Data center T-Systems

  • Confirmation client retention management headaches have put paid to 2018 target.
  • Flagship, long-running project to extend to 2020.
  • Looking beyond: DT mulling copper retirement options.
  • The Group has some way to go to complete IP migration in both Germany and Europe — something that could have a concertina effect on future network plans.

Deutsche Telekom (DT) confirmed it will suffer a two-year delay in completion of its flagship, Europe-wide All-IP Migration programme.

Group Chief Financial Officer Thomas Dannenfeldt stated the PSTN replacement initiative — one of DT’s main network-reshaping programmes of recent years — will now not be wrapped up until end-2020, having originally been scheduled for completion in 2018. Full migration of residential lines is now targeted for 2019, with the last business customers expected to be upgraded to IP connections a year later.

As of 31 March 2018, the operator had firmed up migration of 73% of lines in Germany (up from 57% a year earlier) and 71% in Europe segment markets (up from 61%).

  • See full Deutsche Telekomwatch report for Table: Deutsche Telekom European IP migration progress, FY15-FY17.

Being IP doesn’t yet square

The delay brings complications for Group network planning, as it means the budgetary impact of the All-IP Migration scheme now leaks into DT’s next mid-term strategic cycle, from 2019 (rather than being finalised during the current, 2014-2018, phase). This may have a bearing on budgets for other network projects earmarked for the coming cycle, due to be laid out by DT at its coming Capital Markets Day in May 2018.

Late All-IP Migration completion will also likely have an impact on NatCos’ bottom line. The Group has been looking to the programme as an enabler to both boost sales through service improvement and innovation, and to generate operating expenditure (opex) savings with retirement of legacy platforms. Through both All-IP Migration and the Group’s Integrated Networks Strategy and Pan-European Network (PANNET) initiatives — its two other heavyweight infrastructure-reshaping programmes in Germany and Europe — DT has ambitions to deliver a EUR1.2bn annual run-rate on opex reduction (Deutsche Telekomwatch, #25 and passim). However, this aim is to be realised from the “early-2020s” onwards, and was laid out with a view to 2018 completion.

Dannenfeldt assured DT remains in line to deliver “what we have promised” on All-IP Migration-led earnings uplift, although he did not go into detail on the impact of the delays, or how the programme has played out in terms of frontloaded expense and performance improvement. DT had previously estimated the programme would cost between EUR30 and EUR60 per-customer to implement, but ultimately generate per-customer savings of EUR10 per-year.

Bumps in the road

The hold-up does not come out of the blue, as DT has been flagging pain from the migration project since at least 2016, and Dannenfeldt confirmed the deadline “might slip a little bit” in August 2017 (Deutsche Telekomwatch, #56 and #66). Persuading business-to-business (B2B) clients to migrate lines without churning appears to have been a major challenge. In Germany, this has been exacerbated by legislation forcing DT into a “hard” two-step IP migration process, obliging it to cancel customer lines before upgrading them. As well as slowing forward movement on migration, this has affected Telekom Deutschland’s overall broadband market performance, ostensibly as a ‘meerkat effect‘ churn stimulant.

Noticeable, recently, is that the Group has been making faster All-IP Migration progress in Germany than across Europe NatCos, in a reversal of previous trend. DT has not gone into detail on the challenges it is facing in its European markets, instead largely focusing on issues in Germany. However, generally, Dannenfeldt hinted at a Pareto principle being at play across different customer segments and territories.

“ I think what we’ve underestimated a bit is on the consumer side, as well as on the B2B side… is not how to get the first 80% [to] move off the platform; it’s how to get the last 10% off the platform, and that’s harder and takes a bit more time and effort. ” — Dannenfeldt.

Copper retirement now on agenda

Dismantling of legacy systems, like the PSTN, is a key theme of DT’s current investment strategy — but one where progress seldom meets expectations. While savings potential is tantalising, it is an area where the Group is coming up against external barriers such as vendor resistance and technology frustrations (such as the PANNET service platform overhaul, or radio access network upgrade plans), or internal limitations around cost or resource (such as fibre-to-the-premises rollout). It is unsurprising that this leads to delays. As well as acknowledging All-IP Migration drag, DT has yet to clarify whether it will meet a 2018 deadline of service migration to PANNET in Europe, and has given partners repeated hurry-ups over elements needed to construct the regional platform (Deutsche Telekomwatch, #61 and #71).

Another legacy removal initiative that is likely to surface in the coming years is decommissioning of the copper network and related assets — in some ways the physical sibling of PSTN shutdown. DT is again likely to be cautious, and is already behind some incumbent peers such as Telefónica Group, which began taking central offices out of service in late-2015. This is also a potentially fiery topic, with much at stake on how it is managed for DT, wholesale partners, customers, and rivals.

Nonetheless, there are signs copper retirement is coming on the Group radar. Johannes Pruchnow, Head of Broadband Cooperation at DT, recently indicated that DT had agreed to develop a copper retirement plan with other fibre players in 2017. He added copper decommissioning should form “part of the overall clarity” on fibre regulations being discussed within Germany and Europe (Deutsche Telekomwatch, passim). “We would like to retire copper over time. It is certainly not a twelve-month project. It is a longer project and it certainly needs rules and it is part of this fibre plan”, he said.

Image: Deutsche Telekom.

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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