs up network with mid-band muscle [p57]

  • Mid-band momentum
  • Ray bands

FURTHER READING

INDEX

Index

Symbols

3rd Generation Partnership Project (3GPP) 48

A

AAA 18

Africa 18, 32, 37

– South Africa 32

Alcatel-Lucent 29

Alibaba Group Holding Ltd 20

Amdocs 27, 29, 43

American Tower Corp. 27

Americas

– Brazil 37

– Canada 34, 36, 50

– South America 18

– United States of America (USA) 6, 7, 9, 11, 15, 16, 17, 18, 20, 21, 24, 25, 27, 43, 44, 50, 53, 55, 56

– – Department of Justice (DoJ) 21, 56

– – Federal Communications Commission (FCC) 21, 24, 56

– – Government 21

– – States

– – – Kansas 22

– – – New York 21

– – – Washington 21, 22, 57

– – – Wisconsin 56

Apple 9

Aricent Inc. 43

Asia-Pacific 33, 34, 37, 42, 50

– Australia 50

– China 20, 21, 32, 34, 41, 48, 52

– India 28, 37

– Japan 19, 32, 34

– Singapore 34

AT&T 11, 15, 16, 21, 22, 23, 24, 25, 50, 56, 58

B

Bharti Group 37

– Bharti Airtel 37

Boingo Wireless 28, 29

Boku 29

BOKU Inc. 29

Bridge Alliance 33

Broadcom 21

BT Group 13, 20, 35, 42, 47

– EE 13, 37

Bundesliga 48

C

Cellnex Telecom 30

– Swiss Towers 30

CenturyLink Inc. 32

CGI Group Inc. 37

China Mobile 41

Ciena Corp. 29, 43

Cisco Systems 29, 32, 34, 43

Cleary Gottlieb Steen & Hamilton LLP 11

Colt Group 37

Comarch SA 32, 34

Comcast Corp. 15

– NBCUniversal, LLC

– – CNBC 21

Committee on Foreign Investment in the United States 21

CommScope Inc. 29

Computacenter

– Allnet 58

Crown Castle International Corp. (CCI) 27

CSG Systems 28

D

Deutsche Bank 11

Deutsche Telekom 6, 7, 8, 9, 11, 12, 13, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 27, 28, 30, 31, 32, 33, 34, 35, 36, 37, 39, 40, 41, 42, 43, 44, 46, 47, 48, 49, 50, 52, 53, 56, 57, 58

– Deutsche Telekom Capital Partners 15, 17, 19, 30

– – DocuSign (see separate) 15

– – Fireglass (see separate) 17

– – Mojio (see separate) 50

– – Morphisec (see separate) 17

– – Next Generation Enterprise Network Alliance (ngena) 32, 33, 34

– – Swiss Towers (see separate) 30

– Europe

– – Austria 9, 37, 49, 50, 52, 53

– – Croatia (Hrvatski Telekom) 52, 53

– – Czech Republic 9, 48, 53

– – Greece (see OTE) 9, 42, 53

– – Hungary (see Magyar Telekom) 9, 53

– – Netherlands 12, 30, 36, 39, 53

– – Poland (Polska Telefonia Cyfrowa/PTC) 53

– – Slovakia (Slovak Telekom/T-Mobile) 37, 44, 53

– – UK (EE) 13, 37

– Executives

– – Abolhassan, Ferri 37

– – Al Saleh, Adel 9

– – Budwilowitz, Frank 37

– – Dannenfeldt, Thomas 6, 17, 31, 35, 39, 50

– – Gopalan, Srini 9, 37

– – Höttges, Timotheus 6, 11, 13, 19, 30, 35, 46

– – In der Rieden, Tom 37

– – Jacobfeuerborn, Bruno 31

– – Lange, Peter 37

– – Lauterbach, Thomas 37

– – Legere, John 9, 11

– – Manepalli, Surya 37

– – Melchor, Erik 37

– – Nemat, Claudia 44, 48, 50

– – Pruchnow, Johannes 41, 47

– – Ray, Neville 13, 57

– – Salacki, Andreas 37

– – Sievert, Mike 9, 13, 23

– – Singh Ahluwalia, Kanwardeep 37

– Germany 6, 9, 30, 37, 40, 44, 46, 47, 48, 49, 50, 53

– Investments

– – Magyar Telekom (see separate) 9, 53

– – OTE (see separate) 52

– Product and Innovation

– – hubraum 53

– Products and services

– – Entertain 48

– – immmr 43, 44

– – QIVICON 42

– – StreamOn 9

– – T-Mobile TV 25

– Systems Solutions 8, 9

– – T-Systems 6, 15, 32, 37

– – – South Africa 32

– – – Telekom Security 37

– T-Mobile International 37

– USA 6, 7, 8, 9, 11, 12, 13, 15, 16, 17, 18, 20, 21, 22, 23, 24, 25, 27, 28, 37, 44, 53, 56, 57, 58

– – Un-carrier 13

Deutsche Telekom Capital Partners 15, 17, 30

DLA 11

DocuSign 15

E

eBay

– PayPal 17

Emblaze Group

– European Telecom 36

EMC

– VMware 29

Ericsson 29, 35, 37, 42, 48, 49

Europe

– Austria 12, 37, 49, 52, 53

– Belgium 39

– Croatia 52, 53

– Czech Republic 46, 53

– Eastern Europe 37

– Germany 6, 7, 8, 9, 11, 21, 30, 31, 32, 34, 37, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 50, 53

– – Bundesnetzagentur für Elektrizität, Gas, Telekommunikation, Post und Eisenbahnen (BNetzA, RegTP, FNA, or German Federal Network Agency) 46, 49

– Greece 52, 53

– Hungary 46, 50, 53

– Ireland 43

– Italy 32, 34, 42

– Netherlands 12, 30, 33, 36, 37, 39, 53

– Poland 53

– Romania 9, 46

– Slovakia 37, 50, 53

– Spain 30, 32, 34

– Sweden 48

– Switzerland 30

– United Kingdom (UK) 13, 32, 33, 34, 37, 43, 47

European Telecommunications Network Operators’ Association (ETNO) 35, 36

European Union 35, 36, 52

– European Commission 12, 35

– European Parliament 35

F

Facebook 42

– Telecom Infra Project 42

Fireglass 17

Flash Private Mobile Networks 39

France Télécom 35

– Orange 16, 35, 37, 41, 49

– – UK (see EE, DT) 13, 37

Fujitsu 43

G

Gemalto NV 29

Gilat Satellite Networks Ltd 29

Goldman Sachs 11

GSM Association

– Mobile World Congress 44, 46, 50

GSM Association (GSMA) 56

H

Hewlett-Packard 17

Hrvatski Telekom (see DT, Croatia) 52, 53

Huawei Technologies 48, 49, 52

I

IBM 29

IDEMIA 29

Ingram Micro 36

Inmarsat 32

Intel 43

Interxion 29

ISS Group 31

J

JPMorgan Chase 56

Juniper Networks 29

K

KPN 12, 32, 33

L

Liberty Global

– UPC Austria 12

Liberty Global Inc. 46

– Unitymedia GmbH 37, 46, 47

– UPC Broadband 12

– – Germany (Unitymedia) 37, 46, 47

LivePerson 28

Lookout, Inc. 29

M

Magyar Telekom (see DT) 9, 53

Market segments

– Machine-to-machine (M2M) 29

– Mobile virtual network operator (MVNO) 39, 43, 44

– Multinational corporations (MNCs) 33

– Over-the-top (OTT) 43

– Value-added services (VAS) 29

Mavenir Systems 29, 43

McGraw-Hill Companies, The

– Standard & Poor’s (S&P) 7, 17

Metaswitch Networks 29

MetroPCS Communications Inc. 22, 58

– Carter, Braxton 13, 57

Microsoft 19, 29, 37

Middle East 32, 37

– Saudi Arabia 19

Mojio 50

Morgan Stanley 11

Morphisec 17

MTN 32, 33

N

NEC 43

Nokia 29, 43, 48, 49

O

Openwave Systems 29

Oracle 37

OTE (Hellenic Telecom. Org. SA, see DT) 52

– Cosmote 9, 42, 52, 53

– – Greece 9, 42, 53

P

PCCW 32

PCTEL 28

Peoplesoft 37

Providence Equity Partners

– KDG Holding GmbH (Kabel Deutschland) 46

Q

Qualcomm 21, 29

R

Red Hat 29

Reliance-Anil Dhirubhai Ambani Group

– Reliance Communications (RCom) 6, 32

S

SafeBreach 17

Samsung 29, 37, 43

SAP 37

Schellenberg 42

Sequoia Capital 17

SK Telecom 32, 43

Slovak Telekom (see DT, Slovakia) 37, 44, 53

Smith Micro Software 28, 29

SOFTBANK CORP. 11, 12, 13, 16, 17, 19, 20, 21

– Son, Masayoshi 13, 19

Sprint Corporation 6, 7, 11, 12, 13, 15, 16, 17, 18, 20, 21, 22, 23, 24, 25, 27, 28, 29, 56, 58

– Boost Mobile 22

Strabag International 31

Sunrise 30

T

Technology

– 2.5G 23, 24

– 2G 23, 24, 48

– – GSM 56

– 3G 48

– – Evolved HSPA (HSPA+/I-HSPA)

– – – MIMO 24, 42

– 4G 23, 24, 39, 41, 42, 48

– – Long Term Evolution (LTE) 24, 28, 29, 48, 57, 58

– 5G 6, 7, 13, 17, 21, 23, 24, 25, 27, 28, 30, 41, 42, 48, 49, 50, 58

– Billing 29

– BSS 28, 32, 34

– CRM 29

– Ethernet 32

– Fibre 6, 7, 25, 35, 41, 42, 47, 50

– IMS 29

– IP 6, 7, 39, 40, 41, 42

– IPTV 25, 48

– M2M 29

– NaaS 34

– Narrowband Internet of Things (NB-IoT) 52, 53

– NFV 29, 33, 34, 42

– OpenStack 32

– OSS 29, 32, 34, 48

– “Push-to-talk” 39

– RAN 41, 42, 43, 48

– R&D 52

– SDN 33, 34

– SIM 39, 53

– Smartphone 25

– Spectrum 24, 58

– – 700 MHz 58

– – 1900 MHz 23, 57

– – Advanced Wireless Spectrum 57, 58

– WAN 29, 32, 33, 34, 52

– W-LAN 28, 29

Tele2 12, 30

– Netherlands 12, 30

Telecom Italia 18

Telefonica Group 18, 35, 41

– Europe 37

Telekom Austria 32, 33

– Austria

– – A1 32, 33

Telit 29

Telstra 32, 43, 50

Telus 32, 34, 50

Texas Instruments 43

Time Warner 21

Twitter Inc. 20, 21, 57

V

Value-added services 15

Verizon Communications 13, 15, 16, 21, 22, 23, 24, 25, 43, 56, 57, 58

– Verizon Wireless 13, 57, 58

– – McAdam, Lowell 21

Virgin Group

– Virgin Mobile 22

Vodafone 13, 18, 33, 42, 46, 47

– Africa, Middle East, and Asia Pacific Region (AMAP)

– – India 37

– Europe Region

– – Germany 46, 47

Voxbone 43

Z

Zscaler 29

About

About Deutsche Telekomwatch

Report: #73
Published: May 2018
Next report: June 2018
For more information visit: Deutsche Telekomwatch