Portugal Telecom Board Member Both sides of the same story! Peter Golob Lisbon, September 2004.
-
date post
19-Dec-2015 -
Category
Documents
-
view
220 -
download
1
Transcript of Portugal Telecom Board Member Both sides of the same story! Peter Golob Lisbon, September 2004.
Portugal Telecom Board Member
Both sides of the same story!
Peter Golob
Lisbon, September 2004
2
• The Portuguese telecoms market has achieved a The Portuguese telecoms market has achieved a strong level of developmentstrong level of development
• Portugal Telecom has been a key driver in this Portugal Telecom has been a key driver in this process - as opposed to some of its competitors - and process - as opposed to some of its competitors - and despite a very demanding regulatory contextdespite a very demanding regulatory context
• In the future we intend to continue this effort through In the future we intend to continue this effort through a new growth era for the sector with the support of a new growth era for the sector with the support of both Government and regulation authoritiesboth Government and regulation authorities
Contents
3
Contents
• The Portuguese telecoms market has achieved a The Portuguese telecoms market has achieved a strong level of developmentstrong level of development
• Portugal Telecom has been a key driver in this Portugal Telecom has been a key driver in this process - as opposed to some of its competitors - and process - as opposed to some of its competitors - and despite a very demanding regulatory contextdespite a very demanding regulatory context
• In the future we intend to continue this effort through In the future we intend to continue this effort through a new growth era for the sector with the support of a new growth era for the sector with the support of both Government and regulation authoritiesboth Government and regulation authorities
4
Portugal has a very strong infrastructure base
Indicators
Fixed coverage (percentage of population)
Mobile penetration (percentage of population)
Cable footprint with “bidirectionability” (percentage of households)
Broadband penetration (percentage of households with PC)
Portugal EU average
100 100
100 90
5030
40 28
5
Service penetration rates are also amongst the highest in EuropePercentage
Spain
*June 2003 data
Source:ANACOM; ECTA; Pyramid
101
99
98
94
92
91
85
85
81
79
70
UK
Germany
Spain
France
Netherlands
Switzerland
Portugal
Mobile(2004)Mobile(2004)
Belgium
Italy
Handset penetration
Greece
Norway
63
47
44
39
38
28
23
23
21
10
UK
Germany
France
Netherlands
Switzerland
Portugal
Cable(2002)Cable(2002)
Belgium
Italy
Homes passed with bidirectionality
Norway
UK
Germany
Spain
France
Netherlands
Portugal
Broadband(2003)
Broadband(2003)
Belgium
Italy
Penetration*
Austria
25
22
16
13
11
10
10
9
8
6
Penetrations are supported by low average prices in a market with competitive conditions in placeEuro cents per minute
*Price per minute of a 3-minute call, regular hours
**Average revenue per minute
***Average excluding Portugal
Wireline* interconnection rates (2004) Mobile** (2004)
Leased lines basket
Origination tariffs Termination
0.70 0.72Local 0.70 0.70
1.00 1.00 1.00 0.98
1.49 1.47 1.49 1.41
Single transit
Double transit
Portugal EU14*** Portugal EU14***
70
100
Portugal EU15
1922
Portugal European average
Index: 100 European average. 2002
7
Contents
• Portuguese telecoms market has achieved a strong Portuguese telecoms market has achieved a strong level of developmentlevel of development
• Portugal Telecom has been a key driver in this Portugal Telecom has been a key driver in this process - as opposed to some of its competitors - and process - as opposed to some of its competitors - and despite a very demanding regulatory contextdespite a very demanding regulatory context
• In the future we intend to continue this effort through In the future we intend to continue this effort through a new growth era for the sector with the support of a new growth era for the sector with the support of both Government and regulation authoritiesboth Government and regulation authorities
8
Main investments
Total CapexEUR billion 1996-2003
Upgrade of historic infrastructure
Rollout of successive waves of mobile technology
Infrastructure development in a competitive environment
~3
• Network digitalization• ATM, IP network
development• Launch of new services
(ADSL, Voice mail, etc.)
• Rollout of GSM network• 2.5G upgrade• 3G rollout
• Cable network rollout• Network digitalization • Launch of NetCabo, iTV
~2
~1
Source: PT
Fixed Fixed
Mobile Mobile
Cable/Cable/Multimedia Multimedia
Portugal Telecom had a key role in the development of the sector in Portugal through major investments policies…
9
As opposed to PT, Portuguese competitors show disappointingly low levels of investment as demonstrated by the unbundling example…
52.1
25.8
24.0
16.5
16.0
9.9
5.8
4.0
3.9
3.9
2.6
1.7
1.3
Competitors’ investment levels June 2003, % of C.O. Utilized by attackers
Average 12.9%
Average 12.9%
Finland
Netherlands
Italy
Austria
Sweden
Luxemburg
France
Belgium
Spain
Ireland
Portugal
Greece
UK
Only ~60 out of ~1,600 central offices were being used by competitors in January 2004
8.88
8.17
6.25
5.45
5.30
4.77
4.15
3.49
2.95
2.80
2.32
2.25
0.61
Partial unbundling Monthly fee
Norway
Ireland
UK
Austria
Greece
Germany
Denmark
Spain
Portugal
Italy
Belgium
Netherlands
France
66.90
123.41
165.53
10.90
47.04
74.91
32.25
26.97
88.21
54.87
54.86
44.05
78.70
One-off cost
Average 4.41
Average 4.41
Low prices and availability … … but low investment from competitors
100% of MDFs in Portugal prepared for unbundling
100% of MDFs in Portugal prepared for unbundling
ILLUSTRATION
10
… where Portugal is well behind its peers
*Includes total and partial unbundling
Source:ECTA; Project team
Europe has a slow evolution of unbundled lines... ... but Portugal is one of the less unbundled countries in Europe
642
683
743
883
959
1,010
1,137
1,545
Number of unbundled* linesThousands of lines
3T 01
4T 01
1T 02
2T 02
3T 02
4T 02
1T 03
2T 03
0,31%0,31%
0,34%0,34%
0,37%0,37%
0,44%0,44%
0,49%0,49%
0,52%0,52%
0,59%0,59%
0,79%0,79%
2.60
2.30
2.20
1.60
1.13
0.50
0.25
0.24
0.19
0.11
0.06
0.05
0.01
0.01
Unbundled* lines (June 2003)Percentage of total
Average 0.79%
Average 0.79%
Denmark
Finland
Holland
Germany
Italy
Austria
Sweden
Luxemburg
France
Belgium
Spain
Ireland
Portugal
Greece
Only 5,000 lines were in use by the attackers in 2004
11
In France, where competitive conditions are similar to Portugal, solid strategies have enabled competitors to achive a strong market positioning
Fonte:UBS
France
Portugal
2,95
2,90
Shared
Monthly fee
78,7 78,7
887 887 11,96
10,50
Total
7979
84 84
15
7
7
6
510
50
DSL market share 1Q 2004
FT
Free
AOL
Tiscali
Club Internet
Tele 2
Other
Tele 2 gained this market share in ~9 months with an offer based in renting unbundled lines from LD Com (which has 50% of the population unbundled)
On off fee
Unbundling conditions
12
PT has been a strong industry driver despite a strict liberalization process not conceived to benefit the incumbent…Not only Portugal implemented the liberalization 3 years before the negotiated schedule,… … but also has done it faster than its peers
Liberalization in Europe
Liberalization in Portugal
Scheduled liberalization date for Portugal
19981998
20002000
20032003
Time for introduction of regulatory measures after liberalizationMonths
ULL PreselectionNumber portability
Belgium
France
Italy
Switzerland
Spain
Austria
Portugal
Germany
36
26
26
25
18
12
12
36
24
26
8
0
36
8
0
24
0
25
24
13
27
6
0
27
13
PT provides a comprehensive range of “social services”…
Universal service Plans for retired people
Plans for low consumption levels
Plans for people with disabilities
Social role exclusively
supported by PT
14
…along with other mandatory services also supported solely by PT and without compensation until now
Telegraph “Móvel marítimo”
Telex Broadcasting transport
15
There are several European countries where wireline incubents also own cable networks
Stream (50%), 2nd cable operator in the country with ~900 thousand subscribers
TDC Kabel TV (100%), largest cable operator with ~800 thousand subscribers
Telenor Avidi (100%), largest cable operator with ~370 thousand subscribers
European examples of simultaneous ownership
Regulatory intervention is not acceptable in a context of development of the cable network in a liberalized market
Italy Italy
DenmarkDenmark
Norway Norway
Wireline op. Cable op.
Telecom Italia
TDC
Telenor
16
Contents
• The Portuguese telecoms market has achieved a The Portuguese telecoms market has achieved a strong level of developmentstrong level of development
• Portugal Telecom has been a key driver in this Portugal Telecom has been a key driver in this process - as opposed to some of its competitors - and process - as opposed to some of its competitors - and despite a very demanding regulatory contextdespite a very demanding regulatory context
• In the future we intend to continue this effort through In the future we intend to continue this effort through a new growth era for the sector with the support of a new growth era for the sector with the support of both Government and regulation authoritiesboth Government and regulation authorities
17
PT is currently the largest corporate group in Portugal…
Source:Bloomberg; Annual report
Market cap of main Portuguese companiesSeptember 2004 Millions euros
1,780
2,272
2,795
3,795
4,065
5,860
7,050
2,785
11,087
Number of clientsPercentage. Millions
93
34Vídeo
Data
Voice
35
12
15
73Mobile Brasil
Mobile Portugal
Fixed Portugal
Voice clients
100%=32
24%24%
15%15%
13%13%
9%9%
8%8%
6%6%
6%6%
5%5%
4%4%
The Group PT weights ~30% of PSI20 market cap … … and has more than 30 million clients
Weight in PSI 20 market cap
18
… contributing strongly to the economic development of the country…
• Weight in Portugal >3% of GDP
• Leader in the internationalization process of the national economy – present in the 5 continents
• Largest floated Group in Portugal – 30% of … capitalization
• Present in leading capital markets (one of the two Portuguese companies fully listed in NYSE-PT and BCP)
• Key contributor to the development of the information society
• One of the main employers in Portugal - ~14,500 employees
• Weight in Portugal >3% of GDP
• Leader in the internationalization process of the national economy – present in the 5 continents
• Largest floated Group in Portugal – 30% of … capitalization
• Present in leading capital markets (one of the two Portuguese companies fully listed in NYSE-PT and BCP)
• Key contributor to the development of the information society
• One of the main employers in Portugal - ~14,500 employees
19
PT’s leadership in the development of the Information Society is one of the Group’s main strategic priorities
Reinforce its role as the
lead actor in the
development of Portugal’s Information
Society
Aspiration
• Increased investment in new technologies, launching and contributing to the mass market development of innovative products and services (e.g., PT’s support of the Aveiro innovation center)
• Support and financing of R&I projects developed by domestic investors and researchers
• Support of specialized technical training, “job recycling” and continuous training
• Development of discussion forums on the information society subject
• Support to the development of entrepreneurship in Portugal
Main initiatives underway
20
To achieve this vision we expect a healthy participation of Portuguese authorities
• Develop Information Society– Promote PC penetration (e.g., subsidize PC acquisitions)– Promote internet utilization (e.g., introduce internet in all public schools)– Promote internet utility perception (e.g., dinamize media advertising
about internet advantages)– Promote e-government (e.g., migrate public services to internet)
• Strictly apply the basic principles of the new regulatory framework– Primacy of ex-post regulation over ex-ante regulation (e.g., do not
introduce ex-ante regulation if “direito da concorrência” is enough to deal with the problem)
– Primacy of wholesale regulation over retail regulation– Minimize regulation over new/emerging markets (e.g., broadband)
• Promote competition, not competitors’ interests, i.e., promote competition based on investments and innovation rather than on free riding
• Promote infrastructure models rather than pure resale models
What we expect
GovernmentGovernment
ANACOMANACOM
21
In summary …
• Some players and commentators have pessimistic views on the Portuguese Telecoms market
• Some structural challenges exist but hard facts show that they do not stop Portugal from being at the forefront in the telecom sector
• PT has been a key driver in this process …
• … as opposed to some of our competitors and despite a very demanding regulatory context
• We are a leading player in the market and we have an integrated growth vision …
• … that we expect to develop in a healthy environment supported by Government and regulatory authorities
Thank you !
Back-Up
Section 1
25
What some critics say about the telecoms markets in Portugal
Lack of competitiveness
The regulator is too soft
The prices are too high
“É o enquadramento de um mercado pouco aberto, pouco liberalizado, que nos condiciona”
Pedro Norton de Matos in Diário Económico 14/09/2004
“Estamos a pagar pelo acesso às centrais mais do que noutros países”
Pedro Norton de Matos in Diário Económico 14/09/2004
“A oferta de chamadas grátis (…) é ilegal e viola os mais elementares princípios da concorrência”
Tele 2 19/03/2004
Recent quotations from attackers
26
In fact despite some efforts, Portugal is a difficult market when compared to its European peers: it is a small country with limited income levels, …
SizePopulation. Millions
WealthGDP per capita nominal Thousand euros. 2003
A small market… … with lower income levels
82.5
59.8
59.7
58.1
40.8
16.1
11.4
10.4
8.8
5.3
Germany
France
UK
Italy
Spain
Netherlands
Greece
Portugal
Sweden
Denmark
44.2
37.7
35.3
33.3
32.5
32.4
28.2
22.8
17.0
15.3
Germany
France
UK
Italy
Spain
Netherlands
Greece
Portugal
Sweden
Denmark
27
0.01.
01.01.01.01.42.02.02.1 6.
7
… low sophistication levels…
Illiteracy rate PC penetration rateInternet and broadband utilization in schools
PortugalUS EU*
Schools with broadband Percentage
Schools with websitesPercentage
36
2
94
5737
86
Percentage. June 03
Netherlands
Austria
U.K.
Belgium
France
Germany
Spain
Italy
Portugal
94% of classrooms in
the US with internet access
94% of classrooms in
the US with internet access
65
58
52
50
47
46
45
43
31
Spain
Portugal
Austria
Belgium
Italy
Netherlands
UK
France
Germany
Denmark
Percentage. 2003
28
… heterogeneous resource distribution …
Two different Portugals
“Interior”
“Litoral”
64
87
Purchasing power index
Population densityPop./km2
With a very high concentration on the two major cities% of population of the two major cities
38
38
27
26
24
22
21
13
9
40
377
Portugal
Spain
Belgium
Italy
France
Germany
Denmark
Sweden
Greece
29
… and less modern than its peers, which is illustrated by the primary sector weight in the economyPercentage. Weight of I sector in GDP
1.10
2.10 2.20
3.60
5.565.88
Portugal is the European country where the primary sector weighs more
7171 72.472.4 6969 6868 71.471.4 6464
Spain PortugalItalyUK Denmark Greece
III sector weight
Section 2
31
21 to 26
7
3
Source:European Commission
Delay granted in Portugal
Telephone
Telecoms sector demands a much stronger effort than that of other sectors
Electricity
Gas
Water
Larger effort demanded to the telecoms sector, resulting in a more aggressive competitive environment
Sectors in liberalization National
5
High
Low
Effective delay
2
Internal/external competition
International
Oni, Jazztel
—
Some distributors (e.g., Digal)
—
Vodafone, Optimus/France Telecom
Sodesa
Shell, BP
—
32
Regulation levels in the telecom sector are higher than in other industries…
“Internal”
ProductsProducts
Prices Prices
Ex ante regulation strongly limits development of new products (e.g., bundled pricing plans)
Although present in costing model, curtailment cost are not always considered for pricing definition (e.g., circuits)
Swift liberalization; many (>10) attackers in retail markets
Transparent wholesale offer mandatory, cost-driven and no discrimination
“External”
New entrantsNew entrants
Wholesale offerWholesale offer
Ex-ante regulation limits product development, although commodity status of electricity makes it not critical
Curtailment cost accepted by the regulator for price definition (e.g., restructuring costs)
Delayed liberalization for retail; few entrants (e.g., Sodesa)
Wholesale offer will be available in the future
No limitations on new product launch
Free pricing by operators for products or bundles
Legal barriers (commercial licensing law) protect established players (despite new legislation)
No legal restrictions to the wholesale offer
Telecommunications Electricity Mass distributionLevel
NON- EXHAUSTIVE
Favorable
Unfavorable
33
… and the obligations imposed on the telecoms incumbent are among the strictest in Europe
To supply telephones to any home anywhere
Restrictions on selling bundles of different product families (e.g., fixed and mobile)
6-month ban on contacting clients lost to competitors
To supply pipe gas to any home anywhere
Ban to buy other products in a gas station
Ban on selling fuel to anyone who used another reseller
To have train lines in every corner of the country
Ban to buy monthly tickets to replace more expensive 1-journey tickets
Ban on using a train by anyone who had used a bus
Hypermarkets forced to deliver goods anywhere at zero cost
Ban to sell coffee and sugar bundled in a discounted price
Hypermarket banned from servicing clients that shopped elsewhere
Telecommunications Energy Transport Mass distribution
Universal serviceUniversal service
Commercial positioning
Restrictions to product develop-ment
Restrictions to product develop-ment
Win-back períodWin-back períod
We have in place almost every obligationthat have been imposed in other countries …
… plus some obligations specific to Portugal and very few other countries• Win back• Retail minus in
broadband• Special
interconnect regime for dial up internet
Remedies proposed by Anacom on the new NRF represent the complete supermarket offer
We have in place almost every obligationthat have been imposed in other countries …
… plus some obligations specific to Portugal and very few other countries• Win back• Retail minus in
broadband• Special
interconnect regime for dial up internet
Remedies proposed by Anacom on the new NRF represent the complete supermarket offer
34
Furthermore, universal service is supported by PT alone since ever…
No contribution or other type of support ever provided by other operators
Section 3
36
PT is the only telecoms operator with presence in all 5 continents…Examples
Macau
Timor
37
Our vision for the future entails a growth strategy based on 3 segments
Corporate
Residential
Personnel
Fixo Móvel Cabo