Telecom For Beginners 2007

Europe
Telecommunications
Company
Research
6 December 2006
Telecom for beginners 2007 Primer
Industry and technology

primer
Guy Peddy Matthew Bloxham, CFA Gareth Jenkins
Research Analyst Research Analyst Research Analyst
Industry Focus
(44) 20 754 58490 (44) 20 754 58163 (44) 20 754 75849

guy.peddy@db.com matthew.bloxham@db.com gareth.jenkins@db.com
A real mixed bag: confusing simplicity!

The telecom sector can appear confusing: the stakeholders are many and often
have contradictory objectives. Balancing government/political designs, huge
employee numbers, an increasing competition without limiting investment in an
environment of technological evolution and substitution, can appear
overwhelming. However, fundamentally the drivers of telecom business models
are simple: penetration, customers and ARPU whilst balancing investment levels.
Second edition: Revised and updated for 2007 and beyond
This is the second edition of our Telecom for Beginners report, first published in
January 2004. This comprehensive report aims to show how the telecom sector
has developed over time. We focus on the influences on returns, and we examine
some of the key issues for the future and we have consciously avoided drawing
any company specific conclusions.
Structured into discreet parts: Environmental/Technological/Reference
There are three distinct sections to this report. In section 1 we examine the
telecom business model, highlighting the relationship between penetration, ARPU
and revenue, explain the history of telecoms over the past three decades and how
the sector had ended up where it is, and assessed the wider telecoms
environment showing how operators, equipment manufacturers and content
providers interrelate. We study the evolution of the regulatory model, probably the
single most important driver of pricing and competition industry, and finally we put
telecoms into a wider industry context with some macro comparisons. We have,
where relevant, attempted to use standard business analysis tools (such as the
BCG matrix and Porters’ 5 forces) to highlight themes.
In section 2 we look at some of the key technologies in the industry, starting with
a basic explanation of the electro-magnetic wave (i.e. the signal), followed by an
assessment of voice technologies (switching, PTSN and VoIP), mobile
technologies 1G to 3G, HSDPA and Bluetooth) and broadband technologies DSL, Pan-European Telecoms Team
fibre, WIMAX/WiFi and satellite). We also review trends in convergence (TV, IPTV, Guy Peddy guy.peddy@db.com
mobile TV, gaming and music). +44 20 754 58490
Carola Bardelli carola.bardelli@db.com
Finally, in section 3 we summarise basic statistical facts about each European +39 0286379-708
country and a basic SWOT analysis of the industry. We also include those Matthew Bloxham matthew.bloxham@db.com
+44 20 754 58163
databases that are often forgotten: licence payments and types, European
Gareth Jenkins gareth.jenkins@db.com
telecom IPOs, key events for large capitalized operators over the past few years, a +44 20 754 75849
breakdown of government ownership and a list of recent M&A transactions and Vivek Khanna vivek.khanna@db.com
finally we end the note with an ever-expanding glossary. +44 20 754 72905
Something for everyone

Sales Contact
This primer is aimed at everyone - those that have been involved in the sector for
Audrey Wiggin audrey.wiggin@db.com
years and those who are new, and to generalists who like to occasionally dip in +44 20 754 50707
and out of the sector. It has been fun to write, but is by no means exhaustive, and Jonathan Smith jonathan-d.smith@db.com
we are always open to suggestions on how we improve it going forwards. +44 20 754 74383
Deutsche Bank AG/London

All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from
local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies.
Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should
be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
Independent, third-party research (IR) on certain companies covered by DBSI's research is available to customers of
DBSI in the United States at no cost. Customers can access this IR at http://gm.db.com, or call 1-877-208-6300 to
request that a copy of the IR be sent to them.
DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1
6 December 2006 Telecommunications Telecom for beginners 2007
Table of Contents
Section 1: Environmental.................................................................. 5
The telecoms business model .......................................................... 6
History of European telecoms ........................................................ 31
The telecoms environment ............................................................. 47
Regulation ........................................................................................ 57
Telecoms in a macro context.......................................................... 77
Section 2: Technological ................................................................. 82
Basics of Electronic Communication ............................................. 83
Technology: Traditional voice ........................................................ 86
Technology: Mobility....................................................................... 93
Technology: Bandwidth ................................................................ 105
Technology: Convergence ............................................................ 116
Section 3: Reference...................................................................... 129
Country: Austria............................................................................. 130
Country: Belgium........................................................................... 131
Country: Denmark ......................................................................... 132
Country: Finland ............................................................................ 133
Country: France ............................................................................. 134
Country: Germany ......................................................................... 135
Country: Greece............................................................................. 136
Country: Ireland ............................................................................. 137
Country: Italy ................................................................................. 138
Country: Japan............................................................................... 139
Country: Netherlands .................................................................... 140
Country: Norway ........................................................................... 141
Country: Portugal .......................................................................... 142
Country: Spain ............................................................................... 143
Country: Sweden ........................................................................... 144
Country: Switzerland .................................................................... 145
Country: US.................................................................................... 146
Country: United Kingdom ............................................................. 147
Deutsche Bank AG/London Page 3

Appendix A: European telecoms SWOT ...................................... 148

Appendix B: European UMTS licenses ........................................ 149
Appendix C: AWS auctions........................................................... 152
Appendix D: License lives ............................................................. 162
Appendix E: European IPOs .......................................................... 166
Appendix F: European operator key dates .................................. 168
Appendix G: Government ownership .......................................... 183
Appendix H: European M&A......................................................... 184
Glossary.......................................................................................... 186
Page 4 Deutsche Bank AG/London

Section 1: Environmental

The telecoms business model

Penetration and ARPU
Telecommunications is a very simple business complicated by regulation and politics. The
standard business model relies on a trade off between pricing, penetration and capital
intensity. Almost all elements of the telecoms industry follow the standard “S” growth curve
in penetration as depicted in Figure 1.
Figure 1: Penetration “S” curves in UK telephony
Penetration slows
140%
- start of a market share
battle
120%
100%
Wireless penetration
80% inflexion - mass market
60%
Premium product
40% - business focus
20%
0%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006E
Wireless Broadand
Source: Deutsche Bank
Four key drivers

In Figure 2 we have attempted to describe, simplistically, the effects on what we believe are
the four key drivers (business model clarity, competitive environment, pricing and capex) of
telecoms profitability at different stages in the product life cycle. Although there are clearly
some business models that do not conform to these characteristics, we believe most of
them do.
As we show later in our BCG matrix analysis (Figure 76) and as we also show in Figure 6,
much of the European telecoms sector is approaching the maturity stage in the product life
cycle, with broadband penetration offering a hope of growth, but with significant price
deflation and an increasing risk of substitution with the technologies that it has enabled (VoIP,
IPTV etc).
Figure 2: Key drivers of the product life cycle

Phase of the life cycle Business model clarity Competitive environment Pricing Capex
Early stage Uncertain Limited Premium product Capital intensive

Growth Certain Focused on growth Aggressive deflation to drive Customer/demand driven
penetration
Maturity Commoditization Market share battle Commoditization Replacement/maintenance
Source: Deutsche Ban

Telecom cycles
The telecom industry work in cycles (earning, revenue growth etc) and they tend to range
from 3 to 7 years. In Europe over the past 15 years there have been several cycles, such as:
Market related:
Mobile penetration and revenue growth: 1998 to 2004
Broadband penetration growth: 2004 to ?
EU regulatory focus on unbundling, mobile termination and mobile roaming tariffs:
2004 to ?
Financial related
TMT bubble: 1998 to 2000
European earnings downgrades: 2004 to ?
European deleveraging: 2001 to 2004
The most important consideration currently is where is the growth driver for the European
industry? Historically the telecom industry has found ways to invent growth drivers but
currently the outlook is void. As such, rather than the industry growing at its historical rate (at
greater than nominal GDP) expectations are that it grows at rates below nominal GDP in the
coming years. This is shown in Figure 3 and in Figure 4 we proffer a view on where European
and US telecom industries are in their current cycle. The outlook for the US operators appears
to be more positive as the regulatory cycle has subsided and operators are more aggressively
roll-out fibre and IPTV services.
Figure 3: Re-inventing growth Figure 4: Cycles in telecom trends
3-7 years?
Future growth
+ ve
US telecoms ?
Historic growth
Time
EU telecoms ?
-ve
Today
Fixed Mobile What is the next technology?
Source: Deutsche Bank Source: Deutsche Bank
Evolving value chain

One of the major drivers of the current change in the cycle is the revolution in the structure of
the European telecom value chain. In the past, operators focused on networks, where there
was an exclusivity of supply, and outsourced industry R&D to equipment manufacturers (i.e.
Nokia, Ericsson etc), and distribution to third parties (such as Carphone Warehouse in the UK)
and this meant that the consumer relationship was minimal.
In the modern world network exclusivity is disappearing as the equipment manufactures

increasingly look to manage, and even own infrastructure, and other media operators and
upstarts, such as Google, are entering the distribution place. In order to respond telecom
operators are investing more in R&D to deliver new products and are seeking to take control
of distribution channels, both on-line and on the high street, and finally are investing in brand
and market segmentation to more appropriately target the consumer.

Figure 5: The evolving telecom value chain
R&D New focus of

operator services
Networks Equipment Distribution Consumer
BSkyB
Google
Usage drivers: New product innovation

Average revenue per user (ARPU) is one of the most common measures of customer value in
the telecoms world, especially in the mobile environment. It is most often driven by usage,
either with an incremental pricing-based model (i.e. a charge is incurred for every call made)
or through a bundle (i.e. a flat rate package with specified or unlimited usage).
With growth slowing and many markets in the maturity phase of development new product
innovations, which could be additional services and products that either exploit existing
infrastructure or open up new market environments, are required. In Figure 6 we flag where
we believe different products/services currently are in the product life cycle and we highlight
the maturity of the leading revenue streams (mobile voice and traditional wireline). There are
however new services and products that offer hope for the future, such as telecoms
operators offering TV services.
Figure 6: European telecoms product life cycle
Mobile voice
Mobile SMS
Traditional wireline – voice

Broadband
Instant messaging
VoIP
ATM, X25, leased lines
Mobile data
Mobile TV,
IPTV, video
telephony
Introduction Growth Maturity Decline

However, it should be noted that there is balance between those new services that are
substitutionary and those that are revolutionary products. A substitutionary product merely
deflates existing pricing whereas a revolutionary product opens up a new segment to the
market that is incremental (i.e. the mobile phone). In Figure 7 we have attempted to show

which products and services are substitutionary to existing offers and which are revolutionary
products. For those that are substitutionary, we have listed which other business areas have
they affected.
Figure 7: Classifying new products and services

Product/Service Categorization Affected business
Mobile voice Revolutionary

Mobile SMS Revolutionary
Mobile data ?
Broadband Substitutionary Traditional wireline access (PTSN and ISDN)
VoIP Substitutionary Wireline and mobile voice
Instant messaging Substitutionary Email, SMS, voice
Mobile TV Revolutionary
IPTV Substitutionary Traditional TV (terrestrial, cable, satellite)
Video telephony Substitutionary Wireline and mobile voice
Wireline – all about access and traffic

Access – growth and then substitution
A wireline business model (either incumbent or new entrant) is fundamentally about securing
the consumer access and then charging for incremental services. Unfortunately, in most
cases the premium charged for incremental services trends to be zero and as such the
wireline business model is increasingly focused on access revenues. As can be seen in
Figure 8, access line growth in OECD countries was consistent throughout the 1990s but
more recently has started to decline as wireless competes as another form of access
technology and broadband has reduced the demand for multiple access to single premises --
broadband has replaced ISDN and increasingly the convergence with media is such that
consumers require only a single TV/telephony access pipe rather than one for each service.

Figure 8: Access lines (m) and growth (%) in OECD countries
700 7.0%
6.0%
600
5.0%
500
4.0%
400 3.0%
300 2.0%
1.0%
200
0.0%
100
-1.0%
0 -2.0%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Access channels* Growth

Source: OECD
In many counties access line penetration has stalled at around 50% to 60% of the population
reflecting the fact that the average house has over 2 residents that can share and access. In
certain countries, such as Mexico, access penetration remains lower and we doubt there will
be huge long-term growth, as wireless is picking up the incremental demand for access
technologies, and is considerably more cost effective to deploy – the civil works in
constructing wireline infrastructure can be excessive. There may, however, be incremental
demand if broadband penetration picks up, but again there is an affordability issue in many of
these under-developed countries.

Figure 9: Access lines penetration in OECD – 2004
100 100
90 90
80 80
70 70
60 60
50 50
40 40
30 30
20 20
10 10
0 0
United Kingdom
Belgium
Denmark
Netherlands
Czech Republic
Germany
United States
Canada
Korea
Portugal
Slovak Republic
Norway
Greece
Australia
OECD average
Italy
France
Austria
Hungary
Sweden
Switzerland
Iceland
Finland
Japan
Ireland
New Zealand
Turkey
Spain
Poland
Luxembourg
Mexico
% of population OECD average
Source: OECD
In Europe, the pressure on access lines is explicit. Using Deutsche Telekom as an example
below (Figure 11), the company grew ISDN access volumes in the 1990s as if offered higher
basic internet dial-up speeds and was not regulated (only PSTN access fees and traffic tariff
were regulated). This ISDN growth replaced existing PSTN accesses, which were also
starting to suffer the effects of the growth in mobile penetration. However, with the launch
of broadband, ISDN has become more redundant and since 2005 DT has experienced access
line erosion due to unbundling.
Figure 10: Deutsche Telekom PSTN and ISDN access Figure 11: Deutsche Telekom PSTN and ISDN access
lines (000) lines changes (000)
45,000 5,000
40,000 4,000
35,000 3,000
30,000
2,000
25,000
1,000
20,000
0
15,000
-1,000
10,000
-2,000
5,000
-3,000
-
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
PSTN ISDN
PSTN ISDN
Source: Company data Source: Company data

Traffic – up, down and down

Over the past decade it is has been difficult to construct a view on the underlying trends in
tariff as there have been many material one-off events. Liberalization of the European
telecoms markets and consequential tariff deflation led to increased volumes, but this was
combined with huge growth in ISP dial-up accesses, which stimulated a dramatic increase in
local call volumes. This has subsequently been impacted by the growth in broadband which
has reduced dial-up ISP minutes and increased mobile substitution, especially in markets
where mobile is the dominant traffic device (such as Portugal and Finland as shown in Figure
12). Increasingly VoIP substitution is also depressing traditional traffic volumes.
Figure 12: Share of outgoing mobile minutes (%) – 2005
Portugal 55.7
Finland 49.2
Austria 48.8
France 42.3
Spain 40.6
Ireland 40.0
UK 31.4
Denmark 30.3
Italy 29.4
Greece 25.6
Netherlands 21.7
Sweden 19.9
Germany 16.2
10 15 20 25 30 35 40 45 50 55 60
Source: Analysys
In Figure 13 we show how the German fixed-line voice market grew between 1997 and 2002
due to liberalization and the growth in dial-up ISP traffic. But due to mobile, broadband VoIP,
volumes in the industry have rolled over. Figure 13 also highlights how Deutsche Telekom
has lost 50% market share in wireline traffic (since liberalisation in 1998).

Figure 13: German market traffic growth (bn of minutes)

Broadband, VoIP and mobile
400 substitution and ISP growth
350 Liberalisation
and ISP growth
300
250
200
150
100
50
0
1997 1998 1999 2000 2001 2002 2003 2004 2005
Other DT AG
Source: Bundesnetzagentur
This shift in traffic revenue has led to a substantial cut in the importance of wireless traffic
revenue in an operators revenue mix. Indeed at Deutsche Telekom, access revenue, due to
price increases and DSL growth, has increased by 32% but traffic revenue has declined by
71% since 1998. This also reflects a huge rebalancing of tariff that has been undertaken in
Europe over the past decade. Historically, and for philanthropic reasons, access fees were
kept to a minimum in order to stimulate penetration, but traffic fees were high. In this
scenario, heavy users (i.e. corporates) subsidised domestic telephony. However, with the
charges in EV model to more accurately reflect the cost of provision, access charges have
increased and traffic fees have declined.
Figure 14: Access and traffic revenue at Deutsche Telekom’s domestic wireline
business (Euro m)
25,000
20,000
15,000
10,000
5,000
-
1997 1998 1999 2000 2001 2002 2003 2004 2005
Access revenue Traffic revenue

Source: Company data

Mobile – penetration is the king

Universally the mobile technology has been accepted by the consumer, once the price point
of entry has been lowered (with advances in handset development, infrastructure costs have
declined for the benefit of the consumer) and in many emerging markets the wireless device
has become the pre-eminent access technology (i.e., stimulating wireline penetration). Key to
this business model is penetration (access or SIM), and the industry growth becomes
challenging when penetration growth slows down (as we depicted in Figure 1) and a market
share battle materialises.
The scale of industry growth since the turn of the century across the globe has been
outstanding. The technology has grown such that penetration is now over 40%, up from low
single digits a decade ago. This growth has predominantly been driven by the near universal
acceptance of GSM technology (other than in Korea and Japan) which has led to a
consequential reduction in both capex and handset costs as shown in Figure 16.
The combination of competition in the infrastructure market, (especially with the entrance of
Chinese vendors such as Huawei) and the belief that 2G technology will soon be replaced by
3G, has led to infrastructure price deflation. This has allowed mobile technology to be rolled
out into emerging markets where ARPUs are low, and advances in handset technology are
such that ASPs (average selling prices) have declined as the cost of low-end handsets has
reduced to $30 and below. This has materially enhanced the attractiveness of the emerging
market mobile business model (hence the huge growth in markets such as China and India)
Figure 15: Global digital mobile customers (m) Figure 16: Technology spread of mobile customers
3,000 3 GSM
3%
2,500
CDMA
2,000 2%
1,500 CDMA 1x
GSM 9%
1,000 CDMA 1x EV-DO
81%
1%
TDMA
500
1%
iDEN Analog
PDC
0 1% 0%
2%
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
H1 2006
Source: EMC and Wireless Intelligence Source: Wireless Intelligence
Europe was the main driver of GSM growth (as the EV adopted it as a single technology in
the early 1990s) as penetration is over 100%. The US has grown on a more steady trajectory,
helped by consolidation, and growth in GSM technology over the past three years (the USA
also has CDMA technology), but the growth in LatAm has been the most marked, due to
handset price deflation and severe competition in Brazil as the market has consolidated. In
total volume terms, the Chinese market is driving the huge absolute, even if relative growth is
less discernable.

Figure 17: Penetration of mobile by continent Figure 18: Geographic spread of digital mobile
customers (2006E)
120% Europe: Eastern

Europe: Western
17%
100% 22%
80%
60%
Middle East
6%
40%
20% USA/Canada
5%
0%
2003 2004 2005 2006E 2007E Asia Pacific Africa
41% 9%
Europe Middle East + Africa China
Asia Pacific North America LatAm
Source: Deutsche Bank estimates and company data Source: Wireless Intelligence
However, across continents the mobile business model varies significantly, primarily due to
stages in competition, development and regulatory pressures. In Figure 19 we attempt to
show how the European mobile business model is changing and the importance of the
current wave of regulatory pressure which is driving down roaming, SMS, data (potentially)
and mobile termination revenue.
Figure 19: Changes in the European mobile business model (% of revenue)
100
90
80 Assuming
elasticity 1x
70
60
50
40
3.2x increase
30
20
10 Reduction of
2/3rds
0
2006E 2010E
Roaming SMS data Mobile Termination Non SMS data Outgoing voice
Source: Deutsche Bank estimates
Putting these trends into context, in Figure 20 we have attempted to assess the drivers of
the mobile business model in each region.
Figure 20: Comparing mobile markets (2006E)

Europe USA Japan Asia Middle East Africa Latam
Stage in product life cycle Maturity Growth Maturity Mixed (but mostly Growth Growth
growth)
Competition Severe Controlled Controlled Light Light Severe
Regulatory threat Significant Negligible Limited Limited Limited Significant

Over the past 20 quarters, growth in the European mobile market has slowed down
dramatically due to a combination of penetration peaking, price declines and regulation. To
compensate for this slowdown and in order to support returns and cash flow generation,
capex levels have been volatile but essentially flat, as there are spurts of 3G investment and
then a slowdown to reflect, in many countries, a lack of usage and demand.
Figure 21: Western European wireless operators: Figure 22: Western European wireless operators:
Aggregated revenue and EBITDA growth (YoY) Aggregated capex growth (YoY)
30%
40%
35%
20%
30%
25% 10%
20%
15% 0%
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
4Q05
1Q06
10%
-10%
5%
0%
-20%
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
4Q05
-5% 1Q06
-10% -30%
Revenue EBITDA -40%
Whilst penetration is king to the mobile business model it is also important to stress ARPU,
elasticity and pricing. Due to a combination of penetration-mix effects, price cuts and
regulatory pressure, ARPU in Europe has contracted in recent years (we show the trends in
the UK since 1993 in Figure 23), whereas it has been more stable in the US. This may also
reflect different usage patterns and price points.
Figure 23: ARPU per month for UK operators (£)
180
160
140
120
100
80
60
40
20
0
Q1 1994
Q1 1995
Q1 1996
Q1 1997
Q1 1998
Q1 1999
Q1 2000
Q1 2001
Q1 2002
Q1 2003
Q1 2004
Q1 2005
Q1 2006E
Vodafone O2 T-Mobile Orange
Source: Deutsche Bank estimates and company data
In Figure 24 we compare the revenue yields in each market (mobile and fixed line) in the UK
and the ratio between fixed and mobile pricing. This highlights how mobile pricing has
converged in the UK closer to wireline levels over the past decade, but also reinforces the
fact that mobile voice revenues are premium revenue earners. In the US, the difference
between fixed and voice pricing is indistinguishable and consequently mobile usage (and
elasticity) continues to be positive.

Figure 24: Comparative UK fixed and mobile pricing (GBp)
0.70 12.0
0.60 10.0
0.50
8.0
0.40
6.0
0.30
4.0
0.20
0.10 2.0
0.00 0.0
Q1 1993
Q1 1994
Q1 1995
Q1 1996
Q1 1997
Q1 1998
Q1 1999
Q1 2000
Q1 2001
Q1 2002
Q1 2003
Q1 2004
Q1 2005
Q1 2006E
Mobile Fixed Fixed/mobile ratio
Source: Deutsche Bank estimates, OFCOM and company data
Broadband and regulation

Broadband is a generic term describing the consumer demand for greater internet access
speeds, and is predominantly a battle between two technologies; cable and DSL. Other
technologies, such as WiFi, WIMAX and satellite are either infant or are merely used to infill
footprint where cable and DSL are uneconomic.
Generally, North America and Korea have a strong cable broadband presence and the EU is
led by DSL. There are, of course, exceptions such as the Netherlands, but strength of cable in
any market is driven by the legacy position of the technology and TV distribution (cable
dominant in TV distribution in most of these countries) and the cable operators’ historical
ability to fund a network upgrade from narrowband to broadband in the early part of the
century. In Figure 25, we show the relative penetration of broadband at the end of 2005 in
most OECD countries and the split by technology. The lack of cable broadband in France,
Germany and Italy is as stark as is the scale of cable in the USA and Canada.

Figure 25: OECD broadband penetration (as % of population by technology) 2005
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Belgium
United Kingdom
Netherlands
Denmark
Czech Republic
Korea
Portugal
Slovak Republic
Norway
Canada
United States
France
Austria
Australia
Germany
Italy
Hungary
Greece
Turkey
Iceland
Switzerland
Finland
Sweden
Japan
Spain
New Zealand
Ireland
Poland
Luxembourg
Mexico
DSL Cable Modem Other
Source: OECD
In Figure 26, we show the scale of relative cable and DSL broadband in the OECD, where
DSL is 2x the size of cable and in Figure 27, we reinforce the fact that the EU is dominated by
DSL.
From a regulatory perspective, the strength of cable has huge implications. In the US, and
increasingly so in the Netherlands, technology-based competition is removing the need for
regulatory body to set wholesale DSL tariffs, as effectively two competitive networks control
access pipes into homes and businesses. Where DSL is dominant, regulators are forced to
maintain wholesale access in order to compensate for the fact that there may only be a
single access pipe connected to a home or business.
Figure 26: Broadband access technology (2005) - OECD Figure 27: Broadband access technology (2005) – EU 15
Other Other
7% Cable Modem 2%
16%
Cable Modem
31%
DSL
62%
DSL
82%
Source: OECD Source: OECD

Assessing the long-term penetration of broadband is difficult, but as shown in Figure 28 there
remains growth if only to fully penetrate current internet (PC) demand. Thereafter, broadband
growth will depend upon the success of non-PC access technologies (such as television and
mobile). However, as we showed earlier, to date broadband is following the “S” curve trends
of other technologies.
Figure 28: Internet subscribers in total OECD (m)
300
250
200
150
100
50
0
1999 2000 2001 2002 2003 2004 2005E 2006E 2007E
Total Internet subscribers (including broadband) Broadband subscribers

Source: OECD
As we show in Figure 29, email communication remains the most popular use on the internet
(both in a broadband and narrowband world). However, broadband has also opened up new
markets, such as gaming, music and film downloading, and is also a substitute for traditional
voice telephony. In particular, we would highlight the growth in business models, such as
Google and Party Gaming, which have been spawned by broadband growth.
Figure 29: Applications used by broadband versus dial-up
Real time gambling/trading 7%

16%
Chat & voice calls 17%

40%
Gaming 21%
38%
Music or film downloads 22%

46%
Banking 38%
57%
Making purchases 60%

72%
General surfing 67%

82%
e-mail 84%
91%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Broadband Narrowband
Source: Deutsche Bank, Ofcom

Figure 30: Value transfer to new media: Aggregated Figure 31: Growth in internet gaming (revenue ($bn))
market cap of Time Warner and Disney compared with
Google ($m)
200,000
16.0
150,000 14.0
12.0
100,000
10.0
50,000 8.0
6.0
-
4.0
Q1 2002
Q3 2002
Q1 2003
Q3 2003
Q1 2004
Q3 2004
Q1 2005
Q3 2005
Q1 2006
Q3 2006
2.0
1998
1999
2000
2001
2002
2003
2004
2005E
2006E
Time Warner/Disney Google
Source: Datastream Source: Deutsche Bank
Telecoms and PayTV: Converging through fear

What is convergence? Convergence is an overly used generic term, which is hiding an
underlying rationale: “fear” – the opportunity cost of inactivity and business model
evaporation.
Telecoms and PayTV operators are increasingly fearful of their existing business models,
which are historically technology dependent, and are therefore executing the “prisoner’s
dilemma” – entering each others markets with a marginal cost pricing model. This expansion
of strategy is being driven by:
Expectation of declining returns;
Increasingly technology agnostic consumers;
Technology evolution dissolving barriers to entry;
Historic returns driven by network differentiation.
In turn this is leading to a charge to “own the consumer” and the operators are seeing other
business areas, preferably where they are unregulated (as they would be new entrants), to
increase consumer stickiness. As a consequence telecoms and PayTV operators are chasing
the residential consumer’s wallet and both industries are therefore being consumerised.

Figure 32: Current landscape of communications Figure 33: Future landscape of communications
technology and the consumer technology and the consumer
Pay TV Consumer
Consumer Pay TV Consumer
Free to air TV Consumer

Consumer Free to air TV Consumer
Consumer
Consumer
Broadband Consumer
Consumer Broadband Consumer
Mobile Consumer
Consumer Fixed voice Consumer
Fixed voice Consumer

Consumer Mobile Consumer
Consumer
This convergence of distribution channels for voice and data (content) is dramatically
increasing the consumer choice as we highlight in Figure 34. For example television in the UK
has three existing distribution channels – terrestrial free to air, satellite and cable, but all three
have coexisted for the last one decade as there was sufficient differentiation.
With telecoms operators entering the media sector, this framework is changing dramatically:
Pricing for premium services reduces dramatically, as telecoms operators price at a more
marginal cost and exploit the imbalance between traditional and IPTV content rights –
triple pay offerings are now priced at Euro35;
Offer integrated services with mobility, currently not offered by cable operators.
Offer simplicity – a single provider for services in the home. The major decision maker in
the home, invariably an adult, has shown a willingness to accept single electricity and
gas providers in the UK, such that around 60% of all customers are dual bill.
The move to digital TV will require every European television consumer to acquire some
kind of digital receiver (DTT box, satellite, cable or IP TV), which means telecoms
operators could benefit from this transition.

Figure 34: Broadband fixed connections into the home – The UK example
annels
00 ch )
400-5 nk (1-way
li
Down
Digital Terrestrial 50-70 channels
TV (DTT) (1-way)
Uplink of TV broadcast signals

-way)
Downlink (1
Broadband (ADSL)
Up to 8 Mbit/s (downstream)
Up to 0.5 Mbit/s + voice telephony
M
D O
S D
L E
M
2-way
wireline/
wireless link
Cable Modem Set Top Box
120-200 digital channels
Low capacity phone line return
2-way internet + voice Cable
telephony Operator
Up to 10 Mbit/s downstream
Up to 0.5 Mbit/s upstream
ULL “Unbundled local loop”
Telephone DSLAM
Exchange Satellite
Operator
TELCOS INTERNET CONTENT
Source: Deutsche Bank NB. With ADSL 2+ the downstream capacity will increase to “up to 18 Mbit/s” in the UK
A measure of convergence will be the pricing of terrestrial TV and IPTV football rights. In a
converged world where the technology differential is non-existent there should be limited
difference. For example on the 1995 sale of Bundesliga rights the winning consortium paid
Euro420m per annum for the traditional terrestrial TV rights whereas we estimate Deutsche
Telekom paid around Euro40m for the IPTV rights per annum. We would expect this
imbalance to narrow at the next auction in 2008.
Is broadband really different?

We have identified five key drivers of the change in consumer activity that is affecting the
way media operators think about the internet. This was aimed at showing why current moves
are different from the “super-highway” nonsense of the late 1990s. In Figure 35 we
summarise these drivers, offer examples and also relate them to the telecoms space.

Figure 35: Drivers of increased economic scale of online activity

Driver Examples Implications for telecoms operators
Investment in network BSkyB's entrance into ULL and DT's FTTC roll-out This is the primary focus of operators, as it protects existing
expenditure revenue but also breaks into unregulated business areas
Online applications Google and its roll out of music downloads, web-hosting, VoIP Less relevant to operators, but given network advantages are
etc diminishing, operators will focus increasingly on services as
they try to circumvent "independent" gateway providers
Consumer demand 10pp growth in EU penetration in 2005 The key driver of existing market expansion and is being
stimulated by declining access prices as competition increases.
Operators sense a demand for integrated services and so are
diversifying their technology exposure – clearly the integrated
operators have an existing competitive advantage
Piracy Content owners seeking direct customer relationships Not relevant to telecoms operators but Vodafone and Google
are now cooperating to limit exposure
Robust on-line business Google is not a "dot.com" era business model Not relevant currently, but may stimulate operators to acquire
models business in this space in the longer term as they may offer
increased access to both services and customers
PayTV: Moving offline to online?

The rollout of broadband networks by telecoms operators is radically changing the European
media distribution landscape, stimulated by the EU’s aggressive deregulatory policy agenda.
The moves by telecoms operators into broadband access and rollout of IPTV will create
higher capacity networks. These, coupled with new applications being released by portal
operators and other Internet service providers, will bring about a steep change in online
functionality.
The media sector is pricing in a massive shift to online media operators, suggesting that
historic distribution franchises are being eroded and value is being generated by businesses
that provide gateways (i.e. facilitate access rather than infrastructure access).
This is leading to a scenario where value lies in monetizing customer traffic rather than
content exploitation or connection. Value will remain in content ownership as a driver of
generating consumer interest (i.e. traffic) rather than in content aggregation.
Portals will increasingly become conduits for information and services currently provided by
media owners. Historical silo-based oligopoly competition will slowly break down and with it
the high margin characteristics of the sector will be threatened. This in turn will lower pricing
power as media companies have smaller direct audiences.
Furthermore, as a longer-term threat to medium distributors, telecoms operators are

increasingly purchasing content either on fixed or on mobile platforms. As an example of the
devaluation of content aggregation in early 2006 France Telecom signed an agreement to
access Viacom content directly, by passing TPS and Canal+; this has since stimulated their
merger in order to improve their competitive strength.
To compensate for this threat media companies are increasingly looking to expend their
service offerings and distribution platforms. For example in the UK an unbundling strategy
opens media companies to a c.£6bn market with limited capital investment and limited only
by consumer’s willingness to churn and a desire for a strong marketing push.

Figure 36: Relative market size of telecoms and media in Figure 37: Relative market size of telecoms and media in
the UK (annualized 2005E) (£m) the Germany (annualized 2005E) (Euro m)
14,000 14,000
12,000 12,000
10,000 10,000
8,000 8,000
6,000 6,000
4,000 4,000
2,000 2,000
- -
Consumer
Telephony -
Subsciption
Adspend
Licence fee
Consumer
Telephony -
Subsciption
Licence fee
Adspend
Residential
Residential
Mobile -
Mobile -
TV -
TV -
TV -
TV -
Source: Deutsche Bank, OfCOM, Company data Source: Deutsche Bank, FNA, Company data
France (annualized 2005E) (Euro m) Italy (annualized 2005E) (Euro m)
16,000 16,000
14,000 14,000
12,000 12,000
10,000 10,000
8,000 8,000
6,000 6,000
4,000 4,000
2,000 2,000
- -
Consumer
Consumer
Telephony -
Licence fee
Telephony -
Licence fee
Subsciption
Adspend
Subsciption
Adspend
Residential
Residential
Mobile -
Mobile -
TV -
TV -
TV -
TV -
Source: Deutsche Bank estimates Source: Deutsche Bank estimates
Spain (annualized 2005E) (Euro m) big five European markets (annualized 2005E) (Euro m)
12,000 80,000
70,000
10,000
60,000
8,000
50,000
6,000 40,000
30,000
4,000
20,000
2,000
10,000
- -
Consumer
Consumer
Telephony -
Licence fee
Telephony -
Licence fee
Subsciption
Adspend
Subsciption
Adspend
Residential
Residential
Mobile -
Mobile -
TV -
TV -
TV -
TV -
Source: Deutsche Bank estimates Source: Deutsche Bank estimates
In Figure 42 we attempt to highlight the potential winners and losers in the new media
distribution world.

Figure 42: Winners and losers in a media world

Winners Why?
Content developers The expansion of competing distribution technologies will increase the value of quality content (i.e. content that secures the consumer
eye and wallet. It will lead to a reduction in the power of content aggregators and potentially reduce developer distribution costs).
Examples: Sports rights licensors; film studios (such as DreamWorks which has recently been bought for $1.6bn by Paramount who
intends to sell off its rights library which could fetch $850m to $1.0bn); TV content producers such as ITV, BBC; potentially music labels.
Content gateways Cross media platforms that act as bucket shops to all types of media - music, print, film and video.
Examples: Increasingly this is Google's domain, but strong internet brand such as Amazon.com could benefit.
IPTV platforms Entry costs are minimal as the network capability is a core element of any telecoms network and the access to content is cheap as there
is limited current demand. Deutsche Telekom acquired the IPTV rights to the Bundesliga for 1/10th of the traditional rights costs
although the offering will be comparable. This represents a very cheap option in our view.
Examples: Dominant IP network and IPTV operators, such as European integrated operators. Note, in their area football is a killer
application in Europe and is something that US telecoms operators will struggle to replicate.
Advertising agencies With the proliferation of new business models (IPTV for example) and the increase of the cost of “must have content”, we would
anticipate significant increases in advertising and promotional spend. Where this spend is targeted is difficult to judge (i.e. high street
billboards or TV or press advertising) but there may be an increase in the total budget. The consumerisation of media and telecoms will
result in a greater level of marketing activity.
Examples: The German cable operators will aggressively publicise their Bundesliga offerings as DT will publicize its IPTV offerings.
Similarly Premiere will have to reposition its business model and this will require continued brand investment.
Losers
Content aggregators Network providers will increasingly circumvent the telecoms aggregators and source content directly from the developers. Also
aggregators that previously monetized an exclusivity of content through a specific distribution platform or with premium channels are at
risk.
Examples: Premiere's business model is requiring immediate surgery, but others such as Sogecable and BSkyB are at risk through
potentially losing rights or significant price inflation as other distributors (cable, telecoms) seek to compete.
Traditional high street In a converged world with the ability to download content and with mass market video-on-demand, there is further risk to high street
media retailers volume contraction and price declines. Also with operators such as Orange turning their retail distribution into communication centres,
we would expect them to offer on-site access to content that is downloadable into CDs and DVDs (replicating the home environment for
those that do not have a PC).
Small mobility premium; diversification of service; distribution and brand strength key
With the value of networks diminishing it will be increasingly difficult for operators to sustain
superior returns through network advantages. It will also lead to the abandonment of the
generic mobile strategies (all operators currently target all segments of the market with
similar networks and services) and technological differentials.
Industry analysts have long talked about the integration of media and telecoms
(“infotainment”) and increasingly telecoms operators across Europe are launching TV over
broadband strategies (entitled IPTV or TV over DSL).
Capital intensity
Most of the other areas of telecoms we have discussed so far are macro revenue growth
drivers. Therefore, it is important not to forget the importance of capital expenditure, in what
has historically been a capital intensive business. Admittedly, there are cycles in capex, as
shown in Figure 43, which highlight the growth in telecoms infrastructure during the 1990s,
and the slowdown since 2000. In particular, this reflects the growth in European mobile
penetration and the subsequent focus on balance sheet recovery post 2000.

Figure 43: Telecommunications infrastructure investment for OECD ($bn) and growth
rates
300 40%
30%
250
20%
200
10%
150 0%
-10%
100
-20%
50
-30%
0 -40%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004E
OECD Total Growth
Source: OECD
Capex/sales is often assessed as the best measure of capital intensity, but it works best in a
steady state environment and fails to reflect the marginal return on capex. As such, we prefer
EBITDA/capex multiples. In Figure 44 we show the capex/sales ratios of US, European and
Japanese operators over the past 15 years, and in Figure 45 the implied EBITDA/capex
multiples, which highlight the range (from past to current levels) in the European capex cycle
relative to the US.
Figure 44: Comparative capex/sales ratios
60%
50%
40%
30%
20%
10%
0%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006E
2007E
2008E
US EU BT Vodafone DoCoMo NTT

Figure 45: Comparative EBITDA/capex multiples
3.5
3.0
2.5
2.0
1.5
1.0
0.5
-
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006E
2007E
2008E
US EU BT Vodafone DoCoMo NTT
Indeed the greater consistency of the US relative Europe can be interpreted as offering
greater certainty, we believe. The volatility in Europe was also driven by the faster mobile
penetration in the late 1990s and the requirement for the year 2001 to 2003.
How operators spend capex lacks clarity but Vodafone has offered details of its capex spend
for its March 2006 financial year as shown in Figure 46. Interestingly only 48% was actual
network investment and a further 19% was backbone transmission-related. Indeed the key
determinant of capex is peak capacity, which often leaves networks underutilized (breeding
marginal cost business model). In Figure 47 we show our best estimate of the usage profile
of T-Mobile UK and O2 UK, highlighting the fact that networks are built for two peak hours in
the day, have much residual capacity. Usage patterns differ depending on customer and tariff
profiles.
Figure 46: Vodafone capex analysis for FY05/06 (£5bn) Figure 47: T-Mobile UK and O2 UK – comparison of
usage patterns
Other operations
100%
2%
90%
80%
Other mobile 3G network 70%
31% 36% 60%
50%
40%
30%
20%
10%
0%
2G network
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
12%
Transmission
19% O2 TMO
Source: Company results announcement, Deutsche Bank estimates Source: Deutsche Bank estimates

Earnings and P/E trends

In Figure 48 we highlight the trends in earnings and P/E ratios in Figure 48, which broadly
show the trend of declining multiples as the sector has converged with general market
multiples.
Figure 48: Cyclicality of earnings and market enthusiasm
100.0
EU liberalisation
80.0
UK liberalisation and
move to digital Technology bubble
60.0
mobile technology
EU earnings
40.0 downgarde cycle
20.0
0.0
-20.0 Focus on cost control

and deleveraging
-40.0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006E
2007E
2008E
P/E ratio Headline (x) Total Headline Earnings Growth (%)
In order to contextualize the environment, we have shown in Figure 50 the performance of

the European telecoms sector over the past 14 years and categorized the sector into three
periods: utilities, bubble and uncertainty (we explain these definitions in more detail in Figure
51).

Figure 49: Key characteristics of each period

Utilities Monopolies in fixed line, mobile in infancy, retail regulation
Bubble M&A expansion, mobile growth, broadband in infancy

Uncertainty Mobile maturity, fixed line declines, broadband explosion, commoditization of pricing,
substitution, regulatory convergence
Figure 50: Telecoms sector (.SXKP) over the past 14 years
1,200
"BUBBLE"
1,000
800
600
400
"UNCERTAINTY"
"UTILITIES"
200
0
05 January 1992
05 July 1992
05 January 1993
05 July 1993
05 January 1994
05 July 1994
05 January 1995
05 July 1995
05 January 1996
05 July 1996
05 January 1997
05 July 1997
05 January 1998
05 July 1998
05 January 1999
05 July 1999
05 January 2000
05 July 2000
05 January 2001
05 July 2001
05 January 2002
05 July 2002
05 January 2003
05 July 2003
05 January 2004
05 July 2004
05 January 2005
05 July 2005
05 January 2006
05 July 2006
Source: Deutsche Bank and Reuters
Telecoms: Financials relative to the total market

In the following charts (Figure 51 to Figure 56), we attempt to compare the overall telecoms
sector with other sectors, in order to put the sector into context. The messages are clear
however; margins are high, as are operating cash flow margins. EBITDA/capex ratios for the
sector as a whole are comparable with other sectors and the wider market, but the relative
capital intensity (capex/sales) has declined significantly over the past few years following the
end of the wireless boom.
Over time telecoms earnings multiples have converged but indebtedness has increased
significantly, suggesting a greater “financial risk” to the telecoms sector.

Figure 51: High relative EBITDA margins Figure 52: High relative operating cash flow margins
60% 30%
50% 25%
40% 20%
30% 15%
20% 10%
10% 5%
0% 0%
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005E
2006E
2007E
2005E
2006E
2007E
Telecommunications ALL SECTORS EUROPE Telecommunications ALL SECTORS EUROPE
Source: Deutsche Bank estimates and company data Source Deutsche Bank estimates and company data
Figure 53: Comparable EBITDA/capex ratios Figure 54: But declining capital intensity
3.5x 50%
3.0x
40%
2.5x
2.0x 30%
1.5x 20%
1.0x
10%
0.5x
0.0x 0%
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005E
2006E
2007E
2008E
2005E
2006E
2007E
Telecommunications ALL SECTORS EUROPE Telecommunications ALL SECTORS EUROPE
Figure 55: Converged P/E multiples Figure 56: Shift in relative indebtedness
40.0
3.0x
35.0
2.5x
30.0
2.0x
25.0
1.5x
20.0
1.0x
15.0
0.5x
10.0
0.0x
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005E
2006E
2007E
5.0
0.0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006E
2007E
2008E
Telecommunications ALL SECTORS EUROPE
Telecommunications ALL SECTORS EUROPE

History of European telecoms

Telecoms over the ages: Pre-1980
Before Alexander Graham Bell, the Scotland born scientist and inventor, widely considered to
be the father of the telephone, communication was a haphazard affair, and was carried out
using basic tools such as paper, couriers, noise, carrier pigeons, beacons, semaphore and
flags.
With developments in electronic communications and with advances in cable technology,

networks were developed. Initially these were local area networks, but then national and
international connections were made that facilitated long distance communication. Originally,
most national calls were switched manually by operators but in the 1960s there was the first
international direct-dial call between the UK and USA.
Transatlantic services started in 1927 using two-way radio, but the first trans-Atlantic
telephone cable was laid in 1956, with TAT-1, providing 36 telephone circuits. The first
experimental satellite was commissioned in 1962 (Telstar 1). With the laying of TAT-8 in
1988, the 1990s saw the widespread adoption of systems based around optic fibres, which
introduced a 10-fold increase in capacity, which has since been expanded by many multiples
again.
Figure 57: A history of transatlantic cable

Cable Name Date(s) Initial No. of channels Final No. of channels Western end Eastern end
TAT-1 1956-1978 36 48 Newfoundland Scotland
TAT-2 1959-1982 48 72 Newfoundland France
TAT-3 1963-1986 138 276 New Jersey England
TAT-4 1965-1987 138 345 New Jersey France
TAT-5 1970-1993 845 2112 Rhode Island Spain
TAT-6 1976-1994 4,000 10,000 Rhode Island France
TAT-7 1978-1994 4,000 10,500 New Jersey England
TAT-8* 1988-2002 40,000 - USA France
TAT-9 1992-2004 80,000 - USA Spain
TAT-10 1992-2003 2 x 565 Mbit/s - USA Germany
TAT-11 1993-2003 2 x 565 Mbit/s - USA France
TAT-12/13 1996 12 x 2.5 Gbit/s Transatlantic - USA x 2 GB, FR
TAT-14 2000 64 x 10 Gbit/s Transatlantic - USA x 2 GB, FR, NL, D, DK
CANTAT-1 1961-1986 80 - Newfoundland Scotland
CANTAT-2 1974-1992 1,840 - Nova Scotia England
CANTAT-3 1994 2 x 2.5 Gbit/s Canada Europe
PTAT-1 1989 3 x 140 Mbit/s US-Bermuda Ireland-UK
Source: Deutsche Bank and Wikipedia,
In Europe, telecoms was deemed a “philanthropic” investment predominately lead by

governments and often combined with the national postal operators (therefore building a
complete communication monopoly). Indeed, before the privatisation wave of European
telecoms in the 1990s most governments had to separate out into different legal entities the
telecommunications business from the post office. Indeed in some countries such as Austria,
the post office still owns most of the property that houses the telecoms operators’ switches.

In the USA, AT&T was formed through the amalgam of different geographically diverse US
telecoms companies and it was not until the 1920s that the concept of universal services
was developed.
In Figure 58 we use the Boston Consulting Group matrix to highlight the relative development
of European and US telecoms. In 1980, with penetration growth slowing, the industry was
deemed “utility like” and, as can be seen, was a relatively simple. Indeed, the fax machine
was deemed a revolution in the industry in the mid-1970s as it stimulated demand for
incremental lines and volumes. It was also the first mover of the telecoms industry outside
voice, and it started to challenge the postal services as a distributor of hard copy information.
It was also the first move to immediacy.
Figure 58: European telecoms in context: Application of BCG matrix – 1980
STAR ?
High
Business growth rate
European traditional wireline
CASH COW DOG
US traditional wireline
Low
High Low
Relative position (market share)

The 1980s: Embryonic

This decade was the start of the telecommunications evolution. As the PC and the video-
recorder were growing in importance dramatically, the structure of the telecoms industry
changed forever. In the US, AT&T’s monopoly was broken up, BT was privatized in the UK
and mobile technology, as we know it today, was born.
Break-up of AT&T
The break-up of AT&T was initiated in 1974 by the U.S. Department of Justice anti-trust suit
against the telephone monopoly. Under the terms of a settlement finalized on 8 January
1982, AT&T (known as “MaBell”) agreed to divest its local exchange service operating
companies, in return for a chance to go into the computer business, AT&T Computer

Systems. Effective 1 January 1984, AT&T's local operations were split into seven
independent Regional Bell Operating Companies (RBOCs) known as "Baby Bells". AT&T,
reduced in value by about 70%, continued to run all its long distance services, although it lost
some market share in the ensuing years to competitors such as MCI and Sprint.
BT privatization
In 1981 BT became a state-owned corporation independent of the Post Office. In 1982 BT's
monopoly on telecommunications was broken, with the grant of a license to Mercury
Communications, part of Cable and Wireless. BT’s privatisation occurred in 1984, with the
sale of more than 50% of its shares.
Cable and Wireless privatization and Mercury Communications

Cable and Wireless was one of the early privatisations by the Thatcher government in the UK.
It was announced in 1980, with Cable and Wireless privatised in November 1981. Mercury
Communications was Cable and Wireless’ UK national telephony business (formed in 1981).
Mercury proved only moderately successful at challenging BT's dominance as in 1997 the
Mercury brand was abandoned and it was amalgamated into Cable and Wireless
Communications (the UK cable division of the group), which in turn was eventually acquired
by NTL.
First generation (cellular) mobile telephony

The Motorola DynaTAC 8000X, which received approval in 1983, was the first mobile
telephone “brick”. Mobile phones began to proliferate through the 1980s with the
introduction of "cellular" phones based on cellular networks. Networks were constructed by
multiple base stations located relatively close to each other, and protocols established for the
automated "handover" between two cells when a phone moved from one cell to the other. At
this time analogue transmission was the technology in all systems. The weakness with
analogue mobile technology was (and still is in many markets) easy to eavesdrop, and as
such, was not particularly private.
Mobile phones were large with a battery pack the size of a briefcase and were designed for
permanent installation in cars (hence the term carphone). In Switzerland, the name of the big
car-based phone models was "Nationales Autotelefon", and the abbreviation of it ("Natel")
persists as Swisscom Mobile’s brand today. Towards the end of the decade the handsets
were becoming “transportable" but still briefcase size.
In the early days, there were multiple differences in analogue technologies (NMT, AMPS,
TACS, RTMI, C-Netz, and Radiocom 2000) which later became known as first generation (1G)
mobile. In September 1981 the first cell phone network with automatic roaming was started
in Saudi Arabia; it was an NMT system manufactured by Svenska Radio Aktiebolaget (SRA).
In late 1982 the Nordic countries started an NMT network with automatic roaming between
countries and became pioneers of the technology (hence Nokia and Ericsson’s dominance
today).
Returning to the BCG matrix in Figure 59 we note that by 1990 the telecoms environment is
becoming busier and a new growth driver has arrived with mobile technology; although at
this stage there were question marks over the long-term penetration rate the technology
would achieve. Indeed mobile was expected to be a premium product aimed at the corporate
market, achieving a maximum of 10% penetration.

STAR ?
European mobile
US mobile
High
CASH COW DOG

Low
High Low

The 1990s: Revolution

At the beginning of the 1990s the telecoms sector was slowly evolving from its utility-like
reputation, but no one envisaged the growth in the industry towards the end of the decade.
In the US there was the Telecommunications Act in 1996, which introduced local loop
infrastructure competition. In Europe the later years of the decade were dominated by IPOs
(national incumbents and new entrants) and liberalization. However, the most significant
events in the decade were the dramatic pick-up in mobile penetration growth rates and the
equity market bubble. In particular, the bubble-fuelled large scale M&A as operators chased
scale, footprint and in some cases anything that had either “com” or “data” in its
description.
US Telecommunications Act of 1996

The Telecommunications Act of 1996 was the first major overhaul of United States
telecommunications law in nearly 62 years, amending the Communications Act of 1934. The
general intention of the Act was deregulation and promotion of competition. The Act
removed barriers which had previously prevented telecoms from competing head-to-head. A
new group of telephone companies, "Competitive Local Exchange Carriers" (CLECs), grew to
compete with the incumbents (also known as "ILECs" or “Incumbent Local Exchange
Carriers”). Deregulation and the new entrants provided consumers and businesses choice in
local phone service. Over time, the passage of the Act has resulted in several major
telecommunications mergers, leaving the following telecommunications companies in the
US:

AT&T: SBC acquired AT&T in 2005 and adopted the name AT&T. AT&T previously
acquired TCI, Media One Cable, and Teleport Communications. SBC was created when,
as Southwestern Bell, it acquired Pacific Telesys, Ameritech and SNET;
Verizon: Verizon acquired MCI in 2005. In 2000, Bell Atlantic and GTE merged to form
Verizon. Bell Atlantic previously merged with NYNEX (1998) and MFS. Verizon Wireless
was the analogue of Bell Atlanta mobile and Vodafone’s Air Torch business.
BellSouth: AT&T and BellSouth are in the process of merging. AT&T and BellSouth are
already connected through their wireless joint venture, Cingular.
Qwest: Qwest was founded in 1996 and merged with US West in 2000.
European liberalization
Most European markets were liberalized en masse on 1 January 1998, but there were a few
exceptions as shown in Figure 60. In some cases delays were generally awarded to allow the
incumbents to complete the tariff rebalancing processes, but effectively the delay merely just
deferred the introduction of competitive pressures. Indeed, the Southern European operators
still benefit in 2006 from these early liberalization delays we believe.
Figure 60: European market full liberalization dates

Austria Jan-98
Belgium Jan-98
Denmark Jan-96
Finland Jan-98
France Jan-98
Germany Jan-98
Greece Jan-01
Ireland Jan-00
Italy Jan-98
Netherlands Jan-98
Norway Jan-98
Portugal Jan-00
Spain Oct-98
Sweden Jan-93
Switzerland Jan-98
UK Mar-91
A wave of European IPOs

As the equity markets motored in the late 1990s and offered a glut of capital, there was a
wave of telecoms IPOs. The trend was kicked-off with incumbent privatizations, but in 1999
and 2000, start-up or early stage new entrants dominated the list. This also reflected the
liberalization of European telecoms in 1998 and the launch of many smaller start-up
businesses. Since Orange (for the second time) was IPOd in 2001, the number of telecoms-
related IPOs have been small, limited primarily to eircom (also for the second time) and
Belgacom, both of which were IPOd in 2004, and Iliad and Telenet, which are both focused
on the growth in broadband.

Figure 61: IPOs per annum

New entrant IPOs
16
14
12
10 Privatisation of Privatisations/
incumbents broadband
8
0
1994 1995 1996 1997 1998 1999 2000 2001 2003 2004 2005
Source: Deutsche Bank estimates and Bloomberg
European mobile licenses

There was a proliferation of 2G operator launches in the 1990s with the auction/beauty
contest of many third and fourth licenses; especially in 1992 to 1995 when the first
generation analogue operators converted into digital, and GSM 1800 spectrum became
available.
Figure 62: An explosion in European mobile operators (service launched per annum)
14
12
10
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006E
2007E
Source: Deutsche Bank estimates, Company data and GSM Worlds Associations
The start of the M&A frenzy

Worldcom bid for MCI – the M&A catalyst: In June 1994, BT and MCI launched
Concert Communications Services which was a $1bn joint venture between the two
companies. Its aim was to build a network which would provide easy global connectivity
to multinational corporations. This alliance progressed further on 3 November 1996 when
the two companies announced that they had entered into a full merger agreement to
create a global telecommunications company to be called Concert plc, which would be
incorporated in the UK with headquarters in both London and Washington DC. This

would have given BT an entry into the US market and MCI a global reach. The merger
proposition gained approval from the European Commission, the US Department of
Justice and the US Federal Communications Commission and looked set to proceed.
However, on 1 October 1997 Worldcom made a rival bid for MCI which was followed by
a counter bid from GTE. MCI accepted the Worldcom bid and BT pulled out of its deal
with a generous severance fee of $465m. BT made even more money when it sold its
stake in MCI to Worldcom in 1998 for £4,159m on which it made an exceptional pre-tax
profit of £1,133m. It also avoided being mired in the later Worldcom scandal. BT also
bought from MCI its 24.9% interest in Concert Communications making Concert a
wholly-owned part of BT.
Vodafone’s moves to increase footprint. In January 1999, AirTouch agreed to be
acquired by Vodafone, in a cash-stock transaction valued at $62bn (to be rebranded as
Vodafone AirTouch) and after AirTouch had received a bid from Bell Atlantic. Then in
September 1999, Bell Atlantic and Vodafone Airtouch agreed to merge their U.S.
wireless operations (Bell Atlantic Mobile, AirTouch Cellular, PrimeCo Communications,
and AirTouch Paging) to form Verizon Wireless.
In April 2000 after a long battle, Vodafone bought German conglomerate Mannesmann
AG to get control over the mobile network operator Mannesmann Mobilfunk GmbH & Co
KG, operating the "D2" network in Germany and control of Omnitel, the number 2 in Italy.
The deal is one of the largest in European history and is Germany's first hostile takeover
by a foreign firm and valued Mannesmann’s equity at Euro181.4bn. The conglomerate
was subsequently broken up and all manufacturing-related operations sold off.
Deutsche Telekom and Telecom Italia – a deal that got away: In 1999 Deutsche
Telekom and Telecom Italia tried to merge. The proposed transaction broke-up Deutsche
Telekom’s partnership with France Télécom , where there were cross shareholdings, but
was trumped in a wave of nationalistic frenzy by a bid by the Italian conglomerate,
Olivetti.
Telefónica and KPN – squashed by political meddling: In early 2000 Telefónica and
KPN were discussing a merger, which would have, with hindsight, saved billions of
Euros in the UMTS license auction process of 2000 and 2001, but was squashed by
political interference.
The globalisation trend
NTT DoCoMo invested heavily outside Japan, but was consistently unsuccessful.
DoCoMo had significant sums invested in KPN, Hutchison Telecom (including 3 UK,
Hutch in India), KTF and AT&T Wireless, and unfortunately had to write-off or sell-off all
of these investments.
Concert with MCI, AT&T and then implosion: As mentioned above, in June 1994, BT
and MCI launched Concert Communications Services. Its aim was to build a network
which would provide easy global connectivity to multinational corporations. With the
purchase of MCI by Worldcom, BT switched to AT&T as its global partner, but in late
2000 the two Boards eventually fell-out due to both BT and AT&T’s excess debt levels
and management changes. Concert was split into two: North America and Eastern Asia
went to AT&T, the rest of the world to BT. BT's remaining Concert assets were merged
into Global Solutions group and Concert disappeared.
Global One and implosion: Global One was an international voice and data
telecommunications carrier, formed in 1996 as a joint venture between France Télécom,
Deutsche Telekom and Sprint Corporation (each owned 1/3rd) and France Télécom and
Deutsche Telekom both owned 10% in Sprint. DT invested Euro367m and both DT and
France Télécom invested $1.8bn in Sprint at the same time. Although Global One built an
extensive international network, it was never a financial success. In 2000, France
Télécom bought out the other partners, and in 2001 it was taken over by Equant, who
themselves have since been bought by France Télécom.

Unisource and implosion: Unisource was set up in 1992 by KPN and Telia. Swisscom
joined in 1993 with an initial investment of CHF100m and Telefónica followed. In 1998
the owners decide to sell off and dismantle the Unisource business during 1999, except
a division called AUCS, which was sold to Infonet (since bought by BT).
The satellite bubble: Telephony access where there is no demand
Globalstar: Globalstar is a low Earth orbit satellite constellation for telephone and low-
speed data communications. The Globalstar project was launched in 1991 as a joint
venture of Loral Corp. and Qualcomm. On 24 March 1994, the two sponsors announced
formation of Globalstar with financial participation from eight other companies, including
Alcatel, AirTouch, Deutsche Aerospace, Hyundai and Vodafone. At that time, the
company predicted the system would launch in 1998. In February 1995, Globalstar
Telecommunications Ltd. raised $200m from its initial public offering on NASDAQ. The
IPO price of $20 per share was equivalent to $5 per share after two stock splits. The
stock price peaked at (post split) $50 per share in January 2000. The stock price
eventually fell below $1 per share, and the stock was delisted by NASDAQ in June 2001.
After a total debt and equity investment of $4.3bn, on 15 February 2002 Globalstar
Telecommunications filed for Chapter 11 bankruptcy, listing assets of $570m and
liabilities of $3.3bn.
Iridium: The Iridium satellite constellation is a system of 66 active communication
satellites and spares around the Earth. The system was originally designed to have 77
active satellites, and was named from the element iridium, which has atomic number 77.
Iridium communications service was launched on 1 November 1998 and went into
Chapter 11 bankruptcy on 13 August 1999.
ICO: Founded in January 1995, ICO Global Communications, planned to build an MSS
constellation in medium earth orbit (in two 45°-inclined orthogonal planes). ICO filed for
Chapter 11 bankruptcy protection in August 1999, but emerged (as New ICO) in May
2000.
Again focusing on the BCG matrix as shown in Figure 63 the outlook for the Telecoms sector
had changed dramatically by the end of 1990s. European mobile was now a huge growth
sector and “data” was the new buzz word. Broadband, as we know it today, was in its
infancy and the valuation (equity market) bubble created the M&A cycle that was to continue
in the coming years. Operators were increasingly breaking down their business models by
technology in order to highlight multiple growth drivers and the BCG matrix was ever more
crowded.

STAR ?
US mobile Emerging market mobile

High
European/US broadband
European mobile
CASH COW DOG

Low
High Low

The 21st century

The past decade has been dynamic for the sector. Starting at the tip of the technology
bubble, expectations have changed 180 degrees and pessimism now prevails. However the
change has come at huge costs: firstly there was the European UMTS license bubble, then a
smaller portal (“hype” bubble) and then the super expensive M&A, which has only recently
abated. Footprint and geographic breadth became buzz-words, and finally technology
differentials are evaporating leading to simpler business models.
The UMTS bubble

The beginning of the decade was marked by the UMTS license frenzy, especially in the UK
and Germany. Overall a total of Euro105.0bn was invested in 3G licenses in Europe, with the
leading pan-European operators spending between Euro15.1bn and Euro21.1bn and leading
many (KPN, BT, TeliaSonera, France Télécom) to the edge of financial disprove, which
necessitated recapitalisation. In Figure 268, Figure 269 and Figure 270 which start on page
149 we provide a full breakdown of all European UMTS licenses.

Figure 64: Leading UMTS license spends (Euro m) Figure 65: Breakdown of UMTS spend (Euro m)
Other, 8,292,
25,000 8%
20,000
15,000
UK, 34,027, Germany,
10,000 50,490, 48%
32%
5,000
0
France Telecom Deutsche Telefonica Vodafone
Telekom Italy, 12,141,
12%
Source: Deutsche Bank estimates and company data Source: Deutsche Bank estimates and company data
Unfortunately, the license auction and the technology development were separated from
reality such that there was a four year delay (2001 to 204/05) between most operators
receiving a UMTS license and launching services. This was due to a combination of handset
quality, prices, volumes and the ability for the technology to not only deliver a call but to also
hand over calls from one call to another. As shown in Figure 66, the launch focus only kicked
off in 2004.
Figure 66: European UMTS launch profile (y-axis – operator launches per year)
35
30
25
20
15
10
0
2000
2001
2002
2003
2004
2005
2006E
2007E
Source: Deutsche Bank estimates, Company data and GSM Worlds Associations
The portal bubble

Running hand-in-hand with the UMTS bubble was the “mobile portal” bubble. Operators
jumped onto the internet bandwagon and launched online portals such as T-Motion and
Vizzavi. These portals were expected to drive an explosion in critical data revenues, but were
years ahead of themselves and too technology specific. Indeed Google has taken over the
space originally targeted by these mobile portals.
T-Motion – a joint venture between T-Mobile and T-Online but eventually consumed
within T-Mobile.
Vizzavi – a wireless portal joint venture between Vivendi and Vodafone aimed at
provision of mobile content and information services. It was established as part of the

overall Mannesmann acquisition by Vodafone (as a way of Vodafone gaining Vivendi’s

support for the Mannesmann bid). In 2002 Vodafone acquired all of Vizzavi for £142.7m,
apart from Vizzavi France which was absorbed by SFR.
The super expensive M&A
France Télécom and Orange: In 2001 France Télécom acquired Orange plc (which had
been acquired by Mannesmann AG, itself purchased by Vodafone shortly after. This lead
Vodafone to divest Orange as there was a conflict of interests in the UK) in a deal with an
equity value of Euro40.3bn (Euro43.2bn enterprise value) and then merged it with
existing mobile operations (France Telecom’s key asset was Itineris in France).
Deutsche Telekom and VoiceStream: VoiceStream Wireless was spun off from
Western Wireless in 1999 and promptly acquired regional GSM carriers Aerial
Communications in the Midwest and Omnipoint in the Northeast. In May 2001,
VoiceStream, along with Southern regional carrier Powertel, was acquired by Deutsche
Telekom. At the time of the announcement (31 July 2000) the equity consideration was
valued at $50.5bn (Euro54.9bn), with debt of $5.0bn. In September 2002, the asset was
re-branded T-Mobile USA and has been a success story in the intervening years.
Telefónica and O2: On 26 January 2006 Telefónica completed its £17.7bn (Euro25.7bn)
acquisition of the O2. This acquisition has given Telefónica additional footprint in the UK,
Republic of Ireland and Germany and marked a return to Germany for the group.
Telefónica previously owned a green-field UMTS license but pulled out of its 3G venture
(Quam) in 2002. The acquisition of O2 has re-energised the debate in Europe over the
value of inter-country consolidation.
Wireless footprint expansion
After a few years of respite, operators are slowly returning to the theme of footprint breadth,
with France Télécom and Telefónica at the fore of these moves over the past year. As result,
the European market is starting to condense into four groupings and there is likely to be
interest if assets become available in Italy and France in the future. These groupings are
Deutsche Telekom, France Telecom, Telefónica and Vodafone.
In the footprint maps below, we have highlighted all controlled assets in deep grey and
associate assets in light grey, for the leading operators.

Figure 67: KPN Figure 68: OTE
Figure 69: Telefónica (including O2) Figure 70: Telekom Austria

Figure 71: Telenor Figure 72: TeliaSonera
Figure 73: T-Mobile (Deutsche Telekom) Figure 74: Vodafone

Starting to see DSL footprint expansion

There is also an increasing move to expand internationally into the DSL space, but most
operators have focused on offering bundled services and therefore offer DSL services where
there are existing mobile assets.
France Télécom has launched an integrated mobile/DSL strategy in 2006 in France,
Spain, Belgium, Poland and the UK;
Telefónica O2 has a bundled strategy in Germany, the Czech Republic and the UK;
Deutsche Telekom appears to be focused predominantly on wireless in their geography,
but interestingly do have broadband assets in France and Spain.
Telecom Italia is also active in the French and German broadband markets (having
bought AOL Germany in 2006), despite not owning any other wireline infrastructure
outside Italy.
Focus on technology differentials evaporating
At the start of the century each operator differentiated its business model by technology, as
operators attempted to benefit from the technology bubble, where premium valuations were
placed on anything with “.com” or “data” in its description. Telefónica has regularly been
one of the most progressive operators in terms of reporting and business segmentation. As
an example, in Figure 75 we depict how Telefónica’s disclosure has changed over the years
and how the emphasis on different business areas has changed. We have based our analysis
on the company’s investor presentations at Rio de Janeiro in 2001 and at Valencia in 2006.
We also show how the company is evolving following recent changes in management
structure following the merger of Telefónica with Telefónica Móviles in mid-2006.

Figure 75: Telefónica’s evolving management structure and business model
Rio 2001 Valencia 2006 From 27 July 2006
Telefónica de España Telefónica de España Telefónica de España
Telefónica Data
Terra Lycos
Emergia
Telefónica Latinamericana Telefónica Latinamericana Telefónica Latinamericana
Telefónica Moviles Telefónica Moviles
O2 O2
Cesky Telecom
Atento Atento Atento
Telefónica Media
Endemol Divested or to be sold
TPI
Separation of wholesale and retail businesses

There has been a constant debate over much of the decade as to whether an incumbent
wireline business should be split (physically, economically and legally) into a wholesale
business and a separate retail business, which competes with other telecoms providers for
customers. Although complete separation of ownership has yet not occurred across the
sector following the UK’s Telecommunications Strategic Review (TSR), in September 2005
BT signed legally-binding undertakings with Ofcom to create Openreach, which is responsible
for managing the UK access network on behalf of the telecommunications industry.
Theoretically, Openreach manages the UK's telecommunications infrastructure, treating the
rest of BT on an equal basis as other operators, and is currently essential to the unbundling
process in the UK.
Returning to the BCG matrix

Convergence is likely to become the most commonly used word in the telecoms space. Not
only is there a convergence of technologies and services, but also of regulation. However,
this convergence is lowering barriers to entry and consequently reducing returns. As we
picture the BCG matrix in 2006 in Figure 76, the scarcity of business in the “?” box, highlights
the uncertainty in the growth prospects of the industry in the future.

Figure 76: European telecoms in context: application of BCG matrix – 2006
STAR ?
Emerging market mobile

High
European/US broadband
Business growth rate
US mobile
CASH COW DOG
European mobile
Low
High Low


The telecoms environment

Telecoms value chain
In this section we investigate the structure by which telecoms operators deliver services to
their customers. It lists the key players in the chain; and each of them participate in the
telecoms industry. Figure 77 summarises the players and in Figure 87 we have adapted
Michael Porter’s five forces model to the telecoms space.
Figure 77: Telecoms Services Value Chain
Implementers Application Content Network Service

Equipment Providers Providers Operators Providers
Providers
Network Software and Basic Provide content Owners of Use their own
Component hardware application to be viewed or the basic or another
Providers integrators platform used while network on network
providers communicating which the operator’s
End-User & Also provide
using various voice or data network to
Distribution consulting, User
applications traffic is provide services
Equipment network application
carried to customers in
Providers maintenance providers
They include: a particular
support, May
Test Equipment Content creators region
optimisation and provide
Providers
upgrade services Content services to
aggregators end
consumers
Content themselves
distributors
Players in the telecoms value chain

Equipment providers (e.g. Alcatel; LG; Nokia; Palm; Sony Ericsson)
Equipment can be divided into network equipment, such as cabling and routers, which
constitute telecoms networks; and user equipment, such as modems and phones, which
enable users to use the network. Equipment providers are thus categorised as network
component providers (Alcatel, Ericsson, Siemens, Qualcomm), or end-user equipment
providers (Nokia, Samsung, Sharp, LG, Sony Ericsson, Motorola).
End-user equipment is sometimes sold directly to the users by the manufacturers or their
agents, as is normal for PCs; but it is also often supplied by telecoms operators, generally
with a subsidy of up to 100%, especially for mobile handsets. Operators may sometimes
self-brand the equipment. The most significant end-user equipment relationships are probably
in mobile, where users are often subsidised hundreds of Euros on new handsets, and many
replace these every year. Having sought-after handsets is a useful differentiator, especially if
operators can get access to these shortly ahead of their competitors; and newer handsets
will be more suited to accessing the latest services, such as video and 3G data services.

Figure 78: Wireless handset volumes (m of handsets) Figure 79: Leading handset vendors market share trends
1,200 40%
Emerging market 35%

1,000
growth 30%
800 25%
20%
600
15%
European
400 growth 10%
5%
200
0%
- 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E
Nokia Motorola Samsung LG Sony-Ericsson
Source: Deutsche Bank estimates sand company data Source Deutsche Bank estimates sand company data
In Figure 78 we show the enormous growth in handset volumes in recent years, as

component costs and manufacturing enhancements have led to the development of low-end
handsets that have enabled the economic explanation of emerging markets (LatAm, India,
Africa and China). In Figure 79 we show the market shares of the leading handset
manufacturers, and it is worth noting the growth of LG and the recent improvement at
Motorola (due to the Rzar). We also highlight in Figure 80 the continued dominance of GSM
technology, especially as leading US operators have migrated from TDMA. Going forward,
we expect WCDMA to become increasingly significant as the pricing of 3G handsets decline.
Figure 80: 2006E handset volumes by technology
CDMA
17%
WCDMA
11%
US Dig ESMR
1%
PDC
0%
GSM
71%
As with much general manufacturing, Chinese presence in telecoms equipment is large and
growing. Basic hardware can become commoditised, likely to the benefit of those buying it,
although this may expose large firms to greater competition by driving down start-up costs.
In the wireless infrastructure market, there has been a recovery in growth due to the
combination of expanding emerging 2G markets (Asia, Africa, LatAm) and 3G investments in
Europe and Japan. This is detailed in Figure 83. The peak in 2001 was due to the explosion in

both penetration and networks in European mobile and the early rollout of 3G in Japan and
networks in China.
Figure 81: Global wireless infrastructure market (US$ m) Figure 82: 2005E market share of wireless infrastructure
market
Siemens
70,000 12%
60,000 NEC Ericsson

7% 30%
50,000
40,000
Motorola
30,000 10%
20,000
Nortel
10,000
9%
0 Nokia
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006E
2007E
2008E
2009E
Lucent 13%
Alcatel
10%
9%
Source: Deutsche Bank estimates and company data Source: Deutsche Bank estimates and company data
Figure 82 shows two of the most important characteristics of the global wireless market.
Firstly, the leading priorities of Ericsson (similar to Nokia in the handset market), but
secondly, and importantly, the fragmented nature of the rest of the market, where the
number two and three mobile handsets suppliers aggregate to just under 40% market share.
This reflects the fact that brand, design and scale are more important drivers in the handset
space than infrastructure market.
Figure 83: Growth in each region of global wireless infrastructure market (US$ m)
25,000
20,000
15,000
10,000
5,000
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E
Europe Asia Pacific North America South America Middle East & Africa

In the wireline sub-sector, Huawei (which has only been a noticeable player for three or four
years) has introduced a new level of competition compounding the fact that significant
overcapacity remains. In Figure 84 and Figure 85 we show the DSL market share by device
and revenue, highlighting Alcatel’s continued outperformance and the price discounts offered
by Huawei (16% market share of parts but only 13% share of the revenue).
Figure 84: Global DSL aggregation (ports) market share Figure 85: Global DSL Aggregation (revenue) market
2005 share 2005
Huawei
Alcatel
Alcatel 16% Huawei
37%
26% 13%
Siemens
7%
Siemens
5%
Ericsson & Ericsson &

Marconi Marconi
Others 6% Others 5%
Lucent Tellabs
39% 36%
6% 4%
Source: Infonetics Source: Infonetics
The other major element to remember in the infrastructure market is the significant annual
deflation in equipment pricing, which according to Telenor has deflated by around 20% per
annum between 2002 and 2006. This has been due to a contraction of the number of buyers,
with the importance of the alternative carrier sector, a focus between 2001 and 2005 in
Europe on debt reduction and advancements in software/compression techniques which
have added life and bandwidth to traditional infrastructure. The key in the future will be the
development of a next-generation network (IP).
Figure 86: Telenor’s view of telecoms equipment prices

100
80
60
40
20
0
2002 2003 2004 2005 2006E
Implementers (e.g. Cisco; Lucent; Nortel)

Implementers (aka ‘network integrators’ or ‘turnkey solution providers’) build networks for
the network operators, using hardware components provided by the equipment
manufacturers, as well as software from application providers. Most implementers offer
additional services relating to planning, managing, and upgrading networks.

Figure 87: Possible application of Michael Porter’s five forces into the telecoms space
Supplier power - Stabilising

Increased handset competition;
Chinese entry into infrastructure
(fixed versus mobile);
High switching costs – the risk
of reverse actions
Barriers to Entry - High Threat of Substitutes = High

Spectrum allocation limited in mobile;
Returns on wireline and wireless
Competition Fixed versus mobile;
IP versus switched;
wholesale declining; Market specific Media versus telecoms;
Access to equity capital harder; Significant exit costs Low switching costs;
Government/regulatory policy key Capacity = bête noire High churn – reduction is key
Buyer Power = Varied

Scale is key;
Price elasticity in most markets;
Regulatory drive;
Homogenous products;
Low buyer concentration
Application providers (e.g. Apple; Microsoft; Sun)

Telecoms services require huge amounts of software, which is divided into two main
categories: basic platforms and user applications. The application providers supply software
to everyone else in the value chain. Basic platforms are underlying sets of instructions, on top
of which other software may be built. These include technologies such as Java.
User applications perform actual computing tasks, from the level of operating systems, like
Windows, to e-mail applications. Companies need not operate their user applications, which
can be outsourced to Application Service Providers (ASPs).
Content providers (e.g. Disney; Google; Reuters; Yahoo)

Apart from simply providing networks, telecoms can get involved in how people use them.
Service providers control the user experience to varying degrees: e.g. a company might
provide both handsets and front-ends to mobile customers, but just a connection to an
internet customer. Increasingly, telecoms operators are looking to differentiate offerings with
superior user experiences. This is often done by providing rich content, which may or may
not be chargeable.
Content providers produce a massive variety of products, with various pricing structures,
starting at free. Offerings are more and more popular with many customers, and may draw
users to telecoms services (e.g. 3G) but to date most has been information-based content
and the explanation of entertainment-based content in its earliest stages by telecoms

operators. Exclusive content can give service providers an advantage against competitors,
but for exclusivity, content must have value (i.e. football rights). Content providers are broadly
divided into content creators (e.g. Disney, EMI); content aggregators (e.g. B Sky B, ITV); and
content distributors (e.g. MSN, Google).
In Figure 88 we highlight the mobile TV value chain, where the content providers are even
more important. With the increasing expectation of convergence going forward, content
providers are likely to play an ever more important role, as distribution sites are dismantled
and more and more access technologies fight over the ownership of the consumer “pipe”.
Figure 88: The DMTV value chain

Testing kit
Alcatel
Chipsets
Nokia
Ericsson IP Encapsulators
IPWireless Muxes
R&S Software
DiBcom
MobiTV T.I Arqiva
Sky Qualcomm Modeo
Yahoo etc MediaFlo
Google TowerCast
Canal + Consumer
YLE
NTL DVB-H/T- Terminal
Content Broadcast DMB/FLO
Network
Content Aggregation Equipment
Providers in Network
Mobile 3G/2G
Network
Universal Cingular
Fox SKT
Disney O2
Premier League Orange
Endemol etc.
etc.
Network operators (e.g. BT; Deutsche Telekom; France Télécom )

Network operators own and run the networks which carry voice and data traffic. Those who
have evolved from former government monopolies are termed incumbents. In reality, much
of operators’ traffic travels beyond their home network, so all service providers must pay for
others’ capacity. Most important network operators are also service providers, but network
ownership is a matter of degree, so that one may own a network of mobile base stations, for
example, but rely on someone else’s network to link them together, and network operators
rent out capacity to other operators, to varying degrees. All will charge interconnection and
termination fees, but some may also provide origination to service providers with no
network. In Figure 89 we show the relationship between network (wholesale) and service
providers (retail) in the UK wireline market and we have also attempted to depict the
influences (and forces) on incumbent operators (former monopolists) in Figure 90.
Increasingly, regulators are seeking to separate networks and service providers, in order to
split some of the legacy market dominant positions of incumbents. This model has been
employed in the UK in the utility and raid sectors, and BT is the most advanced in this regard
with open reach, and its network access business. However, as yet no telecoms operator
has physically separated its network for its service provider (retail business).

Figure 89: Network and service providers in the wireline market
CPS: Tele2, Carphone Warehouse

Wholesale DSL –
Tiscali, AOL
RETAIL
BT Retail
Cable & Wireless

UK Cable
Energis
Other
Colt
WHOLESALE
BT Wholesale
MARKET
SIZE
Clearly, this part of the value chain was changing regularly and we doubt the structure
depicted in Figure 89 will be evident in five years. Indeed, it could be argued that the
wholesale DSL business shown above in Figure 89 has already started to morph into the
infrastructure space.

Figure 90: Influences on an incumbent operator
Access to
Capital
Defines targeted
Returns;
Drives scale of
capital intensity
Regulation
Equipment Vendors Retail market power;
Infrastructure, software and handsets Incumbents Wholesale pricing (ROCE, LRIC);
Power, pricing and competition Open network access;
Political influence
Threat of
Technology
Inter-modal
Competition;
Substitution;
Redundancy of
infrastructure
Service providers (e.g. Vodafone; Tesco Mobile; KPN)

Service providers provide the telecoms services to their customers. They will usually (e.g.
Vodafone), but not always (e.g. Virgin Mobile) own networks, and therefore some of the
capacity they sell. Generally, service providers buy inputs from the rest of the value chain,
and may be integrated with these suppliers. Service providers tend to be the main recipients
of revenue from users, although not exclusively; e.g. content providers often bill customers
themselves.
In Figure 91 we show the relationship between mobile service providers and network
owners. It should also be highlighted that H3G has outsourced its network management to
Ericsson and so even here, the clarity of the picture is starting to get fuzzy. In other European
markets there are a far greater number of MVNO’s, such as in Germany, where there were
over 35 launched by 30 June 2006.

Figure 91: Network and service providers in the wireless market
– Fresh, easyMobile
–Tesco
- Tesco
RETAIL
BT MOBILE
MVNO’s
Virgin
MVNO’S
MNVO’S
MVNO’S
WHOLESALE
Vodafone
T-Mobile
Orange
H3G
O2
MARKET
SIZE
Retailers (e.g. Dixons, Carphone Warehouse)

Telecoms operators use advertising to bring customers to them via phone or internet, but in
mobile, for example, many customers come through third-party retailers, such as Carphone
Warehouse. Retailers run both websites and physical shops, and take commission on selling
products to customers. Increasingly, operators may run their own retailers, e.g. France
Télécom, which owns over 700 shops in France and Cosmote, bought the number one
Balkan retailer (Germanos). Additionally, some of these relationships are starting to break, as
seen by Vodafone UK withdrawing its contract products from Carphone Warehouse in
October 2006 and going exclusively with Phones 4 U Figure 92 summarises all players’
relationships to each other.

Figure 92: Telecoms services relationship chart
Application Content
Providers Apps for platforms for Providers
content development such
Set of rules or protocols for as web page development
communication of devices using HTML etc. Content providers could
Routers, switches, have two business models:
cables, towers and 1. Selling the content by
other network hardware having tie-up with the
and test equipment Network service providers
Implementers
Operators 2. By selling content directly
to the customer.
Service providers could also
offer exclusive content
Service applications for
Equipment various services Service
Providers Providers
Service providers could sell

their offerings through a
distributor or directly to
customers
Equipments used in
services distribution Service End
Distributor User
Mobile phones, PDA, wired telephone sets, DSL Transceivers, Dial up

modems or Cable modems depending in the technology used
Network implementers, supplied by equipment providers, build networks for network operators; and these networks are then used by service providers to deliver services and product from content providers, to users. Any link
in the chain may be integrated or semi-integrated with any others, and generally many service providers are also network operators and content providers to some degree.

Regulation
Why is telecoms regulated?
Regulation seeks to promote the interests of consumers, and to facilitate the contribution of
telecoms to the overall economy by remedying market inefficiencies and promoting
competition. There are three main reasons why regulation is such an important part of the
telecoms industry: market power, the importance of telecoms services, and the need for
commonality.
Regulators objectives are:

To encourage competition;
To emulate competition in segments where it is impossible;
To promote consumer interests;
To promote the contribution of telecoms to wider economic and maybe political goals.
Operators often have significant market power (SMP), in an industry where scale matters,
and so, other third party interests can require protection. Regulators have been largely
concerned with controlling incumbents, but as competition progresses, they regulate new
players.
Telecoms are obliged to provide their customers with connectivity that may be off their
networks. This means it is not possible to have closed networks and scale adds power when
negotiating interconnect (access to other networks). Regulation is therefore the key to
ensuring scale advantages are not abused.
Telecoms are heavily regulated not just because of the size of the industry, but also because
of the importance of telecoms services in the wider economy. Access can be deemed
almost a right in European countries, and incumbent licenses are often issued with Universal
Service Obligations (USOs), which require certain service provision; e.g. equal availability for
access, and free calls to emergency services.
Telecoms are also subject to regulation to help law enforcement; so certain spectrum may be
set aside for emergency services, for example. Operators may also be required to retain
customer-usage records, which must be handed over to the police on request. Although with
a wave of Human Rights and Data Protection Acts in Europe in recent years, this process is
becoming harder.
Finally, for networks to connect, common protocols are required. These protocols must be
standardised, so for example, every Bluetooth chip can communicate with every other
Bluetooth chip. Central bodies set these rules, so that everyone can benefit from
standardisation.
Evolution of the European regulatory model

Past
In the 1990s and until the 2003 EU regulatory framework, the regulatory model in Europe was
based on the principle of ex-ante regulation. In particular, the regulatory model was focused
on retail regulation (price caps) and liberalization in the later part of the decade introduced the
requirement for wholesale wireline offers (and a consequential raft of interconnect tariffs). To
highlight the retail regulation on wireline pricing, we summarize the price caps that were
applied to operators in 1997/1998 in Figure 93. All were based on CPI (or RPI) – x (an
efficiency factor).

Figure 93: 1997/1998 retail regulatory models for selected European telecoms
Company Efficiency Factor Details
British Telecom 4.5% Price cap in effect from August 1997 to July 2001 applied to first 80% of residential customers by bill size. Retail
prices to business customers and up to 20% of residential customers are no longer subject to price cap. Price cap
applies to approximately 18% of BT's total revenues and requires annual price reductions of around £45 million. In
addition, the normal residential bill must not increase by more than the rate of inflation. Prior price cap had
efficiency factor of 7.5%; applied to all revenues, and required annual price reductions of around £350 million.
Deutsche Telekom 6.0% Price reductions in two reference periods of two years each (1988/1999 and 2000/2001) to be made at start of
each reference period. Local and extended local call charges cannot be increased during the first reference period
(1988/1999). The first reference period also has separate price caps for both residential and business customers.
France Télécom 6.0% France Télécom proposed to effectively lower tariffs by 9% in 1998 and by 4.5% in 1999 and 2000.
Portugal Telecom 3.0% Annual price reductions are based on forecast inflation. Price increases for installation charges, rental charges and
each tariff category for national and international services may not exceed CPI plus 6%
KPN 0.0% Annual price increases limited to rate of inflation. KPN has historically remained well below this price cap due to
competitive pressures.
TeleDanmark 3.0% Price-cap scheme in effect until January 1, 1998.
Telefónica N/A No price cap in 1997, Telefónica had regulatory approval to increase rental charges 14% and local calls 13% prior
to January 1, 1999, and to decrease provincial long-distance calls 15%, inter-provincial long-distance calls 35%,
and international calls 23% during this time period.
Telecom Italia N/A No price cap in 1997 but introduced through to 31 July 1999.
In the mobile space there was a soft approach to regulation. Returns were driven by the
capex cycle (network build out costs) and license fees, and issues such as mobile termination
were scarcely discussed. Indeed, as many networks were only just being built, the financial
support from premium fixed-to-mobile revenue was important. Indeed, it was not until the
significant (around 30%) cuts in UK mobile termination rates were announced in June 2004
that the issue jumped into investors’ consciousness.
Present
The European Commission set an EU-wide competition framework in 2003 (due for review in
early 2007), which has been implemented nationally by National Regulatory Authorities
(NRAs), such as Ofcom (although in some countries the initial markets review process is
ongoing and progress varies greatly by country). Most regulation is carried out by the NRAs,
but competition authorities may also get involved in certain cases, where the lack of
competition is clear, but not evidently remediable by NRAs or where there is a cross-border
transaction.
The framework defines 18 markets, and requires NRAs to assess whether these are
competitive (subject to European Commission approval), and then to identify players with
significant market power (SMP) in those which are not fully competitive and then offer
remedies.
SMP is defined as market “dominance”, following from competition law, so it is not clear-
cut, but guidelines state that a market share below 25% is unlikely to mean dominance in a
market, whilst 40% is normally indicative and 50% can be considered evidence in itself.

Figure 94: 18 telecoms markets under EU competition framework

Retail level 1. Fixed-line access to the public telephone network for residential customers.
2. Fixed-line access to the public telephone network for non-residential customers.
3. Fixed-line local/national calls for residential customers.
4. Fixed-line international calls for residential customers.
5. Fixed-line local/national calls for non-residential customers.
6. Fixed-line international calls for non-residential customers.
Markets 1 through 6 are referred to as ‘the provision of connection to and use of the public
telephone network at fixed locations'
7. Leased-lines to connect to the internet, up to 2 Mbps.
Wholesale level 8. Fixed-line call origination.

9. Fixed-line call termination.
10. Fixed-line call interconnection.
11. Unbundled local loop.
12. Wholesale broadband internet access.
13. Wholesale leased line termination.
14. Wholesale leased line interconnection.
15. Access and call origination on public mobile telephone networks (MVNOs).
16. Voice call termination on individual mobile networks (MVNOs).
17. International roaming on public mobile networks.
18. Broadcasting transmission to end users.
Source: Official Journal of the European Communities, Deutsche Bank
Future
Commissioner Reding (a Luxembourg politician, currently serving as European Commissioner
for Information Society and Media) outlined on 29 June 2006 in a speech, a radical proposal
for the future of European telecom regulation. Reding believes that EU regulatory policy is
working – stimulating competition which in turn is driving levels of investment in the EU
telecoms sector higher than those seen in Asia or the US. A key proposal will be a reduction
“by at least one third” of the list of 18 markets regulators that must review for significant
market power (please refer to Figure 94).
Proposals to streamline the market review process central to implementation of the current
framework will also be put forward, combined with tighter timescales for regulatory action.
The Commission is also looking for greater powers over regulatory remedies proposed by
national regulators to smooth out distortions across markets (e.g. on the spread of mobile
termination rates). This is likely to disadvantage countries where regulatory intervention has,
to date, been relatively benign (i.e. the southern European operators).
No room for regulatory Reding makes it clear in her speech that there is no room for “regulatory holidays”. Germany
holidays – competition gets a specific mention, with Reding re-affirming that the current draft telecoms law is
drives investment unacceptable and that infringement proceedings will be started if it becomes law without
substantial changes. Ironically, this could have positive implications on the FCF for the likes of
DT and FT if they now step away from significant investment plans to upgrade their access
networks.
Structural separation to be Separating infrastructure provision from service provision, as we have seen in the UK through
put forward as an option for the creation of Openreach at BT Group, will be put forward as a policy option for discussion.
review Reding references the US where radical regulatory policy in the 1980s (i.e. the break-up of
AT&T) has subsequently led to sustainable infrastructure-based competition between telco
and cable operators. She suggests that perhaps similarly radical proposals might be needed
in Europe to make “real progress”. Such a move could further level the playing field between
incumbents and new entrants. Although the greater superior scale of cable in the US is a
significant difference compared with Europe.

Spectrum management – an Commissioner Reding argues in her speech that the scarcity of radio spectrum risks is
EU-wide, market-based holding back the development of the European economy. To promote more efficient use of
approach is needed spectrum, three specific measures will be proposed:
spectrum allocation on a technological and service neutral basis;
spectrum trading across the EU; and
a revised licensing process.
The idea of a European spectrum agency will also be tabled.
The intention is to conclude the review by the end of 2006/early 2007 with concrete
legislative proposals that will then be submitted to the European Parliament and the Council
of Ministers sometime in 2007.
Figure 95: Regulation timeline for EU regulatory framework of electronic communication networks and services
Call for input on Adoption by

Directives and Commission of Transposition of
Recommendation proposed Directives in
on relevant legislative Member States
markets measures
Negotiation in EP and Council
2004 2005 2006 2007 2008 2009
Commission Communication Adoption by

launching public consultation Commission of
revised
Draft revised Recommendation Recommendation on
on relevant markets relevant markets
Source: Bundesnetzagentur
Types of regulation: Retail

Retail regulation is most common in monopolistic markets in order to control consumer
pricing in the absence of competition. However, it is also the most basic form of regulation
and is common in nationalized industries, such as the postal service, television licenses and
rail infrastructure, and was standard in the wireline telecoms environment before
liberalization. As a reminder in Figure 93, we showed the price caps in the European wireline
telecoms space in 1998 (at the time of European liberalisation), but most of these have been
recently been removed so that operators have flexibility to increase or decrease their tariffs
subject to market forces.
Types of regulation: Wholesale

The basic form of competition-based regulation is wholesale. It is a regulated provided route
for new entrants to access incumbent’s infrastructure and services based on either retail
minus or cost plus pricing model. A basic form of resale competition is for example, call-by-

call competition in the fixed-line market, where a new entrant price discounts standard retail
pricing and builds business models that effectively exploit an arbitrage between retail and
interconnection pricing.
In effect, wholesale is a means to drive traffic-based competition in the short term (i.e. prices
down and market share battles) and allow new entrants to win market share, supporting their
infant business models. Then in the longer term, when the wholesale business model has
scaled, the regulatory model should act as a catalyst for infrastructure-based competition. In
Figure 96 we show how Deutsche Telekom lost its monopoly of wireline-voice traffic in 1998
and simultaneously started to lose its position as the pre-eminent investor in German wireline
infrastructure. Although this is only a snapshot, it effectively highlights the dynamics of basic
wholesale regulation. Deutsche Telekom lost 15% market share of traffic in two years.
Figure 96: German MOU and fibre investment trends around liberalization
Growth
MOU 1997 1998 1999 1998 1999
DT 178 185 200 7 15

Others 0 11 35 11 24
Total 178 196 235 18 39
Share
DT 100% 94% 85% 39% 38%
Others 0% 6% 15% 61% 62%
Cable (Km)
DT 150,600 157,400 165,000 6,800 7,600
Others 41,000 56,000 72,000 15,000 16,000
Total 191,600 213,400 237,000 21,800 23,600
Share
DT 79% 74% 70% 31% 32%
Others 21% 26% 30% 69% 68%
Source: RegTP
In Figure 97 we depict a possible view of the evolution of wholesale competition in the

mobile and fixed-line worlds.

Figure 97: The evolution from wholesale to infrastructure competition
Enhanced
Mobile Service provider service MVNO
provider
Fixed Call-by-call CPS

Full ULL
Reseller/wholesale Partial
Broadband
line rental unbundling
Wholesale Infrastructure
Retail minus pricing Cost plus pricing
Low gross margin High gross margin
Capex light Significant capex
requirement
Service providers: Early form of competition

When the European mobile market was in its infancy in the early 1990s, competition in the
mobile market was driven by service providers. Service providers were set up as
independent of network operators, and maintained the direct customer relationship, providing
basic billing services in return for e-contribution of monthly ARPU. The concept behind
service providers was to remove the risk of the monopoly/oligopoly among the network
operators (of what there were only one or two in each market) dominating the market
dynamics. Service providers often receive a commission from network operators when they
sign up a subscriber, but have limited financial exposure to subscribers (other than billing
related bad debt).
However, as further network operators launched services in the mid-to-late 1990s in most
markets, existing network operators were able to acquire the service providers (in the UK
Vodafone acquired Talkline and Singlepoint, two of the better-known service providers).
Additionally, the value of service providers diminished with the exponential growth in prepaid,
which was sold either online, through independent stores or general retailers.
Enhanced service providers: German phenomenon

In Germany, enhanced service providers still exist (debitel, Mobilcom and Talkline et al), but
the key difference with the UK is that they offer services on all the network operators and are
not exclusively tied. Service providers still have around 25% market share (at the end of
2005) of the customer relationships, but are likely to consolidate as they are increasingly
fragmented and missing the opportunity to benefit from scale leverage.

Figure 98: Service providers’ and network operators’ Figure 99: Market share among service providers (2005)
market share (2005)
debitel
44.0%
Ph. House
Service 4.9%
Mobile
provider
network
25.31%
operator Talkline Telco
74.69% 16.7% 2.2%
Drillisch Mobilcom
8.4% 23.7%
Source: Drillisch Telecom, company data Source: Drillisch Telecom, company data
MVNOs: The frenzy

Mobile virtual network operators effectively act and interrelate with costumers as if they
were network operators. However, the difference is that they acquire wholesale capacity
from networks (at something around retail less 40%) rather than owning and managing
infrastructure. A key difference with service providers is that MVNOs take a greater
economic risk and are responsible for advertising and customer acquisition costs.
The most well know MVNO is Virgin in the UK, which was set up on the T-Mobile network,
and has built up such a strong brand proposition that UK consumers rarely distinguish Virgin
from the other network operators. MVNOs not only provide retail competition, but are often a
more targeted means to increase market segmentation, especially when most network
operators’ brands are generic and therefore can not appeal to all segments of the consumer
segmentation. MVNOs have also been launched in some markets, targeted at immigrants
and different language speakers (such as Turkish brand in Germany).
Call-by-call and CPS

When the European telecoms sector was liberalised in most markets in 1998, the immediate
competition was call-by-call. In simple terms, this exploited the arbitrage between retail
pricing and interconnect costs, especially in the long distance area. Consumers signed up
with alternative providers and were required to dial an access code so that the call would be
routed over the alternative operators’ network.
CPS (carrier pre-select) is effectively a slightly more advanced call-by-call services, but where
the consumer pre-agrees that all calls are transmitted via an alternate’s network, the routing
is automatic.
The downside of call-by-call and CPS competition is that it is nothing more than an arbitrage
and is only successful whilst there is a material difference between retail and interconnect
pricing. When the variance has narrowed, the ability to compete with calling tariffs
disappears. As such, call-by-call and CPS are investment light solutions.
Wholesale line rental and broadband resale

Wholesale line rental is the most advanced form of basic telephony competition, and enables
the call-by-call and CPS operators to recharge the incumbent’s monthly line rental fee. It gives
the alternate operators sole control over the billing relationship (a single bill) and breaks the
direct link between the incumbents and the consumer.

In a broadband world, basic wholesale offerings are simply the resale of the incumbents’
products at a different cost point with the alternative operator covering the marketing and
customer acquisition costs. Again it is a low capital way for alternatives to test their brand
strength and market proposition before investing in infrastructure (i.e. unbundling
equipment).
Unbundling: What is it?

European incumbent operators built their local telecommunication infrastructure over several
years prior to the liberalization of their domestic market. A majority of these infrastructure
developments were carried out during the time they were state-owned monopolies and
hence were effectively financed by the respective governments. Although the sector was
opened to competition driven by EU regulations in and around 1998, new entrants faced
great difficulties in competing with the incumbents with well-established local networks.
Difficulties included:
Financial non-viability in terms of pay back in building telecommunications infrastructure,

such as switching facilities and backbone as well as ‘last mile’ networks from scratch;
Obtaining rights of way for infrastructure constructions.
These difficulties invariable created an uneven playing field disproportionately unfavourable to
the new entrants. Coupled with new developments in the telecommunications industry, such
as the advent of IP-based services, it became increasingly important for incumbents to share
their infrastructure, especially the ‘last mile’ network, with smaller competitors.
The concept of ‘Local Loop Unbundling’ (LLU) emerged as a solution to the above difficulties
and to remove the financial bottleneck in networks (the access loops). As such, smaller or
new entrant operators have rights to use the local loop of the incumbent and this is achieved
by allowing alternative providers to install their own equipment in local exchanges of
incumbents. This process connects the local loop to their own alternative networks allowing
them to effectively take over the copper wire between the exchange and the customer
premises.
Local loop unbundling can be classified into three main types.

Full unbundling: This occurs when the copper pairs connecting a subscriber to the main
distribution frame are leased to other telecoms operators for exclusive use. The lessee
has full control of the local loop and the service rendered to its customers through both
broadband and voice services. However, the incumbent owns and maintains the
unbundled loop and this is the most widely used form of unbundling.
Shared unbundling: The local loop is used by both the incumbent as well as an
alternate operator. Usually, the incumbent provides the telephone service while the
competitor provides high-speed data transmission services on the same local loop by
splitting the frequency spectrum of the copper wire signal. This allows consumers to
obtain broadband services from the most competitive provider without installing a
second line.
Bitstream access: This allows ISPs to compete with a wholesale xDSL product from the
incumbent. In essence, the incumbent provides alternative operators a share of the
bandwidth of the high-speed data transmission circuits between the subscriber premises
and the main distribution frame of the fixed public telephone network. The alternate
operators use the bandwidth for the provision of broadband services to customers. It is
more of a reseller option.

Figure 100: Differences between full unbundling, shared unbundling and bitstream
access
Source: OECD
Implications on the customer

LLU facilitates the development of a competitive telecommunication market by eliminating
the one entry barrier for potential new operators – a local network. The competitive
environment that is created as a result paves the way for improvements in the quality of
services offered and can also lead to price declines making the access technology more
affordable.
Implementation issues and regulation

Unbundling is by no means an easy game to play as good as it may sound. Experiences in
the countries that have thus far taken up the concept show that many technical, pricing and
logistical issues hinder implementation. It is the task of the national regulator to do the
balancing act between the conflicting interests of the incumbent and the alternate operators
at the outset as well as on an ongoing basis.
Technical: Development of technical specifications to implement LLU is a complex
process that usually drags for a significant amount of time – which potentially could
retard implementation. However, technical implementation problems are no more
serious in unbundling than in the case of interconnection.
Pricing: Another difficult issue is the setting of unbundling charges. The various price
points include monthly tariffs, connection fees, and terminations fees which usually vary
by the type of unbundling. The national regulator sets out the relevant charges the
incumbent will be allowed to ask for from the alternate operators. The charges are
determined according to a formula usually based on costs associated with building and
maintaining the shared resources. Incumbents have rarely agreed with the regulator on
the pricing formula or the costs assessments and ongoing litigation regarding the issue
is not uncommon, as isolating the costs of a particular service from a large-scale former
monopolistic network is fraught with risk.
Collocation: In order to connect to the incumbent’s network, alternate operators need
to locate their own equipment at the exchange premises of the former. This has been a
contentious issue as incumbents have not always cooperated in terms of providing rack

space, connecting slots and other forms of general assistance (especially timing and
resource allocated to the process). Some alternate operators have had to fight hard for
collocation and, as a result, some regulators have stipulated minimum obligations on the
part of the incumbent in their regulations. There is also the fear that in some markets
there is a shortage of space to actually fit unbundling equipment and so remote
collocation is often mentioned (remote collocation is where the alternative operator
bases its equipments within a separate building within 50m of the incumbents
exchange).
Quality of service (QOS): The incumbents play a key role in maintenance of the local
loop especially in shared access and bitstream access scenarios where the alternate
operators have minimal control over the loop. Service disruptions, extended down-time
and QOS declines - all due to lack of maintenance of the local loop - have not been
uncommon. Alternate operators have usually been quick to accuse the incumbent of
deliberate actions or negligence to undermine their operations while incumbents have
attributed such incidents as normal or indiscriminate and regulators have generally
sought to formalise the service obligations.
In addition to the national regulators, the EU has issued several pieces of regulation on LLU.
Regulation no 2887/2000 of the European parliament and of the European Council
which as of 2 January 2000 is directly applicable to member states.
Recommendation 2000/417/EC of 25 May 2000 on unbundled access to the local loop:
enabling the competitive provision of a full range of electronic communications services
including broadband multimedia and high-speed internet. Additionally in its Notification of
26 April 2000, the European Commission laid down detailed guidelines for the provision
of assistance to regulatory Authorities, so that these may regulate fairly the various
forms of Local Loop Unbundling.
Law 2867/2000 of 19 December 2000 provides for the obligation of
Telecommunications Operators with significant market power to provide Fully
Unbundled Access to the Local Loop to a new entrant in this particular field of activity,
under the same terms, with the same quality and at the same deadlines as those
applicable to the provision of the same facility to enterprises which are already
associated to them, without discriminations and at a price that corresponds to the actual
cost.
Types of unbundling charges and their declining trend
There are several types of fees and charges associated with LLU.
Installation charges: These are usually one-off charges made at the time of providing a
connection. Some operators may refer to these as connection charges when reporting.
Access fees: These usually take the form of a monthly rental. Direct charges associated
with LLU have been on a steady path of decline. In recent years as regulator have sought
to stimulate ULL in order to build alternative competitive networks, prices have been
reduced in order to improve the economics for alternative networks.
Termination charges: These are charges for terminating a line lease. End customers
may be charged when they opt to obtain communication services from an alternate
operator or the alternate operator providing such services may be charged instead. There
may also be a termination charge levied on alternate operators when they terminate a
line lease.
Collocation cost: These may include the cost of renting space, site preparation,
exchanging site surveys, power usage and security.
In Figure 101, we show the trends in different elements of Deutsche Telekom’s ULL charges.

Figure 101: Deutsche Telekom’s LLU charges (Euro per month)
120.0 14.0
100.0 12.0
10.0
80.0
8.0
60.0
6.0
40.0
4.0
20.0 2.0
0.0 0.0
1999 2000 2001 2002 2003 2004 2005
Access charge (RHS) Installation charge
Customer shifts to another carrier Competitors stop using (no shift to another carrier)
Current charges
The declining trends in LLU charges, both at the connection fee level and the monthly access
rental level, are clear and endemic.
Connection fees, as shown in Figure 102 and Figure 103, for both full unbundling and
shared access have either remained flat or come down across the 25 European countries
studied by the EU except in Greece where there has been a sizeable increase. Denmark
has also seen a slight increase. Accordingly, both the EU 25 and EU15 weighted average
connection charges for full unbundling have come down by close to 31% to Euro 52 and
Euro 46 respectively while the weighted average connection charges for shared access
have come down by 26% and 28% to Euro 59 and Euro 51, respectively.
Figure 102: Prices per full unbundled loop – Connection Figure 103: Prices per shared access – Connection (Euro)
(Euro)
CZ not to scale:
200 339
CZ not to scale:
180 200 346
160 180
163
171
160
150
140
140
139
150
140
120
120
100
109
100
100
97
80
80
83
78
69
60
69
60
65
59
58
57
56
55
55
59
54
58
56
55
51
50
50
48
51
51
40
50
40
43
45
41
40
38
37
38
38
37
36
33
30
29
20 20
123
122
196
150
109
118
118
123
22
122
186
150
168
165
129
57
36
61
47
30
79
45
81
50
37
88
69
57
46
48
57
36
22
79
37
64
50
95
29
55
84
74
0
0 0
BE CZ DK DE EE EL ES FR IE IT CY LV LT LU HU MT NL AT PL PT SI SK FI SE UK BE CZ DK DE EE EL ES FR IE IT CY LV LT LU HU MT NL AT PL PT SI SK FI SE UK
Connection August 2004 Connection October 2005

August 2004 October 2005 EU21 avg. 2004 EU25 avg. 2005
EU22 avg. connection 2004 EU25 avg. connection 2005
Source: EU Source: EU
Monthly rentals, as shown in Figure 102 and Figure 103, have been on a decline except
for the marginal increases in Denmark and Italy (shared access only). The EU 25 and
EU15 weighted average rentals for full unbundling have come down by 6% and 9% to
Euro 10.6 and Euro 10, respectively, while the EU15 weighted average shared access
rental has come down by 9% to Euro 2.8 even as the EU25 average has marginally
increased to Euro 3.4 due to figures of new EU member states (which joined in May
2004) pushing up the average.

Figure 104: Prices per full unbundled loop – Monthly Figure 105: Prices per full shared access - Monthly rental
rental (Euro) (Euro)
18 10
9.9
16 9
8
14.8
14.7
14
14.5
14.1
13.6
7.5
7.4
7
12.9
12
11.7
11.6
6.3
11.4
11.3
11.2
11.1
10.9
10.7
10
5.6
5.5
5.5
5.4
9.8
5
9.7
5.3
9.6
9.6
9.5
9
8.9
4.7
4.7
8.4
8.3
4.5
8.1
4.3
7.8
4.2
4.1
6 3
3
2.9
2.9
2.9
4 2
2.3
1.9
1.9
1.8
1.6
2 1
11.6
16.6
11.8
10.4
11.4
10.5
16.8
11.9
12.5
15.8
11.7
10.9
15.3
11.3
11.3
12.9
1.7
9.3
4.3
2.4
5.2
2.9
2.8
7.4
4.2
6.7
7.5
4.3
1.9
5.5
7.1
5.7
5.4
3.3
8.6
8.9
8.3
8.4
9.6
12
3
0 0
BE CZ DK DE EE EL ES FR IE IT CY LV LT LU HU MT NL AT PL PT SI SK FI SE UK BE CZ DK DE EE EL ES FR IE IT CY LV LT LU HU MT NL AT PL PT SI SK FI SE UK
Monthly rental August 2004 Monthly rental October 2005

August 2004 October 2005 EU21 avg. 2004 EU25 avg. 2005
EU22 avg. monthly rental 2004 EU25 avg. monthly rental 2005
Source: EU Source: EU
Mobile termination, roaming and number portability

An important point to highlight in the world of mobile telephony is whether the environment
is based on a “calling party pays” tariff structure (where the caller picks up the entire cost of
a premium cost call from a phone to a mobile) or “receiving partly pays” (where the callers
pays a standard calling rate for the call to a mobile and the receiver pays any incoming
premium).
Where a calling-party-pays mobile pricing exists (most countries outside the US), mobile
interconnection rates (often knows as mobile termination or fixed-to-mobile charges) are
regulated. Mobile termination is the cost the mobile operator charges the wireline operator
(or any other operator) to complete a call on its network.
Historically, the cost of calling a mobile was deemed a premium rate call, in order to provide
a sustainable revenue and gross profit contribution for start-up mobile operators. However,
as the European telecoms space is maturing, there is increased regulatory pressure to lower
mobile interconnection. In Figure 106 we show the spreads of average mobile termination
rates across Europe (as detailed in January, which highlights a current average of Euro 0.115
per minute in Western Europe). We would highlight that we have adjusted the tariffs for
Greece to reflect the tariff cuts announced in June 2006.

Figure 106: Average mobile termination rate per country (as at 1 January 2006 but
Greece has been adjusted for cuts announced in April)
0.180
0.160
0.140
0.120
0.100
0.080
0.060
0.040
0.020
0.000
Average
UK
Belgium
Denmark
France
Netherlands
Greece
Norway
Austria
Germany
Italy
Portugal
Ireland
Switzerland
Sweden
Finland
Spain
Luxembourg
Source: Company data and ERG
However, the national regulatory bodies are attacking these tariffs and recent moves in
Belgium, the Netherlands and Spain as shown in Figure 107 and Figure 108, are targeting a
medium-term rate around Euro 0.06 per minute and are debating whether asymmetry (i.e.
different rates for different operators in the same country to reflect differing stages in life
cycle) remain valid.
Figure 107: Recent changes in mobile termination (Euro cents per minute)
Belgium - Agreed Current 01-Nov-06 01-May-07 01-Jan-08 01-Jul-08 Cumulative cut
Proximus 12.66 8.09 7.33 7.48 6.56 -48%

Mobistar 15.98 12.75 10.16 9.38 8.21 -49%
Base 19.60 15.81 12.76 11.82 10.41 -47%
Asymmetry - Mobistar 3.32 4.66 2.83 1.90 1.65
Asymmetry - Base 6.94 7.72 5.43 4.34 3.85
Netherlands - Proposed Current 01-Jul-06 01-Jul-07 01-Jul-08 Cumulative cut

KPN/Vodafone 11.00 9.70 7.33 5.50 -50%
Orange/T-Mobile 12.40 10.63 8.86 7.09 -43%
Asymmetry 1.40 0.93 1.53 1.59
Source: Company data, NRAI

Figure 108: Spanish mobile termination glide path (Euro cents per minute)
Final revised Current Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09
TEM España 11.97 11.14 10.31 9.48 8.66 7.83 7.00

Vodafone España 12.21 11.35 10.48 9.61 8.74 7.87 7.00
Amena (Orange) 13.15 12.13 11.1 10.08 9.05 8.03 7.00
Originally proposed Current Oct-06 Mar-07 Sep-07 Mar-08 Sep-08 Apr-09

TEM España 11.97 11.97 10.07 8.47 7.13 6.00 6.00
Vodafone España 12.21 12.21 10.23 8.56 7.17 6.00 6.00
Amena (Orange) 13.15 13.15 10.81 8.89 7.31 6.00 6.00
Variance
TEM España -6.9% 2.4% 11.9% 21.5% 30.5% 16.7%
Vodafone España -7.0% 2.4% 12.3% 21.9% 31.2% 16.7%
Amena (Orange) -7.8% 2.7% 13.4% 23.8% 33.8% 16.7%
Source: Deutsche Bank estimates and CMT
US: receiving party pays

In the US wireless industry there is no need for mobile termination charges as the industry is
based on a receiving-party-pays structure. As such all calls to mobiles are charged at the
standard operator rate (local, long distance or mobile) and the mobile owner pays a premium
for receiving the call.
Initially this system was a restriction on mobile usage, as mobile phone users turned their
phones off in order to avoid incoming call liabilities. However, on 11 May 1998 AT&T
Wireless introduced the first “Digital One Rate” plan, which effectively was a huge bundle of
minuets that could be used for either incoming and outgoing calls and effectively capped a
mobile user’s total tariff. The plan also eliminated roaming (as networks were regional rather
than national in the late 1990s) and long-distance tariffs. This stimulated a dramatic increase
in usage and significant price deflation. (AT&T Wireless’ initially offered three tariff bundles:
600 minutes for $89.99; 1,000 minutes for $119.99; and 1,400 minutes for $149.99.)
European roaming
In 2006, the regulation of roaming was a key target area for Commissioner Reding, especially
as national regulatory authorities had indicated that they did not have a mandate to regulate
as no operator had market dominance on EU roaming. Originally, the EU proposed the "home
pricing" principal for calls made whilst abroad where customers would not pay anymore to
make mobile calls whilst roaming compared with what they would pay at home.
The final proposals, however, have tagged the wholesale rates to national mobile termination
rates. For local calls whilst roaming (i.e. calls to another number in the same country), the
wholesale premium should be capped at 2x national mobile termination rates (currently
around Euro 0.115 per minute average for Europe) and 3x national mobile termination for
international calls. The wholesale rates for incoming calls, a charge the EU expects to
eradicate, are still being debated. These roaming rates will obviously fall overtime, reflecting
the downward pressure on national termination rates.
Since the focus on roaming was kicked off in the EU, many European operators have
proactively led a price-cutting agenda, and in 2006 alone, pricing has declined by around 40%
to 50% and a variety of different roaming pricing options have developed.

Number portability
Wireless number portability has also been a major driver of churn in markets as it reduces a
barrier to the switching provider and implicitly tags a consumer to a number rather than a
network. The timetable for number portability has, however, varied considerably in different
markets. With the rapid penetration of the mobile phone and the increased dependency
consumers have with the technology, the requirement to maintain the same number has
inherently become a quasi-personnel identification for individuals.
Figure 109: Mobile number portability

Singapore 1997
UK 1998
Hong Kong, Netherlands 1999
Spain, Sweden, Switzerland 2000
Australia, Denmark, Italy, Norway 2001
Belgium, Germany 2002
France, Ireland, Austria, Finland, Portugal 2003
USA 2004
Japan 2006
Source: Deutsche Bank, ITU
Figure 110: Churn rates by market

1998 1999 2000 2001 2002 2003 2004 2005*
UK 2.7% 2.5% 2.1% 2.3% 2.5% 2.5% 2.5% 3.1%

Hong Kong 4.0% 5.8% 4.9% 5.6% 4.7% 3.8% 3.6% 3.5%
Netherlands 2.1% 1.9% 1.5% 2.4% 2.1% 1.8% 1.2% 1.6%
Spain 1.8% 2.0% 3.1% 2.5% 1.1% 0.9% 1.4% 1.8%
Italy 1.1% 1.0% 1.2% 1.3% 1.5% 1.1% 1.6% 1.1%
Germany 1.0% 1.4% 1.5% 1.4% 1.5% 1.4%
USA 2.6% 2.8% 2.8% 2.4% 2.4% 2.0%
Source: Deutsche Bank, company reports
Access to spectrum
Spectrum is a key instrument in the development of wireless technologies, and the most
memorable and highly publicised event has been the auction for UMTS licenses in 2000 and
2001. WIMAX, WIFI and the mobile spectrum are a scare resource and different wavelengths
in the electromagnetic spectrum are used for different applications. Spectrum, therefore, has
a material value (this is one of the major differences with fixed-line business models, where
there are no spectrum restraints) and is an undeniable barrier to providing wireless services.
As we discussed earlier, there is also a move to enable spectrum trading, to more actively
mirror capacity demand and supply.

Figure 111: Summary of electromagnetic spectrums

Band name Abbreviation ITU band Frequency/Wavelength Example uses
< 2 Hz, > 100,000 km
Extremely low frequency ELF 1 3–30 Hz, 100,000 km – 10,000 km Communication with submarines
Super low frequency SLF 2 30–300 Hz, 10,000 km – 1000 km Communication with submarines
Ultra low frequency ULF 3 300–3000 Hz, 1000 km – 100 km Communication within mines
Very low frequency VLF 4 3–30 kHz, 100 km – 10 km Submarine communication, avalanche beacons, wireless
heart rate monitors
Low frequency LF 5 30–300 kHz, 10 km – 1 km Navigation, time signals, AM longwave broadcasting
Medium frequency MF 6 300–3000 kHz, 1 km – 100 m AM (Medium-wave) broadcasts
High frequency HF 7 3–30 MHz, 100 m – 10 m Shortwave broadcasts and amateur radio
Very high frequency VHF 8 30–300 MHz, 10 m – 1 m FM and television broadcasts
Ultra high frequency UHF 9 300–3000 MHz, 1 m – 100 mm Television broadcasts, mobile phones, wireless LAN,
ground-to-air and air-to-air communications
Super high frequency SHF 10 3–30 GHz, 100 mm – 10 mm Microwave devices, wireless LAN, most modern Radars
Extremely high frequency EHF 11 30–300 GHz, 10 mm – 1 mm Radio astronomy, high-speed microwave radio relay
Above 300 GHz, < 1 mm Night vision
Licenses (a bag of spectrum) are either awarded for indefinite periods, as are many in the US,
or for set periods, such as 15 or 20 years. In Europe most have been set for specified periods
so that there are regulatory reviews of spectrum utilization. Setting the licenses for specific
periods provides a framework to review the most efficient use of the spectrum and re-
farming (re-allocating) to different uses, technologies or operators.
In Figure 284 on page 162 we highlight Vodafone’s wireless licenses, with its key four
European properties at the head of the table and the European, and also much of the license
data for the other large European operators (Deutsche Telekom, France Telecom, Telefónica
and Telecom Italia.
Regulatory effects
The regulators are generally driven by the principles of increasing competition without
restricting levels of investment. The liberalization of the telecoms market and the introduction
of wholesale regulatory pricing has lead to a dramatic increase in the number of operators (as
shown in Figure 112 which looks at the growth in wireline operators) and in the mobile
space, MVNO’s have added to the competitive intensity (but not to the level of investment).
The former wireline incumbents are no longer dominant provided and in many cases now
control less than 50% of traffic and ULL is reducing their control of accesses.
As a general comment, wholesale competition possibly limits investment as it just exploits an

arbitrage opportunity between retail pricing and its underlying costs. In order to sustain return
in the face of wholesale competition, operators have often restricted investment.

Figure 112: Wider choice of operators Figure 113: Former monopolies less dominant (market
shares)
2,000
1,738 100%
1,800 1,583 1,561
1,484
1,600 80%
1,400 1,239
1,200 60%
945
1,000
40%
800
526
600 20%
400
200 0%
0 1997 1998 1999 2000 2001 2002 2003 2004
1998 1999 2000 2001 2002 2003 2004
EU15 estimated number of fixed public network operators Access Traffic
Source: European Commission Source: Deutsche Telekom
The competition has lead to a reduction in pricing for both wireline and mobile, but in the
wireline segment it has also led to a change in the mix as access pricing has increased and
traffic tariffs have declined. Initially liberalization stimulated an increase in volumes, partly
driven by dial-up ISP access, but due to substitution from mobile (and more recently VoIP)
and the moves to broadband, minute volumes have also started to decline on wireline. The
impact on incumbents has been even more extreme due to the simultaneous loss of market
share. Also, the early demand for dial-up ISP access stimulated a demand for incremental
access lines. Homes often had more than one line such that there was always a dedicated
voice channel for calling and a dedicated ISP access. However, a noticeable differentiation
with broadband is that it can simultaneously deliver both broadband and voice connectivity.
Figure 114: Falling costs of wireline telephony Figure 115: Falling retail prices: annual MOU (m) and
average revenue per minute (Euro)
30% 200 12.0

20% 180
10.0
10% 160
0% 140
8.0
-10% 120
100 6.0
-20%
80
-30% 4.0
60
-40%
40
-50% 2.0
20
-60%
- 0.0
1998 1999 2000 2001 2002
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Average Line rental National call (10 mins)

MOU (Bn) Revenue yield (Euro cents per minute)
Source: European Commission Source: Deutsche Telekom
Liberalization and competition has also stimulated a dramatic increase in mobile and
broadband penetration as prices have reduced to levels where the product has mass market
affordability. This has led to a significant increase in mobile usage as show in Figure 117.
Indeed in the broadband arena, the pace of growth has picked up in 2006 as shown in Figure
119.

Figure 116: Mobile growth extraordinary: total Figure 117: US mobile usage growth (millions of
customers (m) and penetration minutes per annum)
450 120.0% 2,500,000

400
100.0%
350 2,000,000
300 80.0%
250 1,500,000
60.0%
200
150 40.0% 1,000,000
100
20.0%
50 500,000
- 0.0%
1998 1999 2000 2001 2002 2003 2004 2005 -
1999
2000
2001
2002
2003
2004
2005
2006E
EU15 customers (million) EU15 penetration (weighted)
Source: European Commission Source: OECD
Figure 118: Penetration (of population) of broadband Figure 119: Broadband growth accelerating: net
(pp) additions (m)
18 14
16
12
14
12 10
10
8
8
6
6
4 4
2
2
0
2001 2002 2003 2004 2005 0

1Q 2002
3Q 2002
1Q 2003
3Q 2003
1Q 2004
3Q 2004
1Q 2005
3Q 2005
USA EU15 OECD
Source: OECD Source: OECD
Country differentials
Although the EU has set the framework for regulation, each NRA has adopted a separate
interpretation of the model. We have attempted to encapsulate this in Figure 120, where we
picture the “regulatory axis”. On the X-axis we highlight the scale of the regulators’ bias
towards the incumbent fixed-line operator or the new entrants, and on the Y-axis the scale of
protection versus the focus on rate of return regulation on the incumbent. In reality these
axes coexist, such that there are only two realistic outcomes: incumbent biased with political
protection, or net entrant biased with rate of return regulation.
We have also attempted to depict how we perceive the interpretation of the Austrian, French
and German regulators has changed in recent months.

Figure 120: Axes of regulatory influence

Political protection
Iberia and Greece France
Italy
Germany
Switzerland
Austria
Incumbents New entrants
UK/Netherlands
Nordics
EU objective
Scale regulated
returns
The effects of these regulatory differences are highlighted in Figure 121 and Figure 122,
which compare the average costs of a fixed-line and a mobile telecoms basket in each
market.

Figure 121: Average annual costs of an OECD national Figure 122: Average annual costs of an OECD medium
residential basket (at June 2006) (US$/PPP inc VAT) user post-paid basket (at June 2006) (Euro/PPP inc VAT)
900 700
800
600
700
500
600
400
500
400 300
300 200
200
100
100
0
0
UK
Denmark
Austria
France
Greece
Slovakia
Italy
Germany
Netherlands
EU Average
Belgium
Hungary
Czech Republic
Portugal
Finland
Sweden
Luxembourg
Ireland
Poland
Spain
Denmark
Germany
Austria
France
Italy
EU Average
Greece
Hungary
Netherlands
Slovakia
Portugal
Sweden
UK
Luxembourg
Ireland
Finland
Spain
Poland
Czech Rep
Belgium
Access Usage Access Voice usage Messages
Source: Comreg Source: Comreg

Telecoms in a macro context

Important in economic development
The telecoms sector has been and continues to be an important driver of global economic
activity. The boost in communication technologies, speeds and automation, when combined
with society’s greater demand for immediacy (of service, information, delivery etc), has over
the past 20 years opened up telecoms as a new retail market (we have called this process
consumerisation in the past). In the early 1990s, the growth was fuelled by the penetration of
the PC both as a tool at work and then at home. This was hand-in-hand with the explosion in
the electronic games market, which built a whole new market in the home entertainment
segment. In the late 1990s, the mobile phone became a phenomenon, and today we are in
the midst of an acceleration of broadband but without actually knowing how the incremental
bandwidth (capacity and speed) will be utilised.
However, in developed markets, especially Europe the consumerisation of telecoms is

leading to a commoditization of pricing and consequently growth rates and returns are
declining. Most new products are substitutionary and we await the next revolutionary
product.
Figure 123: ICT revenue ($bn) and growth in OECD

1,200 18%
16%
1,000
14%
800 12%
10%
600
8%
400 6%
4%
200
2%
0 0%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
OECD Total Growth

Source: OECD
The growth in ICT spend, as shown in Figure 123, has lead to a pick-up in the relative
importance of the sector as an employer. Indeed of the countries shown in Figure 124 only
Portugal has seen a decline in employment levels and others such as Finland and Austria
have benefited from a strong increase. The growth in Finland, as shown in Figure 125,
highlights the positive effect of Nokia and the world of mobile technology.

Figure 124: Share of ICT-related occupations in total economy (percentage points) in selected OECD countries
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
United Kingdom
Belgium
Netherlands
Denmark
Canada
United States
Australia
Austria
Germany
Italy
Greece
Luxembourg
France
Portugal
Sweden
Finland
Ireland
Spain
1995 2004
Source: OECD
We are also intrigued that the Nordics are among some of the greatest employers and the
southern Europeans the lowest, which possible highlights the differing pace of technological
innovation in these regions and that the southern European economies are more service
(tourist) dependent. Indeed the southern European countries (although a generalisation) are
absorbers/implementers of technology rather than developers/investors.

Figure 125: Change in share of ICT-related occupations in total economy (percentage points) in selected OECD
countries between 1995 and 2004
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
-0.2
-0.4
United Kingdom
Belgium
Netherlands
Denmark
Canada
United States
Austria
France
Germany
Italy
Greece
Portugal
Australia
Sweden
Finland
Luxembourg
Ireland
Spain
Source: OECD
More specifically broadcasting and telecommunication have grown in most economies. We

show the trend for the USA in Figure 126 and the relative growth compared with nominal
GDP growth rates in Figure 127. These charts not only highlight the solid growth of the
industry but also that there is occasional volatility, which offers a glimmer of hope to
operators in Europe, where returns are currently under structural pressure.
Figure 126: Broadcasting and telecommunications as % Figure 127: Nominal GDP and broadcasting and
of US GDP telecoms growth
2.9% 18.0%
16.0%
2.8%
14.0%
2.7% 12.0%
2.6% 10.0%
8.0%
2.5%
6.0%
2.4% 4.0%
2.3% 2.0%
0.0%
2.2%
-2.0%
2.1% -4.0%
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Source: Deutsche Bank estimates and US Bureau of Economic Analysis Source: Deutsche Bank estimates and US Bureau of Economic Analysis
Again using the USA as a data-point, in Figure 128 we graph the quarterly growth in
telephony and telegraph revenue since 1959. The purpose of the chart is to highlight the
constant growth in the industry over the past 50 years. But the chart also shows that the
pace of absolute growth has slowed from the aggressive rates in the 1990s. The uncertainty

as to what happens next (ie. a reacceleration or a further showdown in growth rates) is

probably the most important issue dominating telecoms and broadcasting.
Figure 128: Quarterly spend in telecommunications and telegraphy in USA ($m)
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
1961-III
1966-III
1971-III
1976-III
1981-III
1986-III
1991-III
1996-III
2001-III
1959-I
1960-II
1964-I
1965-II
1969-I
1970-II
1974-I
1975-II
1979-I
1980-II
1984-I
1985-II
1989-I
1990-II
1994-I
1995-II
1999-I
2000-II
2004-I
2005-II
1962-IV
1967-IV
1972-IV
1977-IV
1982-IV
1987-IV
1992-IV
1997-IV
2002-IV
Source: US Bureau of Economic Analysis
Finally, in Figure 129, we show the contribution of ICT investment to GDP growth. It is
difficult to draw significant conclusions, other than the step up in growth between 1995 and
2003, but the data again shows the power and importance of the ICT industry in the US
economy, reflecting the fact the country is at the vanguard of industry trends.
It is surprising that three of Europe’s largest economies (Italy, Germany and France) are at the
tail of the chart and are materially divergent from the UK. Interestingly, four of the economies
which have benefited from ICT growth are English speaking, piggy-backing off the innovation
in the US and all running similar “competition”-based economic models.

Figure 129: Contributions of ICT investment to GDP growth in selected OECD countries (percentage points)
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
United Kingdom
Belgium
Denmark
Netherlands
United States
Canada
Portugal
Greece
Italy
Germany
France
Austria
Australia
Sweden
Japan
New Zealand
Spain
Finland
Ireland
1990-95 1995-2003 (1)
Source: OECD

Section 2: Technological

Basics of Electronic
Communication
The importance of waves
All of the data transmitted in telecommunications is transmitted as an electromagnetic wave.
These waves can either travel down a guided channel, i.e. a fixed line, such as a fibre-optic
cable, or they can travel through the air, i.e. wirelessly, such as mobile phone signals.
But what is wave? In general terms there are four key details describing a radio wave:
Wavelength
The wavelength measures the length of each wave; the distance from the start to the end of
a wave. Each wave has amplitude, i.e. an individual strength, which is the value that will be
recorded for it. In a digital wave, there will be two distinct amplitudes, with one
corresponding to 1, and one to 0 (i.e. its binary coding)
Longer wavelength signals bend more easily around obstacles, so they will travel further than
shorter wavelengths. As such a light-wave, where the amplitude is around 1 billionth of
1meter will not bend easily around obstacles (hence the reason we have shadows), whereas
TV signals which has an amplitude around 1meter are more malleable and can therefore bend
around obstacles.
Frequency
Measures how many waves come each second. Frequency is inversely proportional to
wavelength, according to the formula Frequency= Speed/Wavelength. Electromagnetic
waves travel at the speed of light (300,000,000 meters per second), so frequency would be
0.3 × 109 / wavelength.
High frequency waves have high data capacity (bandwidth) and so can carry lots of data. This
is due to the fact there are many waves, i.e. data-points, in a short space of time and each
wave can carry a coding point (bit).
Strength
Stronger signals travel further as the wave will take longer to peter out. The downside is that
they may interfere with other signals being transmitted elsewhere in the same frequency.
Analogue/Digital
Analogue signals vary continuously, so there is a value at each point, and analogue
waveforms look smooth. People see and hear analogue signals.
Digital signals have discrete values, typically one of two different values at each data-point.
This data can then be interpreted by recording and processing a string of 1s and 0s, called
bits (binary digits).

Figure 130: Analogue wave Figure 131: A 32-bit digital wave
1 wavelength
Amplitude
Wavelength 1 1 1 1 0 0 1 1 1 1 0 0 1 1 1 1 0 0 1 1 1 1 0 0 0 0 0 0 1 1 0 0
Analogue wave Digital wave
Packets and switching

Telecom traffic (voice and data) typically needs to be directed along a network, like traffic on
a railway system. Routers and switches sit on junctions in the network, and direct traffic
along the right route, according to its destination, and their knowledge of the network.
Networks are most commonly built in loops so there are multiple means of getting to the end
point. This allows for capacity management and is fails safe, ensuring the sustainability of
service of a network element fails.
In a circuit-switched network, such as the traditional PSTN, when two users wish to
communicate, a circuit or route is identified (by routers), and then held open all the way
between them (i.e. bandwidth is reserved). This ensures constant quality of service on the
connection, but is very inefficient. When users are not sending each other data, bandwidth is
still reserved for them, and so remains empty. Using a modern day analogy circuit-switching
is equivalent to running a marathon route that has been roped off so that people not racing
are excluded from the running route.
In a packet-switched network, such as the internet (running on IP), when users wish to
communicate, their data is split into packets, labelled with their source and destination
addresses. Routers then direct the packets along the network towards the destination, using
dynamic databases of the most appropriate route to each address. All packets travel
together, fitting into whatever space (capacity) is available, and where excess space is
available routers will identify a potentially quick route, so bandwidth can be used fully. This is
equivalent to a mass of pedestrians walking around and consulting signposts when they
reach a junction, with space never reserved in advance, but allocated to people on the basis
of their occupying it at the moment. The randomness of packet-switching is its key
advantage.
Because circuit-switching involves massively cordoning off bandwidth and preventing its use,
whilst packet-switching uses it as needed, packet-switching is vastly more efficient.
However, packet-switching means that time to delivery is unknown, as it depends on how
many others are using each portion of the route. This is a serious problem for time-sensitive
traffic such as a voice conversation especially when it is important that the order of packets is
reconnected on the correct order. To solve this, protocols such as MPLS may be used, which
label packets according to their temporal priority, and then allow bandwidth to be reserved
for these to run along a predictable circuit-connection that is part of a network where other
data travels as packets. Implementation of MPLS enables the bandwidth efficiency of packet-
switching to be combined with the reliability of circuit-switching for data that needs it. BT is
currently building a “21st Century Network” (21CN), which will utilise MPLS to provide
bandwidth suitable for all of its services in one unified network.

Figure 132: Services available by technology

Voice VoIP SMS MMS E-mail Browsing Broadband IPTV Video-calls Games
(VoD)
PSTN • • •
GSM (2G) • • •
GPRS (2.5G) • • • • • •
3G • • • • • • • •
3.5G (HSDPA) • • • • • • • • •
DSL • • • • • • •
Cable • • • • • • • •
Wi-Fi (802.11g) • • • • • • • •
Wi-Max • • • • • • •
Satellite • • • • • •

Technology: Traditional voice

There are multiple ways of carrying voice traffic; traditional PSTN networks, IP networks
(VoIP) or on mobile network are three examples that are in people’s consciousness. We
discuss mobility later in this Primer and therefore in this section we focus on voice, where it
is carried on a fixed-line pipe of some-kind. However, this definition is determined by type of
infrastructure carriage, whereas VoIP is possible on any data network, including mobile, and
therefore a more appropriate split of voice may be technological (switched versus IP (VoIP)).
Voice traffic was traditionally carried on PSTN and mobile phone networks but with the move
to packet-switching IP is becoming increasingly important (and price deflationary). However
in many cases these networks run parallel and internet access technology such as cable and
DSL may have a PSTN voice channel in addition to an internet channels. VoIP requires a
moderately fast internet connection, and is unsuitable for narrowband connections such as
dial-up.
In Figure 133 we show the evolution of wireline networks and one interesting conclusion is
that there is increasing simplicity within network developments.
Figure 133: Technological evolution of wireline networks
Access - DLCs, POTs,

Access - POTs, ISDN,
ISDN, analog modem
cable modem, ‘DSL’
Network Management
Access - IPDSL, ,
Data -Fr. Relay, ATM Data - IP over ATM cable modem, VDSL
Security/QoS
Voice -Circuit Voice/Data IP
Voice -Packet
Switching Switching
Switching (ATM)
SDH/Sonet/WDM FFTx
SDH/Sonet Transport
Transport
Fibre Optics Fibre Optics
Yesterday Today Tomorrow

Switching (circuit-switching; IP; MPLS) - detail

Network switches connect to each other to transmit information. Simplistically to send data
from one point (node) to another a switch opens the channel between the points and then
sends the data. In complex networks, the route between two communicating nodes will
typically involve a string of such channels.
There are two important types of switching: packet-switching, and circuit-switching. In

packet-switched networks, data for transmission is split up into discrete packets, which then
travel independently to their destination along whatever route is determined for them
individually, and are then reassembled at the destination. In circuit-switched networks, a
route is determined between the point of origin and the destination, and then bandwidth
along this route is reserved for the duration of the connection, with all data travelling along
this same route, and so arriving in the order sent.

Figure 134: A structural mess: A 2003 attempt to map the internet; routers and
switches sit on all these junctions and direct traffic
Source: The Opte Project
Basic small networks

Most nodes on a network have a MAC (Media Access Control) address providing a unique
identity. Switches are increasingly intelligent and learn the MAC addresses of the other
nodes connected to them, and when a switch receives information for a known MAC this
becomes the preferred route. If the MAC is not recognised, the packet is sent to all
alternative neighbouring switches to all neighbours save the sender. Switches are appropriate
to small networks, whereby each node connects to the switch.
In a network consisting of two sets of computers attached to two different connected

switches, each switch knows the MAC of those connected to it: firstly the set of computers,
and secondly the other switch. If a computer attached to the first switch sends a message to
one connected to the second, its switch will broadcast the message to all it other
neighbouring switches hoping that other switches recognises the MAC and then redirects
the message to the correct recipient.
If switches are only connected to end systems and other switches, every packet for a non-
neighbour would propagate throughout the network, overloading it with duplicate
misdirected traffic, so fail if packets are intended for destinations other than their neighbours.
The importance of routers

A router is like a switch but learns that there are other routes beyond its immediate
neighbours, and therefore are able to connect multiple networks together. It can then use
these routes to instruct switches. In an IP network, routers inform each other (either
automatically or on request) about the networks they are connected to. Routers that receive
this information record it in a look-up table, so that they know which of their neighbours can
be used to reach particular systems, and they thus build up a picture of the network.
Each node is assigned a unique IP address, which is attached to packets to or from it, in the
IP header. When routers need to send a packet, they consult their look-up table for the MAC
they have recommended for packets to that IP (a certain portion of the IP will identify the
host network of the node, and the rest will identify it within that network, so routers need
only retain routes for host addresses, not routes to every individual IP). Routers can be

attached to multiple switches, and will then tell switches about which MACs to send packets
to, based on their database of IP addresses. Switches thus send packets to other nodes on
routers’ instructions, without knowing where they will end up.
Figure 135: A wireless router
Source: Telindus
The most widely distributed version of IP is IPv4, but is being slowly replaced by IPv6. The
main difference is that IPv4 addresses are 32-bit long, compared to 128 bits in IPv6. 32 bits
allows for around 4 billion unique addresses (~4.3×109), which is too few for one per person;
whilst IPv6 allows for around 3.4×1038, or about 4.3 x 1020 addresses per square inch of the
Earth's surface; plenty for every device to have an IP address. Having a huge amount of
spare numbers also means that the system of assigning them can be tidier, much the same
as in a system where telephone numbers have many digits. For example, if an IPv4 host
network has many members, it may need to have several host addresses, in order to
generate enough unique addresses for its members, and so this will generate multiple entries
in routers’ address records for that single host, but in IPv6 it is easy to provide a host address
that allows for plenty of user addresses in the network domain.
There are typically many routes along which a router could send packets for a particular
destination, just as there are different routes and modes of transport one can take on a
journey. IP itself doesn’t specify which route to choose, rather it describes the sending
process; it is thus a routed protocol. A routing algorithm is required to decide which routes to
take, based on things like speed and reliability. This then determines which MACs a router
chooses when sending packets. A dynamic routing algorithm will constantly update the look-
up table as it receives data about the network in order to achieve efficient routing. Data about
the network is typically received via TCP (Transfer Control Protocol), which transmits data
about IP transfers, e.g. when a router can’t pass on an IP packet it sends a message back via
TCP to tell the originating system that the packet has failed. TCP is essential to ensure
reliability, as without it there would be no way of knowing whether packets have arrived.
Circuit switched versus packet switched

In circuit-switched networks, bandwidth is reserved to a particular channel of communication,
and so packets do not displace each other, but in a packet-switched network, the capacity
available to a packet depends on what is being used by other packets. Here the traffic’s
inherent unpredictability means that the speed of a packet’s arrival will vary dependent on
network traffic. For applications where latency (the time for a single packet to traverse the
network) matters; this is unacceptable. MPLS is a routing protocol that allows for the
differentiation of packets to remedy this. It attaches a label to an IP packet in addition to the
IP header, which is intended to guide it through the network. Certain circuit-bandwidth can
then be reserved when required for time-sensitive packets, whilst the MPLS label allows this
to co-exist with packet-switching by recording whether it is necessary for particular packets.
Instead of routers determining one route for all packets to a particular IP address, the MPLS

label enables different routes to be chosen depending on the packet, e.g. so that those
routes with constant and sufficiently low latency may be chosen for time-sensitive packets,
whilst other packets are sent where bandwidth is greater. The description of the route in the
label saves routers from searching for the IP in their look-up tables, thus saving time and
computing for intermediate routers.
Figure 136: Packet-switching Figure 137: Circuit-switching
A A A A
B B B B
C C C C
Source: eArchiv, Deutsche Bank Source: eArchiv, Deutsche Bank
Public Switched Telephone Network (PSTN)

This was the foundation of telecoms, copper cables that carry voice calls as analogue
electronic signals, using circuit-switching. In the basic version, two wires are twisted around
each other, with one carrying the signal, and the other reducing interference; after the design
of Alexander Graham Bell. In the modern network, copper is generally the “last mile” into
homes, with the main network carried over fibre-optic lines and cable. Though mobile phones
connect to the PSTN, the networks of base stations that connect them into it are generally
thought of separately. The PSTN is formally the concatenation of telephone networks. (This
commentary is restricted to vanilla PSTN, leaving aside enhancements.)
Figure 138: Twisted Pair Copper Cable
Source: "Evolution of the Technology", Australian Photonics CRC, 1999
A universal technology
PSTN is literally worldwide, with just about every home in Europe connected. It varies in
quality a little between countries, depending on age and maintenance. PSTN connects
everybody potentially to everybody else: most homes have landline telephony, which links in
directly to the PSTN. Apart from its main role for analogue voice calls customers can use a
modem to dial-up through the vanilla PSTN to the internet’s packet-switched network via an
ISP, but as internet usage matures, dial-up’s low-bandwidth (up to 56kbps) is increasingly
inadequate. Numerous additional technologies (e.g. ISDN and DSL) have been designed to
exploit the massive fixed resource in the PSTN network, to better the low speed it offers in
vanilla form.

…but a legacy technology

The PSTN is essentially a legacy technology, which has been upgraded with other software
and technologies to add bandwidth (especially compression technologies). However is most
European and other developed count roes there has been little growth in provision of the
basic offering.
It represents a large and integral asset for both those who own it, and those to whom they
lease it (as required by regulators). As with infrastructure generally, expense can become
more of an issue in remote areas, but even this is not generally a significant factor. Though
the invested capital base was significant (Deutsche Telekom has a domestic asset base in its
domestic network of Euro 27.8bn at the end of 2005), this is a sunk cost, and marginal costs
are fairly small (often negligible) for many types of calls.
Marginal costs depend mainly on interconnecting and termination fees, whereby the service
provider does not actually own the entire network involved. Costs thus depend on what
connection is being made, and operators can match costs to revenues by creating pricing
structures that encourage intra-network traffic.
Figure 139: Basic representation of a switched network
Source: International Engineering Consortium
Voice/VoIP
Voice traffic has traditionally dominated telecommunications and in most market fixed-line
virus remains the dominant call origination technology. Value-added options to vanilla voice
include services such as caller-identification and voicemail. There are also services offered via
premium-rate numbers, such as tech-support, adult services, directory enquiries, telephone-
voting, and conference-call hosting.
Traditional voice traffic is carried over circuit-switched channels, ensuring a constant speed of
communication. Voice was revolutionised by the mobile phone, which turned a service that
people used separately in their homes and offices into one they could carry with them
wherever they went, shifting traffic away from fixed networks whilst growing overall volume.

Voice over IP (VoIP) is voice traffic carried as packet-switched data via the internet, rather
than PSTN or mobile networks, taking advantage of its much cheaper bandwidth. VoIP
requires either a normal point of internet access (e.g. a PC) equipped with a microphone;
speakers; and software, or else a dedicated device, which may be designed to look like a
traditional phone, and which plugs into an internet connection.
Figure 140: UK fixed and mobile voice traffic volumes (bn of minutes)
200
174 173
180 166 167 164
160
140
120
100
80 58 62
51
60 43
34
40
20
0
2000 2001 2002 2003 2004
Fixed voice minutes Mobile voice minutes

Source: Ofcom
Fixed-line users will typically pay a fee to be connected to the network, and then per-usage
fees, although there may be some services (e.g. minutes of calls) included in the fee. Call
prices vary depending on who is called, as the operator must pay termination and
interconnection charges. Third parties may offer services (usually cheap international calls),
typically pre-paid, that enable users to route calls via their networks whilst on another service
provider’s line. Revenue for premium services is shared between the telephone operator and
the content provider.
VoIP technology bypasses the PSTN by going through the internet, thus saving
interconnection charges. Mobile and normal telephones cost more because they must pay
for access to the PSTN, with mobiles more expensive than normal telephones because of the
historic cost of mobile networks and licences. All three voice technologies are networked
with each other, but it is easier, e.g. to organise VoIP-to-VoIP, than VoIP-to-mobile. Note that
the PSTN is a circuit-switched network, whilst the internet is packet-switched and thus much
more efficient.

Figure 141: VoIP System overview
Customer Access Transit Core Transit Access Customer

Premises Premises
DSL or Cable Broadband

Modem
Broadband VSP**
Internet VSP**
ATA* VoIP user
Router PSTN Narrowband

Gateway
PSTN user
* ATA = Analog Telephone Adaptor, connects an Analog Telephone to a VOIP network

** VSP = VOIP Service Providers:the next generation telco
Source: Ofcom

Technology: Mobility
The electro-magnetic spectrum and the allocation of frequencies are key to the mobile
industry, which is in the Ultra High Frequency (UHF) range. This allocations of spectrum
effectively creates a barrier to access and a capacity restraint, whereas in the fixed-line arena
capacity barriers are negligible.
Figure 142: The frequency spectrum

3G mobile services: at
c.3.2GHz
Super Low Frequency (SLF) Very Low Frequency (VLF) Medium Frequency Very High Super High Frequency Night Vision
Communications with Submarine (MF) Frequency (VHF) (SHF)
submarines communication, avalanche AM (medium-wave) FM and television Microwave devices, mobile
beacons, wireless heart broadcasts broadcasts phones (W-CDMA), WLAN,
rate monitors most modern Radars
<3 Hz 3-30 Hz 3-30 kHz 300 kHz 30 – 300 MHz 3 – 30 GHz Above 300 GHz
>100,000 km 10,000 km -1,000 km 100 km -10 km 1 Km – 100 m 10 m – 1 m 100 mm – 10 mm <1 mm
3-30 Hz 300-3,000 Hz 30-300 kHz 3-30 MHz 300 – 3,000 MHz 30 -300 GHz
100,000 km - 10,000 km 1,000 km - 100 km 10 km - 1 km 100 m – 10 m 1 m – 100 mm 10 mm – 1 mm
Extremely Low Frequency (ELF) Ultra Low Frequency Low Frequency (LF) High Frequency (HF) Ultra High Frequency (UHF) Extremely High Frequency
Communications with (ULF) Navigation, time signals, Shortwave broadcasts and Television broadcasts, (EHF)
submarines AM longwave broadcasting amateur radio mobile phones, wireless Radio astronomy, high-
LAN, ground-to-air and air- speed microwave radio
to-air communications relay
2G mobile services: GSM

900MHz, 1800MHz,
1900MHz (USA)
Over the past 15 years the technology has moved from traditional analogue mobile telephony
to 2G (which is the most prevalent today) and is slowly moving to 3G. The switch between
1G and 2G was mostly the move to digital technology, which offers encryption and greater
security, and 3G is a move to greater bandwidth.

Figure 143: Technological developments in mobile technology
1G (Analog ‘88-’94) 2G (Digital ’94-?) 3G (UMTS ‘02-?) 4G (2009-?)

9.6Kb/s 384Kb/s, 1.8/3.6/14Mb/s 100Mb/s?
GSM GPRS, HSCSD EDGE

WCDMA HSPA
LTE
(OFDM)
TACS
TDMA
WiMAX
NMT PDC
iBurst
CDMA2000 EV-DO (IS-856)

(HC-SDMA)
AMPS CDMA
IS-95 IS-2000 (1xRTT) EV-DV
TD-SCDMA
The main change in voice traffic has been in its technology-migration from PSTN towards
mobile networks, (typically at a significant pricing premium although declining all the time)
and increasingly to VoIP, (typically at a significant price discount).
The current weight of traffic remains skewed towards the wireline network with around 70%
PSTN, 30% mobile (this is based on data in the UK, which is around the European average)
but in some markets, such as Finland and Portugal the scale of mobile minutes is over 50%.
VoIP is not yet significant on this measure, but also hard to quantify being often on private
networks and much less regulated. It is also an IP technology which means the voice
message in converted into a data byte and then it is impossible to differentiate from another
data use (email, web download etc), which make s the measurement of VoIP minutes nearly
impossible. In some market however, such as France and the Netherlands around 25% to
30% of broadband customers have VoIP access technologies as well.
The mobile industry exploded with the advent of the pre-paid phone, but the catalysts for
usage were a combination of declining per minute tariffs and bundles. Mobile usage tends to
switch to post-paid as it becomes normalised and as firms try to convert pre-paid customers
to more profitable contracts. New mobile phone users often take up pre-pay and then switch
to post-paid.
1G technology
The development of mobile telephony can be traced as far back as 1946 when the Swedish
police tested a system to connect its police cars to the national network. The early mobile
phone units were rather bulkier than the contemporary models and were mostly
manufactured for installation in vehicles. These were based on technologies such as PTT
(Push to Talk), MTS (Mobile Telephone System), IMTS (Improved Mobile Telephone Service),
which are in common referred to as ‘Zero-generation’ technologies as they were the
predecessors of the first generation of cellular telephones. It took more than 37 years from
the first testing in 1946 for the first commercial mobile system to become available in
Chicago and Washington/Baltimore in 1983. The Motorola DynaTAC 8000X (Figure 144) was

the first mobile unit to receive FCC approval in 1983. It was truly the first mobile unit which
could connect to the telephone network without the assistance of an operator and could be
carried about by the user and hence dawned the 1G era. One key step-up from the previous
generation technologies was the digitisation of the control link between the mobile phone
and the cell site.
Several mobile technologies emerged from different parts of the world during the early part
of the 1980s. NMT (Nordic Mobile Telephone) used in the Nordic region, Eastern Europe and
Russia, AMPS (Advanced Mobile Phone System) used in the US, TACS (Total Access
Communications System) used in UK and Spain, C-450 in West Germany, Portugal and South
Africa, Radiocom 2000 in France, and RTMI in Italy were most prominent 1G technologies.
One of the downside of 1G technologies was its analogue signal which allowed for cloning
and eaves-dropping as the line was not secure. There was also no roaming market due to the
technological differences in different markets and the lack of roaming deals (which allow a
customer from one network to access another in a different country). This was also a time
when operators expected mobile technology to be a premium bespoke services for
businesses rather than a mass market technology.

Figure 144: Motorola DynaTAC 8000X
Source: Motorola
2G and 2.5G (GSM and GPRS)

The launch of digital mobile technology in the early 1990s was the major catalysts for the
growth in the mobile. Its digital signal gave greater security and the harmonisation of
technologies was key to driving down handset pricing but also allowing international roaming.
GSM covers all of Europe, and in fact has presence across all continents, being dominant
outside of Japan and the USA. Remote areas are less well covered, but operators will tend to
aim for coverage in excess of 95% geographic coverage in Europe (99% population
coverage). The reason GSM became dominant in Europe was largely down to the EU which
decided the technology should be roll-out consistently as a single standard. The strong
growth in European mobile and the dominance of Ericsson and Nokia in the telecom
equipment growth phase, allowed GSM to become a cost effective and reliable technology

that was then roll-out in other international markets. Japan remains the only large market
where there is no GSM technology.
As such 2G, or GSM (Global System for Mobile communications, originally Groupe Spécial
Mobile), is the world’s most widespread mobile technology. In the Americas, there is a split
between GSM and the IS-95 standard (CDMA), which is also significant. The GSM network
consists of a huge number of medium-sized base stations, which communicate with mobile
phones using microwaves. Like all mobile networks, it provides mobile devices with
connections to a fixed network, the PSTN (later technologies connect to the internet) and
other mobile networks to which it is physically linked.
The GSM network is very low-powered, with mobile phones transmitting at less than 5 watts.
This means that the signals travel small distances, leading to the cellular element of GSM
networks. A traditional broadcasting system, such as TV, transmits over a very wide area, so
that everyone can access the same signal. This means that once the available spectrum has
been filled (ie there is no additional capacity), the limit of channels is reached.
In contrast, a mobile phone mast transmits to a relatively small area, and furthermore divides
this area around it into different cells, transmitting to each area on a different channel, with
channels occupying different portions of spectrum so that there is no interference. Another
transmitter nearby can then use the same channels, and merely by making sure that its cells
of a particular frequency are not adjacent to another base station’s cells of that frequency, it
ensures non-interference. This approach means that bandwidth can be recycled; i.e. the
same portion of the spectrum can be used as a different channel very frequently. The effect
is analogous to speech, whereby if there is a tannoy, one might distinguish a few different
sounds on it. But, if a room is full of people all of whom speak quietly to each other, a very
large number of conversations can take place totally separately, even whilst each signal
would interfere were they heard together.
Figure 145: Base stations communicate with each cell on a different frequency
(represented by different colours), to stop interference.
Source: Howstuffworks
2.5G, or General Packet Radio Services (GPRS), is an interim technology between 2G and 3G,
to connect mobile devices to the internet. It is rather like dial-up internet access on a mobile
phone, offering speeds of 56-114kbps, and working as a packet-switched network, making it
very efficient in terms of bandwidth, therefore permitting basic data services on mobile.
Building a mobile network was historically expensive, and has become harder as public
concern has grown over health risks suggested by some to be associated with proximity to
masts. Owners of networks will typically rent out some of their capacity to companies that
establish mobile brands without owning any infrastructure (MVNOs): thus many companies
for whom telecoms is not a core offering have exploited their brands (e.g. Virgin, Tesco).

Most 2G licences were offered free of charge or for a small annual fee, in return for specific
network investment and roll-out commitments. However, as the value of the mobile telecom
industry has risen, the costs of subsequent licences has varied greatly in price among
countries, with some still issued for free, on the condition that network coverage is extended
to hard-to-reach rural areas, whilst the charges for other have been bid up in auctions (such
as Germany and the UK in the 3G environment).
Figure 146: Structure of a GSM network
Source: Deutsche Bank and Wikipedia
Voice remains the most common usage of mobile networks and consequently mobile data
remains in its early stage of development but the growth is strong as shown in Figure 147
and Figure 148. However, to date the ability to driver revenue had been the missing link. SMS
has been a successful quasi-data technology, which has exploited a messaging channel,
which was originally established in networks to allow maintenance. With the growth in pre-
paid, SMS usage has exploded.
SMS (short messaging service)

One of the barriers to the early exploiting of SMS was the lack of operator’s billing systems.
But once these were in-place and the consumer realised it was a cheaper form of
communication, SMS volumes have exploded. Short message services are developing very
rapidly throughout the world. In 2000, just 17bn SMS messages were sent; in 2001, the
number was up to 250bn, and 500bn SMS messages in 2004. In recent years, SMS has also
become a conduit to interactive TV voting and commentary.

Figure 147: Consistent growth in text (SMS) messages Figure 148: Growth continues in WAP usage
3,000 2,000
1,800
2,500
1,600
1,400
2,000
1,200
1,500 1,000
800
1,000
600
400
500
200
0 0
Mar 00
Jun 00
Sep 00
Dec 00
Mar 01
Jun 01
Sep 01
Dec 01
Mar 02
Jun 02
Sep 02
Dec 02
Mar 03
Jun 03
Sep 03
Dec 03
Mar 04
Jun 04
Sep 04
Dec 04
Mar 05
Sep 02
Nov 02
Jan 03
Mar 03
May 03
Jul 03
Sep 03
Nov 03
Jan 04
Mar 04
May 04
Jul 04
Sep 04
Nov 04
Jan 05
Mar 05
Source: Mobile data Association Source: Mobile data Association
2G and 2.5G (CDMA and 1xRTT)

Code Division Multiple Access (CDMA)-based mobile standard was developed in 1989 as a
concept and gradually emerged as an alternative to the most widely-used GSM, which is
based on Time Division Multiple Access (TDMA). Greater capacity even in its basic form and
scalability in terms of ability to develop extensions that enable greater bandwidth are the key
advantages of CDMA. It can serve more users per unit of bandwidth (say 1 MHz) compared
with other core technologies such as TDMA and FDMA. Moreover, CDMA laid the
foundation for the development of 3G technologies. It is important to note in this regard that
three of the five ITU standards for 3G (defined under IMT-2000 programme) are CDMA
based.
The code division principle allows multiple signals to be transmitted in the same bandwidth,
but in different codes, with each channel listening to its specific code; hence fitting multiple
channels into the one portion of bandwidth. The technology requires significant processing.
CDMA2000 1x-RTT is one of the earliest versions of the technology. Although it qualifies to
be a ‘3G’ technology as it supports a data rate of above 144 kbit/s, it is considered by most to
be a 2.5G service as it is several times slower than ‘true’ 3G speeds. CDMA2000 1x, the core
CDMA2000 wireless air interface standard, is known by many terms: 1x, 1xRTT, IS-2000,
CDMA2000 1X, 1X, and cdma2000. The suffix ‘1xRTT’ stands for ‘1 times Radio Transmission
Technology’ to represent the version that operates in a pair of 1.25-MHz radio channels (vis-à-
vis 3xRTT, which represents three pairs of 1.25-MHz radio channels). Release 0 supports bi-
directional peak data rates of up to 153 kbps and an average of 60-100 kbps in commercial
networks. Release 1 can deliver peak data rates of up to 307 kbps.
The world's first commercial launch of a CDMA-based network took place in September 1995
when Hutchison Telecom launched CDMA-based services in Hong Kong. The first CDMA
commercial launch in the US took place shortly afterwards in the spring of 1996. There were
over 50 million CDMA subscribers worldwide, served by 83 operators in 35 countries, by the
turn of the century.
3G and 3.5G
The third generation of mobile systems (3G) is also built on the base technologies of 2G
systems (hence sharing all of its functionality), but uses new phones and base stations to
provide much better bandwidth, of 144Kbps-2Mbps. The system in Europe is termed
Universal Mobile Telecommunications System (UMTS), but sometimes called 3G. The
technology to run European UMTS is Wideband Code Division Multiple Access (W-CDMA). In
the rest of the world, a mixture of W-CDMA and the incompatible CDMA2000 1×EV-DO
systems are being deployed. CDMA remains in its infancy but growth is starting to
accelerate.

Indeed in September 2006, the CDMA Development Group (CDG) announced that the total
CDMA mobile subscriber base (including cdmaOne, CDMA2000 and EV-DO) crossed the
335m mark at the end of 2Q06, registering a growth of 24% YoY. The total CDMA2000 subs
base reached 275m, up by 48% YoY. EV-DO subscriber base continued its strong growth,
reaching 36m (+123% YoY). The CDG counts 169 commercial CDMA operators in 75
countries, of which 163 have commercially deployed CDMA 1x networks and 47 commercial
EV-DO networks, with a further 30 CDMA 1x networks and 41 EV-DO networks under
deployment.
Figure 149: CDMA2000 subs (m) and YoY growth (%) Figure 150: EV-DO subs (m) and YoY growth (%)
300 80% 40 140%
250 70% 35 120%

60% 30 100%
200
50% 25
80%
150 40% 20
60%
100 30% 15
20% 10 40%
50 20%
10% 5
0 0% 0 0%
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
Source: CDG Source: CDG
The code division principle allows multiple signals to be transmitted in the same bandwidth,
but in different codes, with each channel listening to its specific code; hence fitting multiple
channels into the one portion of bandwidth. This technology requires significant processing.
An upgrade to W-CDMA, known as High-Speed Downlink Packet Access (HSDPA), offers
download speeds up to 10Mbps (faster than some home broadband). This technology is
being rolled out as many 3G base stations will be software-upgradeable to offer HSDPA.
The 3G idea is based on higher data speeds and advances in mobile computing allowing for a
much richer mobile experience than 2G. One early application has been in providing mobile
internet access for laptop users, with the speed of the 3G network allowing business users
to access office networks and the internet at close to office speeds. On the consumer side,
mobile phones themselves have been greatly enhanced for 3G. The new handsets usually
offer high-resolution colour screens and built-in digital cameras, as well as greatly increased
processing power. This technology will enable service providers to offer enhanced inter-user
services such as video-messaging and video-calls, priced at a premium to voice calls. It is
also hoped that users will pay to access multimedia content, for which revenues will be
shared with content providers. Content thus far has included more sophisticated games
(including 3D graphics and online gaming); and video clips, such as music videos and short
segments of news, comedy, or weather reports.
3G networks are still being built. Coverage is being rolled out first in high-density population
areas, but is by no means universal, although most licenses require provision of a certain
level of coverage. 3G phones will use the GSM network for 2G services where there is no 3G
available, but can only offer 3G services when connected to the 3G network. 3G phones are
spreading, and growth should continue, as the value of a 3G phone to the consumer will
increase as their contacts add 3G capability (e.g. so they can make video calls).

Figure 151: T-Mobile Europe – cell sites by technology

(000)
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2000 2001 2002 2003 2004 2005 plan 2006
2G 3G/HSDPA WLAN
Source: Deutsche Telekom
3G is a more expensive technology for service providers. The enhanced technology in 3G-
enabled handsets can mean prices in hundreds of Euros and have historically been
comparable with premium 2G handsets. As most consumers are unwilling to pay such
prices, much cost has been borne by service providers hoping to recoup the cost in higher
spending on the new services offered. Tariffs on 3G may be higher and contracts (rather than
pre-paid) are more stringently required by operators as part of this effect.
Installing the new networks is expensive, as were some of the licenses, with prices varying
massively due to the auction structure (see Paul Klemperer, “How (Not) to Run Auctions: the
European 3G Telecom Auctions”, 2002), and peaking at Euro 650 per head of population in
the UK. Also high are costs to introduce customers to new services through extensive and
complicated marketing, as products need not just advertising but also explaining. The latter
can take the form of fairly straight education, with representatives employed in mobile phone
outlets to train customers in how to use 3G phones.
What is new to 3G pricing, apart from the increase in focus on selling content, is that users
may be charged by bandwidth rather than call duration. Since the network is packet-
switched, the opportunity cost of each connection is in terms not of other connections, but in
terms of the data it displaces, so there is logic to a data-based pricing model. This could
simplify things for the service provider, who then need not have extensive relationships with
content providers in order to charge appropriately for delivering content. The downside to
bandwidth pricing is that the consumer loses control over the potential cost of the download
as it is not always possible to assess/calculate the time/bandwidth/cost equation prior to
initiating the download. As such, and for simplicity, many operators are charging for
events/downloads rather than bandwidth.

Figure 152: UMTS costs per pop (Euro)
700
600
500
400
300
200
100
0
Belgium
United Kingdom
Denmark
Netherlands
Portugal
Austria
Germany
Greece
Italy
France
Switzerland
Spain
Sweden
Finland
Source: European Commission, CIA
High Speed Packet Access (HSDPA/HSUPA)

HSDPA is a standardised mobile telephone protocol which sits over WCDMA networks and
enhances downlink speeds with various modulation and coding techniques. Theoretically,
with release 5, which will be launched commercially in 2006, speeds of up to 3.8MB/s are
possible. In reality, according to Vodafone, the effective rates will be 75% lower than
theoretical rates and most likely a level around 1MB/s is possible over mobile, although
operators continue to talk about 10MB/s speeds. Most operators expect to launch some kind
of HSDPA service in 2006 and there will be varying paces of roll-out.
Figure 153: Cumulative HSDPA commercial launches
90
80
70
60
50
40
30
20
10
0
4Q05 1Q06 2Q06 3Q06 upto Sep 5 4Q06E
Source: GSA
The benefits of HSDPA to the operators are dramatically increased speeds for limited capex
(c. Euro 300m/network), thereby lowering the cost/bit further.

Figure 154: HSDPA/HSUPA evolution Figure 155: HSDPA cost/Mb vs UMTS
v6 6
DSL6000
5
~ 4
UMTS 384
Long
HSDPA term
v5 7.2Mbs/ >20Mbps 3
HSUPA
HSDPA 2
3.6Mbs HSDPA
DSL1000
HSDPA
~ 1
UMTS 1.8Mbps 0
384 kbps 200 400 600 800 1000
2005 2006E 2007 2007E Average monthly usage (MByte)
Source: T-Mobile Source: Deutsche Bank
While we are encouraged by the increased handset speeds, we believe that there are limited
applications announced to date which the operators will be able to monetize sufficiently to
offset voice revenue pressure. We do believe in applications developing long term like mobile
TV (see next section), but believe this is better suited to broadcast technologies such as DVB-
H. In addition, we do not see a single application which will replace voice as a key revenue
driver.
Bluetooth
Bluetooth is an extremely short-range wireless networking technology, offering bandwidth
from 5Kbps to 1Mbps, over a range from 1-100m, but typically around 10m. The concept
behind Bluetooth is to provide ready connectivity between disparate devices through a
common standard. Devices need only have the standard implemented, rather than being
specifically designed to connect to each other. Bluetooth can therefore enable interaction
between devices that users might not usually think or bother to connect. Obvious uses
include enabling mobile phones and PCs to exchange address book data quickly and
wirelessly, or digital cameras to send pictures directly to printers, without a computer
intermediating.
Bluetooth can be implemented in very many different electronic devices that need to
connect. It is extremely common in mobile phones and PDAs, but is also in some printers
and computers. As Bluetooth chips are very small and very cheap, the software may be in
many devices where users are not aware of its presence.
The community of users that possess Bluetooth devices may be much larger than that which
uses Bluetooth connectivity on a regular basis. As Bluetooth is so common in mobile phones
(partially due to the frequency with which users replace them compared to other electronic
devices), it may be used most often in these. One common application is the wireless
headset, which replicates the microphone and speaker of a mobile phone, in a device that
sits on the ear, enabling hands-free calling using a pocketed phone. Uses of Bluetooth are
innumerable, but many applications are aids in convenience. In Figure 156 we show how BT
intends to use of a Bluetooth phone (Fusion) in the UK.

Figure 156: How the Bluetooth telephone works?

Cellular Radio Access Network (RAN)
Private
Network
Base Station
Controller (BTS)
UMA- Base transceiver
enabled Stations (BTS)
Dual-mode Core Mobile
Handset Network
OP Access
Network
Unlicensed Wireless Network UMA Network
(e.g. WiFi, Bluetooth…) Controller (UNC)
Source: umatechnolog
However, it is also likely that Bluetooth technology will be overtaken by new GSM
applications, such as the home-base station, which is likely to be introduced in 2007. The
home base station effectively offers GSM in-home coverage vie a box attached to a DSL
channel. It will allow far greater in-building GSM functionality and therefore make some of the
BlueTooth applications redundant.

Technology: Bandwidth
Internet access
The internet comprises several core offerings, most importantly e-mail and web-browsing,
but includes the distribution of data such as video and music via the web. It is an entirely
packet-switched network, the largest in history and like the universe we live in, is expanding
every day. It enables any device that accesses it to connect to any other.
Internet access is generally categorised according to bandwidth. Figure 157 demonstrates

one such categorisation, although 512Kbps is often considered the threshold for broadband
(rather than narrowband). Speed makes a crucial difference to what can be offered via the
internet as functionality increases with bandwidth.
Internet access can be free, such as in a public Wi-Fi hotspot; metered by time, as with a dial-
up internet connection; metered by data, as with some 3G technologies; or un-metered, as
with most residential broadband connections (though overall use is often capped). Bandwidth
is the crucial issue in each offering.
The internet is growing both in size and in functionality, taking up ever-increasing roles, e.g.
through RFID technology. As services migrate online, owners of superseded technology lose
out (as fixed-line telecoms may lose out to VoIP), whilst those selling bandwidth benefit from
increased demand. Telecoms service providers may come to provide new online services
themselves, leveraging their client-relationships to become the default provider to their
customers (e.g. shopping through their portals). Mobile service providers come to offer these
services with mobility, as mobile catches up to much of the functionality of home computers.
Figure 157: Typical-download speed of consumer internet access

Technology Typical download speed Fixed/Wireless
2G 9.6kbps Wireless
PSTN 56kbps Fixed
Cable 2Mbps Fixed
ADSL 2Mbps Fixed
3G 500kbps Wireless
Satellite 2Mbps Fixed
ADSL2+ >8Mbps Fixed
3.5G (HSDPA) 10Mbps Wireless
VDSL2 25 to 50Mbps Fixed
Wi-Fi 54Mbps Fixed/Wireless
Wi-Max 70Mbps Wireless
VDSL2 100Mbps Fixed
Figure 158: Wireline bandwidth

Narrowband – up to 64 kbps
Wideband – 64 kbps up to 2Mbps
Broadband – 2Mbps upwards

Cable
Coaxial cable was developed during the Second World War, as a higher-bandwidth
improvement on the twisted pair design of the PSTN. It now carries up to 10800
conversations per line, compared with 12 in twisted pair lines. Coaxial copper cables consist
of a solid wire at the centre surrounded by an electrical insulator, and an outer conductor.
These cables make up much of the cable television and internet networks in Europe and the
USA.
Figure 159: Coaxial Cable
Source: “Evolution of the Technology”, Australian Photonics CRC, 1999
Fibre-optic cables are a distinct technology, with similar characteristics and are also crucial to
these networks. Fibre-optics does away with the transmission of electrical signals, which are
subject to radio interference. Instead, lasers or LEDs transmit beams of light, which travel
along the closed channel of a glass wire. Due to factors such as the lack of interference, and
the incredibly short wavelengths (and hence high frequencies) of light, fibre-optic cables carry
huge amounts of data. A single fibre-optic cable can manage bandwidth exceeding
1,000Mbps, compared to a maximum capacity of around 50Mbps for copper cables. They
also use and lose less energy in transmission, making them especially suitable to long-
distance transmission. To maximise bandwidth, fibre-optic lines are usually filled with
multiple beams of light, (multi mode) which reflect past each other forming a sort of matrix.
The downside of fibre-optics is they need to be laid in straight lines otherwise the light signal
is compromised.
Figure 160: Single-Mode Figure 161: Single-Mode
Cables are mostly buried in the ground and so to install them involves often major
engineering works (although in the some countries such as the US they have been hung from
poles). Networks vary massively between countries, e.g. the USA has a massive residential
cable television network whereas there is no such cable network in Italy. Combinations of
coaxial and fibre-optic lines constitute most of the backbones of the internet and the PSTN,
carrying data from central points that collect private lines, e.g. fibre-optic cables carry huge
amounts of internet traffic under the Atlantic.
Cable technology allows transmission of huge amounts of data, which simply would fail to fit
onto traditional twisted pair lines. Though satellite and radio technology can also transmit a
lot of data, cable does most of the work of the internet, and of data transmission in general. It
can bring internet; phone services; and multi-channel TV, into the home through the same
connection, and so is a focus for triple-play. TV is often transmitted digitally, requiring a
decoder, which may be incorporated into a PVR.

DSL
DSL (digital subscriber line) technology exploits the fact that twisted pair copper wires have a
much higher bandwidth (several million Hertz) than is used when they carry PSTN voice
traffic (0-3,400 Hertz). DSL exploits that extra bandwidth to provide broadband internet
access through a DSL modem. To enable a normal voice line for DSL requires the installation
of Low Pass Filters (LP filters) to protect normal phone equipment by blocking high-
frequencies, to remove interfere with low-frequency voice-data. LP filters must be installed
on each piece of normal phone equipment in the user’s house, and the local exchange must
have a DSL Access Multiplexer (DSLAM) installed, which accepts connections from
customers’ DSL modems, and connects to the internet.
Figure 162: DSL technologies use bandwidth left empty by pure voice traffic
Source: Aware
Figure 163 demonstrates how the two signals combine when transmitted together. As DSL
data signals are transmitted digitally, only peaks and troughs matter, and the line of the
combined signal peaks and troughs at the same time as the high-frequency signal. For the
analogue signal, absolute value matters. This is rarely the same as the combined line. Low-
frequency sampling will not find an absolute value reflecting the low-frequency signal. So the
high-frequency digital signal thus retains integrity, but the low-frequency does not, and
therefore needs LP filter protection, to screen out the interference.
Figure 163: High-frequency DSL signals need filtering out
L o w fre q u e n c y a n a lo g u e s ig n a l H ig h -fre q u e n c y d ig ita l s ig n a l

C o m b in e d s ig n a l
The most commonly used variant of DSL is ADSL (Asynchronous or Asymmetric DSL).
Asynchronism implies more bandwidth for downloading data than uploading (three to four
times), because users normally download much more information than they upload.

Symmetric DSL (SDSL) currently offers download speeds similar to ADSL, but uploads at that
same speed, rather than slower.
Access remains a fairly large issue for DSL, for two reasons. The primary barrier to usage
tends to be that local exchanges are not DSL-enabled. The costs of installing a DSLAM are
such that companies tend to want a minimum number of guaranteed users on an exchange
before they will invest. In some areas this has led to a requirement that customers register
interest prior to installation, which is triggered by a critical mass of registrations. The second
problem is that customers may be too remotely connected to their exchanges. DSL signals
deteriorate as they travel through the wires, placing a practical limit of around 5.5km on their
wire-distance to the exchange, and they are also disrupted by boosters, bridging, and fibre-
optic sections that tend to extend service in low-density areas. DSL coverage is therefore not
universal, though it is widespread. In Figure 164 we show the average loop lengths of
operator local access networks in selected countries.
Figure 164: Selected profile of local loop lengths
100
90
80
70
60
50
40
30
20
10
0
1 2 3 4 5 6 7
US UK India Germany France Italy

Source: Company data, IEEE
ADSL usually offers speeds around 1.5-8.0Mbps download, and 128Kbps-1.0Mbps upload.
ADSL2 and ADSL2+ are starting to be selectively deployed, offering up to 24Mbps (8Mbps
for ADSL2) download, and 3.5Mbps upload (1Mbps for ADSL2). Very High Bit-rate DSL
(VDSL) originally managed around 100Mbps download and 50Mbps upload, whilst VDSL2
promises 26-100 Mbps speeds (i.e. faster degradation only over short distances), identical for
upload and download.
As DSLAM has a dedicated line for each customer to whom it is connected, speed does not
deteriorate as new customers are added at the exchange, unlike with cable internet. The limit
of its own internet connection can be tested, but this is upgradeable in such circumstances.
DSL is relatively cheap, and does not require major civil works, as it piggybacks on the last
mile of the existing PSTN infrastructure. It can offer speeds suitable for all major broadband
applications, such as IPTV, videoconferencing, gaming, streaming content, and VoIP. Please
refer to Figure 166 for an illustration of DSL speeds, dependent upon distance.

Fibre
Current mass market access networks use copper as the final physical connection between
individual households and the core network. Operators deploy DSL technology at the
exchange (where the copper lines are aggregated) to offer customers broadband internet
access and related services.
The major drawback with DSL over copper is that the available bandwidth is dependent on a
number of factors including line length (i.e. the distance between the exchange and the
household) and the grade (or quality) of the copper. Significant advances have been made
with exchange-based DSL technology to the point where the maximum speeds are as high
as 28mbit/s.
It is still debatable whether such speeds are necessary. Even with the advent of HDTV,
20mbit/s of bandwidth combined with leading-edge compression technologies should be
sufficient to deliver a range of services to customer homes. However, in markets where
competition from satellite and cable TV platforms is strong, telecom operators clearly feel the
pressure to find a way to deliver higher bandwidths more consistently to a wider addressable
market. Hence BT Vision which aims to complete with BSkyB and the cable operators in the
UK market.
R&D efforts continue to squeeze additional performance out of the copper infrastructure with
VDSL2 offering speeds of up to 50mbit/s – but this performance can only be realized by
reducing the distance between the network equipment and each household. That involves
reconfiguring the network at significant expense.
Fibre-to-the-home represents an alternative upgrade path to VDSL. In most cases, it is a more

expensive solution (than VDSL) but has the potential benefits of offering (much) higher
speeds and symmetric bandwidth (i.e. the same speed in both directions). Well-established
FTTH technologies already support 100mbit/s and 1Gbit/s configurations.
In addition, FTTH offers the potential for significant reductions in operating costs. Fibre is
more resilient to physical degradation than copper and FTTH networks are typically designed
to minimize the number of “active” elements in the network. This means there are fewer
pieces of equipment that can go wrong, therefore reducing the underlying maintenance
requirement (compared with copper) and can therefore be a technology that enable operators
to reduce their overall cost base.
Although an oversimplification, operators have two choices when considering a fibre build:
Fibre-to-the-Home/Premise (FTTH, FTTP). Drawing fibre right to the home (or
“premise” as businesses/apartments are key) maximises speeds (over 100mbps
possible) but is expensive to implement;
Fibre-to-the-Curb/Cabinet/Node/Street (FTTC, FTTN). A less costly approach to
running fibre to the home is to run it to a cabinet at the end of street and then use
copper to drop the final signal into the home using a VDSL (a variant of DSL designed to
cope with high bandwidth over short distances). This is Deutsche Telekom’s current plan
for its domestic market.

Figure 165: Local loop fibre strategies – Passive Optical Network

ONT
Splitter
PSTN (Voice)
P )
TT
(F
TH
FT
Central Office
Class 5 Switch FFTN (FFTC)

Router OLT ONU
Video Server Copper
(VDSL)
Data (VOD etc.)

Decisions about FTTH deployment appear to focus around to primary options: passive optical
networks (PONS) and point-to-point (P2P). For example Iliad in France has indicated it will
deploy P2P whereas France Télécom is understood to favour a PON configuration.
P2P FTTH deployments involve laying a dedicated fibre connection between each
customer and the optical node. This configuration has the advantage that each customer
has dedicated bandwidth – there is no sharing with other customers. P2P FTTH
deployments typically use well- established Ethernet-based protocols operating at either
100mbit/s or 1Gbit/s. The advantage of using Ethernet is that it’s a mature technology
that works well with IP. Equipment is widely available and relatively inexpensive.
PON FTTH deployments also involve laying a dedicated fibre to each household but the
connections are aggregated through splitters before they are connected to the optical
node which is deployed deeper into the core network – typically at the exchange. This
has the advantage that more customers can be served via a single optical node
(improving scale economics) and is probably attractive for many incumbents who have
capital tied up in exchange real estate. The biggest potential drawback with PON
configurations appears to be the shared nature of the bandwidth between the optical
node and each customer. Depending on how many customers are served from each
optical node this might mean that headline speeds of 100mbit/s plus can be promoted
but at peak hours the actual available bandwidth per customer will be significantly lower.
There is a considerable amount of development being carried out on PON-based
technologies (for example, combining them with wave division multiplexing) – this is
likely to allow significant improvements in the available bandwidth per customer even in
peak hours.
Loop lengths important
The ability to satisfy consumer demand for bandwidth is dependent upon loop lengths and
most network speeds for products such as IPTV are compromised when loop lengths are
grater than 5,000ft (1,700 yards or 1.5km).

Figure 166: Short loop lengths should enable a European fibre build
50
45 VDSL
ADSL 2+
40
ADSL 2
35
30
25
20
15
10
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Loop Length (k ft)

Source: DSL Forum
How these network are built depends on the consumer (whether a corporate or residential
consumer). As shown by Telstra’s (now abandoned) fibre plan, the corporate consumer
warranted a direct fibre connection and for the retail consumer the objective was to reduce
loop lengths below 1,500m to allow the optimisation of ADSL2+.
Figure 167: Telstra’s proposed FTTN network

FTTB
Multi-Service
Access Node
Exchange
Fibre
FTTN Copper
DSLAM ADSL2+
Fibre
1.5 km
Node
ADSL2+
<1.5 km
DSLAM
Experiences so far – Japan, US and Korea lead

While many of the conditions for fibre build laid out above apply to many international
markets, only three key markets have seen a concerted push to fibre. Two of these have
been driven by intensifying competition (US and Japan) and one by government support
(South Korea). It is no coincidence that the markets that have seen the most rapid take-up of
FTTx are those where pressure from external sources exist. As shown in Figure 169, USA,
Japan and South Korea have relatively high levels of cable competition.

Figure 168: NTT: B-FLET, DSL and IP telephony take-up Figure 169: Worldwide broadband deployment (Q1
2006)
14,000 3,500 60,000 60%
12,000 3,000 50,000 50%
10,000 2,500 40,000 40%
8,000 2,000 30,000 30%
20,000 20%
6,000 1,500
10,000 10%
4,000 1,000
0 0%
2,000 500
USA
China
Japan
South
Germany
UK
France
Italy
Canada
Spain
Korea
0 0
Mar-03 Mar-04 Mar-05 Mar-06 Mar-07E
DSL Cable Modem etc Cabe/total

B FLET FLET's ADSL Optical IP phone (RHS)
Source: NTT Source: Deutsche Bank
In Japan, NTT’s B-FLET 100Mbps fibre service is now provided to 3.4m homes representing
7% of NTT’s total lines and the company expects fibre households to surpass DSL in the
current financial year. What lessons have been learnt from Japan? Unsurprisingly, the service
is ramping as the costs/subscriber is falling. NTT has now driven these below US$1,000
although we believe that the costs remain well above those of the US RBOCs (US$600-700).
Again, it is perhaps not surprising that the capex dedicated to optical access has increased
since B-FLET was launched (August 2001). What is interesting is that while optical capex
increased dramatically, the total annual capex spend has remained c.Y7bn and the portion
allocated to optical has increased at the expense of other spending. NTT estimates that the
installation cost is split 70% to the actual signal transmission (fibre build, underground
enclosures, etc.) and 30% to the point of drop off. This is consistent with commentary from
Deutsche Telekom that of the Euro 3bn fibre build only Euro 500m relates to actual access
equipment. We believe a large bulk of the remaining “other” Euro 2.5bn is comprised of
factors such as civil works. Given this is an extremely low margin business there may well be
a negative margin mix shift for the installers (typically the equipment suppliers) as fibre build-
outs accelerate.
Figure 170: Cost of the B-FLET service to NTT/sub (US$) Figure 171: NTT Optical Capex
6000 4 60%
5000 3.5
50%
3
4000 40%
2.5
3000
2 30%
2000 1.5
1600 20%
1000 1
1000
10%
0.5
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 0 0%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
(y)
Optical Access Investment as % of total capex
Source: NTT Source: Deutsche Bank, NTT
The FTTH build-out by Verizon (FioS) and FTTC roll by SBC (Lightspeed) are starting to ramp
as the operators push TV services into their customer bases. There are now 2.4m homes
passed by fibre in North America, up 46% from about 1.6m just six months ago but as

shown in Figure 173 the number of homes connected with fibre is still a paltry 323k although
this is growing rapidly. Verizon expects 30% penetration of its base with FiOS data services.
Figure 172: Verizon FiOS roll-out – actual versus Figure 173: FTTH – Homes Connected in the US
expectations
35% 0.35
30% 0.3
25% 0.25
20% 0.2
15% 0.15
10% 0.1
5% 0.05
0% 0
6 9 12 5 yrs Sep '01 Sep '02 Sep '03 Sep '04 Sep '05 Apr-'06
Data Penetration Actual vs Goals FTTH Homes Connected
Source: Verizon Source: Render, Vanderslice & Associates
Wi-Fi/Wi-Fi Max
Wi-Fi (WLAN, or standard 802.11) is a wireless networking technology, offering bandwidth up
to 54Mbps, at ranges around 50m. Wi-Max (802.16) is an advance on Wi-Fi technology,
intended to offer ranges up to 50km (although 15km is a more conservative estimate), with
shared bandwidth up to 70Mbps (so home users would likely be offered 1Mbps).
Wi-Max is not yet rolled out in Europe. Wi-Fi is increasingly popular for home networking, e.g.
to share a broadband connection. Wi-Fi is also being installed in public places; either as a
commercial service, whereby users pay via an account with the network, or as a free service.
Areas in which a network can be accessed are referred to as hotspots, and are attached to
broadband internet connections. Educational institutions such as libraries and universities
offer many free hotspots, whilst paid-for services are available in major airports, and at major
chains of coffeehouses, etc.
Figure 174: Wi-Fi hotspots worldwide (Q2 2006)

Worldwide 27,793
Europe 13,670
North America 10,329
Asia 2,519
Australia 329
Source: http://www.hotspot-locations.com

Figure 175: Broadband wireless in action
Main Cell
Site
Business Cell Site Cell Site
Home 1.5 to 3km
Satellite
Satellite technology uses satellites in geostationary orbit (following the Earth’s rotation to
remain still relative to points on the ground) to transmit communication signals. Earth stations
send signals to a given satellite which then relays them either to another satellite, to another
earth station or broadcasts the signal across a particular region of the earth.
Signals from satellites are received using satellite dishes, which focus signals on a radio
receiver called a low noise block (LNB). The LNB amplifies the signal and converts it into a
frequency usable by the terminating equipment (e.g. a TV set-top-box or a modem). The size
of satellite dish required depends on the frequency range being used and the signal strength.
Geostationary satellites suffer from fairly significant latency due to a combination of the
distances involved and the rate of signal propagation. It is estimated that there is a delay of
approximately 1/4 of a second for a round trip.
Satellites use three main sections of the radio spectrum in the Super High Frequency (SHF)
range of 3-30 GHz. Signals transmitted at lower frequencies require larger satellite dishes but
perform better under adverse weather conditions. Signals transmitted at higher speed need
smaller dishes but are impacted by "rain fade" - signal degradation due to the interference of
rainfall or clouds.
Figure 176: Satellite bandwidths

Typical satellite bandwidth Typical dish size Typical usage Companies
usage
C-band 3.4-6.7 GHz 1.8-27m Cable intra-network HDNet

distribution
Ku-band 10.7-18 GHz 0.6-1.5m Direct-To-Home broadcast BSkyB
Ka-band 18-30 GHz 0.6-1.5m Broadband internet BT
Newer satellite technologies are looking at using additional bandwidth in the Extremely High
Frequency (EHF) range of 30-300 GHz. US defence contractor Northrop Grumman is
proposing to build an EHF satellite network, with 1Tbps (1,000Gbps) capacity.

Communications satellites provide comprehensive coverage of the world. A geostationary

orbit satellite maintains a fixed position over a given point on the equator and can typically
cover up to 40% of the earth's surface. A satellite's footprint depends on how its beam is
configured - a "broad" or "wide" beam will give a large footprint (but with relatively low power
especially at the footprint edge) whilst a "spot" beam will provide a relatively narrow but high
power footprint.
There are a number of satellite operators providing coverage of Europe including SES-Astra,
Eutelsat and New Skies.
Figure 177: Typical coverage of a satellite transmitting TV to Europe
Source: SES Astra
Communications satellites provide a range of services. They can offer a very sophisticated
television offering, with potentially hundreds of channels. Signals are targeted at desired
regions, and usually broadcast encrypted (which means customers need the appropriate
decryption key - usually a smart card - to view the channel), so that broadcasters may control
access, and thereby generate subscription revenues. These signals may be analogue or
digital, with the latter accessing the same benefits as digital terrestrial TV, but typically with
higher bandwidth. A digital decoder may be incorporated into a PVR, such as for Sky’s Sky
Plus service, offering much functionality for IPTV to beat.
The global reach of satellites can also be utilized for a global telecommunications network,
although mobiles using this are expensive and bulky due to the need to send signals into
space, and so do not threaten GSM. Such technology is evolving though to offer broadband
internet, carrying some backbone traffic, and servicing particularly users out of the reach of
other technologies. Perhaps the most exciting application is the Broadband Global Area
Network (BGAN), which proposes to offer mobile broadband internet access anywhere on
Earth. This is a professional offering, with the necessary satellite modem about the size of a
laptop, and costing around Euro 500, but if volumes increase, prices should come down.
Access is generally charged by bandwidth used, and is priced for similar users.
Satellite broadband comes in an array of speeds, depending on the demand and the
symmetry required. Generally high bandwidth users require speeds of up to 4,096kbps
download and 1,024kbps upload speeds.

Technology: Convergence
Terrestrial TV
Terrestrial TV is broadcast through the air via transmission towers, and received by roof or
TV-mounted aerials. Most TV signals are currently broadcast using analogue (either PAL as in
Europe and much of the rest of the world and NTSC in the USA), but now Digital Terrestrial
TV (DTT) is being rolled out across Europe. DTT requires a digital decoder that may be either
integrated into a newer TV, or contained within a set-top box. DTT allows more data to be
compressed into a given radio bandwidth, and so this may allow for greater picture quality;
more channels; or use of less spectrum. In practice, these goals are often sought at the same
time, particularly to provide more channels in less bandwidth, although quality may become
more of a focus. Many countries plan to switch off the analogue signals once digital
penetration is sufficient, which will free up some radio bandwidth to be allocated or
auctioned for other services (e.g. this could facilitate an expansion of DTT services).
Figure 178: Number of countries to start up TV services per annum
16
14
12
10
0
1928
1932
1936
1940
1944
1948
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
Source: Country data, Wikipedia
Analogue coverage is fairly universal. Digital signals are very widely available in some
markets, such as the UK, and not in others. Hardware penetration to receive the digital
signals is key in determining the progress of DTT, and analogue switch-off is unlikely to take
place without penetration approaching that of analogue TV. This may mean a free provision of
digital hardware to users who have not switched, although in the UK, the development of
Freeview, where the costs range from around £25 depending on the functionality, has
dramatically increased the take-up of digital services.
The inherent uncertainty involved in waiting for people to buy digital decoders has made
planning very difficult, and whilst the European Commission has called for EU-wide switch-off
by 2012, it is unlikely it will not be completed until the end of the decade in key markets like
France and Spain.
Depending on the bandwidth used, the number of channels offered varies, but in the UK,
analogue TV offers 5 channels, and DTT offers around >40 channels. Functionality may be
greatly improved when this is accessed through a PVR.

Figure 179: The digital switchover timetable

Year
Country 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E 2010E 2011E 2012E
Dec
Italy
ITV Digital
Nov July
United Kingdom
May
France
May
Germany
Quiero TV
Oct May Nov
Spain
Aug
Finland
Apr
Sweden
??
Hungary
Apr
USA
Apr DTT launch/re-launch
Official national switch-off date
National switch-off date based on latest news
Source: Mediaset
IPTV
Internet Protocol Television (IPTV) replaces the traditional broadcasting model of television
with a dynamic internet-based service whereby the user selects content to watch from a
database, and only this is transmitted to them, rather than a selection of channels from which
to choose. Content is retained on servers connected to the internet, which stream it to users
when requested, a process termed as video on-demand (VoD). To combat bandwidth
problems during peak hours, it has been proposed that popular content could be downloaded
off-peak to an inaccessible portion of a PVR hard drive, with the user then paying to unlock it,
rather than for the actual download.
IPTV is transmitted via the internet, but restricted to fast connections, as to obtain decent
video quality requires high bandwidth (a DVD movie is played at around 3Mbps). It is
accessed either via a set-top box or through a normal internet browsing platform, e.g. a PC.
IPTV is extremely new, and so business models are in flux, but it is likely to follow the mix of
models found in existing multi-channel TV. This would include some free-to-air content,
(advertising-supported and public-service), as well as subscription services and pay per view
(PPV). As one core feature of VoD should be user-control, there may be pressure on
advertising that users can skip past, although the level of control over this entirely digital
technology should make it possible to prevent this if users will tolerate such functionality.
PPV should be a much larger factor in the development of IPTV and a differentiation from
existing broadcasting technologies.
Firstly, in contrast to most broadcasting, whereby the marginal viewer makes little
difference to the network, VoD is likely to mean that there will be a marginal bandwidth
cost each time users access content. (There are experiments with peer-to-peer
distribution techniques, to save bandwidth by also utilising users’ own connections, but
these may not reach commercial mass market.)

Secondly, as users are choosing exactly what they want to watch, they are likely to be
more willing to pay for it. However, much content is currently free-to-air; for example,
more than 95% of US cable operator Comcast’s VoD content and in the short-term most
IPTV operators will add free content to their portfolio as it is easier to aggregate and
allows IPTV to at least offer the same basic offering as moist of the TV forms. It also
allows IPTV operators to stress the additional services in their marketing in order to pitch
the product as a premium/higher quality offering.
European operators have different IPTV strategies such as Deutsche Telekom and Swisscom
which are pursuing the VDSL route, whereas others are focused on ADSL2+ (France
Telecom and Telefónica). In France there are also moves to build fibre in France, by all three
leading broadband providers (France Telecom, Iliad and NeufCegetel).
In Figure 180 we show some of the leading IPTV strategies in Europe.
Figure 180: Summary of rollout of Telco operators’ IPTV investments

Operators Technology Capacity (MB/s) Coverage now Target Comments
BT ADSL up to 2 Over 90% No IPTV service

ADSL + MPEG4 up to 8 None 4-5mbits with 50% coverage IPTV + Freeview; launch
4 Dec 2006
Moving to ADSL 2+ 18 None Available sometime in
2008/2009
Deutsche Tel ADSL T-Online Vision 1 >91% Launched Q1 2004. c30-50k subs Video delivered to PC
VDSL up to 50 None 20% coverage by 2006 Build out from 2006 with
Euro 3bn capex budget
30% coverage by 2008
France Tel ADSL2+ 18 15m homes 1m IPTV subs by end 2008 0.18m subs
Telefónica ADSL2+ with MPEG 4 6 4m homes 1m IPTV subs by end 2008 0.3m subs
Telecom Italia ADSL (MPEG 2) 35% coverage end 06 for IPTV Announced Euro 2.1bn
investment
ADSL2+ 50% coverage end 2006
Mobile TV
Mobile TV is in its infancy and as such there are multiple technologies that are looking to
exploit the space (as there were in the early days of mobile). There are also two ways to
propagate the services to devices. The broadcast approach employees a blanket coverage
(as in UK radio and TV), where as the unicast approach sends a dedicated signal to each
device.

Figure 181: Broadcast versus unicast approach
Broadcast Approach Unicast Approach
Source: Alcatel
Working out whether there is demand for mobile TV is a harder task, but existing data on TV
viewing patterns suggest that mobile TV could be a an ideal technology for event driven
viewing when the consumer is seeking tome sensitive data. In Figure 182 we show the
viewing patterns on Sky in the UK when there was a whale in the Thames and in Figure 183
the pick up in usage when Sky launched its mobile TV services.
Figure 182: Sky mobile TV viewing patterns – event Figure 183: Sky mobile TV, streaming usage pre and
driven post launch
Sunday Monday Tuesday Wednesday Thursday Friday Saturday
Whale in the Thames
Mobile TV Launch
Ashes
Big Brother
Midnight
6am
Midday
6pm
Midnight
6am
Midday
6pm
Midnight
6am
Midday
6pm
Midnight
6am
Midday
6pm
Midnight
6am
Midday
6pm
Midnight
6am
Midday
6pm
Midnight
6am
Midday
6pm
May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06
Average weekly viewing figures Video streaming usage
Source: SKY Source: Deutsche Bank
The key will be to apply mobile TV into existing usage patters, and it is most likely to
challenge the strong early morning usage of the radio and the newspapers.

Figure 184: Existing usage patterns (N=7000)

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
6am-10am 10am-5.30pm 5.30-9pm 9pm-6am
Watch TV Use Internet Read Newspaper Listen to radio

Source: Mediascope
3G network snot suitable for mobile TV

Traditional 3G networks – even with HSDPA overlays – are not designed to cope with DMTV
broadcasting owing to capacity constraints and device power issues, operators wishing to
offer DMTV services have two options.
First, they can attempt to adapt 3G networks to a broadcast environment;
Second, they can embrace new technologies, specifically designed to spectrally
optimise for broadcast DMTV taking elements from both the digital terrestrial television
(DTV) environment and applying them to a mobile world.
New broadcast technologies have the benefit of reaching many people simultaneously
though they require new networks to be built. In addition, content providers feel comfortable
with the broadcast medium as it enables firmer control over digital rights management
(DRM). Further benefits of broadcast are the downlink speeds which offer higher quality
picture resolution.
On a 3G mobile network, video runs at c.15 frames per second (2G is c.3/sec), while new
broadcast technologies run at 20-30 frames per second. Therefore, currently, the industry
momentum is very much with the new broadcast approach as most mobile operators
recognise that new broadcast driven technologies are needed. Even here, however, there is
significant fragmentation – again along regional lines.

Figure 185: Emerging mobile TV technologies
e.g DVB-H ~330 kb/s

e.g DVB-H ~330 kb/s
(13.3
(13.3Mbps/40
Mbps/40channels
channels
many
MBMS/UMTS:
MBMS/UMTS: 64-256+64-256+kb/s
kb/s
(7-30%
(7-30%ofofcell
cellpower)
power)
DVB-H MBMS/GSM:
MBMS/GSM: 32-128 32-128kb/s
kb/s
Simultaneously reachable users

T-DMB (4 TS with 8-32 kbps/TS)
(4 TS with 8-32 kbps/TS)
FLO
MBMS
t+ UMTS:
UMTS: 6464kbs
kbs(CS)
(CS)
as
Unic 128 kb/s (PS)
128 kb/s (PS)
Unicast CPRS:
CPRS:~~40
40kb/s
kb/s(PS)
(PS)
Multimedia EDGE: ~ 100 kb/s (PS)
st EDGE: ~ 100 kb/s (PS)
U nica services
few
low high
Service customisation
(service differentiation, personalisation, etc)
Source: Ericsson
There are over 12 mobile TV standards world-wide. We identify 5 DMTV technologies which
are most likely to emerge, which we summarise in Figure 186 and in the section below we
discuss each of these technologies in more detail.
Figure 186: Mobile TV Standards — Summarised

System ISDB-T DVB-H DMB/DAB-IP MediaFLO MBMS
Region/Country deployment Japan Europe/US Korea/Europe US Any WCDMA

Codec MPEG-2 (H.264) MPEG 4 (H.264) MPEG 4 (H.264) MPEG 4 (H.264) MPEG 4 (H.264)
Video/Audio MPEG-2 / AAC MPEG-2 / AAC MPEG4 / BASC MPEG4 / AAC MPEG4/H.264
Frequency/Channel size 6MHz 8MHz 6MHz 6MHz 5MHz
Max 23Mbps 31Mbps 9.2Mbps 11MBps 3x0.128
Modulation OFDM (13-seg/ch) COFDM COFDM COFDM QPSK
Optimized Handset Power Mobile use, 1 segment Time slicing Micro time-slicing Time slicing
Reduction only
Service availability Early-2006 Early 2006 Today 2006 (locally through 2007
analog channels)
Handset availability 2006 2005 2004 2006 2008
Advantages Time to market Wide industry support, Time to market, power Spectrum there, Existing infrastructure
standards consumption on terminal technologically sound used
Disadvantages Likely to be Japan only, Spectrum tied up in Spectrum needed Proprietary, only 700MHz Likely to fall over with
battery life several markets in US lots of usage
Source: Texas Instruments, Deutsche Bank, DVB.org
MBMS (Mobile Broadcast/Multicast Service)/BCMCS (Broadcast & Multicast Service)

MBMS or BCMCS is the name given to the technology family which sits as an overlay (i.e. it
just requires a software upgrade) on top of the traditional 3G network to offer broadcast and
multicast services (bespoke broadcast to a group of users). Instead of the network setting up
dedicated point-to-point contacts to each device through the entire network, MBMS requires
just a single broadcast channel in each cell which has the benefit of increasing capacity.

Figure 187: 3G Network consumption with and without MBMS
6,000
5,000
4,000
3,000
2,000
1,000
0
3G 3G with MBMS
Voice Other data Point-to-point video Broadcast video

Source: Analysyss
Advantages: The benefit of MBMS, which is supported by Ericsson and IPWireless, is

that upgrade costs are low, it is standardised already (under 3GPP), offers lots of
channels (up to 50) using existing spectrum and can offer more interactive services
owing to the bi-directional nature of 3G networks.
Disadvantages: There are three main problems for MBMS. First, the major disadvantage
of MBMS is that the underlying 3G network would still likely suffer capacity constraints
with multiple users and as a result the operators will still choose to allocate spectrum to
higher revenue/bit services like voice. This argument is of course premised on the fact
that revenue/bit of voice does not fall significantly which itself is questionable. Second
are technological issues and we question the speed of hand-off between cells as well as
constraints on power consumption of devices. Third, and perhaps most serious, is that
the industry support for this approach has been weak. Of the operators globally, arguably
Vodafone has been the most supportive of MBMS to date (perhaps unsurprising given
Ericsson is the company’s main infrastructure supplier), but even Vodafone is keeping its
options open and has been trialling a competing system (DVB-H). As O2’s CTO stated at
the recent CTIA conference “We believe that the 3G networks will not be reliable
enough. There is no room in TV for dropped calls…. That is why we think a broadcast
service without complex hand-offs will be the way forward”. Orange UK recently
committed to trialling MBMS using IPWireless’ solutions in 2006.
DAB (Digital Audio Broadcast) derivatives, S-DMB/T-DMB
Developed between 1988 and 1992, DAB was commercially launched globally in 1998 with a
view to replacing traditional analogue radio sets with digital receivers tuned to a terrestrial-
based network capable of overcoming the faults of analogue. It is now available (primarily in
two frequencies 175-240MHz and 1450-1500MHz) to over 475m people globally. Several
television broadcast systems based on DAB have extended by modifications to some of the
inadequacies of DAB in regard to video transmission at higher data rates. These
modifications fall under the title DMB (digital multimedia broadcast) and these come in two
forms – networks with terrestrial-based antennae (T-DMB) and those piped directly from
satellites (S-DMB). Both types of networks have been supported by, and commercially
launched in, Korea (by TU-Media/SKT), ahead of any other dedicated mobile TV network and
with the backing of the Korean device manufacturers, LG and Samsung.

Figure 188: T-DMB, S-DMB
S-DMB Network
T-DMB Network
S-DMB
Broadcasting
Centre
Audio
Content
Video Mobile Devices
Providers
Data
Broadcasting
Centre T-DMB
Transmitter
Advantages/Disadvantages: There is a great deal of posturing (it reminds us of GSM-

CDMA) between major proponents of T-DMB and those of DVB-H (see below) as to
which technology is “best”. In reality, both are based on similar technological principals
(both use OFDM, time interleaving, etc.) and the differences are so small that they are
irrelevant (device power consumption is a little better on DVB-H but greater transmission
power is needed due to operating at higher frequency than DMB). In reality, the biggest
advantage for T-DMB is time to market related and the biggest disadvantage is that the
world’s biggest manufacturer of terminals, Nokia, supports DVB-H. In terms of operator
momentum, T-DMB is gaining some good traction outside of Korea with debitel
(Germany), Virgin Mobile (UK), and Bouygues (France), all either trialling or commercially
committed to T-DMB (DAB-IP) solutions. Moreover, there have been tests in both China
(Beijing Radio Broadcasting) and India.
DVB-H (Digital Video Broadcasting-Handheld)
DVB-H is the latest derivation of the DVB transmission standard which historically has been
responsible for bringing DTV to consumers via satellite, cable and terrestrial networks. DVB-H
adapts DVB technically for a mobile environment, overcoming issues such as weakening
signal strengths while travelling at speed and also lowering power consumption (through
“time-slicing” technology). DVB has been well supported in the past with over 270
organisations in the industry-led consortium in over 35 countries.
Advantages/Disadvantages: Perhaps the most significant advantage DVB-H currently
has is that it is gathering momentum with operators in Europe and the US (through
Modeo - a subsidiary of Crown Castle) as well as with Nokia, Motorola, Siemens, LG and
Samsung. Technologically speaking it is very similar in performance to both T-DMB and
while MediaFlo (see below) may have some technological benefits over DVB-H, the
advantage that DVB-H has is that it is standardised by the European Telecoms Standard
setting Institute (ETSI 302/4 in 2004). The disadvantage DVB-H has is that it requires new
networks to be built and new spectrum to be allocated to it.

Figure 189: Example of the equipment needed in a DVB-H network
Source: UDCast
Integrated Services Digital Broadcasting-Terrestrial (ISDB-T, “one seg”)

ISDB-T is the terrestrial DTV standard developed in Japan and the Japanese government has
allocated 1/13th (“one seg”) of available broadcasting spectrum to mobile. The Japanese
mobile companies are all currently in the process of launching “one seg” handsets. The
advantage with the technology is that it is available today. The disadvantage is that - like PDC
- it is restricted to Japan. In addition, it is regionally based, terminals have short battery life
and perhaps the worst problem is that it is controlled by NHK, Japan’s Broadcasting
Company, which offers the service free for terrestrial TV users.
Forward Link Only (FLO)
FLO technology is a multicast proprietary DMTV technology designed by Qualcomm based
on many of the similar technological principals as both T-DMB/DVB-H – i.e. aimed at
increasing capacity and coverage (1 transmitter covers 60km) and lowering cost for
multimedia content delivery to mobile handsets. It supports up to 20 streaming channels of
up to 30 frames per second.
Advantages/disadvantages - It is difficult to pull out the exact benefits that FLO has
over the other two main DMTV technologies although Qualcomm claims that it is more
efficient as it does not attempt to use historic terrestrial standards as a reference
(improving both transmission and receiver power consumption). In addition, Qualcomm
highlights its low channel switching time of 1.5 seconds, though according to both T-
DMB/DVB-H proponents, this is equivalent to these technologies. Perhaps the difference
between FLO and other technologies is the vertical integration that Qualcomm has
applied. Through its wholly-owned subsidiary, MediaFLO, Qualcomm is actually rolling
out (at a cost of US$800m) and operating the network (at 700MHz completed end 2006)
for the adopters of FLO, which to date include Verizon Wireless. The single biggest
disadvantage of FLO is its proprietary nature (hence concentrated royalty fees) which
means it is unlikely to proliferate in areas outside North America.

Figure 190: MediaFLO in action
Media Radio Access Encoding

Content
Players Networks/FLO Network Schemes
MediaFLO MPEG4 News

Client 1XEV-DO
MPEG4 Windows
Player Media
Player
MediaFLO Microsoft Sports
Server
1XEV-DO
Gold Multicast
RealOne Money
Real
H.26-4
Player
Player
Other Multicast
Networks
H.26-4 Music
-Digital Rights Management

-Billing via existing systems
Client-Server Architecture
Source: Qualcomm, Deutsche Bank, engadget
Other technological possibilities

In addition to DVB-H, which runs on terrestrial antennae, a satellite-based version (DVB-H(S))
has also been developed and Alcatel and Eutelsat hope to launch satellite-based DVB-H
services by 2007/8.
Another technological option is to utilise a mobile Wimax network. Mobile Wimax, or

802.16e, will significantly increase speed over 3G. However, commercial availability is
unlikely prior to 2009 and we believe that its ability to hand-off between cells and on a
ubiquitous basis will mean it is unlikely to be used for mobile TV this decade.
Perhaps one of the biggest technological competitors to live streaming broadcast TV comes
from a non-streamed source. Apple has already introduced a video version of its iPod, which
has a 30GB memory capable of storing 150 hours of video. Given that today’s generation is
comfortable with “time-shifted” technologies such as pod-casting, it is possible that an
elegant iPod/TV synchronisation will render mobile TV obsolete. Indeed, Sky reported that
32% of its Sky+ watch recorded TV. The fact that 68% still watch live TV suggests to us that
mobile TV does indeed have a future.

Figure 191: Mobile TV timeline
2005 2006 2007 2008 Beyond ‘08
Mobile Unicast video HSPDA MBMS

Networks
3G/UMTS over 3G
3GLTE
Service launches
(2110-2170 MHz)
Mixed
Interactivity Better Video Quality
Unicast/Broadcast
Broadcast DVB-S DVB-H S-Band Trials
DVB-H S-Band
Networks in S-Band Broadcast DVB-H S-band
Terrestrial launch National Coverage
(2170-2200 MHz)
Unlimited Usage plus Access Everywhere

WiMAX WiMAX Unicast video Possible Optimization
Networks
(2.3/3.5 GHz) Broadcast Implementation
Over WiMAX Networks
Implementation
Alternative to 3G
Broadcast DVB-H DVB-H From 2010 on:

Networks in UHF DVB-H Local Implementations Massive DVB-H
(470-700 MHz)
trials Deployment
Unlimited Usage
Broadcast
S/T-DMB T-DMB
Networks VHF/L/S-band
Already T-DMB: Korean govt driving into other
(T=175-245-1400 MHz regions
launched
S=2.6GHz) Unlimited Usage
Broadcast
FLO Trials with Qualcomm pushing into other US
Networks multi band Verizon carriers/CDMA customer base
Wireless
(USA = 700MHz)
Unlimited Usage
Source: Alcatel, Deutsche Bank
Video-telephony
Since the early days of consumer-telephony, people have talked of adding video to their calls.
Technology to do so was demonstrated in the early 1960s, but; although dedicated
videophones have yet to find mass-popularity, the service is now used on other devices such
as PCs and 3G mobiles.
Video-calling is implemented on some 3G phones, and can be used on broadband-connected

computers (often called video-conferencing) so long as they have a microphone, speakers
and a webcam (a cheap digital camera - down to €20 - providing a video feed to a computer).
Video-calling on mobiles is charged per minute like voice-calling, but at a premium. 3G tariffs
often include a certain monthly allowance of video calls. Pricing varies in a range around
€0.30 - €1 per minute.
As bandwidth improves and more users discover the technology, free video-conferencing
could challenge fixed-line call charges as the high-bandwidth cousin of VoIP (especially if
image quality improves towards data-rates of TV or even DVD), whilst offering a service
superior to the PSTN, rather than identical.
Mobile video-calling is not yet popular, but enabled phones are increasingly widespread,
creating a latent possibility for the service to take off if users develop a taste for it.

Figure 192: Number of subscribers with TV embedded mobile phones
80
70
60
50
40
30
20
10
0
2005 2006 2007 2008 2009 2010
DVB-H T-DMB S-DMB

Source: Nokia
Gaming
Computer games range from sophisticated fully-immersive experiences, using advanced
technology to offer experiences akin to movies, to extremely basic offerings that may be
entirely text-based. Particularly interesting are games played online with other players
connected to the internet, games downloaded to mobile phones and online gambling.
Games may be played through TVs, mobile phones, computers such as PCs and PDAs, and
also dedicated gaming devices such as the Sony Playstation series.
Figure 193: Game offered on 2G phones Figure 194: Game offered on PCs and dedicated devices
Source: Deutsche Bank Source: Games Digest
Music
Advances in storage, compression, and processing technology, such as the invention of
MP3, made it convenient to keep large amounts of music on computers, and to transmit it
digitally. This means that music no longer requires physical media only the digital storage
space that is found on all sorts of electronic devices, and it can thus be offered through
telecommunications channels, then stored and played on communications devices.
Music is offered through many different devices. Mobile phones are now available with
sufficient storage capacity to act as music players, and these may well converge, with plans

to produce a phone that mirrors the functionality of Apple’s iPod (a high-capacity digital music
player, storing currently up to about 1000 hour-long albums). Even where storage is
inadequate for much music, it may be sold as short ring-tones, which can have quality up to
that of CDs. Computers such as PCs also store music, and this may be transferred onto
dedicated music players, as is usual for the iPod. Music can be downloaded to devices
through a sufficiently fast connection to the internet, as well as imported from media such as
CDs. Any sufficiently fast internet platform that can connect to a music player, or can play
music itself, may offer music downloads.

Section 3: Reference

Country: Austria
Figure 195: Austria: Key information
Regulator Rundfunk und Telekom Regulierungs (formerly Telekom-
Control )
Regulator URL http://www.rtr.at
Liberalised 1998
Population 8,192,880 (July 2006 est.)
Median Age total: 40.9 years
GDP 2005 est.(PPP) $265.8bn
GDP per capita 2005 est. (PPP) $32,500
Source: Deutsche Bank, CIA
Fixed-line services
Figure 196: Austria: Fixed-line subscribers: (Q4’05)
No. of major competing fixed line operators (as at Sept ’05) 6
Total incumbent copper subscriber lines 2,749,831
Total Broadband 1,175,855
BB cable 40%
BB DSL 58%
Incumbent own-branded DSL 68%
Broadband penetration (lines per 100 inhabitants) 14.5%
Source: EcTA, EU
Mobile phones
Figure 197: Austria mobile market
Operator Parent Technology Launch date Subscribers Market
share
2G 3G (2Q’06) (%)
Mobilkom Austria Telekom Austria GSM 900/1800, 3G Dec-93 Apr-03 3,437 39.3%
T-Mobile Austria Deutsche Telekom GSM 900/1800, 3G Jul-96 Dec-03 2,095 24.0%
One Gmbh Telenor/ EON AG GSM 1800, 3G Oct-98 Dec-03 1,817 20.8%
GSM 1800, 3G,
tele.ring Deutsche Telekom WCDMA May-00 Dec-03 1,053 12%
3 Austria Hutchison Telecom 3G - May-03 345 3.9%
Source: GSM world, Company data
TV
Figure 198: Austria: TV by household 2005 (Y/E)
Total households 4,569,434
Cable penetration 38.2%
Satellite penetration 49.1%
Source: Screen Digest, Deutsche Bank analysis

Country: Belgium
Figure 199: Belgium: Key information
Regulator Belgian Institute of Postal services and Telecommunications
Regulator URL http://www.ibpt.be
Liberalized 1998
GDP 2005 est.(PPP) $322bn
Fixed-line services
Figure 200: Belgium: Fixed-line subscribers: (Q4’05)
BB cable 33%
BB DSL 67%
Source: EcTA, EU
Mobile phones
Figure 201: Belgium mobile market
share
2G 3G (2Q’06) (%)
Proximus Belgacom GSM 900/1800, 3G Jan-94 May-04 4,270 47.4%
Mobistar France Telecom GSM 900/1800, 3G Aug-96 - 3,020 33.5%
BASE NV SA KPN GSM 900/1800, 3G Mar-99 Sep-06 1,725 19.1%
TV
Figure 202: Belgium: TV by household 2005 (Y/E)
Digital terrestrial penetration 0.0%

Country: Denmark
Figure 203: Denmark: Key information
Regulator National IT and Telecom Agency
Regulator URL http://www.itst.dk
Liberalised 1994
Fixed-line services
Figure 204: Denmark: Fixed-line subscribers: (Q4’05)
BB cable 26%
BB DSL 65%
Broadband penetration (lines per 100 inhabitants) 28%
Source: EcTA, EU
Mobile phones
Figure 205: Denmark mobile market
share
2G 3G (2Q’06) (%)
TDC Mobile TDC GSM 900/1800, 3G Jul-92 Oct-05 2,516 49.6%
Sonofon Telenor GSM 900/1800 Jul-92 - 1,310 25.8%
Telia Sonera Mobile Telia Sonera GSM 900/1800, 3G Jun-97 Dec-06* 1,127 22.2%
HI3G Hutchison Telecom 3G - Oct-03 120 2.4%
* Planned
TV
Figure 206: Denmark: TV by household 2005 (Y/E)

Country: Finland
Figure 207: Finland: Key information
Regulator Finnish Communications Regulatory Authority
Regulator URL http://www.ficora.fi
Liberalised 1998
Fixed-line services
Figure 208: Finland: Fixed-line subscribers: (Q4’05)
BB cable 13%
BB DSL 79%
Source: EcTA, EU
Mobile phones
Figure 209: Finland mobile market
share
2G 3G (2Q’06) (%)
Sonera Mobile
Networks Telia Sonera GSM 900/1800, 3G Jun-92 Oct-04 2,466 46.5%
Radiolinja Elisa GSM 900/1800, 3G Dec-91 Sep-04 1,983 37.4%
DNA Finnet GSM 900/1800, 3G Jan-01 Dec-05 858 16.2%
TV
Figure 210: Finland: TV by household 2005 (Y/E)

Country: France
Figure 211: France: Key information
Regulator Autorité de Régulation des Télécommunications
Regulator URL http://www.art-telecom.fr
Liberalised 1998
GDP 2005 est.(PPP) $1,794 bn
Fixed-line services
Figure 212: France: Fixed-line subscribers: (Q4’05)
No. of major competing fixed line operators (as at Sept 4
’05)
BB cable 6%
BB DSL 94%
Source: EcTA, EU
Mobile phones
Figure 213: France mobile market
share
2G 3G (2Q’06) (%)
Orange France Telecom GSM 900/1800, 3G Jul-92 Mar-06 22,390 46.3%
SFR Vivendi /Vodafone GSM 900 , 3G Apr-93 Nov-04 17,415 36.0%
Bouygues Bouygues GSM 900/1800 Jan-96 - 8,542 17.7%
TV
Figure 214: France: TV by household 2005 (Y/E)

Country: Germany
Figure 215: Germany: Key information
Regulator Federal Network Agency
Regulator URL http://www.bundesnetzagentur.de
Liberalised 1998
GDP 2005 est.(PPP) $2,480 bn
Fixed-line services
Figure 216: Germany: Fixed-line subscribers: (Q4’05)
BB cable 2%
BB DSL 97%
Source: EcTA, EU
Mobile phones
Figure 217: Germany : mobile market
share
2G 3G (2Q’06) (%)
T-Mobile Deutsche Telekom GSM 900/1800, 3G Jul-92 Apr-04 30,415 37.2%
Vodafone Vodafone GSM 900/1800, 3G Jun-92 Jan-05 29,444 36.0%
E-Plus (KPN) KPN GSM 1800, 3G May-94 Aug-04 11,852 14.5%
O2 Telefónica GSM 1800, 3G Oct-98 Nov-05 10,099 12.3%
TV
Figure 218: Germany: TV by household 2005 (Y/E)

Country: Greece
Figure 219: Greece: Key information
Regulator EETT National Telecommunications and Post Commission
Regulator URL http://www.eett.gr
Liberalised 2001
Fixed-line services
Figure 220: Greece: Fixed-line subscribers: (Q4’05)
Total Broadband 160,113
BB cable 0%
BB DSL 99%
Source: EcTA, EU
Mobile phones
Figure 221: Greece : mobile market
share
2G 3G (2Q’06) (%)
CosmOTE OTE GSM 900/1800, 3G Jan-98 May-04 4,825 37.3%
Vodafone Greece Vodafone GSM 900 , 3G Jul-93 Nov-04 4,636 35.8%
TIM_Hellas Private equity GSM 900 , 3G Jul-93 Sep-04 2,516 19.4%
Q
Telecommunications Private equity GSM 1800 Jun-02 - 968 7.5%
TV
Figure 222: Greece: TV by household 2005 (Y/E)

Country: Ireland
Figure 223: Ireland: Key information
Regulator The Commission for Communications Regulation
Regulator URL http://www.comreg.ie
Liberalised 2002
Median Age total: 34 years
Fixed-line services
Figure 224: Ireland: Fixed-line subscribers: (Q4’05)
No. of major competing fixed line operators (as at Sept ’05) n/a
BB cable 9%
BB DSL 75%
Source: EcTA, EU
Mobile phones
Figure 225: Ireland : mobile market
share
2G 3G (2Q’06) (%)
Vodafone Ireland Vodafone GSM 900/1800, 3G Jul-93 Nov-04 2,090 45.2%
O2 Ireland Telefónica GSM 900/1800, 3G Mar-97 Mar-05 1,606 34.7%
Meteor
Communications Eircom GSM 900/1800 Feb-01 - 683 14.8%
Hutchison 3G
Ireland limited Hutchison Telecom 3G - Jul-05 250* 5.4%
Source: GSM world, Company data, *23_aug 2006
TV
Figure 226: Ireland: TV by household 2005 (Y/E)

Country: Italy
Figure 227: Italy: Key information
Regulator Italian Communications Authority (Autorità per le Garanzie nelle
Comunicazioni)
Regulator URL http://www.agcom.it
Liberalised 1998
GDP 2005 est.(PPP) $1,667 bn
Fixed-line services
Figure 228: Italy: Fixed-line subscribers: (Q4’05)
BB cable 0%
BB DSL 95%
Source: EcTA, EU
Mobile phones
Figure 229: Italy : mobile market
share
2G 3G (2Q’06) (%)
TIM Telecom Italia GSM 900/1800, 3G Apr-95 Mar-05 30,408 43.4%
Vodafone Omnitel Vodafone GSM 900/1800, 3G Sep-95 Mar-04 18,559 26.5%
Weather
Wind Investments SPA GSM 900/1800, 3G Mar-99 Oct-04 14,300 20.4%
H3G Hutchison Telecom 3G - Mar-03 6,810* 9.7%
* 23_Aug 2006
TV
Figure 230: Italy: TV by household 2005 (Y/E)
Total households (000’) 22,176
Digital terrestrial penetration (D DTT) 17.6%
Cable penetration 0%

Country: Japan
Figure 231: Japan: Key information
Regulator Ministry of Public Management, Home Affairs, Posts and
Telecommunications
Regulator URL http://www.soumu.go.jp
Liberalised 2001 (final stage liberalization)
Population (000) 127,464 (July 2006 est)
Median Age Total: 42.9 years
GDP 2005 est.(PPP) $4,025 bn
GDP per capita 2005 est. (PPP) €31,600
Fixed-line services
Figure 232: Japan: Fixed-line subscribers: (Q4’05)
Total Broadband 24,267,000 (Sept 2006)
BB cable 14%
BB DSL 60%
Source: Company data, Deutsche Bank
Mobile phones
Figure 233: Japan : mobile market
share
2G 3G (2Q’06) (%)
NTT DoCoMo, Inc NTT 3G - Oct-01 51,672.2 55.6%
Vodafone K.K. (J- Softbank mobile
Phone) corp UMTS, PDC, 3G - Dec-02 15,240.2 16.4%
Au (KDDI) KDDI CDMA - Apr-02 23,616.3 25.4%
TU-KA KDDI PDC - Apr-02- 2,340.6 2.5%
Source: Company data, Deutsche Bank
TV
Figure 234: Japan: TV by household 2005 (Y/E)
Total households 48,475.9
Digital terrestrial penetration (DTT) 10.0%

Country: Netherlands
Figure 235: Netherlands
Regulator OPTA
Regulator URL http://www.opta.nl
Liberalised 1998
Fixed-line services
Figure 236: Netherlands: Fixed-line subscribers: (Q4’05)
BB cable 38%
BB DSL 62%
Source: EcTA, EU
Mobile phones
Figure 237: Netherlands : mobile market
share
2G 3G (2Q’06) (%)
KPN Mobile The
Netherlands BV KPN GSM 900/1800, 3G Jul-94 Oct-04 8,264 43.7%
Libertel-Vodafone Vodafone GSM 900/1800, 3G Sep-95 Nov-04 3,881 20.5%
Telfort BV KPN GSM 1800 Sep-98 - 2,400* 12.7%
T-Mobile
Netherlands Deustche Telekom GSM 1800, 3G Feb-99 Nov-05 2,381 12.6%
Orange Nederland France Telecom GSM 1800 -Dec-98 - 1,996 10.5%
TV
Figure 238: Netherlands: TV by household 2005 (Y/E)

Country: Norway
Figure 239: Norway: Key information
Regulator Norwegian Post and Telecom Authority
Regulator URL http://www.npt.no
Liberalised 1998
Fixed-line services
Figure 240: Norway: Fixed-line subscribers: (Q4’05)
BB cable 11%
BB DSL 82%
Broadband penetration (lines per 100 inhabitants)
Source: Informa; company data; Deutsche Bank analysis
Mobile phones
Figure 241: Norway : mobile market
share
2G 3G (2Q’06) (%)
Telenor Mobil Telenor GSM 900/1800, 3G May-93 Dec-04 2,709 68.6%
Netcom Telia Sonera GSM 900/1800, 3G Sep-93 Jun-05 1,242 31.4%
Hutchison Hutchison Telecom 3G 0.0%
TV
Figure 242: Norway: TV by household 2005 (Y/E)
Total households 1,900,003E

Country: Portugal
Figure 243: Portugal: Key information
Regulator ANACOM Autoridade Nacional de Comunicações
Regulator URL http://www.icp.pt
Liberalised 2000
GDP per capita 2005 est. (PPP) €19,000
Fixed-line services
Figure 244: Portugal: Fixed-line subscribers: (Q405)
BB cable 42%
BB DSL 58%
Source: EcTA, EU
Mobile phones
Figure 245: Portugal : mobile market
share
2G 3G (2Q’06) (%)
TMN Portugal Telecom GSM 900/1800, 3G Oct-92 Apr-04 5,343 44.1%
Sonaecom / France
Optimus Telecom GSM 900/1800, 3G Aug-98 Jul-04 2,403 19.8%
Vodafone Portugal Vodafone GSM 900/1800, 3G Oct-92 Feb-04 4,366 36.0%
TV
Figure 246: Portugal: TV by household 2005 (Y/E)

Country: Spain
Figure 247: Spain: Key information
Regulator CMT Comision del Mercado de las Telecommunications
Regulator URL http://www.cmt.es
Liberalised Q4 1998
GDP 2005 est.(PPP) $1,033bn
Fixed-line services
Figure 248: Spain: Fixed-line subscribers: (Q4’05)
BB cable 20%
BB DSL 80%
Source: EcTA, EU
Mobile phones
Figure 249: Spain : mobile market
share
2G 3G (2Q’06) (%)
TEM Telefónica GSM 900/1800, 3G Jul-95 Feb-04 20,655 45.7%
Vodafone Espana
SA Vodafone GSM 900/1800, 3G Jul-95 May-04 13,949 30.9%
(Amena) Retevision
Movil S.A France Telecom GSM 1800, 3G Oct-95 May-04 10,601 23.5%
Dec-06
Xfera TeliaSonera 3G - (planned) - -
TV
Figure 250: Spain: TV by household 2005 (Y/E)

Country: Sweden
Figure 251: Sweden: Key information
Regulator PTS The National Post and Telecom Agency (Post-och Telestyrelsen)
Regulator URL http://www.pts.se
Liberalised 1993
Fixed-line services
Figure 252: Sweden: Fixed-line subscribers: (Q4’05)
BB cable 19%
BB DSL 66%
Source: EcTA, EU
Mobile phones
Figure 253: Sweden : mobile market
share
2G 3G (2Q’06) (%)
TeliaSonera Mobile
Networks AB Telia Sonera GSM 900/1800, 3G Nov-92 - 4,439 46.9%
Tele 2 AB Tele2 GSM 900, 3G Sep-92 - 3,235 34.2%
Telenor Sverige AB Telenor GSM 900/1800, 3G Sep-92 Dec-04 1,676 17.7%
Hi3G Access AB Hutchison Telecom 3G - Jan-04 120 1.3%
TV
Figure 254: Sweden: TV by household 2005 (Y/E)
Total households 4,035,744E

Country: Switzerland
Overview
Figure 255: Switzerland: Key information
Regulator Federal Office for Communications (OFCOM/BAKOM)
Regulator URL http://www.bakom.admin.ch
Liberalised 1998
Fixed-line services
Figure 256: Switzerland: Fixed-line subscribers: (Q4’05)
No. of major competing fixed line operators 3
BB cable(Oct 2005) 36%
BB DSL(Oct 2005) 64%
Broadband penetration (lines per 100 25%
inhabitants)
Source: Informa; company data; Deutsche Bank analysis
Mobile phones
Figure 257: Switzerland : mobile market
share
2G 3G (2Q’06) (%)
Swisscom Mobile Swisscom and
Ltd Vodafone GSM 900/1800, 3G Mar-93 Aug-04 4,469 63.5%
TDC Switzerland
AG (Sunrise) TDC GSM 900/1800, 3G Dec-98 Dec-05 1,289 18.3%
Orange
Communications
SA France Telecom GSM 1800, 3G Jun-99 Sep-05 1,285 18.2%
TV
Figure 258: Switzerland: TV by household 2005 (Y/E)

Country: US
Overview
Figure 259: US: Key information
Regulator Federal Communications Commission(FCC)
Regulator URL http://www.fcc.gov
Liberalised
Population 298,444 (July 2006 est.)
GDP 2005 est.(PPP) $12.31 trillion
Mobile phones
Figure 260: US : mobile market
share
2G 3G (2Q’06) (%)
HSDPA, UMTS, EDGE,
GPRS, TDMA,GSM
Cingular Wireless AT&T and BellSouth 850/1900/3G Jul-96 Jul-04 57,308 30.4%
UMA, EDGE, GPRS,GSM
T-Mobile USA, Inc Deutsche Telekom 1900 Jan-96 23,534 12.5%
CDMA2000 1xEV-DO,
CDMA2000 1x, CDMA
Sprint Nextel (Sprint PCS), WiDEN,
Sprint Nextel Corporation iDEN Apr-99 Aug-02 41,860 22..2%
CDMA2000 1xEV-DO,
Verizon Wireless Verizon CDMA2000 1x, CDMA Apr--00 Jan-02 54,834 29.1%
GSM 850
/1900CDMA2000 1xEV-
DO, CDMA2000 1x,
Alltel Alltel Corp CDMA, AMPS Jan-96 Sep-03 11,085 5.9%
TV
Figure 261:US TV by household 2005 (Y/E)
Total households 113,428

Country: United Kingdom

Figure 262: United Kingdom: Key information
Regulator Ofcom
Regulator URL http://www.ofcom.org.uk
Liberalised 1997
GDP 2005 est.(PPP) $1,818 bn
Fixed Line Services

Figure 263: United Kingdom: Fixed-line subscribers (Q4’05)
BB cable 27%
BB DSL 73%
Source: EcTA, EU
Mobile phones
Figure 264: United Kingdom : mobile market
share
2G 3G (2Q’06) (%)
T-Mobile Deutsche Telekom GSM 1800, 3G Sep-93 Oct-05 16,730 24.7%
O2 Telefónica GSM 900/1800, 3G Dec-93 Feb-05 16,341 24.1%
Vodafone Vodafone GSM 900/1800, 3G Jul-92 Apr-04 16,185 23.9%
Orange France Telecom GSM 1800, 3G Apr-94 Jul-04 14,951 22.1%
Hutchison 3G Hutchison Telecom 3G - Mar-03 3,500* 5.2%
*23 Aug Company data
TV
Figure 265: United Kingdom: TV by household 2005 (Y/E)

Appendix A: European
telecoms SWOT
In the following two figures (Figure 266 and Figure 267 we compare the SWOT of an
incumbent operator with that of a new entrant. Clearly, there are some generic overlaps and
many of the threats to one set of operators are opportunities to others, but there are also
several distinct differences.
Figure 266: Incumbent operator SWOT

Strengths Weaknesses
Strong domestic market share Often running inefficient business models with high cost base (especially
headcount) due to legacy of state ownership
Ownership of local access network Burden of interconnect fees (origination / transit / termination charges)
Strong brand awareness and distribution Difficulties in balancing revenue and market share declines
Benefit from scale economies – can generate strong margins and continues to Often subjects to political influence, where the “good of the state” may be put
generate high returns before economic/value add considerations.
Significant free cash flow allowing operates to mount a defence against
competition
High gross margins
Opportunities Threats
Interestingly, incumbents are technology incubators and therefore can benefit Competition - Local Loop Unbundling (infrastructure light competitors);
from new products such as IPTV alternative infrastructure e.g. Cable; and alternative technologies and platforms
such as VOIP
Opportunity to invest in new markets. Often a strong cash flow position and Regulation - e.g. Ofcom continues to increase competition in the UK through
strong asset base enabling them to raise finance easily introduction of LLU and pressure on wholesale pricing and interconnect rates
Opportunity for cross selling and bundling of products Alternative providers bundling ‘free’ fixed line services such as broadband with
existing products
Figure 267: New entrant SWOT

Strengths Weaknesses
Exploiting declining barriers to entry Lack of infrastructure means they are wholesale dependent
Speed of entry into market Low gross margins
Low capital expenditure enables them to be price competitive Lack scale of large established fixed line / wireless operators
Suitable cost base Risk of being single technology exposed
Opportunities Threats
Local loop unbundling enabling cross-sell and bundling of products into Price competition from incumbents
dual/triple play packages
Further regulatory pressures on incumbents making infrastructure access more Threat of other infrastructure light entrants e.g. MVNOs which also have low
price competitive barriers to entry
First more advantage can drive superior returns Large operators with greater scale and resources can offer wider product range
and new technologies
Can more appropriately segment markets

Appendix B: European UMTS

licenses
Figure 268: Summary of European UMTS licenses (Euro m)
License winner Current parent License cost Spectrum Comments
Austria Telekom Austria Telekom Austria 121 2x 5 MHz + 5 MHz

T-Mobile Deutsche Telekom 120 2x 5 MHz + 5 MHz
Connect Various (Eon, Telenor, France Telecom and TDC) 120 2x 5 MHz + 5 MHz
tele.ring Deutsche Telekom 118 2x 5 MHz + 5 MHz
H3G Hutchison Telecom 114 2x 5 MHz + 5 MHz
TEM Returned to regulator by Telefónica 113 2x 5 MHz + 5 MHz
Total 706
Belgium Proximus Belgacom 150 2x 15 MHz + 5 MHz

Mobistar France Telecom 150 2x 15 MHz + 5 MHz
Base KPN 150 2x 15 MHz + 5 MHz
Total 450
Denmark TDC TDC 129 2x 20 MHz + 5 MHz

Orange Telenor 129 2x 20 MHz + 5 MHz
TeliaSonera TeliaSonera 129 2x 20 MHz + 5 MHz
Total 516
France Orange France Telecom 619 2x 15 MHz + 5 MHz also 1% of 3G revs

SFR SFR (Vivendi) 619 2x 15 MHz + 5 MHz also 1% of 3G revs
Bouygues Bouygues Telecom 619 2x 15 MHz + 5 MHz also 1% of 3G revs
4th license available 2x 15 MHz + 5 MHz
Total 1,857
Finland TeliaSonera TeliaSonera 0 2x 15 MHz + 5 MHz

Elisa Elisa 0 2x 15 MHz + 5 MHz
DNA DNA (Finnet) 0 2x 15 MHz + 5 MHz
Total 0
Germany T-Mobile Deutsche Telekom 8,490 2x 10 MHz + 5 MHz

Vodafone Vodafone 8,420 2x 10 MHz + 5 MHz
mmO2 Telefónica 8,440 2x 10 MHz + 5 MHz
KPN E-Plus KPN 8,390 2x 10 MHz + 5 MHz
Mobilcom Returned to regulator by Mobilcom 8,340 2x 10 MHz + 5 MHz
TEM (Quam) Returned to regulator by Telefónica 8,410 2x 10 MHz + 5 MHz
Total 50,490
Greece Vodafone Panafon Vodafone 176 2x 20 MHz + 5 MHz

Cosmote OTE 161 2x 20 MHz + 5 MHz
Stet Hellas Private equity 147 2x 20 MHz + 5 MHz
Q Telecom Private equity
Total 484
Source: National regulators and company data


Ireland Vodafone Vodafone 114 2x 15 MHz + 5 MHz
mmO2 Telefónica 114 2x 15 MHz + 5 MHz
Smart 57 2x 15 MHz + 5 MHz
Total 336
Italy TIM Telecom Italia 2,417 2x 10 MHz + 5 MHz

Vodafone Omnitel Vodafone 2,448 2x 10 MHz + 5 MHz
Wind Weather Investments 2,427 2x 10 MHz + 5 MHz
H3G Hutchison Telecom 2,427 2x 15 MHz + 5 MHz
TEM (IPSE) Returned to regulator by Telefónica 2,422 2x 10 MHz + 5 MHz
Total 12,141
Netherlands KPN KPN 715 2x 15 MHz + 5 MHz

Vodafone Libertel Vodafone 714 2x 15 MHz + 5 MHz
mmO2 KPN 430 2x 10 MHz + 5 MHz
Dutchtone France Telecom 437 2x 10 MHz + 5 MHz
Ben Deutsche Telekom 395 2x 10 MHz + 5 MHz
Total 2,691
Norway Telenor Telenor 50 2x 15 MHz + 5 MHz

Netcom TeliaSonera 50 2x 15 MHz + 5 MHz
4th license available 50 2x 15 MHz + 5 MHz
Total 200
Portugal TMN Portugal Telecom 100 2x 15 MHz + 5 MHz

Vodafone Telecel Vodafone 100 2x 15 MHz + 5 MHz
Optimus Sonae.com 100 2x 15 MHz + 5 MHz
OniWay Distributed to the other three license holders 100 2x 15 MHz + 5 MHz
Total 400
Spain Telefónica Móviles Telefónica 130 2x 15 MHz + 5 MHz

Vodafone Vodafone 130 2x 15 MHz + 5 MHz
Amena France Telecom 130 2x 15 MHz + 5 MHz
Xfera TeliaSonera 130 2x 15 MHz + 5 MHz
Total 520
Switzerland Swisscom Mobile Swisscom 33 2x 15 MHz + 5 MHz

Sunrise TDC 33 2x 15 MHz + 5 MHz
Orange France Telecom 33 2x 15 MHz + 5 MHz
TEM Returned to regulator by Telefónica 33 2x 15 MHz + 5 MHz
Total 132


Sweden Tele2 Tele2 0 2x 15 MHz + 5 MHz
Vodafone Europolitan Telenor 0 2x 15 MHz + 5 MHz
TeliaSonera TeliaSonera 0 2x 15 MHz + 5 MHz
Total 0
UK Vodafone Vodafone 9,030 2x 15 MHz

mmO2 Telefónica 6,100 2x 15 MHz + 5 MHz
Orange France Telecom 6,200 2x 10 MHz + 5 MHz
T-Mobile Deutsche Telekom 6,061 2x 10 MHz + 5 MHz
H3G Hutchison Telecom 6,636 2x 10 MHz + 5 MHz
Total 34,027
Total 104,950

Appendix C: AWS auctions

On 19 September 2006, the FCC ended the AWS auction in the US. The total spent was
$13.9bn for the 90MHz nationwide spectrum.
In Figure 274 we show the winning bids in term of total spend and by license category, and
in Figure 275, the wining bids on the most valuable licenses. We would also flag however
that Cellco, the Verizon wireless bidding vehicle, spent the most per pop, at around $14.6,
whereas T-Mobile USA spent around $8.8 as we show in Figure 271. To calculate the
population we have attributed to each license the population as defined by the allocation of
bidding units, which does not account for license overlap.
Figure 271: Total license spend per pop ($)
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
SpectrumCo LLC
Denali Spectrum License, LLC

MetroPCS AWS, LLC
T-Mobile License LLC
Cingular AWS, LLC
Barat Wireless, L.P.
AWS Wireless Inc.

Cricket Licensee (Reauction), Inc.
Atlantic Wireless, L.P.

Cellco Partnership d/b/a Verizon
Wireless
Source: FCCs
In Figure 272 we show the cost per license per pop, normalizing for spectrum capacity.

Figure 272: Cost per pop of the REA licenses adjusted for spectrum allocation
Lic. Name Market Name PW Bidder Cost per pop Cost per pop (adjusted for
spectrum allocation)
AW-REA001-F Northeast Cellco Partnership d/b/a Ve 26.7 13.3
AW-REA006-F West T-Mobile License LLC 17.9 8.9
AW-REA003-F Great Lakes Cellco Partnership d/b/a Ve 10.6 5.3
AW-REA002-F Southeast Cellco Partnership d/b/a Ve 11.5 5.8
AW-REA001-D Northeast MetroPCS AWS, LLC 11.0 11.0
AW-REA001-E Northeast T-Mobile License LLC 9.4 9.4
AW-REA005-F Central T-Mobile License LLC 11.7 5.8
AW-REA006-E West Cingular AWS, LLC 7.3 7.3
AW-REA003-E Great Lakes T-Mobile License LLC 6.1 6.1
AW-REA006-D West MetroPCS AWS, LLC 7.1 7.1
Source: FCC
Figure 273: Adjusted cost per pop ($)
14 13.3
12 11
9.4
10 8.9
8 7.3 7.1
6.1
5.8 5.8
6 5.3
0
West - Cingular
MetroPCS
West - TMO
Central - TMO
Northeast -
Northeast -
Northeast -
Great Lakes -
Southeast -
Great Lakes -
MetroPCS
West -
Cellco
Cellco
TMO
Cellco
TMO
Source: FCC

Figure 274: Top 10 bidders by net provisionally winning bids

Bidder PWBs* Population Net PWB* Total ($) PWB* Total ($)
T-Mobile License LLC 120 474,718,308 4,182,312,000 4,182,312,000

Cellco Partnership d/b/a Verizon Wireless 13 192,047,611 2,808,599,000 2,808,599,000
SpectrumCo LLC 137 267,387,437 2,377,609,000 2,377,609,000
MetroPCS AWS, LLC 8 144,544,402 1,391,410,000 1,391,410,000
Cingular AWS, LLC 48 198,768,198 1,334,610,000 1,334,610,000
Cricket Licensee (Reauction), Inc. 99 117,802,839 710,214,000 710,214,000
Denali Spectrum License, LLC 1 58,178,304 274,083,750 365,445,000
Barat Wireless, L.P. 17 41,601,174 127,140,000 169,520,000
AWS Wireless Inc. 154 60,498,394 115,503,000 115,503,000
Atlantic Wireless, L.P. 15 35,803,110 75,294,000 100,392,000
Top 10 Bidders by Number of Provisionally Winning Bids

Bidder PWBs* Population Net PWB* Total ($) PWB* Total ($)
AWS Wireless Inc. 154 60,498,394 115,503,000 115,503,000
SpectrumCo LLC 137 267,387,437 2,377,609,000 2,377,609,000
American Cellular Corporation 84 22,639,578 64,782,000 64,782,000
Cingular AWS, LLC 48 198,768,198 1,334,610,000 1,334,610,000
Red Rock Spectrum Holdings, LLC 42 5,481,709 7,466,000 7,466,000
Cable One, Inc. 30 4,795,074 22,148,000 22,148,000
Cavalier Wireless, LLC 30 13,313,269 14,957,250 19,943,000
Barat Wireless, L.P. 17 41,601,174 127,140,000 169,520,000
Top 5 Bidders by Number of PWBs* In Each Geographic Licensing Group

BEA Bidder PWBs* Population Net PWB* Total ($) PWB* Total ($)
SpectrumCo LLC 136 266,175,900 2,376,176,000 2,376,176,000
AWS Wireless Inc. 48 28,333,075 42,979,000 42,979,000
Cingular AWS, LLC 24 65,557,424 450,314,000 450,314,000
T-Mobile License LLC 17 45,436,013 229,503,000 229,503,000
CMA Bidder PWBs* Population Net PWB* Total ($) PWB* Total ($)
AWS Wireless Inc. 105 28,248,097 69,798,000 69,798,000
American Cellular Corporation 73 16,703,526 53,133,000 53,133,000
Red Rock Spectrum Holdings, LLC 37 4,416,425 6,264,000 6,264,000
REA Bidder PWBs* Population Net PWB* Total ($) PWB* Total ($)
Cellco Partnership d/b/a Verizon Wireles 4 189,240,313 2,798,738,000 2,798,738,000
Cingular AWS, LLC 3 94,260,346 500,232,000 500,232,000
MetroPCS AWS, LLC 2 100,057,254 908,420,000 908,420,000
Space Data Spectrum Holdings, LLC 2 626,932 782,250 1,043,000
* PWB = Provisionally Winning Bid

Source: FCC

Figure 275: Top 10 licenses by provisional winning bids (net) ($)

Geo. Desc. BEA
Lic. Name Market Name PW Bidder Round of PWB* Pops PWB* (Net) ($) PWB* (Gross) ($)
AW-BEA010-B NYC-Long Is. NY-NJ-CT SpectrumCo LLC 20 25,712,577 468,178,000 468,178,000

AW-BEA010-C NYC-Long Is. NY-NJ-CT MetroPCS AWS, LLC 41 25,712,577 363,945,000 363,945,000
AW-BEA064-B Chicago-Gary-Kenosha SpectrumCo LLC 43 10,328,854 228,041,000 228,041,000
AW-BEA160-B LA-Riverside-Orange Cn SpectrumCo LLC 32 18,003,420 215,620,000 215,620,000
AW-BEA064-C Chicago-Gary-Kenosha Cingular AWS, LLC 53 10,328,854 162,082,000 162,082,000
AW-BEA013-B Wash.-Balt. DC-MD-VA- SpectrumCo LLC 47 8,403,130 148,708,000 148,708,000
AW-BEA160-C LA-Riverside-Orange Cn T-Mobile License LLC 34 18,003,420 114,816,000 114,816,000
AW-BEA163-B San Fran.-Oakland-San SpectrumCo LLC 46 9,111,806 80,834,000 80,834,000
AW-BEA057-B Detroit-Ann Arbor-Flint SpectrumCo LLC 50 6,963,637 78,988,000 78,988,000
AW-BEA012-B Phil.-Atl. City PA-NJ-DE SpectrumCo LLC 37 7,309,792 77,838,000 77,838,000
Geo. Desc. CMA

AW-CMA001-A New York-Newark, NY- T-Mobile License LLC 23 16,134,166 396,232,000 396,232,000
AW-CMA003-A Chicago, IL T-Mobile License LLC 51 8,091,720 254,821,000 254,821,000
AW-CMA002-A Los Angeles-Anaheim, Cingular AWS, LLC 33 15,620,448 179,161,000 179,161,000
AW-CMA008-A Washington, DC-MD-VA Cricket Licensee (Reauctio 38 4,182,658 133,150,000 133,150,000
AW-CMA004-A Philadelphia, PA Cricket Licensee (Reauctio 48 5,036,646 82,565,000 82,565,000
AW-CMA005-A Detroit-Ann Arbor, MI T-Mobile License LLC 52 4,775,452 65,187,000 65,187,000
AW-CMA009-A Dallas-Fort Worth, TX Cingular AWS, LLC 36 5,120,721 50,682,000 50,682,000
AW-CMA014-A Baltimore, MD Cricket Licensee (Reauctio 52 2,512,431 43,657,000 43,657,000
AW-CMA006-A Boston-Brockton-Lowell, T-Mobile License LLC 32 4,279,111 36,787,000 36,787,000
AW-CMA012-A Miami-Fort Lauderdale, T-Mobile License LLC 32 3,876,380 35,633,000 35,633,000
Geo. Desc. REA

AW-REA001-F Northeast Cellco Partnership d/b/a Ve 16 50,058,090 1,335,374,000 1,335,374,000
AW-REA006-F West T-Mobile License LLC 15 49,999,164 894,590,000 894,590,000
AW-REA003-F Great Lakes Cellco Partnership d/b/a Ve 14 58,178,304 615,923,000 615,923,000
AW-REA002-F Southeast Cellco Partnership d/b/a Ve 14 49,676,946 572,446,000 572,446,000
AW-REA001-D Northeast MetroPCS AWS, LLC 18 50,058,090 552,694,000 552,694,000
AW-REA001-E Northeast T-Mobile License LLC 17 50,058,090 472,553,000 472,553,000
AW-REA005-F Central T-Mobile License LLC 15 40,343,960 470,290,000 470,290,000
AW-REA006-E West Cingular AWS, LLC 15 49,999,164 362,757,000 362,757,000
AW-REA003-E Great Lakes T-Mobile License LLC 19 58,178,304 356,780,000 356,780,000
AW-REA006-D West MetroPCS AWS, LLC 14 49,999,164 355,726,000 355,726,000
* PWB = Provisionally
Winning Bid
Source: FCC
How Auction 66 worked?

On 9 August, bidding started in the auction of Advanced Wireless Services (AWS) licenses in
the 1710-1755MHz and the 2110-2155MHZ bands (known as Auction 66). In total, 168
applicants qualified to participate and the auction was conducted through the simultaneous
auction of a total of 1,122 licenses and lasted for 161 rounds.

Figure 276: AWS band plan
Source: FCC
Figure 277: AWS band plan (additional details)
Source: FCC
Spectrum and licenses

In each geography there were multiple licenses (up to 6) with different spectrum allocations
(either 20 MHz or 10 MHz). The licenses are split into Cellular Market Areas (CMA), Economic
Areas (EA/BEA) and Regional Economic Areas (REA/REAG).

Figure 278: Breakdown of AWS licenses

Block Frequency Bands (MHz) Total Bandwidth Geographic Area No. of Licenses
Type
A 1710-1720 / 2110-2120 20 MHz CMA 734
B 1720-1730 / 2120-2130 20 MHz EA 176
C 1730-1735 / 2130-2135 10 MHz EA 176
D 1735-1740 / 2135-2140 10 MHz REAG 12
E 1740-1745 / 2140-2145 10 MHz REAG 12
F 1745-1755 / 2145-2155 20 MHz REAG 12
Source: FCC
For example, in the New York area there are six routes to gaining spectrum and we
summarize all the licenses that cover New York City and New York State in Figure 279.
Figure 279: Summary of license options for New York and New York State
Market Description License Frequencies Channel Block Population Bandwidth Bidding Units Upfront Minimum
Number Number (MHz) (MHz) Payment Opening Bid
CMA001 New York-Newark, AW-CMA001-A 1710-1720 / A 16,134,166 20 16,134,000 $16,134,000 $16,134,000

NY-NJ 2110-2120
CMA559 New York 1 - AW-CMA559-A 1710-1720 / A 250,613 20 150,000 $150,000 $150,000
Jefferson 2110-2120
Franklin 2110-2120
Chautauqua 2110-2120
CMA562 New York 4 - Yates AW-CMA562-A 1710-1720 / A 355,651 20 213,000 $213,000 $213,000
2110-2120
CMA563 New York 5 - Otsego AW-CMA563-A 1710-1720 / A 393,028 20 236,000 $236,000 $236,000
2110-2120
Columbia 2110-2120
BEA010 NYC-Long Is. NY-NJ- AW-BEA010-B 1720-1730 / B 25,712,577 20 24,972,000 $24,972,000 $24,972,000
CT-PA-MA-VT 2120-2130
BEA010 NYC-Long Is. NY-NJ- AW-BEA010-C 1730-1735 / C 25,712,577 10 12,486,000 $12,486,000 $12,486,000
CT-PA-MA-VT 2130-2135
REA001 Northeast AW-REA001-D 1735-1740 / D 50,058,090 10 23,877,000 $23,877,000 $23,877,000
2135-2140
REA001 Northeast AW-REA001-E 1740-1745 / E 50,058,090 10 23,877,000 $23,877,000 $23,877,000
2140-2145
REA001 Northeast AW-REA001-F 1745-1755 / F 50,058,090 20 47,754,000 $47,754,000 $47,754,000
2145-2155
Source: FCC
Bidding units
In Figure 279 we highlight the bidding units in New York. A bidding unit was effectively
equivalent to $1 and based on the population in the license area. A bidding unit was required
to participate in the auction for a license. For example, again referring to Figure 279, for an
operator to bid for a Block F license, it needs to have bought 47.754m bidding units. Given
New York is one of the key states in the auction, T-Mobile USA has bought sufficient bidding
units to participate in all 12 license listed (150.19m units at a cost of $150.19m). Although T-
Mobile USA may choose to bid for a REAG license Block F, the company may decide it is
more economic to win Block D.
In Figure 280 we summarize how the US geography was spit by license type and the bidding
units. It is worth highlighting that the final license payments at the conclusion of the auction
were net of the upfront payments (i.e. the cost of the bidding units).

Figure 280: Summary of AWS licenses

Market Area Totals By Channel Block*
Total Number of Total bidding units Total upfront payments Total of minimum
licenses opening bid amounts
Cellular Market Area (CMA) Licenses
Channel Block A (20 MHz) 734 259,332,500 $259,332,500 $259,332,500
Economic Area (EA) (or Basic Economic Area (BEA))

Licenses
Channel Block B (20 MHz) 176 259,342,000 $259,342,000 $259,342,000
Channel Block C (10 MHz) 176 129,678,000 $129,678,000 $129,678,000
Total EA Licenses 352 389,020,000 $389,020,000 $389,020,000
Regional Economic Area Grouping (REAG) Licenses

Channel Block D (10 MHz) 12 129,672,000 $129,672,000 $129,672,000
Channel Block E (10 MHz) 12 129,672,000 $129,672,000 $129,672,000
Channel Block F (20 MHz) 12 259,341,000 $259,341,000 $259,341,000
Total REAG Licenses 36 518,685,000 $518,685,000 $518,685,000
Total 1,122 1,167037,500 $1,167,037,500 $1,167,037,500

Source: FCC
In Figure 281 to Figure 283 we show the relevant market areas for each license and it
highlights the spread in geographic breadth of each.

Figure 281: Map of CMA licenses
Source: FCC

Figure 282: Map of EA licenses
Source: FCC

Figure 283: Map of REA licenses
Source: FCC

Appendix D: License lives

Figure 284: Vodafone: licenses and network infrastructure
Country by region License type License expiry date Network type
Germany 2G December 2009 GSM/GPRS

3G December 2020 W-CDMA
Italy 2G January 2015 GSM/GPRS
Spain 2G July 2023 (1) GSM/GPRS
3G April 2020 W-CDMA
UK 2G See note (2) GSM/GPRS
Other mobile operators

Albania 2G June 2016 GSM
Australia 2G June 2017 (3) GSM/GPRS
3G October 2017 W-CDMA
Czech Republic 2G November 2020 GSM/GPRS
3G February 2025 W-CDMA
Egypt 2G May 2013 GSM/GPRS
Greece 2G September 2012 GSM/GPRS
3G August 2021 W-CDMA
Hungary 2G July 2014 (4) GSM/GPRS
Ireland 2G December 2014 GSM/GPRS
3G October 2022 W-CDMA
Malta 2G September 2010 GSM/GPRS
3G August 2020 W-CDMA
Netherlands 2G February 2013 (1) GSM/GPRS
New Zealand 2G See note (6) GSM/GPRS
3G March 2021 (5) W-CDMA
Portugal 2G October 2006 GSM/GPRS
3G January 2016 W-CDMA
Romania 2G December 2011 GSM/GPRS
3G March 2020 W-CDMA
Notes:
(1) Date relates to 1800MHz spectrum licence. Vodafone Netherlands and Vodafone Spain also have separate 900MHz spectrum licences which expire in March 2010 and February 2020, respectively
(2) Indefinite licence with a one yea notice of revocation
(3) Date refers to 900MHz spectrum licence. Various licences are held for 1800MHz licences, which are issued by specific regional regulators. the earliest expires in June 2013 and the latest in March 2015
(4) There is an option to extend this licence for seven years
(5) Vodafone New Zealand owns three GSM 900 licences (2x21MHz) and one GSM18000 licence (2x15MHz). The GSM900 licences expire in November 2011, July 2012 and September 2021. The GSM 1800 licence expires in
March 2021
Source: Vodafone 2006 annual report

Figure 285: Telefónica: licenses and network infrastructure

Country by region License License expiry date Extension period Network type Frequency
type
Spain 3G April 2020 10 years UMTS 2GHz

2G February 2010 5 years GSM 900MHz (12 bands)
2G June 2020 5 years GSM 900MHz (4 bands)
2G July 2023 5 years DCS 1800MHz (2 bands)
Morocco 2G August 2024 5years GSM 900MHz
Fixed April 2036 5years WiMAx
3G July 2006 25years UMTS 2GHz
Brazil Varies by region: between Must be solicited 30 months CDMA, CDMA 1XRTT, 850MHz
2007 - 2020 before expiration CDMA EVDO, TDMA,
GSM
Other Latam countries
Mexico 2G 2018/2025 20 years CDMA, GSM 1900MHz
Mexico- Other Northern region 2G 2010 20 years CDMA, GSM 850MHz
Venezuela 2G May 2011 20years CDMA, 1X EVDO CDMA 850MHz
Colombia 2G March 2014 10yrs+10yrs GSM, CDMA 1XRTT, 850/1900MHz
TDMA
Perú 2G 2011/2012 20years CDMA/CDMA 1XRTT, 850MHz/1900MHz
GSM
Ecuador 2G November 2008 15 years GSM, CDMA 1XRTT. 850MHz
Chile 2G 2032/2033 30 years TDMA, GSM, CDMA 850MHz/1900MHz
Argentina 2G Unlimited TDMA, GSM, CDMA 850MHz/1900MHz
Uruguay 2G 2022/2024 - CDMA, GSM 850MHz/1900MHz
Panama 2G February 2016 20years TDMA, GSM, CDMA 850MHz
Guatemala 2G April 2014 15 years CDMA/GSM 1900MHz
El Salvador 2G 2018/2019/2021 20 years CDMA/GSM 850MHz/1900MHz
Nicaragua 2G July 2013 To be negotiated 2 yrs TDMA, GSM, CDMA 850MHz
before end, another 10 yr.
Period
Czech Republic 2G 2016 GSM 900MHz
2G 2019 GSM 1800MHz
3G GPRS, 1X EVDO CDMA
O2
UK 2G None. Can be revoked with a GSM 900 MHz (2x16.8MHz)
minimum of one year's notice.
2G As above GSM 1800 MHz (2x5.8MHz)
3G 31st December 2021 UMTS 2100 MHz (2x10 MHz +
5MHz unpaired)
Germany 2G 31st December 2016 GSM 1800 MHz (2 x 22.5 MHz
paired) until 31.01.2007,
from 01.02.2007 (2x17.5
MHz paired) due to
assignment of 2G 900
MHz
2G 31st December 2016 GSM 900 MHz (2x5 MHz
paired)
3G 31st December 2020 UMTS 2 GHz (2 x 9.9 MHz
paired)
Ireland 2G 2011 GSM 900 MHz
2G 2015 GSM 1800 MHz
3G 2022 UMTS 2100 MHz
Isle of man 2G 2019 GSM
3G 2019 UMTS
Source: Telefónica annual report

Figure 286: France Telecom: licenses and network infrastructure

type
France 2G March 2021 GSM 900MHz / 1800MHz

3G August 2021 UMTS
UK 2G Annual renewal GSM 900MHz
3G December 2021 UMTS 10MHz (2 bands), 5MHz
(1 band)
Spain 2G GSM 900MHz
2G GSM 1800MHz
3G April 2020 UMTS
Poland 2G July 2014 GSM 900MHz
August 2012 GSM 1800MHz
3G January 2023 UMTS
Belgium 2G GSM 900MHz / 1800MHz

3G March 2021 UMTS
Netherlands 2G GSM 900MHz / 1800MHz
3G December 2016 UMTS
Romania 2G 2011 GSM 900MHz
3G March 2020 UMTS
Slovakia 2G GSM 900MHz / 1800MHz
3G July 2022 UMTS
Switzerland 2G GSM 1800MHz
3G December 2016 UMTS 15MHz (2 bands)
Moldavia 2G GSM 900MHz
Egypt 2G GSM 900MHz
Botswana 2G GSM 900MHz
Cameroon 2G GSM 900MHz
Ivory Coast 2G GSM 900MHz / 1800MHz
Madagascar 2G GSM 900MHz
Dominican Republic 2G GSM 900MHz
Senegal 2G GSM 900MHz / 1800MHz

Mali 2G GSM 900MHz
Jordan 2G GSM 900MHz
Mauritius 2G GSM 900MHz / 1800MHz
Austria 3G November 2020 UMTS

Portugal 3G 2015 UMTS
Source: France Telecom annual report

Figure 287: Telecom Italia: licenses and network infrastructure

type
Italy 2G December 2015 GSM 900MHz

2G December 2015 GSM 1800MHz
3G December 2022 UMTS 1920-1980Mhz, 2110-
2170MHz, 1900-
1920MHz, 2010-
2025MHz
Brazil
TIM Celular 2G Varies between 2016 - 2018 GSM
Maxitel 2G Varies between 2012 - 2013 GSM, TDMA
TIM Participaçoes 2G Varies between 2012 - 2013 GSM
Source: Telecom Italia annual report
Figure 288: Deutsche Telekom: licenses and network infrastructure

type
Germany 2G December 2009 GSM 900MHz (2 bands)

2G December 2009 GSM 1800MHz (2 bands)
3G December 2020 UMTS 2GHz
UK 2G Annual renewal GSM
Austria 2G December 2015 GSM 900MHz
2G December 2019 GSM 1800MHz
3G November 2020 UMTS
Netherlands 2G February 2013 GSM 1800MHz
Czech Republic 2G October 2024 GSM 1800MHz
2G April 2015 UMTS 872MHz
3G October 2024 UMTS
Hungary 2G June 2008 GSM 900MHz
2G October 2014 GSM 1800MHz
Croatia 2G October 2009 GSM 900MHz
3G October 2024 UMTS
Slovakia 2G August 2011 GSM 900MHz
2G July 2011 GSM 1800MHz
3G June 2022 UMTS
USA 3G 15 year license (2006 auction) UMTS
Source: Deutsche Telekom annual report

Appendix E: European IPOs

Figure 289: Selected list of European telecoms IPOs
Company name Currency Offering price Date
TDC DKK 310 28/04/1994

Europolitan Vodafone SEK 74 27/05/1994
Royal KPN NLG 49.75 13/06/1994
Telewest Communication GBp 182 22/11/1994
Ceske Radiokomunica CZK 4100 01/03/1995

Portugal Telecom PTE 2800 02/06/1995
Orange Plc GBp 205 27/03/1996

Hellenic Telecom GRD 4000 19/04/1996
Netcom ASA NOK 91 03/05/1996
Fibernet Group GBp 100 18/06/1996
Deutsche Telekom DEM 28.5 18/11/1996
Vodafone Portugal PTE 7950 10/12/1996
Mobilcom AG DEM 62.5 10/03/1997

Magyar Telekom HUF 730 14/11/1997
Energis Pls GBp 290 09/12/1997
Drillisch DEM 86 22/04/1998

SES Global LUF 6000 06/07/1998
Equant $ 27 21/07/1998
Swisscom CHF 340 05/10/1998
Mobistar BEF 1235 06/10/1998
Telekomunikacja PLN 15.2 18/11/1998
Vodafone Panafon GRD 5100 07/12/1998
Eesti Telekom EEK 85 11/02/1999

Debitel AG EUR 31 29/03/1999
Vodafone Libertel EUR 21 15/06/1999
Eircom EUR 3.9 08/07/1999
Kingston Communication GBp 225 12/07/1999
Versatel Telecom EUR 10 23/07/1999
Redstone GBp 120 25/10/1999
Tiscali EUR 46 27/10/1999
KPNQwest EUR 20 09/11/1999
Thus Group GBp 310 10/11/1999
PT Multimedia EUR 27 15/11/1999
Jazztel EUR 17 09/12/1999
Source: Bloomberg and company data

Figure 290: Selected list of European telecoms IPOs continued

Company name Currency Offering price Date
Carrier1 International EUR 87 24/02/2000
Song Networks Holding SEK 160.79 16/03/2000
Completel Europe EUR 17.5 28/03/2000
Fastweb EUR 160 30/03/2000
Eutelia EUR 105 19/04/2000
QSC EUR 13 19/04/2000
Sonaecom EUR 10 02/05/2000
Pipex Communication GBp 19 04/07/2000
Turkcell Ilesti TRL 44000 11/07/2000
Cosmote Mobile Telecom GRD 3200 12/10/2000
Telekom Austria EUR 9 21/11/2000
Telefónica Móviles EUR 11 22/11/2000
Telenor NOK 42 04/12/2000
Orange SA Euro 10.0 13/02/2001

Vanco GBp 103 06/11/2001
Iliad EUR 16.5 29/01/2004

eircom group EUR 1.55 19/03/2004
Belgacom EUR 24.5 22/03/2004
Virgin Mobile GBp 200 21/07/2004
Smart Telecom GBp 15 10/09/2004
Telenet EUR 21 11/10/2005

Source: Bloomberg and company data

Appendix F: European
operator key dates
Operator time lines
The following figures [Figure 291 to Figure 306] show the time lines for selected operators,
where we highlight key factors in each company’s history, such as management changes,
capital raisings/IPOs and M&A transactions.
Figure 291: Belgacom’s time line
•Belgacom •Commences joint

created as a venture with Swisscom
single stand- in the fixed-line
alone entity business
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
•Shares floated on
Brussel Euronext,
which also marks the
end of the state
monopoly
Source: Deutsche Bank and company data
Figure 292: COLT’s time line
•Raises •Raises •Raises

•COLT is founded by
£204m in new £1.3bn in new £494m in new
Fidelity Investments
capital capital capital
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
•Floated •Raises •Raises •Changes domicile to

shares on LSE £626m in £724m in Luxembourg and reporting
and NASDAQ new capital new capital into Euro

Figure 293: Deutsche Telekom’s time line
•Restructured into four

major business line: T-
•Management
Online, T-Com, T-Mobile, •Mr. Lothar Pualy is
•Deutsche reshuffle Mr. Kai-Uwe
T-Systems named the new CEO
Telekom AG is Ricke elected as the
•T-Online is floated new CEO, Mr. Rene of T-Systems
formed; •Liberalization of
•Acquires Matav separated from German telecom •Acquires Debis, the Oberman (T-Mobile) •Revised 3-year
(Hungary) the German market systems division of Daimler and Mr. Thomas business plan (Nov)
Postal Service Chrysler Haltorp (T-Online)
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
•Acquires One2One (UK). •Acquires VoiceStream

•DT is floated
•Acquires 22.5% stake in (US) and Powertel •T-Online International is
Polska Telefonia Cyfrowa (US) merged with Deutsche
(Poland) Telekom
•Acquires tele.ring
(Austria)
•Profit warning and
revised FCF focus (Aug)
•Management and
strategy changes (Nov
and Dec)
Figure 294: France Télécom ’s time line
•Acquired 54.1% •Mr. Didier Lombard

stake Equant by appointed Chairman
selling Global One to and CEO of FT
•Becomes Equant •Divested stake in
public limited •Acquiers Orange •Increased Mobilcom
company (UK) capital by
•Acquired remaining
EUR14.85bn
•Global One •Finished acquiring stake of Equant
was formed a interests in NTL (UK) •Divested both
•Sold a further 8% of
joint venture Telecom
France •Acquired •13% of Orange is Pages Juanes
between DT, FT Argentina and
Telecom 6.4% stake in floated on Euronext •Acquires 80% of
and Sprint CTE Salvador
founded NTL Paris and LSE Amena (Spain)
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
•FT is •Mr. Thierry •Acquired •Michel

•Internet subsidiary minority
floated Wanadoo is floated Breton Combes
appointed interests of resigns as
•FT acquires the Orange S.A. and
CEO CFO
remaining stake of Wanadoo S.A.
Global One •Floated 36% of
•Acquired 35% PagesJuanes
Telekomunikacja
Polska SA (Poland)
•Acquires 28.2%
Mobilcom
(Germany)

Figure 295: KPN’s time line
•Acquires
Netherlands and
German UMTS
licences
•NTT Docomo
acquires 15% of
•Demerged from
KPN Mobile for •Acquires Telfort
PPT Post and
Euro 4bn Beheer BV
becomes Royal
(Netherlands)
KPN NV
1998 1999 2000 2001 2002 2003 2004 2005 2006
•Acquires E-Plus •Mr. Ad

(Germany) Scheepbouwer
•Issued Euro 4bn appointed CEO
in new capital •Raises Euro 4.8bn
in share issue
Figure 296: OTE’s time line
•Acquires Armentel
(Armenia) •Cosmote •Cosmote
•Acquires 35% in established acquires from
RomTelecom (Romania) activities in OTE stakes in
FYR of Globul,
•Third Public Offering,
Macedonia, •Increases Cosmorom
also listing on NYSE
•OTE later called stake in (Romania)
•Founded Cosmote in Cosmofon RomTelecom and
floated corporation with Telenor to 54% Cosmofon
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
•Second Public •Cosmote acquires 80% stake •Transfers •Transfers •Cosmote

Offering in AMC (Albania) management shares of acquires
•Acquires 20% •Starts operations in Bulgaria, and control of Globul to Germanos
stake in through Globul Globul and Cosmote
Telekom Cosmofon to
•Cosmote floated
Serbia Cosmote

Figure 297: Portugal Telecom’s time line
•PTM.com is floated
on Eurronext Lisbon
•Portuguese •PT Multimedia acquirers PTM.com
Government reduces •PT acquires 100% of PTM.com, 24.75% interest in
its interest in TP to Paginas Amarelas and 50% interest in Sportinveste
•Floated on 6.93% Multimedia all from PT Multimedia
Lisbon and •Acquirers •Sistemas de
TCP (Brazil) •Joint venture with Telefónica Moviles in Brazil under
NYSE Informacao is created the brand name Vivo
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
•Enters in a corporation •PT Multimedia is formed •PT Multimedia acquires •Vivo acquired
agreement with •PT Multimedia acquires Lusomondo Tele Centro
Telefónica mainly SAPO an internet portal •PT Multimedia is Oeste (Brazil)
concerning international •In a joint venture with floated on Euronext
investments in Latin Telefónica Moviles and Lisbon
America other Moroccan business, •Acquires 81.6% stake
PT won GSM licence in in Global Telecom
Morocco (Medi Telecom) (Brazil)
Figure 298: Swisscom’s time line
•Unisource is
broken up
•Mr. Jens Alder
is appointed
•Became the •Acquires a
CEO of
third party in 97.99% stake in
Swisscom
Unisource Antena Hungaria
Group
initially a joint •Acquires a •Mr. Carsten
venture between •Acquirers 49% stake in Schloter
Telia and KPN Debitel Cinegrade AG appointed CEO
(Germany)
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
•Floated on •Formed a •Divested 95% •Attempts to

Zurich Stock partnership with of its stake in buy eircom
Exchange Vodafone , which debitel before Swiss
also bought 25% •Attempts to government
of Swisscom buy Telekom veto
Mobile AG Austria before
Swiss/Austrian
governments
veto

Figure 299: Telecom Italia’s time line
•TIM
acquired
25% of •Olimpia (Italy)
mobilkom acquires 27.7% of
(Austria) Olivetti, which •Merged into
•Merged own 55% of TI Olivetti, the
•Telecom into STET •Launches new entity is
Italia is (Italy), the nationwide mobile called Telecom
formed by new group •Olivetti in Peru and Brazil Italia
merging takes the acquires •Seat Pagina •Divests its last •Mr Tronchetti
five Italian name 55% of Gialle completes stake in Provera
telecom Telecom shares in a public exchange Telekom resigns as
operators Italia TI offer Austria Chairman
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
•Telecom •Acquires •Merges •SEAT •Acquired

Italia Mobile assets in Seat Pagina Pagine remaining
(TIM) is Brazil Gialle and Gialle spins stake of TIM
founded and Tin.it (fully off •Divest TIM
floated owned businesses Hellas
subsidiary) non related (Greece)
to Yellow
Pages into
Telecom
Italia Media,
which is
floated
Figure 300: Telefónica’s time line
•Tender offers
for Telefónica
Argentina,
Telefónica de •Acquires
Peru, Telesp •Forms Vivo some of Bell
and Tele joint venture South's Latin •Completes
Sudeste in Brazil with American acquisition of
•Acquires Portugal wireless Telefónica
•100m •Mr. Juan Lycos Inc Telecom assets Móviles
shares sold •Acquires •Acquires
Villalonga •Mr. Cesar •Acquires • Completes
by Telesp mediaways in acquisition of
appointed Alierta Telefónica
government (Brazil) Germany O2 (UK)
CEO appointed CEO Movil de Chile
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
•Full •Reorganises group as •Acquires •Acquires

privatization Telefónica Móviles, outstanding Terra outstanding
due to Telefónica Datacorp, Network shares Terra Network
deregulation Terra, Telefónica Publidad •Acquires shares
by EU e informacion (TPI), outstanding •Acquires
Telefónica Media Telefónica Cesky Telecom
•Telefónica Móviles floated Contenidos
•Telefónica Móviles wins
UTMS licences Spain,
Germany, Italy,
Switzerland and Austria

Figure 301: Telekom Austria’s time line
•Independent
•Acquired a 30% •Acquires the
company was
stake in VIPnet remaining stake of
created out of
(Croatia) VIPnet (Croatia)
the Post- und
•New company •Acquires •Mr. Boris Nemsic
Telegrafenverw •Telecom Italia
Telekom Austria AG controlling is appointed CEO
altung (PTV): sells off its shares
formed stake of 75% in of Telekom
Post- und OIAG sells a part
Si.mobil Austria Group
Telekom •Telecom Italia of its shares
(Slovenia) and CEO of
Austria AG acquired a 25% stake making their
mobilkom austria
(PTA AG) in TA holding 30%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
•Telecom •Acquires Czech •Acquires the •Acquires

Italia Mobile Online SA remaining 25% 100% in
acquires 25% •Floated on the stake of Mobiltel
of mobilkom Vienna Stock mobilkom from Bulgaria
Exchange Telecom Italia
Mobile
Figure 302: Telenor’s time line
•Acquires
75% of OAO
Comicom •Acquires the
(Russia) remaining
•Acquires stake in
69.30% Pannon GSM
stake of (Hungary)
•Acquires 25% •Acquires
DTAC •Mr. Jon
stake of Pannon 56.51% •Acquires
(Thailand) Fredrik
GSM (Hungary) stake of remaining
•Acquires Baksaas is •Acquires
•Started Telenor Kyivstar stake in
53.3% stake appointed Mobil63
Mobil business GSM Sonofon
in Sonofon CEO of (Serbia)
in Norway (Ukraine) (Denmark)
(Denmark) Telenor
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
•Acquires •Acquires •Acquires •Acquires Vodafone

17.45% stake 29.91% ComSat Sweden
in ONE stake in Mobile •Acquires
(Austria) VimpelCom •Acquires Bredbandsbolaget
(Russia) DiGi.com (Sweden) and
(Malaysia) Cybercity (Denmark)
•Started
operation in
Sweden

Figure 303: TeliaSonera’s time line
•Telia and
Sonera •Acquires
•Acquires
merged and Xfera Móviles
Denmark
formed the (Spain)
Telecommunicati
new entity of •Acquires
on operation of
Telia Sonera NextGenTel
Orange SA
1998 1999 2000 2001 2002 2003 2004 2005 2006
•IPO in •Acquires
•Acquires UAB
November Volvik
Omnitel
Gruppen
(Lithuania)
•Divested Com
Hem AB
(Sweden) to
Private group
lead by EQT
Figure 304: Telia’s time line
•Enters into an
agreement with Sonera
and CT Mobile to
combine 8 local
Russian carries into one
nationwide carrier
•Divested Siris (part of Megafon
Unisource) to Deutsche •Mr. Anders Igel is
Telekom appointed CEO of Telia
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
•Acquires Netia
Holdings
(Poland)
•Acquires
NetCom ASA
•IPO in June

Figure 305: Sonera’s time line
•Acquires a 35% stake

of International GSM
Business of Fintur
Holdings BV for
EUR140m, Fintur holds
•Sonera participated in majority stakes in K Cell
the forming of Turkcell, (Kazakhstan), Azercell
and was one of the (Azerbaijan), Geo Cell
original owners (Georgia) and Mold Cel
(Moldova)
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
•Acquired 19.4% •Acquires an

of AOC (US) additional
23.55% share in
International
GSM Business of
Fintur Holdings
BV
Figure 306: Vodafone’s time line
•Mr. Chris Gent appointed CEO •Acquires Eircell

•VOD is reorganized in three •Acquires 25% of
main components Vodafone Swisscom Mobile
Corporate, Vodafone Retail •Acquires 17.8% of
and Vodafone Connect Airtel Movil to up its
•Agreed to offer fixed-lined stake to 91.6% •Increases holding in
services through Energis Telecel and Libertel
•New functions Group
Marketing and Group
•Acquires
technology and Business
New
Integration are formed •Acquires
Zealand
•Vodadata •Acquires •Mr. Arun Sarin Telsim
GSM
is created Packnet appointed CEO (Turkey)
Network
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
•20% of Racal •Vodafone launches GSM net •Launch Pre- •Acquires •Acquires
Telecoms •Vodafone and Racal Pay service Mannesmann AG Mobifon
Division is demerge fully in UK (Germany) S.A.(Romania)
floated •Divested Orange and Oskar
to France Telecom Mobile (Czech
Republic)
•Form partnerships in Germany,
South Africa, Australia, Fiji and
Greece. Enables VOD buy •Vodafone PLC merges with Air
licences in these markets Touch Communications
•Form partnerships in •Agrees to create a new •Acquires Vivendi's part in
Netherlands, Hong Kong and wireless business network in the joint venture Vizzavi
France. Enables VOD to buy USA in corporation with Bell •Gains 41% of SFR post
licences in these markets South Atlantic merger with Cegetal

Figure 307: Belgacom

Event Type Year Description
Founding 1987 Belgacom came to be as a single standing entity

IPO 2004 Shares are floated on Brussel Euronext, which also marks the end of the state monopoly.
Joint Venture 2005 Commenced joint venture with Swisscom in the fixed-line business.
Figure 308: Colt

Founding 1992 COLT is funded by Fidelity Investment

IPO 1996 Floated shares on LSE and NASDAQ
Capital Raise 1997 Raises GBP 204m in new capital
Capital Raise 1999 Raises GBP 1.3bn in new capital
Figure 309: Deutsche Telekom

Acquisition 1993 Acquires Matav (Hungary).

Restructuring 1995 Deutsche Telekom AG is formed as a single standing shareholder company separated from the German Postal Service.
IPO 1996 DT is floated through a IPO.
Liberalization 1998 Regulators liberalizes the German telecom market.
Acquisition 1999 Acquires British mobile operator One2One for EUR 7bn.
Acquisition 1999 Acquires 22.5% stake in Polska Telefonia Cyfrowa, which also increased DTs Russian holdings.
Restructuring 2000 Restructured into four major business line: T-Online, T-Com, T-Mobile, T-Systems.
IPO 2000 T-Online is floated as T-Online Holding AG.
Acquisition 2000 Acquires Debis, the systems division of Daimler Chrysler.
Acquisition 2001 Acquires VoiceStream and Powertel for equity values of Euro 29bn and Euro 4bn, respectively.
Management 2002 Management reshuffle Mr. Kai-Uwe Ricke is elected as the new CEO, Mr. Rene Oberman (T-Mobile) and Mr. Thomas Haltorp
(T-Online).
Management 2005 Mr. Lothar Pualy is named the new CEO of T-Systems.
Merger 2006 T-Online International is merged with Deutsche Telekom.
Acquisition 2006 Tele.ring (Austria) is acquired for EUR 1.3bn.
Management 2006 Rene Obermann replaces Kai-Uwe Ricke and instigates a wider change in management and strategy

Figure 310: France Telecom

Founding 1988 France Telecom is founded

Separation 1991 Became an autonomous provider of public service
Reformation 1996 Became a public limited company
Joint Venture 1996 Global One was formed a joint venture between DT, FT and Sprint. FT invested EUR 340m in the joint venture.
IPO 1997 The firms shares started trade at Euronext Paris and New York.
Acquisition 1999 Acquired 6.4% stake in NTL for EUR 1200m.
IPO 2000 Internet subsidiary Wanadoo is floated on Paris Stock Exchange
Acquisition 2000 FT acquires the remaining stake of Global One.
Acquisition 2000 Acquires 35% Telekomunikacja Polska SA (Poland)
Acquisition 2000 Acquires 28.2% Mobilcom (Germany)
Acquisition 2001 Acquires 54.1% stake Equant by selling Global one to Equant.
Acquisition 2001 Acquires Orange (UK) for EUR 35.5bn.
Acquisition 2001 Finished acquiring interests in NTL (UK)
Floating 2001 13% of Orange is floated on Premier Marche on Euronext Paris and London Stock Exchange
Management 2002 Mr. Thierry Breton is appointed CEO.
Capital increase 2003 Increased capital by EUR 14.85bn, through a secondary share offering.
Divesture 2003 Divested both Telecom Argentina and CTE Salvador
Acquisition 2004 Exercised a option programme to up their stake in TPSA.
Buy-Back 2004 Bought back minority interests of Orange S.A. and Wanadoo S.A.for EUR 245m respectively EUR 1276bn.
IPO 2004 Floated 36% of PagesJuanes. Proceeds were EUR 1.46bn.
Management 2005 Mr. Didier Lombard was appointed Chairman and CEO of FT.
Divesture 2005 Divested its whole stake in Mobilcom EUR 265m .
Acquisition 2005 Acquired remaining stake of Equant for EUR 214 m.
Divesture 2005 Sold a further 8% of PagesJuanes. Proceeds were EUR 440m.
Acquisition 2005 Acquires 80% of Amena (Spain) for EUR 8.4bn.
Figure 311: KPN

Founding 1998 Demerged from PPT Post and becomes Royal KPN NV
Acquisition 1999 KPN Mobile acquires 77.49% of E-Plus (Germany) for EUR 19bn
Transfer 1999 transferred all mobile operations to KPN Mobile.
Capital Increase 2000 Raised EUR 22.3bn in debt
Acquisition 2000 Acquires 15% of Hutchison for EUR 1.5bn
Capital Increase 2000 Increased capital by EUR 4.8bn to pay off debt
Divesture 2000 NTT Docomo acquires 15% of KPN Mobile for EUR 4bn
Acquisition 2000 KPN Mobile acquires Netherlands and Germany UMTS License
Management 2001 Mr. Ad Scheepbouwer appointed CEO
Dilution 2002 NTT DoCoMo share in KPN Moblie was diluted to 2.16%
Acquisition 2005 KPN buys NTT DoCoMo share in KPN Mobile
Acquisition 2005 Acquires Telfort Beheer BV (Netherlands) for EUR 980m

Figure 312: OTE

IPO 1996 OTE floated

SEO 1997 Second Public Offering
Acquisition 1997 Acquires 20% stake in Telekom Serbia
Acquisition 1998 Acquires Armentel (Armenia) for EUR 143m
Acquisition 1998 Acquires 35% in Romtelecom (Romania) for EUR 580m (USD 675m)
SEO 1998 Third Public Offering, also listing on NYSE
Founding 1998 Founded Cosmote in corporation with Telenor
Acquisition 2000 Cosmote acquires 80% stake in AMC (Albania) for EUR 92m (USD 85.6m)
Founding 2000 Starts operation in Bulgaria, through Globul
IPO 2000 Cosmote floated
Establishing 2001 Cosmote established activities in FYR of Macedonia, later called Cosmofon
Transferring 2002 Transfers management and control of Globul (Bulgaria) and Cosmofon (FYROM) to Cosmote
Acquisition 2003 Increases stake in Romtelecom to 54% for EUR 235m (USD 273m)
Transfer 2004 Transfers the shares of Globul to Cosmote
Acquisition 2005 Cosmote acquires minority stakes of Globul for EUR 614m
Acquisition 2005 Cosmote acquires Cosmorom (Romania) and Cosmofon (FYR of Macedonia) for EUR 120m (ROL 4340505.5m)
Acquisition 2006 Cosmote acquires Germanos for Euro 1.3bn
Figure 313: Portugal Telecom

IPO 1995 Stocks start trade at the Lisbon, London and NYSE. This also marks the beginning of the privatization process.
Alliance 1997 Enters in a corporation agreement with Telefonica mainly concerning international investments in Latin America.
Acquisition 1998 Acquirers TCP (Brazil)
New Business 1999 PT Multimedia is formed, which marked the beginning of PTs march into the media field, including media, cinema. Cable
Line vision and internet services.
Acquisition 1999 PT Multimedia acquires SAPO an internet portal, which later form the business unit PT.COM.
Joint Venture 1999 In a joint venture with Telefonica Moviles and certain Moroccan entities, PT bid for a GSM license in Morocco and formed
Medi Telecom. The initial investment was EUR 182m (USD 166m).
IPO 2000 PTM.com is floated on Eurronext Lisbon.
Privatization 2000 Portuguese Government ends its privatization campaign started in 1995 and reduces its interest in TP to 6.93%.
New Business 2000 Sistemas de Informacao is created, which today is one of Portugal's largest companies in the consulting and information
Line system sector.
Acquistion 2001 PT Multimedia acquires Lusomondo.
IPO 2001 PT Multimedia is floated on Euronext Lisbon, PT still retains majority interest.
Acquisition 2001 Acquires 81.6% stake in Global Telecom (Brazil) for EUR 337m (BRL 902.6m)
Acquisition 2002 PT Multimedia acquirers all PTM.com shares of the Euronext Lisbon exchange and delists the company.
Acquisition 2002 Acquires 100% of PT.com, 24.75% interest in Paginas Amarelas and 50% interest in Sportinveste Multimedia at the
aggregate price of EUR 199m.
Joint Venture 2002 Joint venture with Telefonica Moviles in Brazil under the brand name Vivo

Figure 314: Swisscom

Joint Venture 1993 Became the third party in Unisource initially a joint venture between Telia and KPN, the initial investment was CHF 100m.
Acquisition 1998 Acquired 50% plus one share interest UTA Telecom (Austria)
IPO 1998 The company is floated on Zurich exchange and also as ADS
Divesture 1999 The joint venture between Telia, KPN and Swisscom; Unisource is broken up.
Management 1999 Mr. Jens Alder is appointed CEO of Swisscom Group.
Partnership 2001 Formed a partnership with Vodafone , which also bought 25% of Swisscom Mobile AG
Acquisition 2003 Acquires a 49% stake in Cinegrade AG
Acquisition 2004 Attempts to buy Telekom Austria before Swiss/Austrian governments veto
Divesture 2004 Divested 95% of its stake in debitel for a price of CHF 1bn (EUR 640m).
Acquisition 2005 Attempts to buy eircom before Swiss government veto
Acquisition 2006 Acquires a 97.99% stake in Antena Hungaria, the deal was completed in two moves.
Management 2006 Mr. Carsten Schloter is appointed CEO of the Swisscom Group
Figure 315: Sonera

Joint Venture 1993 Sonera participated in the forming of Turkcell, and was one of the original owners.
IPO 1998 Shares starts to trade on Helsinki and also as ADS.
Acquisition 1998 Acquired a 27.5% stake in UAB Omnitel (Lithuania)
Acquisition 1998 Acquired 19.4% of AOC (US), with an investment of USD 200m
Acquisition 2000 Acquires a 35% stake of International GSM Business of Fintur Holdings BV for EUR 140m, Fintur holds majority stakes in K
Cell (Kazakhstan), Azercell (Azerbaijan), Geo Cell (Georgia) and Mold Cel (Moldova).
Acquisition 2002 Acquires an additional 23.55% share in International GSM Business of Fintur Holdings BV, totalling its direct and indirect
holdings to 74%.
Figure 316: Telecom Italia

Founding 1994 Telecom Italia is formed by merging five Italian telecom operators
Founding 1995 Telecom Italia Mobile (TIM) is founded and floated on the Milan Stock Exchange.
IPO 1997 Floated 20% stake of TI.
Acquisition 1997 TIM acquired 25% of mobilkom (Austria).
Merger 1997 Merged into STET (Italy), the new group takes the name Telecom Italia
Acquisition 1998 Acquires assets in Brazil
Acquisition 1999 Olivetti acquires 55% of shares in TI
Merger 2000 Merges Seat Pagina Gialle and Tin.it (fully owned subsidiary) and then the entitiy is put into SEAT with a TI stake
Acquisition 2001 Olimpia (Italy) acquires 27.7% of Olivetti, which own 55% of TI.
Launches 2001 Launches nationwide in Peru and Brazil
Divesting 2001 SEAT Pagina Gialle completes a public exchange offer
Spin off 2003 SEAT Pagine Gialle spins off busineses non related to Yellow Pages into Telecom Italia Media, which is floated.
Merger 2004 Merged into Olivetti, the new entity is called Telecom Italia.
Divest 2004 Divests its last stake in Telekom Austria
Acquisition 2005 Acquired remaining stake of TIM for EUR 13.8bn, delised shares.
Divest 2005 Divest TIM Hellas (Greece)
Management 2006 Mr Tronchetti Provera resigns as Chairman. Replaced by Mr Rossi.

Figure 317: Telefónica

IPO 1995 Floated 100m shares

Privatization 1997 Full privatization due to deregulation by EU.
Acquisition 1998 Acquires Telesp (Brazil)
Reorganization 2000 Reorgainises group as Telefonica Moviles, Telefonica Datacorp, Terra, Telefonica Publidad e informacion (TPI), Telefonica
Media.
IPO 2000 Telefónica Móviles is floated
UMTS 2000 Telefónica Móviles win UTMS license Spain, Germany (EUR 8471m), Italy (EUR 3259m), Switzerland (EUR 32.5m), and
Austria (EUR 117m)
IPO 2000 tender offers for Telefonica Argetina, Telefonica de Peru, Telespe and Tele Sudoeste
Acquisition 2000 Acquires Lycos Inc.
Joint venture 2001 Forms Vivo; a joint venture in brazil with Portugal Telecom
Acquisition 2001 Acquires Iberola's Brazilian assets
Acquisition 2001 Telefónica Moviles acquires Norcel, Cedetel, Bajatel and Moviel (all Mexico) for USD 1.89bn
Acquisition 2001 Acquires media ways GMBH (Germany) for EUR 1.5bn
Acquisition 2003 Acquires outstanding Terra Network shares for EUR 1bn.
Acquisition 2003 Acquires outstanding Telefonica Contenidos (EUR 567.4m)
Acquisition 2004 Acquires some of Bell South's Latin American wireless assets for USD 5.9bn
Acquisition 2004 Acquires Telefónica Movil de Chile for USD 1bn
Acquisition 2004 Acquires S.A. for EUR 530m
Divesture 2004 Divested Lycos
Acquisition 2005 Acquires 4.97% of O2 (UK) for EUR 1.3bn
Acquisition 2005 Acquires 5% of China Netcom Group Corporation (China) for EUR 1.3bn
Acquisition 2005 Acquires Cesky Telecom for EUR 3.7bn
Acquisition 2006 Completes acquisition of Telefónica Móviles
Acquisition 2006 Acquires remaining stake of O2 (UK) for EUR 25.7bn
Figure 318: Telekom Austria

Founding 1996 In 1996 an independent company was created out of the Post- und Telegrafenverwaltung (PTV): Post- und Telekom Austria
AG (PTA AG).
Divesture 1997 Telecom Italia Mobile becomes a strategic partner and acquires 25% of mobilkom.
Acquisition 1998 Acquired a 30% stake in VIPnet (Croatia)
Liberalization 1998 The telecom market was fully liberalized and the new company Telekom Austria AG formed.
partnership 1998 Telecom Italia acquired a 25% stake in TA, which was later upped to 29%.
Acquisition 1999 Acquirers Debitel (Germany) for CHF 3.4bn
Acquisition 2000 Acquires Czech Online SA for EUR 231.5m and also expands its stake in VIPnet SA (Croatia) to 61%.
Merger 2000 Merged with industrial holding company OIAG fully owned by the government.
IPO 2000 The shares of Austria Telekom are floated in an IPO on the Vienna Stock Exchange. With OIAG holding 44.4% and Telecom
Italia holding 29%.
Acquisition 2001 Acquires controlling stake of 75% in Si.mobil (Slovenia) for EUR 141m, while increasing its stake in VIPnet (Croatia)
Acquisition 2002 Acquires the remaining 25% stake of mobilkom form Telecom Italia Mobile.
Acquisition 2004 Acquires the remaining stake of VIPnet (Croatia) to make its stake 100%
Divesture 2004 Telecom Italia sells off its shares in the company, while also OIAG sells a part of its share making their holding 30%.
Acquisition 2005 Acquires a 100% in Mobiltel Bulgaria, for EUR 1214m
Management 2006 Mr. Boris Nemsic is appointed CEO of Telekom Austria Group and CEO of mobilkom austria.

Figure 319: Telenor

Acquisition 1993 Acquires 25%% stake of Pannon GSM (Hungary)

New Operation 1993 Commenced Telenor Mobil digital business in Norway
Acquisition 1997 Acquires 17.45% stake in ONE (Austria)
Acquisition 1998 Acquires 56.51% stake of Kyivstar GSM (Ukraine) for NOK 257m
Acquisition 1999 Acquires 29.91% stake in VimpelCom (Russia)
Acquisition 2000 Acquires 75% of OAO Comicom (Russia) for NOK 1.1bn
Acquisition 2000 Acquires 69.30% stake of DTAC (Thailand) for NOK 6.5bn
Acquisition 2000 Acquires 53.3% stake in Sonofon (Denmark) for USD 600m
Acquisition 2001 Acquires ComSat Mobile for NOK. 1.1bn
Acquisition 2001 Acquires DiGi.com (Malaysia) for NOK 3.1bn
New Operations 2001 Started operation in Sweden
Acquisition 2002 Acquires the remaining stake in Pannon GSM (HUN) for NOK 495m (HUF 308155m)
Management 2002 Mr. Jon Fredrik Baksaas is appointed CEO of Telenor.
Acquisition 2004 Acquires remaining stake in Sonofon
Acquisition 2005 Acquires Vodafone Sweden for NOK 11bn (EUR 1,345m)
Acquisition 2005 Acquires Bredbandsbolaget (Sweden) and Cybercity (Denmark) for NOK 4.5bn and NOK 1.3bn
Acquisition 2006 Acquires Mobil63 (Serbia) for NOK 12bn (EUR 1.513m).
Figure 320: Telia

Divesting 1999 Divested Siris (part of Unisource) to Deutsche Telekom for SEK 6.4bn (EUR 700m).
Acquisition 2000 Acquires Netia Holdings (Poland) for SEK 1.6 bn (USD 171.5m)
Acquisition 2000 Acquires NetCom ASA for SEK 24 bn (GDP 1.73bn)
Acquisition 2002 Enters into an agreement with Sonera and CT Mobile to combine 8 local Russian carries into one nationwide carrier
Megafon, where the combined stake of Telia Sonera is 43.8%.
Management 2002 Mr. Anders Igel is appointed CEO of Telia.
Figure 321: TeliaSonera

Merger 2002 Telia and Sonera merged and formed the new entity of Telia Sonera the deal was valued at SEK 61bn (EUR 6.64bn)
Acquisition 2003 Acquires UAB Omnitel (Lithuania) for SEK 1bn (USD 117m).
Divested 2003 Divested Com Hem AB (Sweden) to Private group lead by EQT for Sek 2bn
Acquisition 2004 Acquires Denmark Telecommunication Operation of Orange SA for SEK 5.5bn (EUR 610ms)
Acquisition 2005 Acquires Volvik Gruppen for SEK 1.9bn
Acquisition 2005 Attempts to additional 27% of Turkcell becoming the majority stakeholder. The Cykorowa group instead seel a smaller share
to Alfa Group (Russia). TeliaSonera's bid was SEK 22bn.
Acquisition 2006 Acquires Xfera Moviles(Spain) for SEK 4.5bn (EUR 475m)
Acquisition 2006 Acquires NextGenTel for SEK 2.3bn (NOK 1.9bn),

Figure 322: Vodafone

Foundation 1982 Racal Telecoms Division is set up after winning bid for mobile license in UK.
Foundation 1987 Vodadata is created
IPO 1988 20% of Racal Telecoms Division is floated
Launch 1991 Vodafone launches its GSM net
De-merger 1991 Vodafone and Racal demerge fully
Acquisition 1992 Acquires Packnet
Partnerships 1994 Form partnerships in Germany, South Africa, Australia, Fiji and Greece. Enables To buy licenses in these markets.
Partnerships 1994 Form partnerships in Netherlands, Hong Kong and France. Enables VOD to buy licenses in these markets.
Launch 1996 Launch Pre-Pay service in UK
Management 1997 Mr. Chris Gent appointed CEO.
Reorg 1997 VOD is reorganized in three main components Vodafone Corporate, Vodafone Retail and Vodafone Connect
Partnership 1997 Agreed to offer fixed-lined services from Energis
Acquisition 1998 Acquires New Zealand GSM Network
Merger 1999 Vodafone PLC merges with Air Touch Communications
Partnership 1999 Agrees to create a new wireless business network in the US in corporation with Bell South Atlantic.
Acquisition 2000 Acquires Mannesmann AG (Germany)
Divested 2000 Divested Orange to France Telecom. Orange was before a part of Mannesmann
Acquisition 2001 Acquires Eircell
Acquisition 2001 Acquires 25% of Swisscom mobile
Acquisition 2001 Acquires 17.8% of Airtel Movile to up its stake to 91.6%.
Acquisition 2002 Acquires Vivendi's part in the joint venture Vizzavi
Acquisition 2002 Acquires 41% of Cegetel, which implied a post merger with SFR.
Acquisition 2003 Increases holding in Telecel and Libertel to 70.3% respectively 98.2%
New functions 2003 New functions Group Marketing and Group technology and Business Integration are formed
Acquisition 2005 Acquires Mobifon S.A.(Romania) and Oskar Mobile (Czech Republic)
Acquisition 2006 Acquires Telsim Mobil Telekomunikasyon Hizmetleri (Turkey)

Appendix G: Government
ownership
Figure 323: Government shareholdings and overhang (Euro m)
Company Government stake Total overhang % of market cap Lock up expiry
BELGACOM 50.1% 0 0.0%

DEUTSCHE TELEKOM 32.9% 18,423 32.9% 23 April 2007
FRANCE TELECOM 32.5% 15,934 32.5%
KPN 0.0% 0 0.0%
OTE 38.7% 543 5.7%
PORTUGAL TELECOM 0.0% 0 0.0%
SWISSCOM 67.7% 2,477 17.7%
TELECOM ITALIA 0.0% 0 0.0%
TELEFONICA 0.0% 0 0.0%
TELEKOM AUSTRIA 25.2% 2,312 25.2%
TELENOR ASA 54.0% 721 4.0%
TELIASONERA 56.7% 13,812 56.7%
Source: Reuters sand company data

Appendix H: European M&A

Figure 324: Recent European M&A multiples
Date Operator Acquired asset Yr +1 Yr +2 Yr +3 Comment
10/12/2003 Telenor Sonofon-Bell South 8.8x Assuming control, inter-country

14/10/2004 Telefónica Móviles 10 Latam assets 6.1x 5.8x 5.5x Footprint expansion & inter-country consolidation
29/10/2004 TDC Song Networks 10.2x Enhance profile of corporate data services
20/12/2004 UGC Chorus (Ireland) 6.9x Footprint expansion & inter-country consolidation
26/04/2005 Orascom Telecom Wind 9.2x 7.6x 6.7x Inter-country consolidation
10/05/2005 UGC NTL Ireland 8.3x Footprint expansion & inter-country consolidation
31/05/2005 Vodafone MobiFon/Oskar 7.0x 5.9x 5.9x Stake increase (Mobifon) and footprint expansion
(Oskar)
28/06/2005 KPN Telfort 8.0x 7.1x 6.5x Intra-country consolidation. 5th operator with market
contracting to 4 network players
29/06/2005 Telecom Italia Turk telecom 3.8x 3.9x 4.1x Strengthening existing position
05/07/2005 Telenor Cybercity 9.4x 7.9x 6.8x Inter-country footprint (broadband in Denmark)
06/07/2005 TeliaSonera Chess/Sense 13.9x 12.8x 11.8x Intra-country scale
08/07/2005 Telenor B2 20.1x 15.2x 12.7x Inter-country footprint (broadband in Sweden)
18/07/2005 Tele2 Versatel 11.7x Inter-country consolidation
25/07/2005 Eircom Meteor 42.0x 14.0x 7.6x Intra-country consolidation. Re-entering mobile market
to offer integrated services
28/07/2005 France Telecom Amena - gross EV 9.5x 8.6x 7.8x Inter-country consolidation adding to existing broadband
business, allowing proliferation of integrated services
Amena - EV adjusted for tax 8.0x 7.2x 6.6x
asset
29/07/2005 Ono Auna Cable 10.8x Intra-country consolidation
10/08/2005 Deutsche Telekom tele.ring - Gross EV 8.3x 7.0x 6.0x Inter-country consolidation. 3rd operator with market
contracting to 4 network players
tele.ring - EV adjusted for tax 7.5x 6.3x 5.6x
asset
17/08/2005 Cable & Wireless Energis - pre synergies 6.1x 6.3x 6.5x Intra-country consolidation in the UK
Energis - post synergies 6.1x 6.6x 4.7x
20/09/2005 Elisa Saunalahti - pre synergies 69.6x Intra-country consolidation in Finland
Saunalahti - post synergies 4.3x
30/09/2005 Liberty Global Cablecom 10.4x Intra-country consolidation
17/10/2005 TIM Hellas Q-Telecom 14.3x Intra-country consolidation in Greece
28/10/2005 Vodafone Bharti Televentures 15.4x 11.5x 9.0x Global footprint expansion
31/10/2005 Telefónica O2 8.4x 7.5x 7.0x European footprint expansion
31/10/2005 Telenor Vodafone Sweden 11.0x 10.1x 8.1x European footprint expansion
02/11/2005 Vodafone Vodacom 9.5x 8.0x 6.8x Global footprint expansion
13/11/2005 Vodafone Telsim 22.9x 16.2x 11.5x Global footprint expansion
30/11/2005 TDC Apax, Blackstone, KKR, Permira, 6.3x 6.1x 6.0x Private equity acquisition
Providence
06/02/2006 Sonaecom Portugal Telecom 7.5x 6.7x 6.5x Subject to competition approval. Intra-country
consolidation
29/03/2006 Telefónica Telefónica Móviles 8.9x 7.6x 6.4x Minority buy-ins
07/04/2006 Telefónica Colombia Telecom 5.4x Latam footprint expansion
03/05/2006 MTN Investcom 11.0x Global footprint expansion
23/05/2006 eircom Babcock & Brown 5.6x 5.4x 5.3x Private equity acquisition
02/08/2006 Proximus Belgacom 6.9x 7.2x 7.5x Minority buy-ins
Median 8.8x 7.2x 6.6x

6 December 2006
Figure 325: Summary of recent broadband asset M&A multiples and details
Date Asset Buyer Country Stake Price (Reported Price (Euro m) Subs (000) Price per sub Comments
m)
14-Oct-04 UTA Tele2 Austria 100.0% EUR 213 213 Over 500,000 426 On a debt-free basis with consideration
customers consisting of cash and assumed debt. Cash
position of UTA as at 31,Aug 2004 Eur11.8m
1-Feb-05 Tiscali Denmark Tele2 Denmark 100.0% EUR 20.7 20.7 26 796 Additional 50,000 dial-up internet subs come
Telecommunications Telecom for beginners 2007

on board. Purchase price on a debt-free basis.
30-Sep-05 Comunitel Tele2 Spain 99.96% EUR 257 257 N/a Purchase price on a debt free basis
30-Sep-05 Cablecom Liberty Global Switzerland 100.0% CHF 2,825 1,775 Over 2m 887 Reported multiple - 10.4 x 2006E (not specified
customers what multiple; EV/EBITDA?)
30-Jun-06 E.ON Tele2 AB Sweden 75.1% USD 319 35 Capacity - N/a Reported purchase price of SEK 409 includes
500,000customer the obligation to assume debt of SEK 90m
s
19-Jul-06 UPC - France Altice and France 100.0% USD 1,600 1,250 2000 Voice,Video 625 Subs: Voice video & data
Cinven and data
Customers
8-Sep-06 Casema Cinven and Netherlands 100.0% USD 3,570 2,100 1,836 1,144 1.3m TV subscribers, 136,000 telephony subs
Warburg Pincus in addition to BB subs
15-Sep-06 Tiscali KPN Netherlands 100.0% 255 276 924
Netherlands
19-Sep-06 AOL Germany Telecom Italia Germany 100.0% 675 1,100 614
(Hansenet)
22-Sep-06 AOL France NeufCegetel France 100.0% 288 500 576
3-Oct-06 Tele2 - France SFR France 100.0% USD 3,300 355 3393 (broadband 105 Subs includes fixed subs. Purchase price in
and fixed subs) cash on a debt free basis.
15-Nov-06 Esenet TDC Denmark 100.0% 40 -
Page 185
Glossary
A
AAC (or MP4) Advanced Audio Coding is a codec providing greater fidelity and compression
than MP3. Importantly, it is the default codec for Apple’s iTunes software, while not included
as a default in most versions of Microsoft’s Windows Media Player. Both pieces of software
will read MP3 files, but having a user create their music library in AAC files can commit them
somewhat to iTunes, as conversion requires specialist software.
Access Channels These are channels set aside by the cable operator generally for use on a
non-commercial basis. Users include educational institutions and local municipal
governments. These channels may be leased out on a non-discriminatory basis.
Access Charge Refers to a fee charged by local exchange carriers to subscribers or other
telephone companies for the use of their local exchange networks.
Access Concentrator An access device which integrates several data transmission signals
into a single shared channel. It provides access between the multiple hardware and
applications "behind" the device.
Access Line The telephone line from the telephone company central office to a point on the
physical, private premise. Also called the local loop or "last mile." See also Local Loop.
Access Network Part of the carrier network, which extends from the carrier's central office
to individual homes/businesses.
ACD (Automatic Call Distributor) A telephone system that manages incoming calls and
routes calls to the first available station in a predefined group. If all stations are busy then a
recorded messaged is activated and the call is put into a holding pattern, until stations
become available.
Addressable The ability to signal from hub in such a way that only the desired subscriber's
receiving equipment is affected. In this manner, it is possible to send a signal to a single
subscriber and effect changes in the subscriber's level of service.
Advanced Intelligent Network (AIN) An advanced telephone network architecture that

separates the computer programming that controls new telephone services from the
programming that controls the switching equipment embedded in the network.
Alternative Access Provider A telecommunications firm, other than the local telephone
company, which provides a connection between a customer location and a point of presence
of the long-distance carrier.
Amplifiers A device which increases the strength of an electronic signal. It is placed at 2000-
foot intervals in coaxial-based cable networks to maintain signal strength throughout the
network. While amplifiers extend the practical length of traditional cable networks, they lead
to lower channel capacity, reduced signal quality, and carry higher installation and
maintenance costs. Fibre optic cable networks require less amplifiers.
Analog (Analogue) Method of transmission employing a continuous (versus pulsed)

electrical signal that continuously varies in amplitude or frequency in response to changes in
sound impressed on a transducer in the sending device. (As opposed to digital, which varies
only by being on or off.)

Analog-to-Digital Conversion of a signal whose input is information in the analog form to

output of the same information in digital form.
Ancillary Charges Charges by telcos for optional services, such as caller ID or call waiting.
Anti-Siphoning FCC rules which prevent cable systems from "siphoning off" programming
for pay cable channels that otherwise would be seen on conventional broadcast TV.
"Antisiphoning" rules state that only movies no older than three years and sports events not
ordinarily seen on television can be cable cast.
ARPU Average revenue per user. Financial measure used to evaluate performance in the
cable industry.
Asymmetric Connection A connection where data flows in one direction at a much higher
speed than in the other. Some examples of asymmetric connections are ADSL, 56K
modems, and satellite downlinks.
Asymmetric Digital Subscriber Line (ADSL) A process by which information (voice, video,
and data signals) is compressed and sent over copper wires at high transmission rates,
between 1.5 and 8.0 Mbps downstream and between 16 and 640 Kbps upstream (only
within 18,000 feet of the central office). A more advanced technology than ISDN. ADSL is an
asymmetric connection type.
ADSL Lite (sometimes known as G.Lite in the US) The most popular form of DSL for
consumer use, ADSL-Lite can achieve downstream transmission speeds of up to 1.5 Mbps.
The advantages of ADSL-Lite include its ability to co-exist with regular telephone service on a
single twisted pair line without the aid of a splitter.
Aspect Ratio Refers to the ratio of width to height of a picture. Standard definition has a 4:3
aspect ratio while High definition television uses a 16:9 aspect ratio.
Asynchronous Transfer Mode (ATM) A process in which data is broken into packets of
fixed length, mixed with packets from multiple sources, and reassembled at their final
destination. Information is organized into cells under Asynchronous Transfer Mode. This
fixed-length 53-byte transmission technology allows users to exchange voice, data and video
signals with a single connection to the network at speeds up to 2.4 Gbps.
Attenuation A process by which electrical signals weaken. It is usually related to the

distance that the signal must travel and is expressed in decibels.
ATV Forum A membership association founded in 2000 which promotes interactive TV.
B
B Channel An ISDN B Bearer channel that can be used to carry voice or data connections at
speeds of 56 or 64 bps.
Backbone The backbone is the underlying central network that enables smaller networks to
communicate. The central nodes of networks connect into the backbone, rather than to each
other; so it performs a role analogous to the motorway network, as distinct from the local
roads. The most important backbone is probably the internet backbone, i.e. the high-
bandwidth connections that handle massive traffic between smaller networks (e.g. sub-
Atlantic cables to which country-level transmissions are aggregated); but backbone is a
relative term, which may refer to any network that connects smaller networks together; so
there is no clear boundary that defines the backbone.

Backwards-compatible Many technologies are incrementally upgraded over time, such as

Microsoft Windows: backwards-compatibility is provision for applications designed for a
previous version to work on the upgraded version: so XP is backwards-compatible with 2000
if programs created for 2000 work on XP.
Bandwidth In telecommunications, a band describes a hypothetical space in which data can

be transmitted; bandwidth is the thickness of that pipe. This gives rise to two important
concepts in telecommunications: the bandwidth of a connection, and that of spectrum. The
bandwidth of a connection describes how fast it can transmit data, and is measured in
multiples of bps. Bandwidth determines what applications a connection may have, as
applications require that different amounts of data be transmitted; e.g. a video might need,
every second, data describing 28 different full-screen images; so video requires a lot of
bandwidth. Bandwidth is a crucial differentiator between telecommunications technologies,
as there is a fundamental difference in the utility of a connection that can transmit high-quality
real-time video, and one that is only suitable to load text fast enough to read.
Baseband Transmission technique utilizing a single digital transmission channel shared by all
users, primarily used for local area networks, especially in a cable network.
Base station A base station is a network node to which devices connect wirelessly, such as
the transmitters that constitute mobile networks. Base stations are generally linked into a
backbone and constitute a wireless last-mile service.
Basic Trading Area (BTA) A US term for a geographic area, based on the Rand McNally
1992 Commercial Atlas & Marketing Guide, 123rd Edition, pages 38-39, used by the Federal
Communications Commission to define the coverage of spectrum licenses for certain
services. The United States is divided into 487 BTAs. The Commission has further defined six
other BTA-like areas: American Samoa; Guam; Northern Mariana Islands; San Juan, Puerto
Rico; Mayaguez/Aguadilla-Ponce, Puerto Rico; and the United States Virgin Islands, for a total
of 493 BTAs.
Baud A measure of the rate of data transmission, computed in the number of elements
changed per second.
Baud Rate The speed at which a computer can transfer data through a modem. (Elements
changed per second.)
Bit The smallest unit of data and the standard unit of memory, usually with a binary value of 0
or 1, representing an on or off state in a digital system. To represent the 26-letters of the
alphabet; we would take a 5-bit number, taking 25 = 32 possible values. Each stream of 5-bits
would represent one letter. Numbering the letters 1-26, they can then be represented by the
5-digit binary number equivalents. As in the decimal system, each digit can be thought of as
representing a different power of the base, so as 21=2×101+1×100; 10101 means
1×24+0×23+1×22+0×21+1×20=16+4+1=21; and numbering the alphabet, this means “U”. A
stream of such data can then encode a message such as text, or an image, whereby each
pixel is given a number to say what colour it should be, with longer numbers meaning more
variety in the colour values that can be assigned. A 24-bit image records each pixel’s colour
as one of a possible 224=16,777,216 different values. To interpret it, the computer takes the
first 24-bits to describe the first pixel, and the second to represent the second etc.
Bits are typically used to record transmission rates in networks measured in bits-per-second
(bps). A string of bits that can be addressed as a group is called a byte. One byte is
comprised of eight to ten bits. Bits-per-second (bps) is the standard unit of measurement for
data transmission. Kilo bps (Kbps)-one thousand bits per second. Mega bps (Mbps)-one
million bits per second. Giga bps (Gbps)-one billion bits per second.

Bluetooth A short-range wireless standard that enables data connections between electronic
devices like wireless phones, desktop computers and electronic organizers. Electronic
devices can connect with each other when they are within 30 feet of each other.
Broadband Transmission medium that allows high speed data transfer. Broadband
transmission media can generally carry multiple channels each at a different frequency.
Broadband includes any transmission rate above 1.5 Mbps.
Broadcasting It is sending signals to a large group or area, at the same time.
Broadcaster’s Service Area Geographical area encompassed by a station’s signal.
Bundling The grouping of various telecommunication services – wireline & wireless into a
package to increase appeal to potential customers.
Bundled Rates A pricing metric whereby individual service rates are combined into one. i.e.
cable and cable modem charges bundled together.
Byte A string of bits that can be addressed as a group is called a byte. In most computer
systems, a byte consists of eight bits. One byte may represent a character like a letter or a
number. 8 bits translate to 256 possible values, enough to describe any textual character, so
1 byte represents 1 character of data in a text file.
C
Cable Modem A data transmission device connected to a computer that transmits data via
coaxial cable rather than the traditional copper wire telephone lines. Cable modems transmit
data at speeds up to 10 Mbps, which is 1,000 times faster than the standard computer
modem.
Cable Network The cable television plant typically used to carry data for cable services. Such
plants generally employ a downstream path in the range of 54 MHz on the low end to a high
end in the 440 to 750 MHz range and an upstream path in the range of 5 to 42 MHz.
Cable Television Relay Services (CARS) Terrestrial microwave frequency band used to
relay television, FM radio, cablecasting and other band signals from the original reception site
to the head-end terminal for distribution over cable.
Cable Termination The ends of all trunk and distribution cables are terminated with a 75-
ohm load to ground. If this is not done, serious signal distortion will result because RF
frequency signals traveling in coaxial cable will reflect off any impedance that does not match
the 75-ohm impedance of the cable.
Call Center A facility with operators, computers and client databases that field large numbers
of calls (incoming/outgoing) - usually related to customer service and marketing.
Capacity The highest transmission speed that can be carried on a channel. Capacity can be
expressed as either raw speed or net throughput.
Carriage A cable system's procedure of carrying the signals of television stations on its
various channels. FCC rules determine which signals cable systems must or may carry.
Carrier's Carrier A telecoms company that provides services to other telecoms companies.
Since the company does not provide services to the public, it is faced with less stringent
regulations.

CATV (Community Antennae Television) A television served by cable and connected to a

common antenna.
CCPU (Cash Cost per User-Costs) Total cost (G&A, cost of goods sold, etc.) to run the
network divided by total subscriber base.
CDMA (Code Division Multiple Access) The code division technology was originally
developed for military use more than 30 years ago. CDMA is a multiple access technique,
which uses code sequences as traffic channels within common radio channels – used for
CDMA One (IS-95) air interface. The technology assigns a code to each multiple access
stream of bits, transmits the data stream and then reassembles the data stream to the
original format.
CDMA One (IS-95) A narrowband, second-generation digital air interface technology

developed by Qualcomm.
CDMA2000 A third generation standard evolved from CDMA One. It is the CDMA
community's proposal for a system standard for 3G services.
1xRTT CDMA Specifically, 1xRTT (otherwise known as 3G 1x) represents one times radio
transmission technology with 1.35 MHz channels. This technology supports peak data
speeds up to 144 kbps, up to a doubling of voice capacity and improved standby time.
HDR or 1xEV CDMA A packet data solution that focuses on providing support for data-it
does not support for voice. Peak speeds are 2.4 mbps, with each user in a loaded network
expected to see speeds around 800 mbps.
CDPD Cellular digital packet data. A digital cellular standard used in some smart phones.
Transmission rates are limited to 19.2 kbps. Permits data files to be broken into a number of
packets and sent along idle channels of existing cellular voice networks.
Cell The basic geographical unit of a cellular communications system. Service coverage of a
given area is based on an interlocking network of cells, each with a radio base station
(transmitter/receiver) at its center. The size of each cell is determined by the terrain and
forecasted number of users.
Cell Relay Data transmission technology, which transmits data in small, fixed-sized packets
(or cells).
Cellular Service Radio telecommunication services provided using a cellular system. See
Cellular System.
Cellular System An automated high-capacity system of one or more multi-channel base

stations designed to provide radio telecommunication services to mobile stations over a wide
area in a spectrally efficient manner. Cellular systems employ techniques such as low
transmitting power and automatic hand-off between base stations of communications in
progress to enable channels to be reused at relatively short distances. Cellular systems may
also employ digital techniques such as voice encoding and decoding, data compression, error
correction, and time or code division multiple access in order to increase system capacity.
Cell Splitting A process used to increase coverage and capacity in a wireless system by
having more than one cell site in particular geography.

Central Office (CO) Telephone switching office that connects the local loop to the Public
Switched Telephone Network (PSTN). Typically, the line from the home to the CO is
constructed of twisted pair.
Churn Rate of measure used to describe the percentage of subscribers who leave or switch
from a service provider.
Circuit Switching Circuit-switching is the most intuitive way of designing a communications

network: it means fixing a channel for each connection that is made, e.g. reserving a portion
of bandwidth for communication between two people having a telephone conversation.
Circuit-switching is relatively easy to organise, but it is not efficient, as during periods of
silence bandwidth is reserved but not utilised. Circuit-switched connections are generally
charged per second, as the amount of other traffic displaced is proportional to the time
connected, not data sent, due to bandwidth being reserved for the duration of the
connection.
Circuit-Switched Network A telephone network that transports information over a

dedicated connection between two connected parties for the length of their call. The public
switched telephone network (PSTN) uses circuit switching. Additionally, circuit switching
holds the network open for the duration of the call.
CLEC (Competitive Local Exchange Carrier) An alternate local telephone company which
competes with existing local exchange carriers for local and access business.
Clustering The tendency of cable companies to operate in specific geographical locations in

order to optimize economies of scale.
Coaxial Cable An insulated central wire (axis) within a metal cylinder. The transmission
medium widely used in the cable television industry.
Code Division Multiple Access Digital cellular technology in which signals are thinly spread
out across a broad band spectrum of 1.25 MHz. This medium could increase existing
cellular/analog subscriber capacity by as much as ten to twenty times.
Codec A Coder-Decoder (codec) is a piece of software that enables a piece of software to

read or to write a particular type of file, like knowing someone’s language. Without the
appropriate codec, the file may not be read. Codecs can be available freely or for purchase,
and generally exist to compress data (they are also known as Compressor-Decompressors),
although they may also serve encryption functions.
Collocation Allows competitive LECs and LD carriers to operation (house equipment) in local
exchange carrier offices.
Common Carrier A private company offering telecommunications service to the general

public on a Non-discriminatory basis, under government-mandated operating procedures (i.e.
a telephone company). The company cannot control message content.
Community Antenna Relay Service (CARS) The 12.75-12.95 GHz microwave frequency
band which the FCC has assigned to the cable television industry for use in transporting
television signals.
Compression Compression is a major factor in the ability to store and transmit large
amounts of information digitally. It means representing large amounts of information with
less information. A simple method of compression would be to represent a region of a
picture in which each pixel is black by recording not a value for each pixel, but rather the

boundaries of the region and its blackness. Data-compression requires processing (and
therefore potentially expensive hardware and energy) at both ends; to encode the data using
the compression-technique at the sending end, and to decode it back to the full set of values
at the receiving end. This can save huge amounts of bandwidth; as the software knows how
to extrapolate a lot of information from the smaller amount it is sent, like a person who
knows the complex instruction behind a relatively simple one.
Converter Device attached between the television set and the cable system that increases
the number of channels available on the TV.
Convergence Convergence is the process by which different services or products come

closer together, such as the convergence of voice services and internet services in VoIP.
Convergence is a large issue in telecoms, as communications functionality has become
important for many other services, such as internet music downloading becoming a crucial
issue for the music industry. Convergence has been predicted to change business models,
such as in the idea behind the AOL-TimeWarner merger, that it would enable massive
synergies between media owners and telecoms. More recently, convergence between fixed
and mobile services has become an issue, with designs for phones that migrate from the
fixed to the mobile network as a user leaves their domestic point of access.
Copper Wire (Twisted Pair) Used by telephone companies to carry electrical signals via two
copper wires twisted around each other. One major drawback is that electrical signals
degenerate over long distances, a process called attenuation.
Covered POP The number of individuals in an area to which a wireless provider can provide
service.
CPE (Customer Premise Equipment) Terminating equipment (i.e. terminals, telephones.

Modems). Usually supplied by telephone companies-installed at customer sites and
connected to the telephone company's network.
CPGA-Cost Per Gross Add The average cost for a carrier to sign up a customer, including
handset subsidies, marketing, advertising and promotions. Commonly used in the US.
Cross-Ownership Ownership of two or more kinds of communications outlets by the same

individual or business. The FCC prohibits television stations and telephone companies from
owning cable systems in their service areas. Television networks are prohibited from owning
cable systems anywhere in the U.S.
Customer Acquisition Cost The average cost incurred by a carrier to sign up an individual
subscriber.
D
Dark Fibre Refers to an optical fibre that is in place but not in use. Optical fibre utilizes pulses
of light, so fibre not in use is "dark." Dark fibre can refer to fibre that has been installed but is
not yet ready to be used. For example many cable companies and power companies have
over built in the expectation of future use or to lease to other providers.
Dedicated Line A communication cable dedicated to a specific application. Also called a

Private Line.
Dense Wave Division Multiplexing (DWDM) A technology that dramatically increases the
capacity of existing fibre optic networks by projecting multiple light beams of information
onto a single glass fibre. The technology puts data from different sources together on an
optical fibre.

Digital A digital signal is encoded in a finite number of digits, which take discrete values,
usually 1 or 0 in binary coding. These bits then can scale up to a complex message, through,
for example, representing textual characters with bytes. Digital signals have two key benefits:
firstly, a signal that can only take one of two values is less likely to get distorted; as distortion
from one extreme to the other would need to be very large. Secondly, digital signals are the
language of computers; offering, for example, advanced compression, which can greatly
reduce the amount of data that it is necessary to store or transmit.
Digital Cable A Cable TV product that takes advantage of the digital infrastructure of HFC
networks to expand the range and variety of video programming services available to
subscribers. The expanded capacity of the network allows MSOs to offer greater number of
video programming channels, including enhanced PPV and VOD offerings, advanced
onscreen menus, and CD-quality music channels. Several MSOs report higher buy-in rates
and lower churn with their digital cable offerings compared to their standard analogue
service.
Digital Set Top Box A unit that converts a digital signal to analogue resulting in expanded
channel capacity, improved picture and sound quality on analogue TV.
Digital Subscriber Line (DSL) A data transmission technology that provides high-speed,
"always on" Internet access over standard twisted-pair telephone lines-allowing concurrent
transmission of high speed data and voice. DSL can achieve transmission speeds of between
1.5 and 52 Mbps, depending on the type of DSL used. However, transmission speeds
degrade significantly if the subscriber's home is beyond a certain distance from the CO.
Digital Subscriber Line Access Multiplexer (DSLAM) A device (usually housed in a CO)
used to aggregate data traffic from many DSL subscribers into one high-speed signal for
hand off to the data communications network.
Digital Rights Management (DRM) is the process of safeguarding IPR on digital channels.
Many of the benefits in terms of cost and speed associated with digital distribution, concern
the ease to produce infinite copies of data, but when content providers want to charge users
to access the data, this becomes problematic. DRM uses encryption in order to control who
can access content, usually to restrict this to those who have paid for it.
Digital Video Broadcasting (DVB) The European Standard for digital television.
Dim Fibre A fibre optic system which does not originate the optical signals on one or both
ends, but one for which the carrier provides regenerators.
Direct Broadcast Satellite (DBS) A broadcasting technology which employs geostationary

satellites to transmit broadcast signals directly to individual subscribers. In order to receive
the service, subscribers must have a small antenna or "dish" and a set-top receiver, which
decodes the signals so that they can be processed by a TV or VCR.
Direct-To-Home or Direct Broadcast Satellite Same as Direct Broadcast Satellite.
Distribution (Feeder) Cable The portion of the cable system that comes from the trunk
cable and branches into the local neighbourhoods, typically consists of coaxial cable.
Distribution cables make up approximately 40% of the cable system's total footage.
Domain A unique name/locator that identifies a particular Internet site.
Down Payment Each winning bidder in a typical auction must submit a down payment to the
Federal Communications Commission with an amount sufficient to bring its total deposits up

to 20 percent of its winning bid within ten business days following the release of a public
notice announcing the close of bidding. Upfront funds on deposit will be applied toward the
down payment, after satisfying any withdrawal payments and/or defaulted net high bid
amounts due. In certain auctions, e.g., where installment payments were permitted, bidders
were able to break their initial down payment into two components: first and second down
payments.
Downstream Communications path in a cable network reserved for sending signals from
head end to the subscriber's home. In cable systems the downstream channel occupies the
50 MHz and higher portion of the spectrum. HFC networks have a more robust downstream
capacity than traditional coax-based networks to support the increased upstream data flow
required by digital cable, Internet access, and telephony.
DS-0 Basic North American 64 Kbps digitized voice channel.
DS-1 First level in North American digital hierarchy; the 1.544 Mbps signal consists of 24 DS-
0s multiplexed together.
E
Earth Station Refers to a "dish," or structure used to receive and/or transmit electromagnetic
signals from or to a satellite.
EDGE (Enhanced Data rates for Global Evolution) A radio based high-speed mobile data
standard. It was formerly called GSM 384 and was initially developed for mobile network
operators who did not win Universal Mobile Telephone System (UMTS) spectrum.
E-GPRS (Enhanced GPRS) Another term for EDGE.
Encryption is the process of putting a message into a code in order to prevent unauthorised
access to it. Encrypted data requires a key to access it, which is a piece of data or software
that has been engineered to provide access to the data. Much media that is sold to a user
will be encrypted, with a key personalised to them or to their media viewer, so that they may
not distribute it. Encryption is also important in transmitting confidential user-generated data;
e.g. when credit card details are entered into a website, this is typically done over an
encrypted channel. Encrypting data with sufficient sophistication that it may not be read by
someone unauthorised requires a lot of processing power, which may be an issue in lower-
power devices. Encryption is a matter of degree, and generally any encrypted data may be
decrypted by a sufficiently powerful computer with sufficient processing-time.
Endpoint A terminal, gateway or Multipoint conference unit
Erlang A statistic used in measuring the traffic in the cellular system equivalent to the
average number of simultaneous calls. One erlang equals 3600 call seconds per hour or 36
CCS (call century seconds) per hour.
Ethernet A local data communications network that transmits data over shielded coaxial
cable or over shielded twisted pair telephone wire. It is mainly used for localized network
Internet connections and is the most popular LAN technology in use today.
Exclusivity The exclusive playback rights for the film or episode to a broadcast station in the
market it serves. Exclusivity is granted through contract provisions. Under FCC rules cable
operators cannot carry distant signals which violate local television stations' exclusivity
agreements.
Extended Time Division Multiple Access (ETDMA) A variation of half-rate voiced TDMA
(see TDMA).

F
Facilities Based Carrier A carrier that uses its own facilities to provide service.
Federal Communications Commission (FCC) The U.S. government agency responsible for
regulating interstate and international communications.
Fibre-Optics A transmission medium composed of glass or plastic fibres; pulses of light are
emitted from a laser-type source approximately the diameter of a strand of hair. Data travels
via pulses of light that are sent through the fibre strand.
Fibre-Optic Cable A strand of flexible glass approximately the diameter of a strand of hair.
Data travels via pulses of light that are sent through the fibre strand. It offers greater capacity
and speed than traditional co-axial cable.
Fibre-to-the-Curb (FTTC) Refers to the use of optical fibre cable directly to the curbs near
homes or any business environment. Assumes that coaxial cable or other medium will carry
signals from curb to the user inside home/business
Fibre-to-the-Home (FTTH) A network where the optical fibre runs from the switching station
directly into a subscriber’s home.
Fibre-to-the-Node (FTTN) A characteristic of modern cable networks in which optic fibre

runs from the cable head-end, where broadcast signals are received, to nodes located in
neighbourhoods served by the network. In typical HFC networks, coaxial cable runs from the
node to the subscribers' homes.
Fidelity is the closeness of a reproduction to the original it reproduces
File Transfer Protocol (FTP) A protocol used to move large files on the Internet.
Final Payment After verifying receipt of the proper down payment, reviewing the winning
bidder's long-form application, and resolving any petitions to deny or other oppositions filed,
the Federal Communications Commission will announce by public notice that the license is
ready to be issued. A winning bidder that is not a small business will then have ten business
days from the release of this public notice to submit the full balance of its winning bid.
Firewall Router or access server acting as a buffer between any connected public networks
and a private network-ensuring the security of the private networks.
Fixed-line Telecoms are broadly divided between mobile and fixed line. Fixed-line
connections involve a physical connection between the network and the point of access,
such as a DSL line into the back of a computer. Home-networking via technologies such as
Wi-Fi may enable roaming within the home, but lack of roaming capability, due to the need
for wires, is generally the key disadvantage of fixed-line. Fixed-line services can usually offer
faster and cheaper bandwidth than wireless services,
Fixed Wireless (or Fixed Cellular) This apparent contradiction in terms signifies a cellular
network that is set up to supper fixed rather than mobile subscribers. Fixed wireless is
increasingly being used as a fast and economic way to roll out modern telephone services,
since it avoids the need for fixed wires.
Flexible (Drop) Cables The distribution cable is tapped by flexible "drop" cables as it runs
past customers homes. The flexible cable drops to the home comprise approximately 45% of
the system's total footage.

Footprint The footprint of a network is the area where it’s available; so footprint describes its
reach, and is a general measure of presence (e.g. the extent of a retail network may be its
footprint).
Frame Grouped information sent as a data link layer unit over a transmission medium.
Frame Relay A high-speed, packet-switched data communications service, similar to X.25.

Frame relay is a leading contender for LAN-to-LAN interconnect services, and is well suited to
the burst-laden demands of LAN environments.
Frequency Telecommunications are carried out by sending signals via electro-magnetic

radiation; which can be simply understood as waves. The relationship between speed,
wavelength, and frequency makes sense if one imagines a particular point on the signal
travelling the wavelength each time the wave repeats, i.e. its frequency. If frequency is one
per second, the wave will travel the wavelength once every second. Electromagnetic signals
travel typically at or close to the speed of light, though slower in some media, so wavelength
and frequency are inversely proportional, as maintaining constant speed requires travelling a
long distance less often, or a short distance more often. Thus, frequency =
speed/wavelength.
Front end The user-facing portion of any interface is referred to as the front end.
Fully Integrated System A cable television system which establishes the optimum amplifier-
cable relationship for best performance at lowest cost.
G
Gateway (GW) A gateway provides access to something, so that it might allow two distinct
networks to exchange traffic, or it may be the user’s point of access, e.g. a portal is a
gateway to the Internet. Control of gateways means control of traffic, and so gatekeepers
may be able to take shares of revenues for content distributed through their gateways.
Geostationary Satellites (GEOs) Orbit the earth at an altitude of 22,300 miles. GEOs are
geosynchronous. The orbit of the GEOs provides an advantage in that the satellite is relatively
fixed above a point on earth and the end user can utilize a lower cost antenna or dish fixed on
the satellite's location in orbit. However, the GEOs do suffer from one major drawback: there
is an audible time delay due to the distance the signal must travel.
Geosynchronous Orbit Orbits the earth in the same amount of time it takes the earth to
rotate, relatively fixed above a point on earth.
Gigabits per Second (Gbps) A measure of bandwidth capacity or transmission speed. It

stands for a billion bits per second.
Gigahertz (GHz) A measure of spectrum equal to one billion hertz or one thousand
megahertz.
GPRS (General Packet Radio Service) Wireless standard for high speed transmission of
data packets over GSM networks. It is a 2.5G technology.
GSM (Global System for Mobile Communications) Originally defined as a pan-European

standard for a digital cellular telephone network, to support cross-border roaming, GSM is
now one of the world's main digital wireless standards. GSM uses TDMA air interface and
has provision for text messaging and Subscriber Information Memory (SIM) cards.

H
Hardware is physical computing; anything that exists in reality, such as handsets,
processors, speakers, etc. Hardware may be replaced in part or in whole, but it is not
mutable.
Harmonic Distortion A form of interference involving the generation of harmonics according

to the frequency relationship f=nf1 for each frequency present, where n is a whole number
equal to two or more.
Handoff The process occurring when a wireless network automatically switches a mobile call
to an adjacent cell site.
HDTV (High Definition TV) is TV with a higher resolution than traditional systems, typically
around 5× the resolution, although there is no necessary standard for HDTV, so all numbers
depend on what is chosen to broadcast. The greater amount of information demands higher
bandwidth to transmit it, and so one HDTV channel may take the place of up to four other
channels. HDTV is a coming offering across higher bandwidth distribution channels, although
it is unclear what portion of TV will end up high definition.
Head-end End point of a broadband network. Stations transmit to the head-end, which is
then the origination point for signals distributed to cable television subscribers.
Hertz A unit for measuring frequency that equals one cycle per second. Kilohertz (KHz)
equals one thousand cycles per second. Megahertz (MHz) equals one million cycles per
second. Gigahertz (GHz) equals one billion cycles per second.
High Bit Rate Digital Subscriber Line (HDSL) A modulation method that enables T-1 and E-
1 signals to be delivered over two and three pairs of copper wire, respectively. Originally
designed to bypass costly repeat installations required to provision T-1 and E-1 services to
the far flung, HDSL is now being positioned in single-pair configurations that will deliver up to
768Kbps to residences.
High Definition Television (HDTV) A television signal with greater detail and fidelity than the
current TV systems used. The USA currently uses a system called NTSC. HDTV provides a
picture with twice the visual resolution as NTSC as well as CD-quality audio
High Frequency The entire subsplit (5-30 MHz) and extended subsplit (5-42 MHz) band used
in reverse channel communications over the cable television network.
Homes Passed The total number of homes, which have the potential for being hooked up to
the cable system.
Hop In a circuit-switched connection, all data is going from one end to the other end, so it
doesn’t need directing; but in packet-switched networks, there is not a clear channel
established between communicating nodes. Packets travel by moving towards their
destination from node to node, rather like a traveller using a chain of scheduled bus services
to go from city to city. Each node-to-node journey is a hop. A packet is redirected at each
hop, as it requests the node it has reached to send it to the next node en route to its
destination; so the number of hops is a crucial factor in determining speed. Packets travelling
the same wire distance will take different times if they travel a different number of hops.
Host Device A set-top or receiver containing and executing the OpenCable Application
Platform implementation. It is also host to the CableCARD device.
House Drop The coaxial cable that connects each building or home to the nearest feeder line
of the cable network.

Hub A signal distribution point for part of an overall system. Larger cable systems are often
served by multiple hub sites, with each hub in turn linked to the main headend with a
transportation link such as fibre optics, coaxial supertrunk, or microwave. A hardware device
that interconnects computers on a Local Area Network and acts as a central distribution point
for the communications lines.
Hybrid Fibre/Coax (HFC) A cable network that consists of both fibre-optic lines and coaxial
cable.
Hybrid Communications Network A communications network that uses a combination of

line facilities, i.e., trunks, loops, or links, some of which use only analog or quasi-analog
signals and some of which use only digital signals
HyperText TTP is the protocol defining communication between web browsers and web
servers.
HyperText Markup Language (HTML) The coding (set of commands) used to create and
format HyperText documents; the coding language of an Internet page.
HyperText Transport Protocol (HTTP) The protocol for transporting hypertext files through
the Internet.
I
i-Mode i-mode is NTT DoCoMo’s mobile Internet access system. "i-mode" is also a trademark
and/or service mark owned by NTT DoCoMo. Technically, i-mode is an overlay over NTT's
ordinary mobile voice system. While the voice system is "circuit-switched" (i.e., you need to
dial-up), i-mode is "packet-switched," thus, "always on."
IMT-2000 The term used by the international Telecommunications Union for a family of
standards and technologies targeted at increasing efficiency and improving the performance
of mobile wireless networks for the projected third-generation wireless services.
Incumbent Local Exchange Carrier (ILEC) A local exchange carrier (LEC) which, when
competition begins, has the dominant position in the market; the original carrier in the market
prior to the entry of competition.
Independent Operator Individually owned and operated cable television system, not
affiliated with a Multiple System Operator.
Industry Standard Architecture (ISA) An interface standard for connecting hardware

expansion cards to a computer. The typical ISA connection is a slot, or edge-card connector,
on the computer's motherboard allowing devices such as sound cards and telephone
modems to be plugged in to the computer.
Informercial A commercial, usually 90 seconds or more in length, designed to supply

information about a product or service rather than to present a specific sales message.
Integrated Digital Enhanced Network (iDEN) A Motorola Inc. enhanced specialized mobile
radio network technology that combines two-way radio, telephone, text messaging, and data
transmission into one network.
Integrated Services Digital Network (ISDN) Technology that transmits data at speeds up to
128,000 bits per second over the traditional copper wire.
Interactive Cable Cable systems through which viewers are able to order movies and video
games, access library information, and request sales brochures and coupons from home.

Interactive TV A form of television in which the viewer is able to respond to and/or

manipulate onscreen images, and have on-screen access to supplementary content about a
program's content. Currently in trials in several U.S. markets.
Interactive Voice Response System (IVR) The automated telephony systems that direct
calls within a company or organization, e.g., “Please press one for customer service, press
two for technical support, press zero for the operator.”
Interconnection In a network connection, be it voice or data, there is a point of origination, a

point of termination, and travel in between; interconnection refers to the work of carrying the
connection between the two ends. Interconnection may well be carried out by entirely
different parties than origination and termination, e.g. a call from a customer of a regional US
operator to one of a regional Swedish operator could be carried across the Atlantic by AT&T,
and maybe then through the UK by BT etc.
Interdiction A method of receiving TV signals by jamming unauthorized signals but having all
other signals received in the clear. Because the jamming is accomplished outside the home it
does not require a set-top terminal in the home.
InterWorking Unit (IWU) The network "modem" where all the digital to analogue (and vice
versa) conversions take place within the digital GSM networks.
Inter-exchange Carrier (IXC) In U.S. terminology, an IXC is a long-distance

telecommunications provider that offers a range of circuit-switched, packet-switched, leased
line, and enhanced communications services; any company that provides communications
services between exchanges on a long haul basis. In Europe, Asia, and other nations around
the world, the local telco also serves as the major IXC in the country.
Interface A point of connection between two systems, networks, or devices.
International Telecommunications Union (ITU) A United Nations organization that

establishes standards for telecommunications devices, like ISDN hardware, modems, and
Fax machines.
Interconnection A term that defines the inter-working of two separately owned and
operated networks. Interconnection is used to refer both to the technical interface and to the
commercial arrangements between two network operators providing service.
InterLATA Telecommunications services that originate in one and terminate in another LATA.
Internet Collection of local, regional, national and international networks into one global
network. The Internet uses TCP/IP protocols (Transmission Control Protocol/Internet Protocol)
which was originally designed for the UNIX operating system.
IP(Internet Protocol) Specifies the format of packets, also called datagrams, and the
addressing scheme used to route a message to a different network or sub-network. Most
networks combine IP with a higher-level protocol called Transport Control Protocol (TCP),
which establishes a virtual connection between a destination and a source.
Internet Service Provider (ISP) Internet Service Providers (ISPs) provide consumers with
connections to the internet, and also value-added services such as e-mail and technical
support. They own varying amounts of the connections offered, including incumbents who
own the entire network, and brands who don’t even own the lines into the internet.
IntraLATA Transportation within a LATA (voice, data, or video information).

IP stands for Internet Protocol: the underlying system that organises the internet, without
which it couldn’t really exist. In IP, each system on the network is assigned an IP address,
which identifies it uniquely. Packets bound for that system are addressed to its IP address,
and marked with that of their origin, just like mailed parcels. IP is packet-switched, so packets
are simply passed between nodes via the quickest route available at the time, until they reach
their destination. IP is occasionally upgraded, to accommodate the changing needs of the
network, but its core functionality remains, and it is kept backwards-compatible.
Intellectual Property is data or content with an owner, which may be e.g. copyrighted or
patented. It is sometimes referred to as IP. Intellectual Property Rights, or IPR, refer to the
rights that a particular owner or owners in general have in respect of their IP, such as the
rights of a record company to sell copies of an artist’s back catalogue.
IPVPN A Virtual Private Network (VPN) is a network which uses encryption to emulate the
performance of a closed private network, such as an office network, over open public
channels. The effect is analogous to having private conversations whilst communicating
across in a crowded public space, by speaking in code. IPVPN offers VPNs using IP, and is a
data-service often offered by telecoms companies, so that their customers may establish
private networking between remote locations, without installing closed physical channels.
IP Number The unique address of every computer on the Internet.
IP Telephony An alternative to standard circuit switched telephony in which voice signals are
placed via computer over the Internet, using Internet protocol technology.
ISDN-Integrated Services Digital Network A switched network providing end-to-end digital

connectivity for the simultaneous transmission of voice, data, video, imaging and fax over
several multiplexed communications channels. ISDN employs high-speed, out-of-band
signalling protocols that conform to international standards. This technology can transmit data
at speeds up to 128,000 bits per second over the traditional copper wire.
ISDN Digital Subscriber Line(IDSL) IDSL is a 128 Kbps standard proposed by the Ascend
Corporation for providing low cost, dedicated 128 Kbps data service using telephone lines
and central office switch facility space leased from the telephone company. It uses standard
point-to-point ISDN signalling techniques to link the customer to the central office head-end.
K
Ka-Band 33 to 36 GHz frequency band used by satellites.
Key Performance Indicators (KPIs) Due to the complexity of valuing telecoms businesses;
the sector has a particular focus on KPIs, rather than just pure financial data. KPIs can drive
valuations significantly, and are often released more regularly than financials, though the
degree and regularity of disclosure vary significantly.
Kilobits per Second (Kbps) A measure of bandwidth capacity or transmission speed, a

thousand bits per second.
Kilohertz (KHz) A measure of spectrum equal to one thousand hertz.
Ku-Band Microwave frequencies within the 12 to 18 GHz band; the band of satellite
downlink frequencies from 11.7 to 12.2 GHz.
L
LAN (Local Area Network) A high-speed data network intended to serve a small area, such
as a building. Usually controlled by a network operator.

LATA (Local Access and Transport Area) A contiguous local exchange area, including all
points served by a local phone company within a particular area.
Laser A device that generates coherent electromagnetic radiation in, or near, the visible part
of the spectrum.
Last Mile This describes the connection between large-scale networks and individual users:
e.g. the copper PSTN wires into houses.
Leapfrogging Cable television operators' practice of skipping over one or more of the
nearest TV stations to bring in a further signal for more program diversity. FCC rules establish
priority for carrying stations that lie outside a cable system's service area.
Line or Loop An analog or digital access connection from a user terminal which carries user
media content and telephony access signalling
Line Speed The rate at which individual bits are transmitted on a telephone connection. A
modem’s line speed may be set at 14,400 bits per second, an ISDN line at 64,000 bits per
second.
Lit Fibre activated or equipped with the requisite equipment needed to use the fibre for
transmission.
Local Area Network (LAN) is a closed network (it may connect to the internet, but access to
it is controlled); such as an office network; typically operating at very high speeds
Local Access and Transport Area (LATA) A geographical area used for regulatory, pricing,
and network organization purposes to organize the public telephone network into distinct
regions.
Local Exchange Carrier (LEC) One of the U.S. telephone access and service providers that
resulted from the U.S. deregulation of telecommunications.
Local Franchise Authorities (LFAs) Authorities which grant licenses to cable companies to
operate within their jurisdictions usually for a share of revenues. LFAs have been at the
centre of the debate over open access.
Local Loop The connection between the customer's premises (e.g. home or office) and the
provider's central office servicing this customer. Historically, this has been a wireline
connection, however, wireless options are increasingly available for local loop capacity. Also
referred to as "the last mile" (even though the actual distance can vary).
Local Multipoint Distribution Systems (LMDS) A line-of-sight wireless technology which

delivers two-way audio and video signals via microwaves. System operates at 28 GHz
spectrum level. Coverage cells have a range of approximately three miles, which solves the
terrain and one-way limitations faced by MMDS, however, the greater number of coverage
cells required increases the cost over traditional MMDS. The FCC has not allocated this
spectrum for use, and if the commission chooses to auction the spectrum, costs will rise
dramatically
Local Number Portability (LNP) A system that allows subscribers to change local phone
companies without experiencing a change in phone numbers.
Local to Local The retransmission of local TV signals by DBS back into their local broadcast
markets

Low Earth Orbiting Satellites (LEOs) Orbit the earth at an altitude between 400 and 1,500
miles. Due to the LEO's low orbit, they must travel at high speeds in order to maintain their
altitude, which only keeps them in the line-of-sight of a fixed terrestrial antenna for ten
minutes. LEOs have a shorter lifespan and are less powerful than GEOs. However, unlike
GEOs, LEOs transmit signals with no time delay, which offers a large marketing advantage
compared with the GEO.
M
Major Economic Area (MEA) A geographic area established and used by the Federal
Communications Commission to define the coverage of spectrum licenses for certain
services. There are 52 MEAs, including 46 in the continental United States and 6 covering
Alaska, Hawaii, Guam and the Northern Mariana Islands, Puerto Rico and the U.S. Virgin
Islands.
Medium Earth Orbit Satellites (MEOs) Orbit the earth at an altitude of 10,000+ miles. As
with LEOs, MEOs transmit signals with no perceptible time delay. Proposed MEO networks
would consist of approximately twelve satellites.
Megabits Per Second A measure of bandwidth capacity or transmission speed, a million bits
per second.
Megahertz (MHz) A measure of spectrum equal to one million hertz or one thousand
kilohertz.
Microbrowser A Web browser optimized to run in the low-memory and small-screen

environment of a Net device.
Microwaves High-frequency radio waves used for telecommunications transmission. Line-of-

sight, point-to-point transmission of signals at high frequency, usually above 890 MHz. Many
cable television systems receive some television signals from a distant antenna location via
microwave relay. Microwave frequencies require direct line-of-sight to operate. Trees and
buildings distort or block the signal.
Migration Something migrates when it connects to something different. This occurs in

mobile networks, where a mobile device migrates from base station to base station as the
user moves around, and also technically, when services migrates from technology to
technology, such as voice traffic migrating from the PSTN to mobile and VoIP.
Mobile Telephone Switching Office (MTSO) Monitors all cellular phone traffic signal
strength and, at appropriate times, transfers a call from one cell site to another.
Modem A data communications device that accepts a digital signal, then converts or
modulates it into an analog signal; that another modem can convert back or demodulate into
digital form again.
Modulator An electronic equipment that combines video and audio signals from a studio and
convert them to radio frequencies (RF) for distribution on a cable system.
MPEG (Moving Pictures Experts Group) The group that defined the standards for
compressed video transmission. MPEG also refers to the format itself.
MP3 is formally Motion Picture Experts Group Audio Layer 3; a method of compressing audio
data. MP3 produces CD-quality sound at a data-rate of around 1MBps.
Multichannel Multipoint Distribution System (MMDS) A line-of-sight wireless technology

that delivers audio and video signals one way, to homes via microwaves. Coverage cells have

a range of approximately thirty-five miles. Current analog systems will be upgraded to digital
thereby increasing channel capacity from 30 channels to 120 channels.
Multimedia In the context of mobile communications, a service that may combine voice,
data, graphics and video information.
Multipoint Access User access in which more than one piece of terminal equipment is
supported by a single network termination.
Multiplexing Enables cable operators to offer on a given service multiple feeds, each of
which carries a different line of programming. Made possible by digital compression
technology.
Multiple Service Operator (MSO) A term applied to cable TV companies that hold
certificates of franchises allowing them to provide cable TV service in several different cities
or geographic locations.
Must Carry Refers to the 1992 Cable Act, which requires Cable TV operators to carry local
commercial and non-commercial broadcast channels in areas where the cable companies
provide service.
MVNO Mobile Virtual Network Operators run a mobile phone service without owning a
network of their own, by renting network capacity from others.
N
Narrowband Medium that is capable of carrying voice, fax, paging, and relatively slow-speed
data (not full video applications), typically at 64Kbps or less.
Narrowcasting is sending signals to a small and select group of users, e.g. subscribers.
Near Video on Demand (NVOD) An entertainment and information service that broadcasts
a common set of programs to customers on a scheduled basis. At least initially, NVOD
services are expected to focus on delivery of movies and other video entertainment. NVOD
typically features a schedule of popular movies and events offered on a staggered-start basis
(every 15 to 30 minutes, for example). See also Video on Demand.
Network Congestion A state of overload within a network, where there is a risk of traffic
loss or service degradation.
Network Interface Card (NIC) A hardware interface card that connects a computer to the
network cabling.
Node Transition point in networks where signals travelling over optical fibre are converted
into radio signals and distributed to homes and businesses via standard coaxial cable. Nodes
in modern high frequency networks serve approximately 750 homes, though this number is
higher in older networks. The capacity of high frequency networks can be increased by
constructing additional nodes, which reduces the number of users per node.
Noise The word "noise" is a carryover from audio practice. Refers to random spurts of
electrical energy or interference. Heavy noise is sometimes called "snow."
Number Portability The possibility for individuals and corporations to retain the same phone
number and same quality of service when switching to a new local service provider.
O
OC-1, OC-3, OC-48, OC-192 OC-1 stands for Optical Carrier, level 1. It is a direct SONET
optical signal, transmitting at 51.840 Mbps. All higher levels are direct multiples of OC-1.

On-Demand Service A type of telecommunication service in which the communication path

is established almost immediately in response to a user request brought about by means of a
user-network signaling.
Open Access A term describing the view advocated by AOL and other members of the
openNET coalition that MSOs should be forced to open their cable systems to competing
ISP's. The issue is currently under review by the FCC.
OpenNET An advocacy group co-founded by AOL to lobby congress, the FCC and Local
Franchise Authorities to force cable companies to open up their networks to competing ISPs.
Open Systems Interconnection (OSI) A framework of the International Organization for

Standardization (ISO) standards for communication between different systems made by
different vendors.
Operation Systems Support (OSS) The back office software used for configuration,
performance, fault, accounting and security management.
Optical Fibre An extremely thin, flexible thread of pure glass, able to carry 1,000 times the
information possible with traditional copper wire.
Overbuild The construction of a second cable TV system in a franchise area where a system
already exists.
P
Packet is a discrete piece of data, of a certain length. Any amount of data can be split up into
packets, which may then travel independently, and be reassembled into the original data later
on. Packets often contain meta-data concerning e.g. what portion they contain.
Packet-Switched Network (PSN) A network which transports information by breaking up

the information stream into addressable digital "packets" that are transmitted independently
and then reassembled in the correct sequence at the destination. These networks allow
"sharing" of communications links and are more efficient than circuit-switched networks.
Packet Switching Packet-switching is the underlying principle of IP. In contrast to circuit-

switching, it doesn’t maintain channels according to connections, but rather chops data into
discrete packets, and then sends packets mixed together. When users access websites, they
download a lot of data when first accessing the site, but then very little whilst reading it. In a
circuit-switched system, a channel would be assigned to the user-webpage connection,
dormant as long as the user requested no new data. Not many such connections could be
maintained, given limited bandwidth. In a packet system, the data is sent to the user in
packets, each of which travels independently along the quickest route, without space
reserved for them in advance. This means that traffic is allocated wherever there is free
bandwidth, and bandwidth is never reserved and empty, rather traffic fills the empty space,
and thus more can be sent. The volume of data able to travel in a packet-switched network is
vastly greater than if each required a dedicated channel. This is analogous to the difference
between cars that travel after each other along roads, and those which require that their
whole route be cleared in advance. Packet-switching is much more efficient.
Parasitic networking is a way of decentralising networking. A parasitic network is one in

which each node is hierarchically equal, and uses other nodes indiscriminately to make its
connections, rather than relying on central nodes and a backbone (although parasitic
networks may access the backbone). The postal system is a traditional network, whereby
users send their messages to a central post office, and these are then transmitted in high-
volume to another central location, from which they are then distributed to their destinations.
The parasitic equivalent would involve messages being handed between connected people,

in the direction of their intended recipient; with each node’s connectivity parasitic on the
connections of the nodes to which it is connected. Parasitic networks are potentially very
powerful because the number of distributing nodes on a parasitic network (everyone
involved) may be exponentially greater than in a traditional network; no central network need
be installed; the network is automatically dynamically distributed according to users; and
nodes may be automatically parasitic on each other; using cheap spare capacity in their ability
to transmit and to receive.
Pay-Per-View A service that enables subscribers to purchase films and other programming
on a onetime basis. In most cases, PPV programs are aired according to a schedule set by
the cable operator. Bandwidth constraints have been the main barrier to offering subscribers
the added convenience of more flexible programming schedules. Offers less flexibility than
Video on Demand.
Pay Programming Programming that is available to cable customers for a fee in addition to
basic subscriber fee.
Penetration describes the ability of a technology or service to reach people. 100%

penetration means being available to everyone, e.g. the PSTN has near-100% penetration.
This is distinct from market share; as availability doesn’t compel people to pay for something.
Per-Inquiry Advertising Type of advertising where the cable network running the
commercial is paid based on number of responses received rather than air time used.
Personal Communications Services (PCS) A broad range of telecommunications services

(i.e., voice and data) that enable wireless communication independent of location. PCS
systems operate at higher frequencies than analog cellular systems. PCS cover the 1.9
gigahertz (GHz-one billion cycles per second) or 1900 MHz spectrum in the United States
(1800 MHz in Europe and 1500 MHz in Japan).
Personal Digital Assistant (PDA; Pocket PC; Handheld) were originally designed as
electronic personal organisers, but as technology has advanced they have become more
sophisticated, and now offer functionality such as internet access, or music. There is
convergence between some mobile phones and PDAs, as connectivity enhances mobile
computing, and the line between the two is unclear, but a PDA is, broadly, a handheld device
of which the primary function is to display the user’s data.
PDC (Personal Digital Cellular) The digital wireless standard used in Japan. PDC uses
TDMA air interface.
Personal/Digital Video Recorder (PVR/DVR) record TV onto a hard drive in digital format
(some will convert analogue signals), so that programmes may be played back when they
aren’t live. Sophisticated PVRs will regularly record users’ favourite programmes, so that they
may watch what they want at any time. They can also offer features such as pausing live
television, and fast-forwarding (only as far as the live feed); or rewinding (typically retaining in
memory the last few minutes of what is being watched); as well as recording to DVD. PVRs
usually incorporate an electronic programme guide for browsing, and may be offered either
by a television service provider such as Sky; or a third-party such as TiVo. PVRs offer both
competition to IPTV functionality in their current form, and the likely device through which
IPTV will be accessed.
Pixel Digital images are made of grids of discrete dots, each of which is a particular colour.
Pixel is a contraction of picture element; meaning a single-dot in a digital picture.

POP (Point of Presence) A POP is the location of an access point to the network. It may be
(physically) located in rented space (from a large telco) and houses routers, servers, etc. The
number of POPs an ISP has is usually indicative of its size.
Portal is a central access-point through which a user accesses content, such as the MSN
homepage, with links to different categories and items. With huge amounts of content
available, users need help navigating through it, and portals provide this by organising what
may be of interest. Portals may be customised to the user (as is the case with the Amazon
internet shopping front page), to offer them personalised content based on past usage and
purchase patterns. Popular portals can influence heavily the content that users access, and
are often owned by ISPs and mobile phone service providers, whose portals may be loaded
by default when customers connect to the internet.
Plain Old Telephone Service (POTS) Refers to analog voice telephone services provided
over the public switched telephone network.
Plastic Optical Fibre (POF) A plastic cable used as a substitute to more expensive fiber
optic cable. Can be used for only short distances.
Point of Presence (POP) A measure of population covered; one person is equal to one POP.
Post-paid (Contract) A post-paid account (sometimes referred to as contract), allows the

user credit, and bills them regularly, typically every month. A certain amount of service is
often (especially in mobiles) included in the regular subscription fee. Regular fees mean that
contracts guarantee revenue regardless of usage, with usage in excess of services-included
being chargeable, and providing extra revenue. Users may be locked into a post-paid contract
for a minimum period, and will continue to be charged until they cancel the contract, meaning
that they will be sure to terminate.
Premium Cable Additional cable programming services for which subscribers pay a fee in
addition to a basic cable charge.
Prepaid A pre-paid account is one whereby a user pays for credit prior to accessing services,
which are then paid for from this credit. When the user has used up their credit, they must
top-up their account, in order to be able to purchase more services. Pre-pay accounts include
no commitment to future spending, and so the account simply lapses by dormancy, with the
conditions under which lapse will occur specified in the terms of contract.
Program Non-Duplication Refers to the rules by FCC to the black out of programming by a
cable operator of a distant television station program it carries when a local station also
carries the same programming leading to problems with duplication.
Protocol A protocol is a set of rules governing communication between network nodes;

governing error-checking; compression; end-of-message notification; and received
notification.
PSTN Public Switched Telephone Network. The traditional, wired telephone network.
R
Radio Frequency Identification (RFID) RFID tags are small electronic chips that are
attached to something to track it, and report back data when requested by readers. Cards
that are read by holding them near to readers, such as the London Underground Oyster Card,
contain RFID chips. Active tags contain their own power source, and usually therefore have
greater functionality; such as longer-range transmission, and reading and writing data, e.g. to
provide feedback from a sensor system. Passive tags contain no power source, and transmit
using power gained from the reader’s signal. These typically will transmit only their unique

identifier, but are extremely small and cheap (prices have been projected to drop to €0.05 by
one manufacturer). Passive RFID tags may replace barcodes, being embedded in products to
allow product-tracking. Wal-Mart and the US Department of Defence have demanded that all
their suppliers begin to label all shipments with RFID. Far off proposals for RFID include
person-specific tags that would enable ID authentication, and universal product-tagging. RFID
is hard to predict, but extreme scenarios could involve a massive amount of extra data
travelling across telecommunications networks, as everything everywhere reported itself
back to its owner or vendor.
Rate Adaptive Digital Subscriber Line (RADSL) ADSL modems that are able to adjust to
varying lengths and qualities of lines are said to be rate adaptive. Unlike fixed rate ADSL
modems, these modems will connect over varying lines at varying speeds, making them a
good choice for service providers attempting to deploy ADSL past 18,000 feet. Modems can
be designed to select their connection speed at train-up, during a connection, or upon signal
from the central office.
Real-Time Communications A communication service (usually two-way) in which the

information sent is received instantly by the other party in a continuous stream. Telephone
calls and videoconferencing are real-time: database access and e-mails are not.
Rebuild The physical upgrade of a cable system, often involving the replacement of
amplifiers, power supplies, passive devices and sometimes the cable, strand, hardware and
subscriber unit.
Reciprocal Compensation Payment from telecoms providers to one another in exchange for
providing terminals for each other's exchange traffic.
Regional Bell Operating Company (RBOC) One of (originally) seven U.S. telephone
companies that resulted from the break up of AT&T. The RBOCs were created in 1984.
However, through consolidation, there are now four RBOCs-SBC, BellSouth, Verizon and
Qwest.
Resellers Carriers which purchase services from other carriers and than resell them to end
users.
Revenue Generating Units (RGU) Refers to every additional cable subscription unit. For
example if a customer signs up for both digital video and high-speed internet access, it
counts as two RGUs.
Roaming use involves the ability to stay connected to a network whilst moving around.
Pervasive wireless networks provide connectivity over a wide area by allowing users to hop
between base stations with overlapping cells, so that as they begin to go out of range of one,
they come into range of another. Roaming may also be offered over a small area, such as a
Wi-Fi base station that offers a user wireless connectivity throughout their home. When
users connect outside their home network, this is also roaming use.
Roll-out is the process of implementing a new technology or service in its target area; so
roll-out starts when the product is first offered in the market, and continues until it can reach
the whole market (i.e. has full penetration). Roll-out can involve heavy investments, such as
building new networks of mobile base stations; and is crucial, as people can’t buy services
that have not been rolled out to them; and most technologies (especially innovations) have a
limited shelf-life, so lost revenues will not be replaced.
Router A computer system that connects two or more networks. The router will examine an
incoming document (packet-switched) and forward it to the appropriate address.

Rural Service Area (RSA) A geographic area used by the Federal Communications
Commission to define coverage of spectrum licenses in certain services in the US. There are
428 RSAs, which, when combined with 306 Metropolitan Statistical Areas (MSAs), comprise
the 734 cellular geographic service areas.
S
Sampling Analogue signals are continuous; varying constantly, whilst digital signals are
discrete, having values at regular intervals, e.g. digital pictures have separate values for each
pixel. To convert an analogue signal, e.g. a sound to digital; it is sampled at regular intervals.
The rate at which values are recorded is the sampling rate, so a sampling rate of 1 kHz (1000
times per second) means that 1000 values are set for each second of audio. Sampling rates
are set appropriate to context, typically as twice the highest frequency wished to be
represented, so as not to miss any waves. Quality is a combination of sampling frequency
and the number of bits in each value, a binary equivalent to decimal places. With a bit-rate of
10, each value is recorded in a 1024 (2^10) range, equivalent to measuring with 0.1%
accuracy. A signal sampled at 1 kHz with a bit-rate of 10 would be roughly 10kbps with no
compression.
Satellite A device in orbit above the earth, often geostationary, which receives transmissions
from separate points on the earth and retransmits them to cable systems, DBS, and others
over a wide area.
Satellite Dish Antenna A device or system which receives broadcast signals from a satellite,
for transmission to home or system use.
Satellite Downlink A data service that broadcasts data from an orbital satellite to terrestrial
receivers. Used by some satellite TV vendors to provide a high-speed feed for receiving data
from the Internet. Data sent to the Internet (Web page requests, outbound email, etc.) must
be sent through more conventional means, such as a dial-up modem connections to a local
ISP. Satellite Home Viewers Improvement Act-Legislation signed by President Clinton in
November 1999 that authorizes the retransmission of local network signals to DBS
subscribers under terms similar to those that govern the retransmission of local signals by
cable companies.
Satellite Master Antenna Television System (SMATV) Systems that serve a concentration
of TV sets such as an apartment building, hotel, etc, utilizing one central antenna to pick up
broadcast and/or satellite signals.
Set-Top Box A device which coverts, displays data from analog, digital or digital broadcast
television to a standard frequency for display on a standard analog television set.
Shared Tenant Services (STS) The provision of centralized telecommunications services to

tenants with in the same building(s).
Short Message Service (SMS) A service available on digital networks allowing users to
send/receive short alphanumeric messages. (Works with GSM networks.)
Subscriber Identity Module (SIM) SIMs are 25 × 15 mm cards, containing the details
unique to a mobile phone user. A phone’s SIM can be changed by the user. Newer phones
often have appreciable internal storage, for e.g. media content and SMS archives, but older
phones stored most data on the SIM. When a user connects to a network, it is SIM data that
represents their account. Mobile service providers can sell SIMs to users without handsets,
allowing the user to source the handset themselves (users may have a spare phone, or buy
SIM-free). This model is extremely low-cost, as SIMs are commoditised, and cheap to
manufacture; with low input and transportation costs. Many service providers sell SIM-locked
handsets that won’t accept another SIM without entry of a code; which guards against

thieves and customers who don’t intend to use their account: but unlocking is available
relatively widely on the grey market.
Slamming The unauthorized switching of customers from one long distance company to
another, by a company. Slamming violates FCC rules.
SONET (Synchronous Optical Network) A fiber-optic transmission system for high-speed

digit traffic. SONET speeds range from 51 megabits to multiple gigabits per second. It uses a
"self-healing" ring architecture that is able to reroute traffic if a line goes down.
Spatial Division Multiple Access (SDMA) A complement (not an alternative) to CDMA and
TDMA; this technology increases the number of users that can access an existing wireless
phone or data.
Specialized Mobile Radio (SMR) Also known as Trunked Radio System-Wireless radio
communications systems which employ either conventional or trunking technology.
Historically, these systems have provided one-to-many and many-to-one voice
communications service-also known as mobile dispatch services. These systems are
operated by commercial entities, otherwise known as service providers that are in the
business to resell their services to other entities for a profit.
Spectrum The electromagnetic spectrum, on which all radio communication takes place,
describes different wavelengths and frequencies of electromagnetic radiation, including radio
waves of 10m and more and gamma waves 10-14 that size; with no theoretical limit. When an
electromagnetic signal is interpreted, waves of a restricted wavelength are considered, and
all the rest ignored. When we see visible light, this comprises waves in the restricted range
of 4-7 millionths of a meter, and our eyes are blind to other waves. This range is the
spectrum, or bandwidth, of visible light, i.e. all we can see. Light cannot travel through most
things, so interference is not a massive issue, but for waves intended to permeate over large
areas, such as microwaves, we need to control access to bandwidth, in order that signals are
not broadcast together, and we get the correct signal when we listen to a particular
frequency. Bandwidth on the radio spectrum then, is a massive restriction on telecoms, and
is allocated as licenses to transmit a particular strength of signal in a particular bandwidth in a
particular area. If two separate signals were trying to use exactly the same part of the
spectrum, communication could not take place; as they would interfere with each other.
Streaming A stream is a continuous flow of data: when content is streamed, the user does
not download it all at once prior to use, but rather accesses it continuously, with only a small
buffer loaded in advance to cope with flow fluctuations. Streamed content is often music or
video, although an information ticker may provide streamed data. Streaming allows access to
content that is still being recorded, e.g. live television, whereby not everything is available
initially for download, and reduces requirements on the user’s system, which needn’t have
capacity to load more than a small amount of data at a time. This makes bandwidth
requirements less intensive, although the same amount of data is transferred eventually;
which can be important when a host is distributing the same content to a large number of
users simultaneously. Streaming can also make piracy harder, as unless the user has some
way of recording streaming content, they never obtain a full copy.
Subscriber Line Charge (SLC) A fee charged to compensate the local telephone company
for part of the cost of installation and maintenance of the local loop (i.e. wires and poles). The
SLC is paid by subscribers monthly.
Switch A computer that receives instructions from a caller via a telephone number, by which
the call is then routed. The switch opens and closes circuits, or selects the path/circuits to be
used for transmission.

Symmetrical Digital Subscriber Line A DSL connection that provides equivalent upstream
and downstream transmission rates.
T
T-Carrier System A digital transmission system that takes analog voice circuits and converts
them to digital for transmission using time division multiplexing, the T-0 carrier system was
designed to operate at different rates, known as T1 (1.544 Mbps, equivalent to 24 channels);
T2 (6.312 Mbps, equivalent to 96 channels); T3 (44.736 Mbps, equivalent to 672 channels);
and T4 (274.176 Mbps, equivalent to 4,032 channels). (Without compression, a 64 Kpbs
channel carries a single voice conversation.)
T1 A digital transmission line capable of up to 1.5 Mbps.
T3 A digital transmission line capable of up to 45 Mbps. A T3 connection will allow fullscreen,

full-motion video.
TCP/IP-(Transmission Control Protocol and Internet Protocol) Refers to the collection of

protocols that define the basic working of the internet.
Telecommunications Act of 1996 (US) Landmark legislation aimed at deregulating the

domestic telecommunications market. Amendment to the Telecommunications Act of 1934.
The 1996 Act opened the way for long-distance companies to enter local markets and vice
versa and removed cable-telecom cross-ownership restriction that set the stage for AT&T's
entry into the cable business.
Telecommunications & Internet Protocol Harmonization Over Network (TIPHON) A

project within the European Telecommunications Standards Institute (ETSI) aimed at enabling
systems level interoperability for Voice-Over IP technologies. ETSI has historically been
focused primarily on H.323-based systems; however, the project recently has become
interested in MGCP-based technologies, such as PacketCable NCS.
Termination In telecoms, termination has a rather friendly meaning, concerning the final
connection to the receiving party on a call. A termination fee typically is paid to the company
providing this connection (i.e. that customer’s service provider).
Tiered Programming Refers to different levels of programming for which customers are
charged different fees.
Time Division Multiplexing Technique where data from multiple channels may be allocated
bandwidth on a single wire pair based on time slot assignment.
Time Division Multiple Access (TDMA) Digital cellular technology that sends signals over a
single channel. This medium could increase existing cellular/analog subscriber capacity by as
much as three times.
TDMA (ANSI-136) "TDMA" has been adopted as the new name for the "Digital AMPS" (D-
AMPS) mobile standard, now called ANSI-136, used in the Americas, Asia Pacific and other
areas. TDMA services can be delivered in the 800 MHz and 1900 MHz frequency bands.
Title II A section of the Telecommunications Acts of 1934 and 1996 that outlines obligations
of "common carriers" such as telephone companies. The 1996 act adds "local competition
provisions" for local and long-distance telephone companies.
Title IV A section of the Telecommunications Acts of 1934 and 1996. The 1996 Act amends
the definition of "cable service" to include interactive services.

Top-100 Market Ranking of largest television broadcast areas by size of market; i.e., number
of viewers and TV households. Used in FCC rulemaking and in selling of airtime to
advertisers.
Total Activity Report (TAR) A quarterly Nielsen report which lists all the television activity
during a sweep including broadcast stations, basic cable, pay cable, and superstations. It
shows household rating and share delivery by daypart in both the DMA (total market) and
cable household universe for all program sources.
Transponder The part of a satellite that receives signals and transmits communications
signals back to earth.
Trunk Cable The portion of the cable system architecture that transports the cable signal
from the head-end to the neighbourhood node. Can be either coaxial or fibre Due to the long
distances travelled, trunks generally consist of fibre optic cables in order to maintain the
signal integrity. Trunks make up approximately 15% of a cable system's total footage.
Twisted Pair Insulated pairs of copper wire twisted around each other in order to reduce
cross talk or electromagnetic induction between pairs of wires. Used to connect telephone
customers to the central office.
Two-Way Capacity A cable television system with two-way capacity can conduct signals to
the head-end as well as away from it. Two-way or bi-directional systems now carry data, they
may eventually carry full audio and video television signals in either direction.
Two-Way System The ability to receive TV programming through the broadband network
and send information back through the same network. This capability is used by customers to
order movies and music and to interact in other ways with the broadband network.
U
Ultra-High Frequency (UHF) Referring to channels in the 470 MHz-806 MHz band.
Unbundling The separation and discrete offering of components of the local telephone
service.
UNE (Unbundled Network Elements) The Telecommunications Act of 1996 requires that
the ILECs unbundled network elements and make them available to competitors based on
incremental cost. UNEs include local loops, switch ports, transport facilities, etc.
UNE-P Unbundled Network Elements Platform-When UNEs are combined to provide a

complete end-to-end circuit, you have UNE-P. The six elements that must be provided under
UNE-P regulatory guidelines are: 1) loops; 2) network interface devices; 3) local circuit
switching; 4) dedicated and shared transport; 5) signalling and call-related databases; and 6)
operation support systems.
Unified Messaging Software technology that allows carriers and Internet service providers
to manage customer e-mails, SMS and fax messages from any phone, PC, or information
device.
Universal Licensing System (ULS) The new Wireless Telecommunications Bureau program
under which electronic filing of license applications and reports of changes to licenses
creates a database that can be accessed remotely for searches.
Upstream Communications path in a cable network reserved for sending signals from the
subscriber's home to the headend. In coax-based cable systems, the upstream channel
occupies the 5 MHz to 42 MHz portion of the spectrum and is used principally for

communication with set top converters. HFC networks have a more robust upstream
capacity than traditional networks to support the increased upstream data flow required by
digital cable, Internet access, and telephony.
UTMS (Universal Mobil Telecommunications System) Europe's approach to

standardization for third-generation cellular systems.
V
Value-added Reseller Distributors that provide other services such as systems integration,
network management.
Very High Data Rate DSL (VDSL) Modem for twisted pair access operating at data rates
from 12.9 to 52.8 Mbps with corresponding maximum reach ranging from 4,500 feet to
1,000 feet of 24-gauge twisted pair.
Very High Frequency (VHF) Refers to channels in the 54-88 MHz and 174-216MHz range.
Very Small Aperture Terminal (VSAT) A satellite dish usually 4-6 feet in diameter used to
receive high and low speed data transmissions.
Video-on-Demand (VOD) A service that offers truly customizable viewing schedules for
films and other programming by enabling subscribers to order films and other kinds of
programming for home viewing. Although the service is not yet commercially available,
several MSOs are currently conducting VOD trials.
Video Telephony The ability to view real-time video communications on a two-way or

multipoint basis. Also called videoconferencing.
Virtual Private Network A network that is constructed by using public wires to connect
nodes. For example, a number of systems enable creation of networks using the Internet as
the medium for transporting data. These systems use encryption and other security
mechanisms to ensure that only authorized users can access the network and that the data
cannot be intercepted.
Violence Chip (V-Chip) A microchip which will permit parental control over rated television
programs.
Voice Frequency In telephony, typically the range is from zero to four KiloHertz.
W
WAP (Wireless Access Protocol) A global, open standard for on-line service access from
small-screen mobile phones.
WAN (Wide Area Network) A circuit or network that connects sites that are at a
considerable distance from each other.
Wavelength See Frequency.
WCDMA (Wideband CDMA) The air interface technology selected by the major Japanese
mobile communications operators, and in January 1998 by ETSI, for wideband wireless
access to support third generation services. This technology is optimized to allow very high-
speed multimedia services such as full-motion video, Internet access and video-conferencing.
Windows Media Audio (WMA) is a proprietary Microsoft audio codec, used by its Windows
Media Player software. It offers superior compression and fidelity, compared with MP3, but
now mainly competes with AAC. Similarly to iTunes users being committed to iTunes if they

let it encode into AAC; Windows Media Player users may become committed if they let it
encode into WMA, as some software, such as iTunes, won’t play WMA.
Wired City The concept of television and other communications data, educational material,
instructional television and information retrieval service that wired services can provide.
Broadcast services must, of necessity, be limited by scarce spectrum space; wired services
have theoretically unlimited channel capacity.
Wireless Application Protocol (WAP) An evolving worldwide standard for providing Internet
communications optimized for mobile phones, pagers, digital assistants, and other wireless
terminals. WAP primarily facilitates text or tabular data, but it can support monochrome
bitmap graphics. WAP Forum was established in 1997 by Nokia, Ericsson, Motorola, and
Phone.com
Wireless Cable Uses microwaves frequencies to transmit programming to a small antenna at

a subscriber's home.
WML (Wireless Markup Language) The markup language used in the Wireless Application
Protocol (WAP).
X
xDSL A generic term for the suite of DSL services, where the "x" can be replaced with any of
a number of letters, including "A," "H," "M," "RA,""S," and "V." See also Asymmetrical DSL, High
Bit Rate DSL, Moderate Speed DSL, Rate Adaptive DSL, Symmetric DSL, and Very High Data
Rate DSL.

European Telecoms Research Team

Guy Peddy Matthew Bloxham
Germany, Iberia, Greece, Wireline Thematics France, Benelux, UK, Wireline Thematics
Telephone: +44 20 754 58490 Telephone: +44 20 754 58163

Fax: +44 113 336 1299 Fax: +44 20 754 51788
E-mail: guy.peddy@db.com E-mail: matthew.bloxham@db.com
Winchester House Winchester House

1 Great Winchester Street 1 Great Winchester Street
London EC2N 2DB London EC2N 2DB
ENGLAND ENGLAND
Vivek Khanna Carola Bardelli
Nordic, Austria, Eurasia, Switzerland Italy

Fax: +44 20 754 51788 Fax: +39 02 8637 9786
E-mail: vivek.khanna@db.com E-mail: carola.bardelli@db.com
Winchester House Via Santa Margherita 4

1 Great Winchester Street Milan 20121
London EC2N 2DB ITALY
ENGLAND
Gareth Jenkins
Vodafone, Telecom Equipment, Wireless Thematics
Telephone: +44 20 754 75849

Fax: +44 20 754 73085
E-mail: gareth.jenkins@db.com
Winchester House
1 Great Winchester Street
London EC2N 2DB
ENGLAND
Alexei Yakovitsky Krzysztof Kaczmarczyk Pontus Gronlund

Russian Telecoms Central and Eastern European Telecoms Finnish Telecoms
Telephone: +7 501 9673727 Telephone: +48 22 579 8732 Telephone: +358 9 2525 2552
Fax: +7 501 7253770 Fax: +48 22 579 8701 Fax: +358 9 2525 2585
E-mail: ayakovitsky@ufg.com E-mail: Krzysztof.Kaczmarczyk@db.com E-mail: pontus.gronlund@db.com
10 Povarskaya Street Al. Armii Ludowej 26 Kaivokatu 10 A

121069 Moscow Focus Building PO Box 650
RUSSIA Warsaw 00-609 Helsinki FIN - 00100
POLAND FINLAND
Audrey Wiggin Jonathan Smith

Telecom Specialist Sales Telecom Specialist Sales

Fax: +44 20 754 51788 Fax: +44 20 754 51788
E-mail: audrey.wiggin@db.com E-mail: jonathan-d.smith@db.com
Winchester House Winchester House

1 Great Winchester Street 1 Great Winchester Street
London EC2N 2DB London EC2N 2DB
ENGLAND ENGLAND

Appendix 1
Important Disclosures
Additional information available upon request
For disclosures pertaining to recommendations or estimates made on a security mentioned in this report, please see
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Analyst Certification
The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject
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compensation for providing a specific recommendation or view in this report. Guy Peddy/Matthew Bloxham/Gareth
Jenkins/Vivek Khanna/Carola Bardelli/Pontus Grönlund/Divij Ruparelia
Equity rating key Equity rating dispersion and banking relationships
Buy: Expected total return (including dividends) of 10% or 50%

more over a 12-month period. 400 45%
Hold: Expected total return (including dividends) between - 300
10% and 10% over a 12-month period.
200 31%
Sell: Expected total return (including dividends) of -10% or
34%
worse over a 12-month period. 100 5% 21%
Notes: 0
1. Published research ratings may occasionally fall outside
Buy Hold Sell
these definitions, in which case additional disclosure will be
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website (http://gm.db.com); Companies Covered Cos. w/ Banking Relationship
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Telecom For Beginners 2007

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Telecom For Beginners 2007

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Europe

Telecom for beginners 2007 Primer

Industry and technology

(44) 20 754 58490 (44) 20 754 58163 (44) 20 754 75849

A real mixed bag: confusing simplicity!

Something for everyone

Deutsche Bank AG/London

Deutsche Bank AG/London Page 3

Appendix A: European telecoms SWOT ...................................... 148

Page 4 Deutsche Bank AG/London

Deutsche Bank AG/London Page 5

The telecoms business model

Figure 1: Penetration “S” curves in UK telephony

80% inflexion - mass market

Four key drivers

Figure 2: Key drivers of the product life cycle

Early stage Uncertain Limited Premium product Capital intensive

Page 6 Deutsche Bank AG/London

Figure 3: Re-inventing growth Figure 4: Cycles in telecom trends

Fixed Mobile What is the next technology?

Source: Deutsche Bank Source: Deutsche Bank

Evolving value chain

In the modern world network exclusivity is disappearing as the equipment manufactures

Deutsche Bank AG/London Page 7

Figure 5: The evolving telecom value chain

R&D New focus of

Networks Equipment Distribution Consumer

Usage drivers: New product innovation

Figure 6: European telecoms product life cycle

Traditional wireline – voice

Introduction Growth Maturity Decline

Page 8 Deutsche Bank AG/London

Figure 7: Classifying new products and services

Mobile voice Revolutionary

Wireline – all about access and traffic

Deutsche Bank AG/London Page 9

Figure 8: Access lines (m) and growth (%) in OECD countries

Access channels* Growth

Page 10 Deutsche Bank AG/London

Figure 9: Access lines penetration in OECD – 2004

Source: Company data Source: Company data

Deutsche Bank AG/London Page 11

Traffic – up, down and down

Figure 12: Share of outgoing mobile minutes (%) – 2005

Page 12 Deutsche Bank AG/London

Figure 13: German market traffic growth (bn of minutes)

Access revenue Traffic revenue

Deutsche Bank AG/London Page 13

Mobile – penetration is the king

Source: EMC and Wireless Intelligence Source: Wireless Intelligence

Page 14 Deutsche Bank AG/London

120% Europe: Eastern

Figure 19: Changes in the European mobile business model (% of revenue)

Figure 20: Comparing mobile markets (2006E)

Deutsche Bank AG/London Page 15

Revenue EBITDA -40%

Source: Deutsche Bank Source: Deutsche Bank

Figure 23: ARPU per month for UK operators (£)

Vodafone O2 T-Mobile Orange

Source: Deutsche Bank estimates and company data

Page 16 Deutsche Bank AG/London

Figure 24: Comparative UK fixed and mobile pricing (GBp)

Broadband and regulation