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10/13/2010 IDC

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European Wholesale Telecoms:

Sizing the OpportunityJan Hein BakkersAngela Salmeron

James EibischEMEA Telecoms and Networking

June 30, 2010

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Agenda

Introduction

Wholesale Access Services

Wholesale Voice Services

Wholesale Data Services

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Introduction

Wholesale is an increasingly important

segment for many major operators,generating up to around 20% of grouprevenue

Regulation has put more emphasis onwholesale segment

IDC analyzed three key segments, worth$75.5 billion in revenues in 2009:

Access

Voice

Data

Total = $75.5 B

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Agenda

Introduction




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Wholesale Broadband

Access

DSL simple resale

DSL bitstream access

Naked DSL

Wholesale fiber access

Wholesale Line Rental

Unbundled Access Full Unbundling

Line Sharing

Subloop Unbundling

Fiber Unbundling

Traditional Fixed Voice

IP Voice

Broadband Access

TV

Data services (e.g. IPVPN, ethernet services)

Wholesale Markets Associated Retail Markets

Wholesale Versus Retail

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Regulation and Broadband HaveDriven the Wholesale Access Market

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Wholesale Access Status byCountry, 2009

Bubble size indicates market size in revenues

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Access Market Outlook

Market contraction in retail voice

Slowdown in growth in retail broadband access

Next generation access drives wholesale broadband access

Regulation inhibits retail market for next generation access services,

...but will drive the role of wholesale in it

LLU business model will come increasingly under threatConsolidation is wild card

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Access Essential Guidance

Next generation access will drive wholesale broadband access

LLU operators need to develop long term strategies

For owners of access infrastructure, wholesale should be morethan just regulatory obligation

Strong wholesale portfolio can improve position against otherinfrastructures

Wholesale services can improve business case for next generationaccess

Cost based, regulated prices improve predictability of revenue

streams

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Agenda

Introduction




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Wholesale Voice Markets andAssociated Retail MarketsWholesale Voice Markets andAssociated Retail Markets

Wholesale Voice Markets Retail Voice Markets

National VoiceInterconnection Services

qTermination, transit

qTraditional voice, VoIP and mobile voiceq

National TDM Calls toFixed/Mobile National Numbers

National VoIP Calls toFixed/Mobile National Numbers

National Mobile Calls toFixed/Mobile National Numbers

International TDM Calls toFixed/Mobile Numbers

International VoIP Calls toFixed/Mobile Numbers

International Mobile Calls toFixed/Mobile Numbers

International Voice

Interconnection Services

qTermination, transitqTraditional voice, VoIP and mobile voice

q

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New Wholesale Business Models

From traditional voice interconnection toinnovative wholesale IP-based services(including non-voice services)

Transition from a minute/kbps model to aconsumption/seat wholesale model(packaging of voice/data services)

Pioneering wholesale carriers aim tobecome partner of choice for managed

services

Move up the value chain

Convergence, NGN architecture,interoperability services, IPXplatform

Operational efficiencies: voicerouting; common infrastructure tosupport new IP and multimediaservices

Expansion to non-voice services.Partner of choice for managedservices at a global scale.

International partnerships (incl.traffic outsourcing) to global

carriers with scale

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SWOT Analysis EuropeanIncumbents

Extensive local network andinterconnection services

State-of-the-art network and ability tointroduce innovative services

Extensive global on-net and off-netcoverage

Pressure on profitability: capex for thebuild out of new networks vsmaintenance costs for legacy networks

Large legacy customer base andrevenues to protect

Wholesale services are heavily

regulated in some instances

STRENGTHS

OPPORTUNITIES

WEAKNESSES

THREATS

Partnership, alliances for economies ofscale and improvement in cost structures

IPX platform, interconnectivity services

Development of bundles, value addedservices and voice managed services

Emerging players competing in priceand creating disruptive businessmodels

Negative impact on wholesale tariffs

Consolidation and aggressivecompetitive environment

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Wholesale Voice Market Outlook

14

Wholesale voice traffic volumes will remain barely flat in 20092014

National voice traffic volume is expected to be well sustained despite the threat of alternativetechnologies (SMS, email, IM): new opportunities in remote and flexible working

Healthy growth in international wholesale voice traffic from wireless operators and voice overbroadband (VoBB) players

Pressure on voice termination rates and aggressive competition (mainly ininternational and wireless voice) will bring overall revenue down

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Agenda

Introduction




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Data Scope of Coverage

Fixed-line wholesale data services: Capacity e.g. SDH/PDH private line, Ethernet private line,

wavelength services

Managed network services e.g. wholesale IP/Ethernet VPN

IP transit

Excluded: Non-wireline services e.g., microwave backhaul

Infrastructure e.g., dark fiber/ducts

Network outsourcing, transformation

Pure play CDN e.g., Akamai Standard reseller channel

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Data Trends

Volumes and pricing High growth in volume persists, driven by Internet, video, mobile,

private networking and, in the future, cloud. Highly competitivemarket in Europe: legacy pricing down but fairly stable; Ethernetpricing varies considerably, declining strongly overall.

Migration patterns SDH to Ethernet migration in progress. Long-term migration topacket circuits. Move towards wrapping wholesale as a managedservice.

Interconnection Ethernet exchanges becoming significant. IP transit will evolve.

Supplier landscape Scale will dominate mass market but niche players will remain.

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Data Market Outlook

Combination of volume increase and price decrease results in modestgrowth in wholesale data revenues overall.

Carriers should make a positive decision whether to target wholesaleactively (and so develop scale, wholesale managed services, sales marketing) or not; both are valid options.

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Suggested Reading

EMEA Wholesale Access Services 20102014 Forecast and

Analysis (IDC #BT03S)

Western European Wholesale Voice Market Analysis (IDC #HP02S)

Western European Wholesale Data Services 20102014 Forecastand Analysis (forthcoming)

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Jan Hein [email protected]

Angela [email protected]

James [email protected]

Questions?

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