4 September 2020 Equity Research Europe

European Fibre Networks V Building the gigabit society – incumbent deployments accelerating

Integrated Telecommunication Services | Theme

Summary: In our fifth annual review of fibre-to-the-home (FTTH) in Europe, we look at Research Analysts the current landscape for both public and private fibre network deployment. FTTH deployments are accelerating across Europe (and in our view will accelerate further) and we Jakob Bluestone, CFA expect fibre assets to re-rate over time. We introduce our FTTH market dashboard for 44 20 7883 0834 ranking future FTTH investment opportunities. [email protected] Fibre deployment accelerating: In Western Europe, nearly 40% of premises were passed Ben Lyons by FTTH at end-2019 with the pace of deployment accelerating +15% to 12.5m incremental 44 20 7888 8742 [email protected] premises passed. We expect a further +10% acceleration in homes passed in 2020 and FTTH coverage to reach 74% by 2024. In particular, incumbent deployments are picking up; Paul Sidney e.g. in the UK, France and the Netherlands, incumbents are accelerating build. 44 20 7888 6015 [email protected] Demand growing but still lagging: FTTH uptake is lagging deployment, with 15% of premises taking FTTH-broadband, but we expect this to rise to 33% by 2024. We believe Evgeny Kudinov in a post-COVID-19 world, demand for fixed connectivity generally – and FTTH in particular 44 20 7888 1791 – will be higher. We also expect FTTH to take share from cable, which has tended to lose [email protected] market share when faced with FTTH-based infrastructure competition. Specialist Sales: Jan-Willem Brand Stock conclusions: We believe incumbent operators will generate the best incremental 44 20 888 6027 [email protected] returns where there is little existing fibre in the ground, limited competition and a high upsale opportunity. The UK (BT – Outperform) and Germany (DT – Neutral) are the markets with the most attractive returns outlook for incremental fibre, in our view. We also see KPN (Outperform) as well positioned on balance, as it benefits from little challenger overbuild/levered cable. Conversely, we see the outlook for new FTTH investment as weaker in Sweden (Telia – Underperform) and Spain (Telefonica – Neutral), as both markets have already largely monetised the upside from FTTH. Figure 1: Homes passed and connected to FTTH by market (% of premises)

120%

100%

80%

60%

40%

20%

0%

Belgium DK France GermanyIreland Italy N'lands NorwayPortugal Spain Sw eden Sw itz UK EU-13 Homes passed & connected with FTTH Homes passed but not connected with FTTH

Source: Company data, Credit Suisse estimates for 2024

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, 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.

4 September 2020

Table of Contents

Key Charts 3

Investment summary 4

1. Demand for fixed-line infra to accelerate 10

2. Fibre deployment accelerated in 2019 11

3. Incumbent fibre build accelerating 12

4. Fibre economics stack up if demand high 14

5. FTTH winning against cable 15

Ranking markets for new fibre investments 17

Deployment of FTTH 18

Demand for FTTH broadband 29

Changes to our forecasts 34

Belgium 40

Denmark 44

France 48

Germany 52

Ireland 56

Italy 60

Netherlands 65

Norway 69

Portugal 73

Spain 77

Sweden 81

Switzerland 85

United Kingdom 89

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Key charts

Figure 2: We expect fixed line to benefit most post-COVID-19 Figure 3: Forecast for gross over net coverage to decline

160.0 2.5x 133.9 140.0 130.6 129.6 2.0x 120.0

100.0 1.5x

80.0 68.2 69.0 62.4 64.4 65.2 64.9 1.0x 60.0

40.0 0.5x

20.0 0.0x 0.0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2019 2020 2021

EBITDA Capex OpFCF EU 13

Source: Company data, Credit Suisse estimates for 2020-21 (units = € bn) Source: Company data, Credit Suisse estimates

Figure 4: We introduce our FTTH market dashboard for ranking Figure 5: Incumbent FTTH coverage to reach 59% of premises future FTTH investment opportunities by 2024

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

2020E 2024E

Source: Company data, Credit Suisse research Source: Credit Suisse estimates

Figure 6: FTTH remains attractive given FTTC take-up rates of Figure 7: Markets with significant FTTH and HFC coverage are >50% and ARPU uplift seeing cable market share deteriorate

55.0% 28.5%

28.0% 50.0%

27.5% 45.0% 27.0% 40.0% 26.5%

35.0% 26.0%

30.0% 25.5% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 1Q 3Q 1Q 3Q Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 18/19 18/19 18/19 18/19 19/20 19/20 19/20 19/20 20/21 13 13 14 14 15 15 16 16 17 17 18 18 19 19

Openreach FTTx take-up rate Simple Average of Cable Market Share

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

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Investment summary Sector conclusions Fifth annual review of European FTTH landscape This report is our fifth annual review of the state and outlook of European FTTH build, where we look at what both public and private operators are doing. For previous editions please follow these links 2016, 2017, 2018, 2019, and for the full database in Excel please contact your Credit Suisse contact.

Figure 8: This is our 5th review of the landscape of FTTH in Europe

Source: Credit Suisse research Mapping the industry In the report, we map out what fibre is being built by the traditional telco incumbents as well as the new sources of fibre competition from existing resellers or new fibre challengers. The latter in particular are often privately held or small/fragmented and therefore in our view their collective importance is less well appreciated.

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V Networks Fibre European

Figure 9: Mapping the European telco industry and its disruptors Classic Telecom Traditional challengers/Start-ups Telecom Industry Disruptors

Incumbents Mobile operators Cable (major) Fixed Resellers Fibre challengers (new) Internet of Things (IoT) 5G disruptors Hardware BT Group 1&1 Liberty (multiple) 1&1 Adamo Misc muni fibre Driverless Cars Local networks Equiment DT (Germany) 3 Europe (multiple) NOS Bahnhof Altibox M-Net BMW Wireless Infrastructure Group Huawei Elisa (Fin) Altice (multiple) SFR Bouygues Altitude NetCologne Rolls Royce B4RN Nokia KPN (NL) Bouygues TDC Bredband2 Axione Norlys Tesla Application providers (Video) Ericsson

Orange (France) DT (multiple) Tele Kolumbus Digi B4RN OF Google (YouTube)

Proximus (Bel) Iliad Fra/Iit Tele2 Euskaltel Cityfibre SFN Energy Amazon Device manufacturers Swisscom (Swit) KPN Telenet Fastweb Covage Salt Bosch Netflix Samsung TDC (DK) Mas Telenor Iliad Delta Fiber Siro Hulu Apple Telefonica (Spain) Orange (multiple) Virgin Media Mas Deutsche Glasfaser SSE Healthcare Disney Huawei Telenor (Norway) Salt Vodafone (multiple) Orange dstelecom Stadtwerke Sunshine Apple Telia (Swe) Sunrise VodafoneZiggo SFR E-Fiber Swiss Fibre Orbita Facebook Satellite TI (Italy) Swisscom VOO (Brutele) Sky (Comcast) Eurofiber TDF Fibre Application providers (other) Kymeta TDC VOO (Nethys) Sunrise EWETel Voneus Transport/Logistics Uber Telefonica (multiple) TalkTalk FibreNation Waao DHL deliveroo eSIM Telenor TEFD Fore Freedom wilhelm.tel Konux Apple Telia Tiscali Gelsen-net zzoomm Smart Retail Samsung TI Vodafone (multiple) Gigaclear MVNOs Manufatcuring JD.com Gemalto Vodafone (multiple) Wind GlobalConnect 1&1 Fujitsu Wind Hyperoptic Chili Mobil Inexio MasMovil IP-Only Post office KCOM Tesco Mobile L2Fibre Rotterdam VMED

Mobile Towers Satellite operators Satellite disruptors Distributors New Disruptive Technologies

Operators Operators Disruptors Viasat Traditional Maritime Cyber Security Artificial Intelligence Holographics Cellnex Deutsche Funkturm JCDecaux Eutelsat Iridium Speedcast OmniSci Nvidia SeeReal INWIT Hivory Telcos e.g. DT, VOD Intelsat Planet KVH Vertica Twilio Volkswagen. Kaleida EI Towers Wireless Infrastructure Group Private Equity Inmarsat Smallsats Manufacturers Machine Learning Deepmind AMT Altice Portugal Towers Massive MiMO etc extending range Telesat SpaceX Airbus Infopulse Augmented Reality TDF Echostar OneWeb Boeing Altoros Niantic Arqiva Challengers Launchers Google Lockheed Martin Netguru Lucyd CTIL Digital Economy Amazon (BlueOrigin) Loon Thales iTechArt Zappar MBNL StrattoOpencell SpaceX Aero Telxius Private Equity ILS (Proton) GlobalEagle ULA GoGo Note that some smaller companies have been excluded

Source: Credit Suisse research

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Our key takeaways this year Demand for fixed-line infrastructure looks set to accelerate. We believe that a longer- term effect of COVID-19 is higher demand for fixed services and lower cord-cutting. This was already evident in Q2 20 (when line loss went from -3% y/y to -2% y/y) and we expect to see further improvement. We estimated in Beyond the Pandemic that full stabilisation of fixed lines (i.e. no further access lines lost) would imply ~15% potential upside to sector FCF (and share prices) over three years. Fibre deployment accelerated in 2019 - with further acceleration likely to come in 2020. In Western Europe there are now 80m premises passed by FTTH (40% of total premises). In 2019, 12.5m premises were passed by FTTH (6.1% of premises; net of overbuild), which was 15% above the 10.9m (5.4%) premises passed in 2018. We expect FTTH deployment to accelerate by a further 10% in 2020 to 13.7m (6.8%). Incumbent fibre build accelerating. Challenger FTTH deployment (67m homes) currently slightly outstrips incumbent FTTH coverage, but we expect this to revert by 2023 with half (7) of Western Europe's 13 incumbents announcing accelerated FTTH plans over the past year. Incumbent FTTH deployments by incumbents accelerated in 2019 (9.5m vs 8.0m in 2018). Between 2019 and 2024 we expect incumbents to double FTTH coverage with 61m homes passed, which represents an acceleration from 39m homes passed over the previous five years. In contrast, we expect challenger fibre deployment of 46m between 2019 and 2024; i.e a slight deceleration from 51m homes passed in the 2014-19 period. Fibre economics would work if demand was high enough. There is a long-running debate on the relative merits of whether and where FTTH generates attractive returns. The economics vary widely depending on planning rules, duct access and many other factors - but arguably the most important driver is the level of demand for the service. We believe that generally FTTH economics are attractive where uptake is at least 50% of homes passed. Currently FTTH uptake is still lagging behind, with 15% of total premises taking FTTH broadband (38% of homes passed by FTTH), but we expect this to grow into the mid-40s by 2024. Growing evidence of FTTH winning against cable. The relative technical merits of cable technology vs FTTH are still up for debate, but we think it is increasingly clear that cable is generally struggling in markets where the main form of competition is FTTH, while cable generally performs well in markets that are mostly FTTC. In markets that are mostly FTTC, cable has won on average 1.5pp retail market share over the past five years, while in markets that are mostly FTTH based, cable has lost 1.2pp retail market share over the past five years (and in some markets mid-single-digit share losses). As the last few FTTC markets shift more towards FTTH, this poses a growing risk to cable.

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Figure 10: New deployment targets since the last iteration of Building the Gigabit Society Country Company New FTTH Targets Date Belgium Proximus ~3m homes passed by 2025 (extending from previous announcement at CMD to pass 2.4m). Jul-20 An extra 30% is to come from a co-investment with Delta-Fiber and Eurofiber Denmark TDC 100k homes to be passed in 2020 with a long term target of 1m premises Mar-20 France Altice France (SFR) Acquisition of Covage means 8m homes secured to pass. 2.7m were built by Dec-19. Nov-19 Orange Engage 2025 Plan includes expanding own lines in France to ~23m with ~19m in private investment Dec-19 areas and a further ~4m in public investment areas and total footprint to 36m lines Bouygues Increased FTTH homes marketable 2022 target to 22m from 20m. Feb-20 Iliad Have 2m FTTH subscribers by 2020, 22m homes marketable by 2022 and 30m by 2024 with 4.5m Mar-20 FTTH subscribers Germany Deutsche Glasfaser To provide 4m homes with FTTH by 2030 with a total footprint of 6m with Inexio Nov-19 Inexio To provide 2m homes with FTTH by 2030 with a total footprint of 6m with Deutsche Glasfaser Nov-19 Deutsche Telekom Will ramp up to 2m homes passed a year run rate. Expect 2030 FTTH coverage in Germany of 100% (all Feb-20 operators) Ireland Eir Targeting 1.8m homes passed by FTTH adding an additional ~1.3m to current footprint Sep-19 National Broadband Ireland Identified 537k homes in rural areas to pass with the aim of passing 115k within first two years May-20 Italy Open Fiber Targeting complete coverage of Band 1 (400k homes), 100% coverage of Band 2 (4.4m homes) and Jul-20 81% of Band 3 (3.7m homes) by 2022 with either FTTH or FWA Telecom Italia Increase own FTTH build to 40% of technical households by 2023 and 56% by 2025 Aug-20 Portugal NOS Signed agreement with dstelecom to cover an additional 900k-1.2m households Jul-19 Switzerland Swisscom Plans to double FTTH homes passed by 2025 which we estimate at ~1.5m homes passed Apr-20 Swiss Open Fiber (Salt/Sunrise JV) New JV announced with a target to pass 1.5m homes within 5-7 years in mostly new areas. Strategic May-20 partnership with Swiss Fibre Net. United Kingdom KCOM Expanding footprint from Hull and Yorkshire base with a £100m investment Jan-20 BT Expanded FTTH homes passed targets to ~20m homes by mid-to-late 2020s of which at least 3.2m will May-20 be rural homes Source: Company data, Credit Suisse research

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Stock conclusions New scorecard ranks UK top In this report, we introduce a new tool for assessing which European markets are most attractive for incremental FTTH deployment, i.e. where could the highest returns be achieved by an operator looking for marginal fibre investment. This does not measure the return on existing fibre deployments (sunk cost). Rankings are based on relative metrics, with the best scoring country receiving a 1 and the poorest 13. We sum these scores to get an overall score and rank the various countries. The UK, Ireland and Germany screen as the most attractive markets for incremental fibre deployment owing to a combination of low coverage at present and a lack of large-scale competition in FTTH infrastructure. Ireland’s incumbent is not listed and is therefore less relevant to public equity investors, but Germany and UK both have major incumbents that are listed. At the other end of the spectrum, we believe the markets that are least attractive for further FTTH investment are Spain and Sweden. Telefonica covers 90% premises and Telia 53%; so additional FTTH coverage is focused on areas with more challenging economics. There is also already high uptake of FTTH subscriptions in Spain (67% of broadband subs) and Sweden (71%); so there is less scope than lower-penetration markets for incremental migration of customers to FTTH. The Netherlands comes out slightly below the middle of the pack, although we believe this could improve. It scores low for Build Momentum (as it has slowed in recent years), as well as for Build Capacity (slow historically) rollout by KPN. The Netherlands also has FTTH access already in one-third of the market. However, this is likely to improve as KPN is ramping its build in 2020-21 and more broadly it operates in a duopoly fixed market where prices are rising and there is little challenger overbuild.

Figure 11: Summary of scorecard rankings by rank (1 most attractive, 13 least attractive), unless otherwise stated Overall Rank Country (incumbent) Build Momentum Market National Coverage Build Capacity Customer Demand Competitiveness 1 UK (BT) 1 1 3 8 5 2 Ireland (Eir) 2 4 6 5 7 3 Germany (D. Telekom) 9 2 2 13 2 4 Italy (Telecom Italia) 3 3 7 7 11 5 Belgium (Proximus) 5 10 1 12 4 6 France (Orange) 4 11 8 4 6 7= Norway (Telenor) 8 5 10 3 9 7= Switzerland (Swisscom) 11 8 4 11 1 9 Denmark (TDC) 7 6 9 9 8 10= Netherlands (KPN) 10 12 5 10 3 10= Portugal (MEO) 6 9 11 2 12 12 Sweden (Telia) 12 7 12 6 10 13 Spain (Telefonica) 13 13 13 1 13 Source: Credit Suisse research

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Summary of our stock ratings

Figure 12: Ratings and targets (priced 2 Sept 2020) Company Ticker FX Price Target Share price

Outperform Bouygues BOUY.PA € 36.0 27.5 BT Group BT.L £ 1.80 1.16 Cellnex CLNX.MC € 57.8 47.5 INWIT INWT.MI € 11.0 9.2 KPN KPN.AS € 3.00 2.20 Orange ORAN.PA € 13.5 10.8 Orange Belgium OBEL.BR € 22.0 14.7 SES SESFd.PA € 10.5 6.7 TEF Deutschland O2Dn.DE € 2.90 2.77 Tele2 TEL2b.ST € 162.0 125.3 Telenet TNET.BR € 52.0 36.9 Vodafone VOD.L £ 1.70 1.33

Underperform 1&1 Drillisch DRIG.DE € 21.0 23.0 Proximus PROX.BR € 19.0 18.8 Swisscom SCMN.VX CHF 430.0 499.8 TalkTalk TALK.L £ 0.80 0.91 Telia Company TELIA.ST SEK 28.0 32.3

Neutral Altice ATCA.AS € 4.20 3.60 Deutsche Telekom DTEGn.F € 18.0 14.2 Elisa ELISA.HE € 53.0 56.4 Eutelsat ETL.PA € 10.1 8.96 Iliad ILD.PA € 111.0 158.4 NOS NOS.LS € 3.50 3.70 Rai Way RWAY.MI € 6.60 5.46 Telefonica TEF.MC € 4.20 4.07 Telenor TEL.OL NOK 162.0 147.4 United Internet UTDI.DE € 30.0 36.9 Source: Credit Suisse estimates

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1. Demand for fixed-line infra to accelerate

In Beyond the Pandemic we argued that one of the key longer-term effects of the COVID-19 crisis was likely to be higher demand for fixed, including higher demand for FTTH-based broadband. We expect this rising demand to drive an acceleration in deployment of fibre in the coming years. We believe that increased working from home (WFH) and higher reliance on home connectivity are likely to continue even in the longer term. As a result we expect fixed-line cord-cutting to moderate in the next few years. This would represent a reversal after several years of deteriorating access-line development (growing until 2017 and steadily worsening since). There were already early signs of this in Q1 20 and Q2 20 (during lockdown) when cord-cutting in Europe inflected and started to improve. We estimated in Beyond the Pandemic that 1% lower line loss over three years equates to an additional 5% to industry FCF, and a full stabilization of line loss would lead to a ~15% uplift to equity FCF for the listed European telcos. On top of this we also see scope for higher ARPU as faster broadband speeds tend to have higher ARPU. Directly where there is an explicit premium for faster broadband Indirectly as it also tends to drive higher demand for content (VoD). We also expect policy-makers to make fibre investment more attractive. This could be through a more dovish regulation of wholesale rates, more support for wholesale-only networks (as already embedded in EECC) and easier deployment of fibre.

Figure 13: Cord-cutting in Europe showing first signs of Figure 14: FTTH tends to have higher ARPU than DSL – inflection (line growth y/y) example from France (€/m)

1% 9 €8.0 8 0% €7.0 7 €6.2 -1% 6 €5.0 -2% 5

-3% 4 3 -4% 2 -5% 1 -6% 0 2015 Q3 17 2018 Long term

Orange France ARPU uplift - FTTH vs ADSL EU market line loss y/y EU incumbent retail line loss, y/y EU incumbent total line loss, y/y

Source: Credit Suisse research Source: Company data

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2. Fibre deployment accelerated in 2019

There are now 80m homes passed by FTTH in Western Europe, representing a coverage of 35% of total premises. Fibre deployment over the past year has proven faster than we expected a year ago. We estimate that 12.5m new premises were passed with FTTH during 2019. This is an acceleration from the 10.9m homes that were passed by FTTH in 2018 and nearly 1.5m faster than we had estimated when published our annual fibre review a year ago Gigabit society (slowly) turning into reality. The markets that have surprised on the upside in terms of FTTH deployment are France and Spain – in the other major markets (Italy, UK and Germany) FTTH deployment has been slower than we expected, particularly for challengers. As a result, we have increased our forecasts for FTTH deployment. We now forecast 123m premises will be passed by FTTH in 2022 (47% of total premises), 6.3m more than our forecast a year ago. Most of the increase comes from France and to a lesser extent from Italy and Switzerland. We have lowered our forecast for the UK and Germany as both markets have seen lower challenger fibre build than we expected. We estimate that incumbents cover 30% of premises (net of overbuild) in Western Europe and challengers cover 33%, i.e. challengers have slightly wider FTTH footprints than incumbents. If we add up all fibre footprints available (i.e. gross fibre coverage, including co-financing) and compare it with the number of premises passed by FTTH, we can measure the degree of overbuild in Europe (operators available to serve each fibre line). We estimate that the overbuild ratio was around 2.3x per home passed in 2019. We expect the degree of overbuild will fall to 2.1x. Expanded builds in the UK, Italy and Belgium reduce this metric owing to relatively fewer wholesale agreements between Infrastructure Operators (IOs), which reduces the EU aggregate.

Figure 15: Changes to aggregate net challenger FTTH Figure 16: Gross FTTH build over net FTTH build gives the coverage (2022; % of premises) average number of IOs present at each home passed (x)

100.0% 2.5x 90.0%

80.0% 2.0x 70.0%

60.0%

50.0% 1.5x

40.0%

30.0% 1.0x 20.0%

10.0% 0.5x 0.0%

0.0x 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2022E Net Homes Passed New Forecast 2022E Net Homes Passed Old Forecast EU 13

Source: Credit Suisse estimates Source: Company data, Credit Suisse estimates

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3. Incumbent fibre build accelerating

We expect incumbent fibre to be the major driver of growing fibre deployment in the coming years. We expect incumbents to pass 59% of premises in 2025, i.e. an increase of 29pp from the 2019 level. This represents an annual increase in coverage of around 6pp pa and a pick-up in the 3-4pp annual increase in FTTH coverage, driven particularly by faster FTTH deployments in the UK and Germany. In total we estimate that incumbents will double their FTTH coverage from 60m premises in 2019 to 120m in 2024.

Figure 17: FTTH homes passed for EU 13 by incumbent (% of premises)

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

EU 13

Source: Company data, Credit Suisse estimates

Figure 18: FTTH homes passed by incumbents (% of premises)

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

2020E 2024E

Source: Credit Suisse estimates

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Announcements over the past year include BT, DT, TI, Orange, Proximus, Swisscom and Eir increasing their FTTH builds suggest that they will become the largest companies in their respective domestic markets. Figure 19: 7 of the 13 incumbents have expanded their FTTH roll-outs this year Incumbent Homes Passed Guidance Change in 2019A Guidance Proximus 300 ~3m homes to be passed by 2025 expanded from previous announcement at CMD to pass 2.4m. An extra  30% is to come from a co-investment with Delta-Fiber and Eurofiber TDC 267 100k homes to be passed in 2020 with a long term target of 1m premises  Orange 16,281 Announcement of Engage 2025 Plan which includes expanding own lines in France to ~23m with ~19m in  private investment areas and a further ~4m in public investment areas and total footprint of 36m lines by 2023 Deutsche Telekom 1,573 Will ramp up to 2m homes passed a year run rate  Eir 455 Targeting 1.8m homes passed by FTTH adding an additional 1.4m to current footprint  Telekom Italia 4,000 Increase own FTTH build to 40% of technical households by 2023 and 56% by 2025  KPN 2,509 Passing 1m homes with FTTH between 2019 and 2021  Telenor 560 Continued expansion of FTTH network in Norway  Altice Europe (MEO) 4,915 Plans to pass 4.5m homes on their own network  Telefonica 23,133 Targeting 100% coverage by 2025  Telia 2,611 Selective expansion of FTTH network  Swisscom 1,448 Plans to double FTTH homes passed by 2025 which we estimate at ~1.5m homes passed at FY2019  BT/Openreach 2,156 Expanded FTTH homes passed targets to ~20m homes by mid-to-late 2020s of which at least 3.2m will be  rural homes Source: Company data, Credit Suisse research In markets where challengers have deployed a lot of fibre, incumbent line loss tends to be higher. Conversely, in markets where incumbents have a big NGN lead (i.e. including incumbent cable) line loss tends to be lower. So fibre deployment should lead to better line loss, in our view.

Figure 20: FTTH homes passed by challengers versus Figure 21: Incumbent line loss (y/y) vs incumbent NGN minus incumbent line loss (y/y; 2019) challenger FTTH coverage (% premises)

2.0% 2.0%

MEO MEO 0.0% BT 0.0% BT 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% -40.0% -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0%

-2.0% -2.0% DT EIR DT EIR EU-13 EU-13 TEF TEF KPN KPN -4.0% -4.0% SCOM SCOM TDC TDC ORA TI ORA

-6.0% PROX TI -6.0% PROX

Incumbent Line Loss Line 2019 Incumbent Incumbent Line Loss2019 Line Incumbent -8.0% -8.0% TELIA TELIA

-10.0% TNOR TNOR -10.0%

-12.0% -12.0% % Homes Passed by Challenger FTTH 2019 Incumbent NGN - Challenger FTTH Coverage

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

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4. Fibre economics work if demand is high

FTTH deployment costs are high (typically ~€1,000 per home passed) compared with FTTC (~€100-200) but we believe that the returns are still value-accretive provided uptake is sufficiently high (typically >50% of homes passed). In our recent note on BT we highlighted the return profile of FTTH assets given their more than 30-year operational life and superior reliability. Openreach noted in December that its FTTH network was operating with a 50% lower fault rate and is typically not affected by weather. Initial costs vary by country and company according to loop length, duct access and building regulation. Assuming ~£400 a home passed, BT can still achieve a 10% ROCE on a 10-year time frame given a target ~50% take-up rate and £17 ARPU.

Figure 22: Return profile for Openreach’s expanded FTTH targets Actual YE March 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Year of project # 0 1 2 3 4 5 6 7 8 9 10

No of households (m) 20 Cost per home passed (£) 400 Total CAPEX (£'m) 8,000

Penetration 1.5% 2.6% 5.9% 9.8% 15.0% 21.7% 28.4% 35.0% 41.7% 48.4% No of Openreach FTTP customers 306 524 1,170 1,960 3,000 4,337 5,673 7,010 8,346 9,683 ARPU** 17.0 17.0 17.0 17.0 17.0 17.0 17.0 17.0 17.0 17.0 Service revenues (£'m) 62 107 239 400 612 885 1,157 1,430 1,703 1,975 EBITDA margin 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% EBITDA contribution 31 53 119 200 306 442 579 715 851 988 UK Tax rate 19% 19% 19% 19% 19% 19% 19% 19% 19% 19% Earnings from fibre build 25 43 97 162 248 358 469 579 690 800 ROCE (post-tax) 0.3% 0.5% 1.2% 2.0% 3.1% 4.5% 5.9% 7.2% 8.6% 10.0%

Target Pre-tax Post-tax Target ROCE 12.3% 10.0% Target earnings 800 Pre-tax earnings = EBITDA 988 Target service revenues 1,975 Target households (m) 9.7 = target penetration 48.4% Source: Company data, Credit Suisse estimates for Mar-21 onwards

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5. FTTH winning against cable

DOCSIS 3.1 upgrades allow for gigabit-capable connections over HFC, as for example shown in Germany where Vodafone has been pushing its Gigabit broadband service since taking over Liberty Global’s Unity Media in mid-2019. There is a long-running debate on the pros and cons of cable with DOCSIS 3.1 vs FTTH, and from a technical/financial point of view we think it is still unclear which is the superior platform (FTTH tends to have higher upfront capex but lower recurring opex than DOCSIS 3.1). However, in our view what is clearer is that cable appears to be competing less effectively against FTTH than against FTTC when it comes to broadband market share. Indeed, several cable operators (Virgin Media, Telenor, SFR, and NOS) are deploying FTTH in countries as a means of future-proofing their networks. In the charts below, we show the retail broadband market share evolution in markets where the incumbents predominantly have been competing using FTTC and FTTH. Markets that have predominantly been FTTC markets (i.e. where incumbent FTTH coverage is low) cable has tended to perform reasonably well. We include Belgium, Germany and the UK in this category. On a simple average basis, cable’s market share has risen by 1.5pp over the past five years in these “FTTC markets”. Cable has grown by >2pp in Germany and Belgium but is only marginally up in the UK.

Figure 23: Cable broadband market share in markets with Figure 24: Cable broadband market share in markets with mostly FTTC – by market mostly FTTC – simple average

60% 35%

50% 30% 25% 40% 20% 30% 15%

20% 10%

10% 5%

0% 0% 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20

Belgium Germany UK Simple Average of Cable Market Share

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

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In contrast, in markets with extensive FTTH coverage cable has gradually been losing market share. We include Denmark, France, the Netherlands, Norway, Portugal, Spain, Sweden and Switzerland in the category of “high FTTH competition”. In these markets cable has lost an average of 1.2pp of market share on a simple average basis. By market, the picture is a bit more nuanced with cable market share having risen in Denmark (Stofa turnaround, TDC push), France (DSL migration post the SFR/Numericable integration) and the Netherlands (operational turnaround at VodafoneZiggo). But cable’s broadband market share is sharply down in Norway, Portugal and Spain in particular. Norway and Portugal have both seen some cable-to-FTTH migration but Spain is interesting as it has seen the most extensive FTTH build in Europe coupled with the worst cable performance (the former ONO business – Vodafone bought this business for €7.2bn in 2019 (roughly book value) and took a €2.9bn impairment in FY19).

Figure 25: Cable market share in markets with mostly FTTH – Figure 26: Cable market share in markets with mostly FTTH – by market simple average

50% 30% 45% 40% 25% 35% 30% 20% 25% 20% 15% 15% 10% 10% 5% 5% 0% 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 0% 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q Denmark France* Netherlands Norway 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 Portugal Spain Sweden Switzerland Simple Average of Cable Market Share

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research Over the past year Proximus, DT and BT have all announced significant FTTH builds; so cable networks will soon have to compete with incumbent FTTH roll-outs, which we expect to take market share from cable. This leaves some question marks around the longer-term outlook for cable market share in the markets which are predominantly FTTC-based – we would for example note Vodafone’s disappointing broadband net adds in calendar Q2 20 in Germany and the weak KPIs over the past few quarters at Virgin Media.

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Ranking markets for new fibre investments

In this report, we introduce a new tool for assessing which European markets are most attractive for incremental FTTH deployment; i.e. where could the highest returns be achieved by an operator looking for marginal fibre investment. This does not measure the return on existing fibre deployments (sunk cost). Rankings are based on relative metrics, with the best scoring country receiving a 1 and the poorest 13. We sum these scores to get an overall score and rank the various countries. The UK, Ireland and Germany are the most attractive markets for incremental fibre deployment due to a combination of low coverage at present and a lack of large scale competition in FTTH infrastructure. Ireland’s incumbent is not listed so less relevant to public equity investors but Germany and UK both have major incumbents that are listed. At the other end of the spectrum, we believe the markets that are least attractive for further FTTH investment are Spain and Sweden. Telefonica covers 90% premises and Telia 53% so additional FTTH coverage is focused on areas with more challenging economics. There is also already high uptake of FTTH subscriptions in Spain (67% of broadband subs) and Sweden (71%) and so there is less scope than lower-penetration markets for incremental migration of customers to FTTH. We show the detailed mechanics of the new tool in the Appendix of this report. We recently downgraded Telefonica to Neutral owing to its relatively low fixed exposure (~1/4 of revenue compared to ~1/2 for most peers) and the deterioration in mobile pricing in Spain.

Figure 27: Market Dashboard methodology Figure 28: Pillar ranks for each FTTH market

Overall Rank Country Build Momentum Market Competitiveness National Coverage Build Capacity Customer Demand

1 UK 1 1 3 8 5

2 Ireland 2 4 6 5 7

3 Germany 9 2 2 13 2

4 Italy 3 3 7 7 11

5 Belgium 5 10 1 12 4

6 France 4 11 8 4 6

7= Norway 8 5 10 3 9

7= Switzerland 11 8 4 11 1

9 Denmark 7 6 9 9 8

10= Netherlands 10 12 5 10 3

10= Portugal 6 9 11 2 12

12 Sweden 12 7 12 6 10 13 Spain 13 13 13 1 13

Source: Credit Suisse research Source: Credit Suisse research

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Deployment of FTTH FTTH coverage

We forecast 60% of aggregate premises in Western Europe will be passed by FTTH by 2022 compared with around 40% in 2019. Among the big European markets: We expect the UK to narrow the gap on the European average by 11pp from 2019 levels. We expect 10m homes to be passed between 2019 and 2022. We expect Germany to remain a laggard due to its large number of premises as well as a slower rate of net build-out, which we forecast to grow to around 2.5m new homes per annum by 2022 (5.5m homes passed 2019-22). DT has said that it expects 100% FTTH coverage by 2030, but this includes third parties building out faster. In absolute terms, we expect France to contribute the most with 12.5m homes passed between 2019 and 2022 owing to expanded coverage targets from Orange. We expect Italy to go from below-average FTTH coverage in 2019 to above-average by 2022. We expect Italy to see the third-largest absolute increase in FTTH premises passed (7.5m in 2019-22; behind only the UK and France). Spain currently has the highest FTTH coverage in Europe and we expect this to remain the case in 2022. However, with nearly 100% of premises covered, we expect most incremental build in Spain to be overbuild rather than greenfield expansion.

Figure 29: We forecast 60% of EU premises to be passed by FTTH by 2022 99.7% 96.3% 100.0% 92.7% 93.0%

90.0% 80.9% 77.2% 80.0% 68.6% 70.0% 60.2% 56.7% 60.0% 47.8% 47.9% 50.0% 46.2% 40.0% 30.0% 22.5% 23.3% 20.0% 10.0% 0.0%

2019 2020E 2022E

Source: Company data, Credit Suisse estimates Looking further out, we expect net premises passed to reach 74% by 2024 from 40% in 2019.

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Figure 30: Change in net homes passed by country in absolute terms (2019-22; ‘000)

140,000 123,123

120,000 1,037 369 850 9,793 1,589 429 1,013 715 7,525 100,000 5,463

80,390 966 478 12,506 80,000

60,000

40,000

20,000

0

Source: Company data, Credit Suisse estimates

Figure 31: Net premises passed by FTTH over time

80.0%

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

EU 13

Source: Company data, Credit Suisse estimates

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We forecast France, Norway, Portugal, Spain and Sweden to all have greater than 90% coverage by 2024, with Italy and Denmark not far behind. Telefonica remains the incumbent with the highest coverage aiming to reach all premises by 2025, followed closely by MEO, which we expect to reach 97% total coverage. Deutsche Telekom has the least extensive incumbent FTTH network as a percentage of premises, which we expect to total 5.3% by the end of 2020.

Figure 32: FTTH coverage by country - % homes passed

100.0%

90.0%

80.0%

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Belgium Denmark France Germany Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland UK EU 13

Source: Company data, Credit Suisse estimates

Figure 33: Incumbent FTTH coverage by country - % homes passed

100.0%

90.0%

80.0%

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Belgium Denmark France Germany Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland UK EU 13

Source: Company data, Credit Suisse estimates

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FTTH overbuild

We define gross homes passed as the sum of all of the major infrastructure operators’ FTTH coverage including wholesale, co-investments and JVs to determine the number of homes reached by each company. For a net figure, we only count each home passed once to determine the total number of premises passed at least once. Spain continues to have a high degree of overbuild owing to several companies (Telefonica, Masmovil, Orange and Vodafone) all having coverage above 60% of premises with Telefonica and Masmovil around 90%. On average there are 3.2x IOs (infrastructure operators) present at each home passed. At the other end of the spectrum, the UK and Belgium have very little overbuild owing partly to low coverage.

Figure 34: Gross FTTH passed divided by net FTTH passed

4.0x

3.5x

3.0x

2.5x

2.0x

1.5x

1.0x

0.5x

0.0x

2019 2020E 2022E

Source: Credit Suisse estimates

Figure 35: Gross FTTH passed divided by net FTTH passed over time

4.0x

3.5x

3.0x

2.5x

2.0x

1.5x

1.0x

0.5x

0.0x 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Belgium Denmark France Germany Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland UK EU 13

Source: Credit Suisse estimates

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Incumbent vs challenger FTTH coverage

Spain and Portugal have high coverage because of cheap access to, and extensive, ducting which has been leveraged in particular by the incumbents. We expect almost total coverage by 2024. Sweden and Norway have coverage split between utility networks and the incumbents, Telia and Telenor. Telia also benefits from access to lines from the open network.

Figure 36: Incumbent FTTH coverage by country

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

2019A 2020E 2022E

Source: Company data, Credit Suisse estimates Due to Telia lines being accessible by all companies at a wholesale rate, Sweden’s challengers have a higher net coverage than Telia as Telia does not utilize all of the lines available on the open networks. In Spain, Masmovil currently has a larger number of homes marketable than Telefonica owing to extensive wholesale agreements with the other major IOs.

Figure 37: Challenger FTTH coverage by country

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

2019A 2020E 2022E

Source: Company data, Credit Suisse estimates

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Figure 38: Challenger net homes passed by year as a percentage of total premises

100.0%

90.0%

80.0%

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Belgium Denmark France Germany Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland UK EU 13

Source: Company data, Credit Suisse estimates We expect incumbents to maintain a steady build rate as newer FTTH markets (Belgium, Germany and the UK) begin to deploy fibre networks rapidly. We then have incumbents surpassing net challenger coverage in 2022 owing to a lack of large challengers in the previously mentioned countries.

Figure 39: Incumbent versus challenger net FTTH passed over time

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0% 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Incumbent Net Homes Passed % Premises Challenger Net Homes Passed % Premises

Source: Company data, Credit Suisse estimates

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Incumbent vs challenger coverage gap FTTH gap 2019 In the following charts, we compare the gap of FTTH for the incumbents vs the challengers. The Nordic markets stand out for having challenger FTTH coverage that far exceeds incumbents’. Owing to TDC’s large HFC network, FTTH has only been a recent target for the company, while the challenger network Waoo has already built extensively by leveraging the infrastructure capabilities of local utility companies. The NGN gap for Denmark reverses and favours TDC. In the Netherlands, KPN has restarted its FTTH roll-out targeting 1m homes between 2019 and 2021 after pausing the programme when it reached 28% of premises. T- Mobile and DeltaFiber are planning to build FTTH, which may reduce the gap in the future.

Figure 40: Incumbent versus challengers net FTTH homes passed by country 2019

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

Incumbent Net Homes Passed % Premises Challenger Net Homes Passed % Premises

Source: Company data, Credit Suisse research

Figure 41: FTTH homes passed by incumbents versus challengers by country 2019

100.0% Spain 90.0% Sw eden 80.0%

70.0% Denmark Norw ay 60.0% Portugal 50.0%

40.0% France Italy EU 13 30.0% Sw itzerland

% Homes PassedHomesChallengers by % 20.0% Ireland 10.0% GermanyUK Netherlands 0.0% Belgium 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% % Homes Passed by Incumbent

Source: Company data, Credit Suisse research

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NGN (FTTH + incumbent cable) gap 2019

When including Telenor and TDC’s cable networks to calculate the total next-generation network (NGN), the gap closes for Norway and Denmark. Altibox coverage still dominates the overall NGN market in Norway with other companies also able to gain wholesale access to some of Telenor’s FTTH access lines.

Figure 42: Incumbent NGN versus challenger FTTH coverage by country 2019

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

Incumbent NGN 2019A Challenger Net FTTH 2019A

Source: Company data, Credit Suisse research

Figure 43: Delta in incumbent NGN versus challenger FTTH coverage 2019

30.0%

20.0%

10.0%

0.0%

-10.0%

-20.0%

-30.0%

-40.0%

NGN Gap (Incumbent NGN vs Challenger FTTH) 2019A

Source: Company data, Credit Suisse research

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Fibre gap 2022

By 2022, we expect incumbents in France, Germany, Switzerland, Ireland, the Netherlands and the UK to extend the gap on challenger FTTH coverage as roll-outs accelerate in all four of those nations. Overall, we expect challenger and incumbent coverage to be at a similar level by 2022 for Europe in aggregate.

Figure 44: Incumbent versus challengers net FTTH homes passed by country (2022E)

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

Incumbent Net Homes Passed % Premises Challenger Net Homes Passed % Premises

Source: Credit Suisse estimates

Figure 45: FTTH homes passed by incumbents versus challengers by country 2022

100.0% Spain Sw eden 90.0% Norw ay 80.0% Denmark France 70.0% Portugal 60.0% Italy 50.0% EU 13

40.0% Sw itzerland 30.0% Ireland 20.0% UK

% Homes Passed by Challenger FTTH % FTTH PassedHomesChallenger by % Netherlands 10.0% Germany Belgium 0.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Homes Passed by Incumbent FTTH %

Source: Credit Suisse estimates

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NGN (FTTH + incumbent cable) gap 2022

We include cable coverage for Telenor and TDC, which narrows the gap for both countries significantly.

Figure 46: Incumbent NGN versus challenger FTTH coverage by country 2022

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

Incumbent NGN 2022E Challenger Net FTTH 2022E

Source: Credit Suisse estimates

Figure 47: Delta in incumbent NGN versus challenger FTTH coverage 2022

100.0%

80.0%

60.0%

40.0%

20.0%

0.0%

-20.0%

-40.0%

-60.0%

NGN Gap (Incumbent NGN vs Challenger FTTH) 2022E

Source: Credit Suisse estimates

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Change in network gap

We expect Belgium, the UK and Ireland to be dominated by their respective incumbents as their FTTH builds do not face nationwide challengers for comprehensive coverage. Overall, we expect incumbents to accelerate their deployment over challengers with the gap increasing 3.5% across the 13 EU countries we track. We do not expect any incumbents to increase cable coverage owing to consumer preference for cable as well as being a more future-proof technology.

Figure 48: Delta in NGN gap 2022E vs 2019

15.0%

10.0%

5.0%

0.0%

-5.0%

-10.0%

Change in NGN Gap 2022E vs 2019A

Source: Company data, Credit Suisse estimates

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Demand for FTTH broadband FTTH subscribers – % of premises

15% of premises had an active FTTH connection in 2019, which we expect to increase to 25% by 2022 as the take-up rate increases 3pp to 41% combined with a larger number of homes passed. Germany’s take-up rate is expected to decline slightly as new build accelerates and stabilizes at 39% by 2024. Italy has a low take-up rate due to its relatively low fixed broadband penetration.

Figure 49: FTTH subscribers as a percentage of premises by country

80.0%

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

2019 2020E 2022E

Source: Company data, Credit Suisse estimates

Figure 50: Net FTTH take-up rate by country

80.0%

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

2019 2020E 2022E

Source: Company data, Credit Suisse estimates

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Figure 51: EU aggregate FTTH subscribers as a percentage of premises

35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Total Subscribers % Premises

Source: Company data, Credit Suisse estimates

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FTTH subscribers – % of broadband subs

By 2022, our forecasts indicate FTTH subscribers will account for more than 30% of the broadband market, a 10pp increase as xDSL connections continue to switch to NGN services.

Figure 52: EU aggregate FTTH subscribers as a percentage of total broadband subscribers

45.0%

40.0%

35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

FTTH % Total Broadband Subscribers

Source: Company data, Credit Suisse estimates

Figure 53: FTTH subscribers as a percentage of total broadband subscribers over time

100.0%

90.0%

80.0%

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Belgium Denmark France Germany Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland UK EU 13

Source: Company data, Credit Suisse estimates

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Incumbent versus challenger FTTH subscribers

Spain and Portugal had large increases in net challenger coverage in 2019 without equal growth in subscribers leading to a slight dip in the EU aggregate challenger net take-up rate to 26%. The challenger take-up rate declined in just 5 of the 13 countries we track but is skewed by the large weighting of Spain and Portugal’s FTTH coverage. By taking a simple average of the 13 countries, challenger take-up rates rose +0.9% in 2019. Challengers tend to benefit from higher take-up rates as many (especially rural ISPs) will only build in areas where they have guaranteed customers. Markets with a small amount of FTTH coverage also usually have higher take-up rates due to the higher proportion of B2B lines.

Figure 54: EU 13 take-up rate on net coverage

35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Incumbent take up rate (net) Challenger take up rate (net)

Source: Company data, Credit Suisse estimates Owing to incumbents rolling out FTTH more quickly than challengers by 2024, we expect their subscriber base to begin to grow as a percentage of total FTTH subscribers. These graphs do not take into account wholesale subscribers; hence the number of subscribers on the company’s owned network may differ.

Figure 55: EU 13 incumbent vs challenger FTTH subscriber market share

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Incumbent % Total Subscribers Challenger % Total Subscribers

Source: Company data, Credit Suisse estimates

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Figure 56: Incumbent vs challenger % of new FTTH subscribers

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0% 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Incumbent % New Subs Challenger % New Subs

Source: Company data, Credit Suisse estimates

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Changes to our forecasts Net homes passed

We have updated our net homes passed forecasts with significant increases in Norway, after passing 90% of households towards the end of 2019, and in Denmark where utilities continue to have the largest market share of FTTH subscribers. We have made minor reductions to our short-term estimates for the UK, Netherlands, Germany and Portugal. Overall we increase our EU estimates for homes passed by 1pp in 2020 with a 3pp increase in estimates for 2022.

Figure 57: Updated forecasts for 2020E net homes passed by country

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

2020E Net Homes Passed New Forecast 2020E Net Homes Passed Old Forecast

Source: Credit Suisse estimates

Figure 58: Updated forecasts for 2022E net homes passed by country

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

2022E Net Homes Passed New Forecast 2022E Net Homes Passed Old Forecast

Source: Credit Suisse estimates

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Incumbent net homes passed We update our numbers this year for net coverage using a new methodology which takes into account wholesale access, JVs and co-investment. On a rebased premises number, the largest coverage increases are in Sweden where we include ~1m lines with which Telia has access to via the nations open network and an additional 500k homes in Portugal that MEO has access to on a wholesale basis.

Figure 59: Updated forecasts for 2020E net homes passed by incumbents by country

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

2020E Net Homes Passed New Forecast 2020E Net Homes Passed Old Forecast

Source: Credit Suisse estimates

Figure 60: Updated forecasts for 2022E net homes passed by incumbents by country

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

2022E Net Homes Passed New Forecast 2022E Net Homes Passed Old Forecast

Source: Credit Suisse estimates

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Challenger net homes passed By including network sharing in this year’s numbers, Spain’s challengers have increased coverage with Masmovil overtaking Telefonica in absolute numbers during Q220. We have also upgraded estimates in Norway to include challengers’ access to some of Telenor’s network as well as a faster roll out in France. Due to network sharing agreements, we also reduce challenger FTTH coverage in Portugal due to overlap between Vodafone, NOS and dstelecom as well as adjusting for future plans to share newly built lines in rural areas.

Figure 61: Updated forecasts for 2020E net homes passed by challengers by country

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

2020E Net Homes Passed New Forecast 2020E Net Homes Passed Old Forecast

Source: Credit Suisse estimates

Figure 62: Updated forecasts for 2022E net homes passed by challengers by country

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

2022E Net Homes Passed New Forecast 2022E Net Homes Passed Old Forecast

Source: Credit Suisse estimates

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FTTH Subscriptions Total subscribers Our forecasts for subscribers are largely the same with EU subscribers as a percentage of premises falling 0.3% in 2020 due to a slower take-up in the UK and Germany (mostly due to slower roll-outs than predicted last year) as well as in Spain.

Figure 63: Updated forecasts for 2020E FTTH subscribers as a % premises by country

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

2020E FTTH Subscribers % Premises New Forecast 2020E FTTH Subscribers % Premises Old Forecast

Source: Credit Suisse estimates

Figure 64: Updated forecasts for 2022E FTTH subscribers as a % premises by country

80.0%

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

2022E FTTH Subscribers % Premises New Forecast 2022E FTTH Subscribers % Premises Old Forecast

Source: Credit Suisse estimates

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FTTH Take-up We now forecast the EU FTTH take-up rate to be 39% in 2020 from our previous 41% forecast last year, a decrease mostly due to deployment being slightly faster than predicted. We expect the take-up to return to 41% by 2022.

Figure 65: Updated forecasts for 2020E FTTH take-up rate by country

80.0%

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

2020E FTTH Take-up Rate (net) New Forecast 2020E FTTH Take-up Rate (net) Old Forecast

Source: Credit Suisse estimates

Figure 66: Updated forecasts for 2022E FTTH take-up rate by country

90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

2022E FTTH Take-up Rate (net) New Forecast 2022E FTTH Take-up Rate (net) Old Forecast

Source: Credit Suisse estimates

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Company/Country pages

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Belgium Overview Cable and FTTC continue to be dominant in Belgium with only Proximus announcing a large FTTH build targeting 2.4m homes by 2025 with an additional 30% through JVs with DeltaFiber and Eurofiber. Orange Belgium stated on its Q220 earnings call that it would be open to FTTH JVs in the future. High speed broadband is also offered widely over cable with Telenet rolling out gigabit-capable downloads speeds on its networks over DOCSIS 3.1.

Figure 67: FTTH homes passed by operator (gross; ‘000) Figure 68: FTTH subscribers by company (‘000)

7,000 6,000

6,000 5,000

5,000 4,000

4,000 3,000 3,000

2,000 2,000

1,000 1,000

0 0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Proximus Fluvius Other Total Premises Proximus Fluvius Other Total BB Subs

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 69: Net FTTH homes passed (‘000)

3,000 50.0%

45.0% 2,500 40.0%

35.0% 2,000 30.0%

1,500 25.0%

20.0% 1,000 15.0%

10.0% 500 5.0%

0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Net FTTH passed % of all Premises

Source: Company data, Credit Suisse estimates

European Fibre Networks V 40

2020 September 4

V Networks Fibre European Market Dashboard Belgium ranks 1st on the National Coverage pillar due to low historic FTTH build and hence opportunity to deploy FTTH without competition. For similar reasons, however, it also scores poorly for build capacity.

Figure 70: The Credit Suisse Fibre Market Dashboard ranks Belgium as the 5th most attractive market for incremental FTTH deployment

Source: Company data, Credit Suisse estimates

41

4 September 2020

Proximus We project Proximus to ramp up FTTH deployment rapidly by upgrading its extensive FTTC network to reach the targeted 1.1m by 2022 or ~20% of premises rising to over 2.3m by 2024 to meet the targets set out with Q220 results. Without another major telecom deploying fibre we expect Proximus to retain 90% of the market subscribers due to high wholesale prices currently making it unaffordable to resell to B2C customers.

Figure 71: Proximus subscriber market share Figure 72: Proximus FTTH homes passed

100.0% 2,500 45.0%

90.0% 40.0%

80.0% 2,000 35.0% 70.0% 30.0% 60.0% 1,500 25.0% 50.0%

40.0% 20.0% 1,000 30.0% 15.0% 20.0% 10.0% 500 10.0% 5.0% 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 0 0.0% 2014A 2016A 2018A 2020E 2022E 2024E Challenger FTTH Subscriber Market Share Proximus FTTH Subscriber Market Share Proximus FTTH Homes Passed (LHS) % Premises (RHS)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 73: Proximus FTTH take-up rate

1,000 45.0%

900 40.0%

800 35.0% 700 30.0% 600 25.0% 500 20.0% 400 15.0% 300 200 10.0% 100 5.0% 0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Proximus FTTH Subscribers (LHS) Proximus FTTH Take-up rate (RHS)

Source: Company data, Credit Suisse estimates

European Fibre Networks V 42

4 September 2020

Wireline trends Currently over 60% of broadband subscribers receive a connection of at least 100Mbps due to extensive FTTC and cable coverage. Proximus’ line loss has continued to accelerate albeit with Belgium starting to show signs of recovering overall. With the delivery of a nationwide FTTH network, we expect the proportion of cable and VDSL subscribers (currently at ~95%) to fall.

Figure 74: Fixed broadband market share by technology

60%

50%

40%

30%

20%

10%

0%

DSL VDSL Cable FTTH-FTTB Other (FWA)

Source: Company data, Credit Suisse research

Figure 75: Fixed access line loss y/y Figure 76: Percentage of broadband subscribers with a connection speed greater than 100Mbps

2.0% 90%

1.0% 80% 0.0% 70% -1.0% 60% -2.0% 50% -3.0%

-4.0% 40%

-5.0% 30%

-6.0% 20%

-7.0% 10% -8.0% 0%

PROX retail PROX total BEL >=100Mbps subs as % of total fixed BB

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

European Fibre Networks V 43

4 September 2020

Denmark Overview Denmark net coverage is over 68% with the majority coming from utilities, and a large number from the Waoo partnership. Norlys has a separated consumer business, which also covers over 600k homes in Jutland and TDC is progressing with its FTTH roll out despite having extensive cable coverage. We expect net FTTH coverage to reach 88% of premises by 2024 with overbuild only rising slightly.

Figure 77: FTTH homes passed by operator (gross; ‘000) Figure 78: FTTH subscribers by company

4,000 3,000

3,500 2,500 3,000

2,500 2,000

2,000 1,500 1,500

1,000 1,000

500 500 0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 0 TDC Norlys (SE/Stofa/Eniig) 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E Waoo Other TDC Norlys (ex Eniig) Waoo Total Premises Other Total BB Subs

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 79: Net FTTH homes passed (‘000)

3,500 100.0% 90.0% 3,000 80.0% 2,500 70.0% 60.0% 2,000 50.0% 1,500 40.0%

1,000 30.0% 20.0% 500 10.0% 0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Net FTTH passed % of all Premises

Source: Company data, Credit Suisse estimates

European Fibre Networks V 44

2020 September 4

V Networks Fibre European Market Dashboard Denmark ranks 9th for National Coverage due to extensive FTTH coverage from Waoo and Norlys as well as a roll out from TDC. The country is above average in Market Competitiveness due to low overbuild.

Figure 80: The Credit Suisse Fibre Market Dashboard ranks Denmark as the 9th most attractive market for incremental FTTH deployment

Source: Company data, Credit Suisse estimates

45

4 September 2020

TDC TDC plans to pass 100k homes in 2020 with a long-term target of 1m premises. We expect the build to progress at a steady pace of ~100k a year building from a current base of ~300k homes passed. Currently, TDC offers speeds of 1Gbps via its youSee brand over its network, with Waoo also offering Gigabit capable symmetric broadband.

Figure 81: TDC FTTH subscriber market share Figure 82: TDC FTTH homes passed

100.0% 900 25.0%

90.0% 800

80.0% 20.0% 700 70.0% 600 60.0% 15.0% 500 50.0%

40.0% 400 10.0% 30.0% 300 20.0% 200 5.0% 10.0% 100 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 0 0.0% 2014A2015A2016A2017A2018A2019A2020E2021E2022E2023E2024E Challenger FTTH Subscriber Market Share TDC FTTH Subscriber Market Share TDC FTTH Homes Passed (LHS) % Premises (RHS)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 83: TDC FTTH take-up rate

250 35.0%

30.0% 200 25.0%

150 20.0%

15.0% 100

10.0% 50 5.0%

0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

TDC FTTH Subscribers (LHS) TDC FTTH Take-up rate (RHS)

Source: Company data, Credit Suisse estimates

European Fibre Networks V 46

4 September 2020

Wireline trends More than 40% of Danish broadband subscribers receive speeds greater than or equal to 100Mbps downlink where FTTH continues to take market share from xDSL technologies. Cable remains stable due to extensive coverage and comparable speeds to FTTH for consumers. Line loss has begun to slowly reverse, with TDC contributing to negative line loss within Denmark.

Figure 84: Fixed broadband market share by technology

60%

50%

40%

30%

20%

10%

0%

xDSL Cable Fibre (FTTH) Others

Source: Company data, Credit Suisse research

Figure 85: Fixed access line loss y/y Figure 86: Percentage of broadband subscribers with a connection speed greater than 100Mbps

0.0% 80%

-1.0% 70% -2.0% 60% -3.0%

-4.0% 50%

-5.0% 40% -6.0% 30% -7.0%

-8.0% 20%

-9.0% 10%

-10.0% 0%

TDC retail TDC total DEN >=100Mbps subs as % of total fixed BB

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

European Fibre Networks V 47

4 September 2020

France Overview France has several large infrastructure operators deploying FTTH as well as some smaller operators deploying fibre in rural areas. Altice announced plans to acquire one of these operators (Covage) in November 2019 giving it a total tender of 8m homes to be passed of which 2.7m were complete by the end of 2019. All operators get access to homes passed in PIN areas with tenders for deployment there deemed uneconomical for the private sector. Due to a large amount of network co-investment, France has been able to deploy FTTH quickly, reaching 45% of premises by 2019 or a 25pp increase in three years. A continuation of the high build rate means we forecast 93% of homes to have access to an FTTH connection by 2024.

Figure 87: FTTH homes passed by operator (gross; ‘000) Figure 88: FTTH subscribers by company (‘000)

140,000 40,000

120,000 35,000

100,000 30,000

80,000 25,000

20,000 60,000

15,000 40,000

10,000 20,000 5,000 0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 0 Orange Altice France 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E Bouygues Iliad Orange Altice France Bouygues Projects in non-dense areas Total Premises Iliad Other Total BB Subs

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates *Iliad data correct as of 2nd September 2020 *Iliad data correct as of 2nd September 2020

Figure 89: Net FTTH homes passed (‘000)

40,000 100.0%

35,000 90.0% 80.0% 30,000 70.0% 25,000 60.0% 20,000 50.0%

15,000 40.0% 30.0% 10,000 20.0% 5,000 10.0% 0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Net FTTH passed % of all Premises

Source: Company data, Credit Suisse estimates

European Fibre Networks V 48

2020 September 4

V Networks Fibre European Market Dashboard France scores 4th best for both Build Capacity which has been accelerating in recent years and Build Momentum due to aggressive targets from the 4 largest IOs. Due to a large amount of network sharing, it scores poorly for Market Competitiveness with several players with large FTTH coverage as a percentage of net homes passed.

Figure 90: The Credit Suisse Fibre Market Dashboard ranks France as the 6th most attractive market for incremental FTTH deployment

Source: Company data, Credit Suisse estimates

*Iliad data correct as of 2nd September 2020

49

4 September 2020

Orange Orange is targeting 36m homes marketable by 2023 of which ~13m will be wholesaled or co- financed. This implies net adds to its homes passed of 5m a year from a current run rate of 4.5m. Iliad is targeting an FTTH subscriber targets of 4.5m by 2024, while Bouygues and Altice (SFR) expand coverage. We see Orange continuing to grow FTTH subscribers but losing FTTH market share to the other three large operators.

Figure 91: Orange FTTH subscriber market share Figure 92: Orange FTTH homes passed

100.0% 40,000 100.0%

90.0% 90.0% 35,000 80.0% 80.0% 30,000 70.0% 70.0% 60.0% 25,000 60.0% 50.0% 20,000 50.0% 40.0% 40.0% 15,000 30.0% 30.0% 20.0% 10,000 20.0% 10.0% 5,000 10.0% 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 0 0.0% 2014A 2016A 2018A 2020E 2022E 2024E Challenger FTTH Subscriber Market Share Orange FTTH Subscriber Market Share Orange FTTH Homes Passed (LHS) % Premises (RHS)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 93: Orange FTTH take-up rate

8,000 25.0%

7,000 20.0% 6,000

5,000 15.0% 4,000

3,000 10.0%

2,000 5.0% 1,000

0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Orange FTTH Subscribers (LHS) Orange FTTH Take-up rate (RHS)

Source: Company data, Credit Suisse estimates

European Fibre Networks V 50

4 September 2020

Wireline trends 25% of broadband subscribers were FTTH in Q4 as xDSL market share declines. Improving FTTH market share has led to large increases in the number of subscribers receiving a connection of at least 100Mbps rising to 28%, a 7pp increase year on year. Orange line loss has rebounded but remains around 5%.

Figure 94: Fixed broadband market share by technology

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

xDSL Fibre (FTTH) Other (incl cable)

Source: Company data, Credit Suisse research

Figure 95: Fixed access line loss y/y Figure 96: Percentage of broadband subscribers with a connection speed greater than 100Mbps

3.0% 80%

2.0% 70% 1.0% 60% 0.0%

-1.0% 50%

-2.0% 40%

-3.0% 30% -4.0% 20% -5.0%

-6.0% 10%

-7.0% 0%

ORA retail ORA total FRA >=100Mbps subs as % of total fixed BB

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

European Fibre Networks V 51

4 September 2020

Germany Overview Germany continues to be a laggard in terms of FTTH deployment covering around 11% of the country. There are a lot of regional players but the biggest remains the incumbent Deutche Telekom with 1.8m homes passed as of Q220. Our forecasts predict a large ramp up in FTTH deployment with around 1/3 homes able to access an FTTH line by 2024. Currently DT has extensive FTTC coverage with super-vectoring offering speeds as high as 250Mbps downlink. DT expects 100% FTTH coverage by 2030 but this includes fibre built by other operators, not just DT (we expect DT to ramp up to 2.5m homes pa by 2022).

Figure 97: FTTH homes passed by operator (gross; ‘000) Figure 98: FTTH subscribers by company (‘000)

50,000 45,000 45,000 40,000 40,000 35,000 35,000 30,000 30,000 25,000 25,000 20,000 20,000 15,000 15,000 10,000 10,000 5,000 5,000 0 0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Deutsche Telekom NetCologne Deutsche Telekom NetCologne M-Net wilhelm.tel M-Net wilhelm.tel Deutsche Glasfaser EWEtel Deutsche Glasfaser EWEtel Vodafone Inexio Vodafone Inexio Other Total Premises Other Total BB Subs

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 99: Net FTTH homes passed (‘000)

16,000 40.0%

14,000 35.0%

12,000 30.0%

10,000 25.0%

8,000 20.0%

6,000 15.0%

4,000 10.0%

2,000 5.0%

0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Net FTTH passed % of all Premises

Source: Company data, Credit Suisse estimates

European Fibre Networks V 52

2020 September 4

V Networks Fibre European Market Dashboard Germany ranks well for Market Competitiveness, National Coverage and Customer Demand due to a high take-up rate on the FTTH currently deployed and that very little FTTH has been deployed as a percentage of premises. We also note the high number of regional players with small market shares which give an opportunity for consolidation and competitive wholesale pricing for access.

rd

Figure 100: The Credit Suisse Fibre Market Dashboard ranks Germany as the 3 most attractive market for incremental FTTH deployment

Source: Company data, Credit Suisse estimates

53

4 September 2020

Deutsche Telekom Deutsche Telekom has plans to reach a run-rate of 2m homes passed per year and to reduce the current average cost of each home passed of around €1000. As of Q220 DT has passed 1.8m homes which is a little over 4% of premises in Germany. The company also announced in early 2020 a partnership with Deutsche Glasfaser and more recently with the city of Münster in order to speed up the rollout of FTTH.

Figure 101: Deutsche Telekom FTTH subscriber market share Figure 102: Deutsche Telekom FTTH homes passed (m)

100.0% 12,000 25.0%

90.0% 10,000 80.0% 20.0%

70.0% 8,000 60.0% 15.0% 50.0% 6,000 40.0% 10.0% 30.0% 4,000

20.0% 5.0% 10.0% 2,000

0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 0 0.0% 2014A 2016A 2018A 2020E 2022E 2024E Challenger FTTH Subscriber Market Share Deutsche Telekom FTTH Subscriber Market Share Deutsche Telekom FTTH Homes Passed (LHS) % Premises (RHS)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 103: Deutsche Telekom FTTH take-up rate

3,500 60.0%

3,000 50.0%

2,500 40.0% 2,000 30.0% 1,500 20.0% 1,000

500 10.0%

0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Deutsche Telekom FTTH Subscribers (LHS) Deutsche Telekom FTTH Take-up rate (RHS)

Source: Company data, Credit Suisse estimates

European Fibre Networks V 54

4 September 2020

Wireline trends Fibre connections continue to take market share from xDSL albeit from a low base and cable subscriptions are remaining stable. Less than 30% of German customers receive a connection of 100Mbps download speed due to 70% of connections still being on xDSL technologies. Line loss has begun to improve in DT’s retail business with losses stabilizing overall in Germany in 2019.

Figure 104: Fixed broadband market share by technology

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

xDSL Cable FTTB/FTTH Other

Source: Company data, Credit Suisse research

Figure 105: Fixed access line loss y/y Figure 106: Percentage of broadband subscribers with a connection speed greater than 100Mbps

2.0% 80%

1.0% 70%

0.0% 60% -1.0% 50% -2.0% 40% -3.0%

-4.0% 30%

-5.0% 20%

-6.0% 10%

-7.0% 0%

DT retail DT total GER >=100Mbps subs as % of total fixed BB

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

European Fibre Networks V 55

4 September 2020

Ireland Overview We estimate FTTH coverage currently stands around 35% of premises due to expanding roll- outs from the incumbent Eir and Vodafone-backed Siro. National Broadband Ireland is planning on passing rural homes (CSe ~0.5m homes passed currently). FTTH subscribers currently account for ~12% of the total with Sky Ireland taking market share since gaining access to Siro’s network which covers 13% of premises.

Figure 107: FTTH homes passed by operator (gross; ‘000) Figure 108: FTTH subscribers by company (‘000)

3,000 2,000

1,800 2,500 1,600

2,000 1,400

1,200 1,500 1,000

1,000 800 600 500 400

200 0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E Eir SIRO National Broadband Ireland Magnet Networks Eir SIRO Magnet Networks Total Premises Other Total BB Subs

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 109: Net FTTH homes passed (‘000)

2,000 80.0%

1,800 70.0% 1,600 60.0% 1,400 1,200 50.0% 1,000 40.0%

800 30.0% 600 20.0% 400 200 10.0% 0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Net FTTH passed % of all Premises

Source: Company data, Credit Suisse estimates

European Fibre Networks V 56

2020 September 4

V Networks Fibre European Market Dashboard Ireland scores well on Build Momentum as Eir and Siro increase their respective roll-outs as well as ranking fourth for Market Competitiveness due to a low amount of overbuild and number of different ISPs looking to offer FTTH services direct to customers.

Figure 110: The Credit Suisse Fibre Market Dashboard ranks Ireland as the 2nd most attractive market for incremental FTTH deployment

Source: Company data, Credit Suisse estimates

57

4 September 2020

Eir Eir currently covers 1.9m homes with FTTx of which ~500k are FTTH. Long term, the incumbent plans to connect 1.8m homes via FTTH (we expect 1.4m by 2024). Due to Siro planning to cover 450k premises, we expect Eir to take significant market share accounting for 50% of all FTTH subscribers by 2024 vs 40% in 2019.

Figure 111: Eir subscriber market share Figure 112: Eir FTTH homes passed (m)

100.0% 1,600 60.0%

90.0% 1,400 50.0% 80.0% 1,200 70.0% 40.0% 60.0% 1,000

50.0% 800 30.0% 40.0% 600 30.0% 20.0%

20.0% 400

10.0% 10.0% 200 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 0 0.0% 2014A 2016A 2018A 2020E 2022E 2024E Challenger FTTH Subscriber Market Share Eir FTTH Subscriber Market Share Eir FTTH Homes Passed (LHS) % Premises (RHS)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 113: Eir FTTH take-up rate

300 20.0% 18.0% 250 16.0% 14.0% 200 12.0% 150 10.0% 8.0% 100 6.0% 4.0% 50 2.0% 0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Eir FTTH Subscribers (LHS) Eir FTTH Take-up rate (RHS)

Source: Company data, Credit Suisse estimates

European Fibre Networks V 58

4 September 2020

Wireline trends FTTC market share has seen no growth in 2019 and cable subscribers have migrated to FTTP in Ireland. The increased FTTP rollout has allowed for higher speeds with the proportion of customers on speeds of at least 100Mbps downlink rising 7% in 2019 to 36%.

Figure 114: Fixed broadband market share by technology

50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

DSL VDSL Cable FTTP Other

Source: Company data, Credit Suisse research

Figure 115: Percentage of broadband subscribers with a connection speed greater than 100Mbps

80%

70%

60%

50%

40%

30%

20%

10%

0%

>=100Mbps subs as % of total fixed BB

Source: Company data, Credit Suisse research

European Fibre Networks V 59

4 September 2020

Italy Overview The two largest fibre infrastructure operators in Italy are the incumbent TI, which has rolled out FTTC to >80% of the country, and Open Fiber (which operates a wholesale-only model allowing Wind Tre, Vodafone, Tiscali and some other smaller ISPs access to its footprint). Currently Open Fiber is deploying in rural areas using TI cabinets to speed up the roll-out. TI recently announced an agreement with KKR and Fastweb to establish FiberCop, a NewCo to which TIM’s secondary network (from cabinets to customers’ homes) will be transferred along with the fibre network developed by FlashFiber, the joint venture in which TIM has an 80% and Fastweb a 20% stake. TI’s Board of Directors also gave the green light for the signing of the Letter of Intent with CDP Equity (CDPE) intended to implement the wider plan for a single national network (AccessCo) through the merger of FiberCop and Open Fiber. Our mapping of Italy is shown pre this deal.

Figure 116: FTTH homes passed by operator (gross; ‘000) Figure 117: FTTH subscribers by company (‘000)

35,000 25,000

30,000 20,000

25,000 15,000 20,000

15,000 10,000

10,000 5,000

5,000 0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E Telecom Italia Fastweb Vodafone Telecom Italia Fastweb Open Fiber Wind Iliad Other Other Total Premises Total BB Subs

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 118: Net FTTH homes passed (‘000)

25,000 100.0% 90.0% 20,000 80.0% 70.0% 15,000 60.0% 50.0% 10,000 40.0% 30.0% 5,000 20.0% 10.0% 0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Net FTTH passed % of all Premises

Source: Company data, Credit Suisse estimates

European Fibre Networks V 60

Septe 4

V Networks Fibre European Market Dashboard

Italy scores highly for Build Momentum as Open Fiber continues to build out FTTH with TI also ramping up its own build (first-mile largely done). 2020 mber

Figure 119: The Credit Suisse Fibre Market Dashboard ranks Italy as the 4th most attractive market for incremental FTTH deployment

Source: Company data, Credit Suisse estimates

61

4 September 2020

Telecom Italia Telecom Italia is aiming to cover 40% of premises by 2023 and 56% by 2025. Currently we estimate FTTH homes passed is ~4.5m of which almost 3m is via the Flash Fiber JV with Fastweb which is no longer rolling out fibre from 2020. Telecom Italia has an extensive FTTC network which we expect to reach close to 90% of premises by the end of 2020 due to newly opened cabinets for use by Open Fiber in rural areas.

Figure 120: Telecom Italia FTTH subscriber market share Figure 121: Telecom Italia FTTH homes passed

100.0% 12,000 50.0%

90.0% 45.0% 10,000 80.0% 40.0% 70.0% 35.0% 8,000 60.0% 30.0% 50.0% 6,000 25.0% 40.0% 20.0% 30.0% 4,000 15.0% 20.0% 10.0% 10.0% 2,000 5.0% 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 0 0.0% 2014A 2016A 2018A 2020E 2022E 2024E Challenger FTTH Subscriber Market Share Telecom Italia FTTH Subscriber Market Share Telecom Italia FTTH Homes Passed (LHS) % Premises (RHS)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 122: Telecom Italia FTTH take-up rate

1,800 16.0%

1,600 14.0% 1,400 12.0% 1,200 10.0% 1,000 8.0% 800 6.0% 600 4.0% 400

200 2.0%

0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Telecom Italia FTTH Subscribers (LHS) Telecom Italia FTTH Take-up rate (RHS)

Source: Company data, Credit Suisse estimates

European Fibre Networks V 62

4 September 2020

Figure 123: Telecom Italia FTTx deployment (‘000)

30,000

25,000

20,000

15,000

10,000

5,000

0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

FTTx Homes Passed Total Premises

Source: Company data, Credit Suisse estimates

Figure 124: Telecom Italia UBB* take-up rate

6,000 30.0%

5,000 25.0%

4,000 20.0%

3,000 15.0%

2,000 10.0%

1,000 5.0%

0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

UBB Subscriptions UBB take-up rate

Source: Company data, Credit Suisse estimates *Includes FWA

European Fibre Networks V 63

4 September 2020

Wireline trends Telecom Italia’s deployment of FTTC has quickly taken market share from legacy DSL technologies with advertised speeds up to 200Mbps. A lack of cable and FTTH means gigabit capable speeds are still rare but deployment by Open Fiber and Telecom Italia is speeding up. Line loss had accelerated in 2019 but begun to reverse towards the end of the year as we expect fixed-mobile substitution to reverse with the improvement of fixed line speeds.

Figure 125: Fixed broadband market share by technology

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

DSL FTTC FTTH Other techologies

Source: Company data, Credit Suisse research

Figure 126: Fixed access line loss y/y Figure 127: Percentage of broadband subscribers with a connection speed greater than 100Mbps

4.0% 80%

2.0% 70%

0.0% 60%

-2.0% 50%

-4.0% 40%

-6.0% 30%

-8.0% 20%

-10.0% 10%

-12.0% 0%

TI retail TI total ITA >=100Mbps subs as % of total fixed BB

Source: Company data, Credit Suisse research Source: Regulator data

European Fibre Networks V 64

4 September 2020

Netherlands Overview Initially, KPN built FTTH to approximately 1/3 of the country but then halted the rollout only to begin again in 2019 with a targeted 1m homes to be passed by 2021. T-Mobile, DeltaFiber and L2Rotterdam are also increasingly building fibre to challenge the incumbent.

Figure 128: FTTH homes passed by operator (gross; ‘000) Figure 129: FTTH subscribers by company (‘000)

10,000 9,000

9,000 8,000

8,000 7,000 7,000 6,000 6,000 5,000 5,000 4,000 4,000 3,000 3,000 2,000 2,000

1,000 1,000

0 0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

KPN L2Fiber Rotterdam Other Total Premises KPN L2Fiber Rotterdam Other Total BB Subs

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 130: Net FTTH homes passed (‘000)

6,000 70.0%

5,000 60.0%

50.0% 4,000 40.0% 3,000 30.0% 2,000 20.0%

1,000 10.0%

0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Net FTTH passed % of all Premises

Source: Company data, Credit Suisse estimates

European Fibre Networks V 65

2020 September 4

V Networks Fibre European Market Dashboard The Netherlands ranks above average for Customer Demand due to a high take-up rate and that FTTH still makes up a relatively low percentage of total broadband subscribers. However rankings are lower for Build Momentum and Market Competitiveness due to KPN’s dominant market position and that the company paused its rollout after deploying to around 1/3 premises.

th

Figure 131: The Credit Suisse Fibre Market Dashboard ranks Netherlands as the 10 most attractive market for incremental FTTH deployment

Source: Company data, Credit Suisse estimates

66

4 September 2020

KPN KPN currently covers ~30% of premises with an additional 740k homes to be covered by the end of 2021. We expect the incumbent to lose subscriber market share as challengers increasingly build out their own network. KPN has little competition at present. We forecast incumbent coverage to reach 45% by 2024 with subscriber market share to fall to 78% from 93% in 2019.

Figure 132: KPN FTTH subscriber market share Figure 133: KPN FTTH homes passed

100.0% 4,500 50.0%

90.0% 4,000 45.0%

80.0% 40.0% 3,500 70.0% 35.0% 3,000 60.0% 30.0% 50.0% 2,500 25.0% 40.0% 2,000 20.0% 30.0% 1,500 15.0% 20.0% 1,000 10.0% 10.0% 500 5.0% 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 0 0.0% 2014A 2016A 2018A 2020E 2022E 2024E Challenger FTTH Subscriber Market Share KPN FTTH Subscriber Market Share KPN FTTH Homes Passed (LHS) % Premises (RHS)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 134: KPN FTTH take-up rate

2,500 60.0%

50.0% 2,000

40.0% 1,500 30.0% 1,000 20.0%

500 10.0%

0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

KPN FTTH Subscribers (LHS) KPN FTTH Take-up rate (RHS)

Source: Company data, Credit Suisse estimates

European Fibre Networks V 67

4 September 2020

Wireline trends FTTH subscribers continue to cannibalise xDSL connections with FTTH almost reaching 20% of total subscribers. As well as other FTTH networks VodafoneZiggo also offers gigabit capable broadband over its extensive cable network and therefore ~45% of subscribers receive a broadband speed of at least 100Mbps. Line loss continued to deteriorate in 2019 particularly for KPN’s retail segment with the Netherlands overall starting to turn around in Q120.

Figure 135: Fixed broadband market share by technology

60%

50%

40%

30%

20%

10%

0%

xDSL Cable Fibre (FTTH)

Source: Company data, Credit Suisse research

Figure 136: Fixed access line loss y/y Figure 137: Percentage of broadband subscribers with a connection speed greater than 100Mbps

0.02 100%

0.01 90%

0 80%

-0.01 70%

-0.02 60%

-0.03 50%

-0.04 40% -0.05 30% -0.06 20% -0.07 10% -0.08 0%

KPN retail KPN total NETH >=100Mbps subs as % of total fixed BB

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

European Fibre Networks V 68

4 September 2020

Norway Overview Telenor has a significant HFC network (as one of the only incumbents still owning most cable in the country) and is continuing to roll out FTTH reaching 420k consumer homes passed in 2019. Currently the Altibox partnership accounts for 47% of the market share covering an estimated 35% of premises. Telenor in combination with Altibox and other utilities building outside of the partnership cover an estimated 79% of premises and 90% of households rising to 98% by 2024 mostly due to Telenor rolling out more FTTH.

Figure 138: FTTH homes passed by operator (gross; ‘000) Figure 139: FTTH subscribers by company (‘000)

3,500 3,000

3,000 2,500

2,500 2,000

2,000 1,500

1,500 1,000

1,000 500 500 0 0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E Telenor Altibox Eidsiva Bredvand Telenor Altibox Other Total Premises Get Other Total BB Subs

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 140: Net FTTH homes passed (‘000)

3,000 120.0%

2,500 100.0%

2,000 80.0%

1,500 60.0%

1,000 40.0%

500 20.0%

0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Net FTTH passed % of all Premises

Source: Company data, Credit Suisse estimates

European Fibre Networks V 69

20 September 4

V Networks Fibre European Market Dashboard Due to extensive FTTH coverage, Norway lacks opportunity to build in new areas hence ranks at the lower end for National Coverage and Build Momentum. Customer Demand also ranks 9th due to the high percentage of broadband subscribers that are already using fibre.

th

Figure 141: The Credit Suisse Fibre Market Dashboard ranks Norway as the 7 most attractive market for incremental FTTH deployment 20

Source: Company data, Credit Suisse estimates

70

4 September 2020

Telenor Telenor continues to roll out FTTH due to consumer preference for the service over coax in Norway. The incumbent already has an extensive HFC footprint and offers 500Mbps symmetric speeds to customers. We forecast Telenor to cover 1/3 of premises by 2024 from 20% in 2019 which should allow subscriber market share to rise to over 30%.

Figure 142: Telenor FTTH subscriber market share Figure 143: Telenor FTTH homes passed

100.0% 1,000 35.0%

90.0% 900 30.0% 80.0% 800

70.0% 700 25.0% 60.0% 600 20.0% 50.0% 500 40.0% 15.0% 400 30.0% 300 10.0% 20.0% 200 10.0% 5.0% 100 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 0 0.0% 2014A 2016A 2018A 2020E 2022E 2024E Challenger FTTH Subscriber Market Share Telenor FTTH Subscriber Market Share Telenor FTTH Homes Passed (LHS) % Premises (RHS)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 144: Telenor FTTH take-up rate

700 70.0%

600 60.0%

500 50.0%

400 40.0%

300 30.0%

200 20.0%

100 10.0%

0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Telenor FTTH Subscribers (LHS) Telenor FTTH Take-up rate (RHS)

Source: Company data, Credit Suisse estimates

European Fibre Networks V 71

4 September 2020

Wireline trends Cable market share is in permanent decline as Telenor transitions to full fibre with xDSL declining at an even faster pace. More than 40% of consumers now have a broadband download speed greater than or equal to 100Mbps. Telenor line loss exceeded 10% in Q120 after the trend worsened in 2019.

Figure 145: Fixed broadband market share by technology

60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

xDSL Cable Fibre (FTTH) Others (FWA)

Source: Company data, Credit Suisse research

Figure 146: Fixed access line loss y/y Figure 147: Percentage of broadband subscribers with a connection speed greater than 100Mbps

2.0% 80%

0.0% 70%

-2.0% 60%

50% -4.0%

40% -6.0% 30% -8.0% 20% -10.0% 10% -12.0% 0%

TNOR retail TNOR total NOR >=100Mbps subs as % of total fixed BB

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

European Fibre Networks V 72

4 September 2020

Portugal Overview Fibre has been deployed widely in Portugal due to extensive ducting. MEO continues to have the largest footprint but Vodafone, Nos and dstelecom have signed network sharing agreements increasing challenger reach into rural areas. dstelecom plans to build a further 900k-1.2m homes with NOS.

Figure 148: FTTH homes passed by operator (gross; ‘000) Figure 149: FTTH subscribers by company (‘000)

16,000 6,000

14,000 5,000 12,000 4,000 10,000

8,000 3,000

6,000 2,000 4,000 1,000 2,000

0 0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Altice Europe (MEO) Vodafone Portugal Altice Europe (MEO) Vodafone Portugal NOS dstelecom NOS Other Total Premises Total BB Subs

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 150: Net FTTH homes passed (‘000)

7,000 100.0% 90.0% 6,000 80.0% 5,000 70.0% 60.0% 4,000 50.0% 3,000 40.0%

2,000 30.0% 20.0% 1,000 10.0% 0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Net FTTH passed % of all Premises

Source: Company data, Credit Suisse estimates

European Fibre Networks V 73

2020 September 4

V Networks Fibre European Market Dashboard Portugal ranks highly for Build Capacity because it has high FTTH coverage but ranks lower on other metrics due to the maturity of the market and the number of players already competing for subscribers.

Figure 151: The Credit Suisse Fibre Market Dashboard ranks Portugal as the 10th most attractive market for incremental FTTH deployment

Source: Company data, Credit Suisse estimates

74

4 September 2020

MEO (Altice) Altice sold 49.99% of a newly created unit Fastfiber (containing all of MEO’s fibre assets) to MSIP for €1.6bn (plus two further payments of €375m at later dates subject to performance) in December 2019. Currently we forecast MEO to reach 97% of premises by 2024 as the company continues to roll out fibre as well as maintain access to 0.5m wholesale lines.

Figure 152: MEO FTTH subscriber market share Figure 153: MEO FTTH homes passed

100.0% 7,000 100.0%

90.0% 90.0% 6,000 80.0% 80.0%

70.0% 5,000 70.0%

60.0% 60.0% 4,000 50.0% 50.0% 3,000 40.0% 40.0%

30.0% 2,000 30.0% 20.0% 20.0% 1,000 10.0% 10.0%

0.0% 0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2014A 2016A 2018A 2020E 2022E 2024E

Challenger FTTH Subscriber Market Share Altice Europe (MEO) FTTH Homes Passed (LHS) Altice Europe (MEO) FTTH Subscriber Market Share % Premises (RHS)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 154: MEO FTTH take-up rate

1,800 30.0%

1,600 25.0% 1,400

1,200 20.0%

1,000 15.0% 800

600 10.0%

400 5.0% 200

0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Altice Europe (MEO) FTTH Subscribers (LHS) Altice Europe (MEO) FTTH Take-up rate (RHS)

Source: Company data, Credit Suisse estimates

European Fibre Networks V 75

4 September 2020

Wireline trends Extensive FTTH coverage has meant it is the dominant broadband technology with more than 50% of lines, growing at the expense of xDSL and cable. This has also meant 78% of connections receive speeds of at least 100Mbps downlink. Portugal returned to line growth in early 2018 and has maintained growth throughout 2019.

Figure 155: Fixed broadband market share by technology

60%

50%

40%

30%

20%

10%

0%

xDSL Cable Fibre (FTTH) Others (FWA)

Source: Company data, Credit Suisse research

Figure 156: Fixed access line loss y/y Figure 157: Percentage of broadband subscribers with a connection speed greater than 100Mbps

8.0% 90%

6.0% 80%

4.0% 70%

60% 2.0% 50% 0.0% 40% -2.0% 30% -4.0% 20% -6.0% 10% -8.0% 0%

PT retail PT total POR >=100Mbps subs as % of total fixed BB f Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

European Fibre Networks V 76

4 September 2020

Spain Overview Spain has benefitted from the low cost to build FTTH due to extensive ducting which has led to high competition in the market. The market is also characterized by a large amount of wholesale agreements and co-investments which have allowed Masmovil to access a larger footprint than the incumbent Telefonica despite building far fewer physical lines.

Figure 158: FTTH homes passed by operator (gross; ‘000) Figure 159: FTTH subscribers by company (‘000)

100,000 20,000

90,000 18,000

80,000 16,000

70,000 14,000

60,000 12,000

50,000 10,000

40,000 8,000

30,000 6,000

20,000 4,000

10,000 2,000

0 0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Telefonica Orange Spain Vodafone Spain Telefonica Orange Spain Vodafone Spain MasMovil Adamo Other MasMovil Adamo Other Total Premises Total BB Subs

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 160: Net FTTH homes passed (‘000)

30,000 100.0% 90.0% 25,000 80.0% 70.0% 20,000 60.0% 15,000 50.0% 40.0% 10,000 30.0% 20.0% 5,000 10.0% 0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Net FTTH passed % of all Premises

Source: Company data, Credit Suisse estimates

European Fibre Networks V 77

2020 September 4

V Networks Fibre European Market Dashboard Spain ranks as the least attractive market to enter at this point due to high net coverage and for having several IOs competing, all with large FTTH footprints.

Figure 161: The Credit Suisse Fibre Market Dashboard ranks Spain as the 13th most attractive market for incremental FTTH deployment

Source: Company data, Credit Suisse estimates

78

4 September 2020

Telefonica The incumbent has built the most FTTH lines at over 23.6m lines as per Q220. The company is targeting complete coverage by 2025 which we estimate will require another 2.5m lines or just over a year at the current run rate. Subscriber market share has been decreasing year over year but this ignores wholesale subscribers which combined with Telefonica own brand subscribers accounted for 63% of total FTTH connections in Spain.

Figure 162: Telefonica FTTH market share Figure 163: Telefonica FTTH homes passed

100.0% 30,000 100.0%

90.0% 90.0% 25,000 80.0% 80.0%

70.0% 70.0% 20,000 60.0% 60.0% 50.0% 15,000 50.0% 40.0% 40.0% 30.0% 10,000 30.0% 20.0% 20.0% 10.0% 5,000 10.0% 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 0 0.0% 2014A 2016A 2018A 2020E 2022E 2024E Challenger FTTH Subscriber Market Share Telefonica FTTH Subscriber Market Share Telefonica FTTH Homes Passed (LHS) % Premises (RHS)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 164: Telefonica FTTH take-up rate

7,000 25.0%

6,000 20.0% 5,000

15.0% 4,000

3,000 10.0%

2,000 5.0% 1,000

0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Telefonica FTTH Subscribers (LHS) Telefonica FTTH Take-up rate (RHS)

Source: Company data, Credit Suisse estimates

European Fibre Networks V 79

4 September 2020

Wireline trends FTTH overtook xDSL as the most commonly used broadband technology in 2017 and now accounts for 2/3 of all connections. This has allowed for the speed delivered to customers to increase rapidly with 77% of connections receiving a speed of at least 100Mbps downlink.

Figure 165: Fixed broadband market share by technology

80%

70%

60%

50%

40%

30%

20%

10%

0%

xDSL Cable Fibre (FTTH) Others

Source: Company data, Credit Suisse research

Figure 166: Fixed access line loss y/y Figure 167: Percentage of broadband subscribers with a connection speed greater than 100Mbps

2.0% 80%

1.0% 70% 0.0% 60% -1.0%

-2.0% 50%

-3.0% 40%

-4.0% 30% -5.0% 20% -6.0%

-7.0% 10%

-8.0% 0%

TEF retail TEF total SPA >=100Mbps subs as % of total fixed BB

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

European Fibre Networks V 80

4 September 2020

Sweden Overview 91% of premises in Sweden have been passed by FTTH with Telia’s own build covering 1.5m homes and utilities covering 2.2m. Most of the networks in Sweden are open access and hence many companies have access to lines via wholesale. The rate of build has slowed due to Telia only building selectively in further areas. Due to the open network structure, physical overbuild is limited.

Figure 168: FTTH homes passed by operator (gross; ‘000) Figure 169: FTTH subscribers by company (‘000)

10,000 5,000

9,000 4,500

8,000 4,000

7,000 3,500

6,000 3,000

5,000 2,500

4,000 2,000

3,000 1,500

2,000 1,000

1,000 500

0 0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Telia Telenor Telia Telenor IP-Only Utility Networks and Other ComHem Utility Networks and Other Total Premises Total BB Subs

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 170: Net FTTH homes passed (‘000)

6,000 100.0% 90.0% 5,000 80.0% 70.0% 4,000 60.0% 3,000 50.0% 40.0% 2,000 30.0% 20.0% 1,000 10.0% 0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Net FTTH passed % of all Premises

Source: Company data, Credit Suisse estimates

European Fibre Networks V 81

2020 September 4

V Networks Fibre European Market Dashboard Sweden’s FTTH roll-out is mostly over and coverage is around 90% of total premises hence it looks less attractive than other countries to add incremental FTTH investment.

Figure 171: The Credit Suisse Fibre Market Dashboard ranks Sweden as the 12th most attractive market for incremental FTTH deployment

Source: Company data, Credit Suisse estimates

82

4 September 2020

Telia Telia has passed around 1.5m homes via own network FTTH and has access to another ~1m through open networks of high enough quality of which take-up rate remains lower than on its own network. The company believes long term take-up could reach 80%. The company is only selectively expanding the network based on demand in the area.

Figure 172: Telia FTTH subscriber market share Figure 173: Telia FTTH homes passed

100.0% 3,500 60.0%

90.0% 3,000 80.0% 50.0%

70.0% 2,500 40.0% 60.0% 2,000 50.0% 30.0% 40.0% 1,500

30.0% 20.0% 1,000 20.0%

10.0% 10.0% 500 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 0 0.0% 2014A 2016A 2018A 2020E 2022E 2024E Challenger FTTH Subscriber Market Share Telia FTTH Subscriber Market Share Telia FTTH Homes Passed (LHS) % Premises (RHS)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 174: Telia FTTH take-up rate

1,800 60.0%

1,600 50.0% 1,400

1,200 40.0%

1,000 30.0% 800

600 20.0%

400 10.0% 200

0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Telia FTTH Subscribers (LHS) Telia FTTH Take-up rate (RHS)

Source: Company data, Credit Suisse estimates

European Fibre Networks V 83

4 September 2020

Wireline trends Over 70% of broadband connections are FTTH which is causing cable and xDSL line loss as fibre growth continues. High FTTH take-up has meant almost 80% of connections receive a download speed of at least 100Mbps. Line loss continues for Telia which remains below 8% in Q120.

Figure 175: Fixed broadband market share by technology

80%

70%

60%

50%

40%

30%

20%

10%

0%

xDSL Cable Fibre (FTTH+fibre LAN) Others (FWA)

Source: Company data, Credit Suisse research

Figure 176: Fixed access line loss y/y Figure 177: Percentage of broadband subscribers with a connection speed greater than 100Mbps

4.0% 90%

80% 2.0% 70% 0.0% 60%

-2.0% 50%

-4.0% 40%

30% -6.0% 20% -8.0% 10%

-10.0% 0%

Telia retail Telia total SWE >=100Mbps subs as % of total fixed broadband

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

European Fibre Networks V 84

4 September 2020

Switzerland Overview In May 2020, Salt and Sunrise announced a new FTTH JV (Swiss Open Fiber) which plans to deploy 1.5m lines over 5-7 years with deployment beginning in Q420. Swisscom has also announced its intention to increase FTTH deployment by doubling the current footprint of just over 28% of premises by the end of 2025. Swiss Fibre Net has also signed a strategic agreement with Swiss Open Fiber which we expect will increase its footprint from 1.1m homes passed at the end of 2019.

Figure 178: FTTH homes passed by operator (gross; ‘000) Figure 179: FTTH subscribers by company (‘000)

7,000 4,500

4,000 6,000 3,500

5,000 3,000

2,500 4,000 2,000

3,000 1,500 1,000 2,000 500

1,000 0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

0 Swisscom Salt 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E Sunrise Fiber7 Swisscom Swiss Fibre Net Swiss Open Fibre Baden Fibre Networks Other Other Utilities Total Premises Total BB Subs

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 180: Net FTTH homes passed (‘000)

3,500 100.0% 90.0% 3,000 80.0% 2,500 70.0% 60.0% 2,000 50.0% 1,500 40.0%

1,000 30.0% 20.0% 500 10.0% 0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Net FTTH passed % of all Premises

Source: Company data, Credit Suisse estimates

European Fibre Networks V 85

2020 September 4

V Networks Fibre European Market Dashboard Customer Demand is very high in Switzerland with the take-up rate being over 50% on currently deployed FTTH. However due to a slow rollout by Swisscom who co-invested with utilities, it scores poorly for Build Momentum and Build Capacity. These metrics will likely improve when Swiss Open Fiber begins deploying fibre to the home.

Figure 181: The Credit Suisse Fibre Market Dashboard ranks Switzerland as the 7th most attractive market for incremental FTTH deployment

Source: Company data, Credit Suisse estimates

86

4 September 2020

Swisscom Swisscom currently covers ~1.6m homes and plans to double this by 2025. We forecast subscriber market share will decrease from 63% to 53% by 2024 due to significant competition from Salt and Sunrise given increasing coverage from the Swiss Open Fiber JV. We also expect some kind of wholesale agreement between Swisscom and Swiss Open Fiber in order to minimize capex spend and physical overbuild.

Figure 182: Swisscom FTTH subscriber market share Figure 183: Swisscom FTTH homes passed

100.0% 3,500 60.0%

90.0% 3,000 50.0% 80.0%

70.0% 2,500 40.0% 60.0% 2,000 50.0% 30.0% 40.0% 1,500

30.0% 20.0% 1,000 20.0%

10.0% 10.0% 500 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 0 0.0% 2014A 2016A 2018A 2020E 2022E 2024E Challenger FTTH Subscriber Market Share Swisscom FTTH Subscriber Market Share Swisscom FTTH Homes Passed (LHS) % Premises (RHS)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 184: Swisscom FTTH take-up rate

1,200 40.0%

35.0% 1,000 30.0% 800 25.0%

600 20.0%

15.0% 400 10.0% 200 5.0%

0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Swisscom FTTH Subscribers (LHS) Swisscom FTTH Take-up rate (RHS)

Source: Company data, Credit Suisse estimates

European Fibre Networks V 87

4 September 2020

Wireline trends Cable and xDSL are increasingly losing market share despite FTTC connections offering download speeds of over 80Mbps on Swisscom’s network and UPC’s cable offering of 1Gbps downlink. Salt and Sunrise are the fastest growing internet providers which currently have access to FTTH over Swiss Fibre Net’s network. Line loss at Swisscom is recovering but still remains around 3%.

Figure 185: Fixed broadband market share by technology

70%

60%

50%

40%

30%

20%

10%

0%

xDSL Cable Fibre

Source: Company data, Credit Suisse research

Figure 186: Fixed access line loss y/y Figure 187: Percentage of broadband subscribers with a connection speed greater than 100Mbps

2.0% 90%

80% 0.0% 70%

-2.0% 60%

50% -4.0% 40%

-6.0% 30%

20% -8.0% 10%

-10.0% 0%

SCOM retail SCOM total SWI >=100Mbps subs as % of total fixed BB

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

European Fibre Networks V 88

4 September 2020

United Kingdom Overview The UK remains a laggard within Europe at just 15% of premises. BT has now set targets to cover 20m homes by the mid to late 2020s with Virgin Media also passing an estimated 400- 500k homes a year as part of Project Lightning. There are several PE backed challengers which have yet to pass 500k homes total as of 2019 and these include CityFibre, Hyperoptic and Gigaclear. In 2018 the UK government set targets for 15m full fibre premises by 2025 with nationwide coverage by 2033.

Figure 188: FTTH homes passed by operator (gross; ‘000) Figure 189: FTTH subscribers by company (‘000)

35,000 35,000

30,000 30,000

25,000 25,000

20,000 20,000

15,000 15,000

10,000 10,000

5,000 5,000

0 0 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

BT/Openreach Hyperoptic Gigaclear BT/Openreach Hyperoptic Gigaclear CityFibre KCOM Virgin Media CityFibre KCOM Virgin Media Voneus Other Total Premises Voneus Other Total BB Subs

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 190: Net FTTH homes passed (‘000)

25,000 100.0% 90.0% 20,000 80.0% 70.0% 15,000 60.0% 50.0% 10,000 40.0% 30.0% 5,000 20.0% 10.0% 0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

Net FTTH passed % of all Premises

Source: Company data, Credit Suisse estimates

European Fibre Networks V 89

2020 September 4

V Networks Fibre European Market Dashboard The UK appears to be the most attractive market for incremental FTTH investment due to strong Build Momentum and interest in superfast broadband as well as a large amount of small players offering FTTH with little overbuild providing opportunity for competitive access pricing. Currently only 15% of premises have access to FTTH.

Figure 191: The Credit Suisse Fibre Market Dashboard ranks the UK as the most attractive market for incremental FTTH deployment

Source: Company data, Credit Suisse estimates

90

4 September 2020

BT/Openreach Openreach now has plans to pass 20m homes in the UK which accounts for 2/3 of UK premises. We forecast it to reach 14.3m premises by 2024 as the yearly run rate ramps up to almost 3m homes per annum. BT currently estimates the cost of each home passed to be at the lower end of the £300-400 range.

Figure 192: BT/Openreach FTTH subscriber market share Figure 193: BT/Openreach FTTH homes passed

100.0% 16,000 50.0%

90.0% 45.0% 14,000 80.0% 40.0% 12,000 70.0% 35.0% 60.0% 10,000 30.0% 50.0% 8,000 25.0% 40.0% 20.0% 6,000 30.0% 15.0% 20.0% 4,000 10.0% 10.0% 2,000 5.0% 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E 0 0.0% 2014A 2016A 2018A 2020E 2022E 2024E Challenger FTTH Subscriber Market Share BT/Openreach FTTH Subscriber Market Share BT/Openreach FTTH Homes Passed (LHS) % Premises (RHS)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 194: BT/Openreach FTTH take-up rate

4,500 35.0%

4,000 30.0% 3,500 25.0% 3,000

2,500 20.0%

2,000 15.0% 1,500 10.0% 1,000 5.0% 500

0 0.0% 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E

BT/Openreach FTTH Subscribers (LHS) BT/Openreach FTTH Take-up rate (RHS)

Source: Company data, Credit Suisse estimates

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Wireline trends Less than 20% of broadband subscriptions receive a connection on average of at least 100Mbps due to low FTTH and cable take-up. Cable’s market share has remained stable with the main provider being Virgin Media and FTTC connections eroding ADSL’s market position. BT line loss has recovered with retail lines growing for the first time since Q116.

Figure 195: Fixed broadband market share by technology

80%

70%

60%

50%

40%

30%

20%

10%

0%

ADSL Cable Other (incl FTTx)

Source: Company data, Credit Suisse research

Figure 196: Fixed access line loss y/y Figure 197: Percentage of broadband subscribers with a connection speed greater than 100Mbps

2.0% 80%

70% 0.0%

60% -2.0% 50%

-4.0% 40%

-6.0% 30%

20% -8.0% 10%

-10.0% 0%

BT retail BT total UK UK % of fixed broadband subs on >=100Mbps

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

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APPENDIX Methodology

We have constructed the data for FTTH coverage and subscribers from operator and regulator data, other public sources and speaking to companies directly. We define “Gross Homes Passed as a % Premises” as the total number of premises connectable by each infrastructure operators (IO) summed, divided by a country’s total premises or nearest available dataset. This is a change from last year’s report in which we used total households and it was possible to have FTTH homes passed as a percentage of households greater than 100%. Gross homes passed includes homes accessed via wholesale agreements, joint ventures and co-investments as well as own-build hence may well be beyond 100% of premises due to multiple IOs being able to connect a single household. In last year’s report we only included homes passed on an operator’s network rather than including wholesale hence gross numbers will be higher in this year’s report to better reflect a company’s total FTTH reach. Net homes passed deducts overlapping of networks from wholesale agreements, JVs, physical overbuild and co-investment hence will always be less than or equal to 100% of premises. We calculate take-up rate as subscribers divided by the net coverage. Subscriber numbers are displayed on a company basis excluding wholesale customers (customers on their network but with a contract with another company) and may include companies that are not infrastructure operators. Scorecard In the 2020 iteration of Building the Gigabit Society, we introduce a new tool which helps to identify markets which look attractive on an incremental FTTH deployment basis. In order to assess which markets are the most attractive for further FTTH investment, we prefer to look at five pillars which are key to providing an appealing investment profile for network expansion. We rank each of the 13 markets on a relative basis to each other on five metrics and take a sum to form an overall score where lower numbers are better.

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Ranking tool

Figure 198: We base our overall ranking on 5 pillars key to being an attractive market to invest in further FTTH roll-outs

Source: Credit Suisse research

1) Build Momentum i) % change in net homes passed ii) Change in net homes as a % total premises An ideal market would have growing Build Momentum as interest increases in FTTH networks; we look at this on an absolute and relative basis in order to fairly assess markets at different stages of network deployment.

Figure 199: Build Momentum rank by country Country Belgium Denmark France Germany Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland UK Build Momentum 5 7 4 9 2 3 10 8 6 13 12 11 1 Source: Credit Suisse research

2) Market Competitiveness i) Average number of infrastructure operators at each home passed ii) Largest market share of FTTH subscribers

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An ideal market would have a low amount of infrastructure operators at each net home passed, in essence there being few wholesale agreements, physical overbuild or number of players deploying fibre within the country. For further FTTH deployment we also would prefer a market with a fragmented subscriber base which will increase competitiveness for line access and does not have one player with significant market power.

Figure 200: Market Competitiveness rank by country Country Belgium Denmark France Germany Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland UK Market Competitiveness 10 6 11 2 4 3 12 5 9 13 7 8 1 Source: Credit Suisse research

3) National Coverage i) Net FTTH homes passed as a % premises

An ideal market would have a low net FTTH coverage leaving room for growth into areas where there is little FTTH passed.

Figure 201: National Coverage rank by country Country Belgium Denmark France Germany Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland UK National Coverage 1 9 8 2 6 7 5 10 11 13 12 4 3 Source: Credit Suisse research

4) Build Capacity i) Maximum change in net homes passed as a % premises

An ideal market would have proven capacity to increase FTTH deployment to meet growing demand; this can be affected by the terrain of country, duct access and building regulation as well as historical capital investment.

Figure 202: Build Capacity rank by country Country Belgium Denmark France Germany Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland UK Build Capacity 12 9 4 13 5 7 10 3 2 1 6 11 8 Source: Credit Suisse research

5) Customer Demand i) FTTH take-up rate (FTTH subscribers as a % of net homes passed) ii) FTTH market share (FTTH subscribers as a % of total broadband subscribers)

An ideal market has pent-up customer demand for FTTH connectivity with a high take-up rate for currently deployed fibre. We also look for markets where FTTH is a low percentage of total broadband subscribers, leaving an opportunity for subscriber growth.

Figure 203: Customer Demand rank by country Country Belgium Denmark France Germany Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland UK Customer Demand 4 8 6 2 7 11 3 9 12 13 10 1 5 Source: Credit Suisse research

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Overall Score Combining these metrics produces an overall score and a ranking as per the table below; for further details see the country sections at the back of the report.

Figure 204: Overall Rank Country Build Momentum Market Competitiveness National Coverage Build Capacity Customer Demand 1 UK 1 1 3 8 5 2 Ireland 2 4 6 5 7 3 Germany 9 2 2 13 2 4 Italy 3 3 7 7 11 5 Belgium 5 10 1 12 4 6 France 4 11 8 4 6 7= Norway 8 5 10 3 9 7= Switzerland 11 8 4 11 1 9 Denmark 7 6 9 9 8 10= Netherlands 10 12 5 10 3 10= Portugal 6 9 11 2 12 12 Sweden 12 7 12 6 10 13 Spain 13 13 13 1 13 Source: Company data, Credit Suisse estimates

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Figure 205: The pressure on telcos to deploy FTTH continues to build

Source: Credit Suisse research

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Figure 206: Investment incentives also strengthened by EU code (EECC) Is there an SMP Replication of network elements economically operator? inefficient or physically impracticable No

Yes Yes

Access up to Yes Is the SMP operator FDP sufficient? Wholesale -only? Yes >1 customer No

No Small project? Yes

Has the SMP operator made No cooperative commitments? Yes Subject to market test VHC network? No No Yes Is the SMP operator offering Wholesale-only Co-investment in VHC? Yes Fair & reasonable access terms network? Maintenance of existing access

Yes No No

Access obligation on No (further) Access Access Access No access SMP operator access obligation obligation obligation obligation <30Mbps – cost-plus obligation beyond FDP beyond FDP up to FDP >30Mbps – retail-minus Fair and reasonable “commercially viable” Fair and reasonable

Source: Credit Suisse research

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Valuation, Methodology and Risks

Target Price and Rating Valuation Methodology and Risks: (12 months) for 1&1 Drillisch (DRIG.DE)

Method: We use our standard DCF assumptions to set our target price of €21. We model the business with the MBA-MVNO assumptions rather than the MNO options (though we include spectrum costs into our net debt estimates). For our cost of debt, we assume it is similar to Iliad (which has a 2.4% higher debt cost for its 2025 bonds vs French sovereigns). We assume our standard 1.0x beta, 8.7% ERP (CS strategists), 30% long-term debt capitalization and 33% corporate tax rate. We assume a -1% long-term growth rate given our assumption the reseller model over time goes ex growth. This gives a valuation per share of €26. This is slightly below the current share price, hence our Underperform rating.

Risk: The main upside risks to our Underperform rating and €21 target price are: 1) wholesale cost inflation coming in lower than we assume, for example, through winning the pricing review; and 2) winning better national roaming terms, for example, by signing with another operator or supported by the regulator. Target Price and Rating Valuation Methodology and Risks: (12 months) for Altice Europe (ATCA.AS)

Method: We derive our Eur4.2 target price by using a DCF. We assume a risk free rate of -0.5%, an interest spread of 5.2%, a beta of 1.0, an equity risk premium of 8.6% and a long term optimal capital structure of 30% with a long term blended tax rate of 28%. We assume a terminal growth rate of -1%, reflecting its mostly mobile revenue mix. We rate Altice Europe Neutral given the limited visibility on its turnaround.

Risk: The risk factors that could positively affect our Eur4.2 target price and/or Neutral rating are: Positive: succesfully turning around France or major disposals. Negative: pressure in HY markets, continued pressure on France/Portugal. Target Price and Rating Valuation Methodology and Risks: (12 months) for Amazon com Inc. (AMZN.OQ)

Method: We use the discounted cash flow (DCF) method to calculate our $3680 target price for AMZN. Our 5-year DCF uses a 3% terminal growth rate and a market-implied discount rate derived by discounting our unlevered FCF (free cash flow) estimates from 2021 through 2026 to arrive at the stock's current trading price. We then applied this discount rate to our 2021-2026 unlevered free cash flow estimates for AMZN. We maintain our Outperform rating for AMZN shares, and factors that can provide potential upside to our estimates include: 1) re-establishment of e-commerce segment operating margin expansion as Amazon grows into its larger infrastructure, 2) ongoing margin benefit due to shipping loss moderation, and 3) upward bias to AWS revenue forecasts and likely more moderate deceleration path as suggested by ongoing capital intensity in the business.

Risk: Risks to our $3680 target price and Outperform rating for AMZN include a deteriorating global economy, competition from major offline retailers, volatility in operating margins, and unpredictable investment spending. Target Price and Rating Valuation Methodology and Risks: (12 months) for American Tower (AMT.N)

Method: Our Outperform rating and Target Price of $300 for American Tower are weighted one-half to our 30.0x P/ 2021 AFFO per share estimate of $8.95 and one-half to our DCF with a WACC of 5.2% and terminal growth rate of 2.4%. We rate American Tower Outperform as we expect its total return to exceed REIT peers.

Risk: Risks to our $300 target price and Outperform rating for American Tower are 1) economic risk associated with a slowdown in overall telecom spending, 2) shift away from macro tower infrastructure towards small cells, 3) customer concentration - revenues are highly tied to the three large US carriers, 4) interest rate risk - leading to greater borrowing costs, and 5) REIT qualification risk where the company must abide by numerous complex rules to qualify for its tax free status. Target Price and Rating Valuation Methodology and Risks: (12 months) for Apple Inc (AAPL.OQ)

Method: Our $380 target price and Neutral rating for AAPL are based on 25x our $15.15 calendar 2021 EPS estimate. Our 25x multiple is a premium vs. Apple’s three-year average of 14x, reflecting the increasing mix toward Services which warrants a higher multiple than the company’s hardware-centric past. We rate AAPL Neutral as we expect it to perform inline with its peers.

Risk: Risks to our $380 target price and Neutral rating for AAPL are a slowdown in smartphone demand, the company's ability to monetize Services, regulatory issues, and US-China trade tensions. Target Price and Rating Valuation Methodology and Risks: (12 months) for BT Group (BT.L)

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Method: Our price target of 180p is driven by a 10-yr DCF valuation of 189p. Key drivers or our DCF valuation are the following assumptions: Risk-free rate 0.5%; Interest rate spread of 1.0%; Equity risk premium of 8.3%; WACC of 6.5% and a perpetual growth rate of -0.5%. We rate BT Group Outperform as we now believe BT can return to sustainable EBITDA growth by FY22E consistent with an Outperform rating compared to its European Telecom peers.

Risk: The main risk to our 180p target price and Outperform rating on BT is a deeper recession negative economy impact on its Global Services division and UK business, in particular BT's Enterprise division. Target Price and Rating Valuation Methodology and Risks: (12 months) for Bouygues (BOUY.PA)

Method: Our eur34 target price is based on a DCF of the business. We make explicit forecasts till 2024 and then fade returns over 5 years, followed by a terminal value. We use a 7.8% WACC and a -1% terminal growth rate. We deduct net debt from the implied enterprise value. We also deduct the value of downpayments as these would need to be returned in a wind-down (as well as adjusting for minority debt). This implies a value of eur34 which implies a value above the current share price, hence our Outperform rating.

Risk: The main downside risks to our Outperform rating and eur34 target price are renewed earnings pressure in telecoms and further earnings disappointment in the construction-related actvities, esp from the current macro headwinds. Target Price and Rating Valuation Methodology and Risks: (12 months) for CK Hutchison Holdings Limited (0001.HK)

Method: Our target price of HK$74 for CKH is based on a 20% target discount to CKH's NAV of HK$93 per share. We believe CKH not only has a steady earnings base from infrastructure and retail but also a visible earnings upgrade path from the European mobile market recovery, synergies impact of WIND Italia acquisition, and potential asset monetisation. We thus rate CKH OUTPERFORM.

Risk: The key risks to our HK$74 target price and OUTPERFORM rating for CKH are (1) performance of 3 Group, (2) European and oil exposure, (3) consolidation of newly acquired projects, and (4) integration of WIND-3 Italy. Target Price and Rating Valuation Methodology and Risks: (12 months) for Cellnex Telecom (CLNX.MC)

Method: We base our €62 per share target price on a DCF, similar to the methodology for the rest of the sector. We use a 4.9% WACC, relatively low due to the high amount of debt in the business (>6x net debt/EBITDA) and low cost of debt. We have assumed a 1.5% perpetual growth rate, somewhat above current rate of inflation reflecting longer term growth prospects. We assume unlevered FCF growth fading towards our 1.5% perpetual growth over 10 years (vs 5 years for the telecoms sector) reflecting the high visibility and defensive nature of the tower industry. We forecast better revenue and EBITDA growth than consensus and thus rate Cellnex Outperform.

Risk: Risks to our Outperform rating and €62 target price for Cellnex include: Cellnex's premium equity FCF yield reflects the company's potential to continue to consolidate mobile tower assets in Spain and Italy realising material synergies. The risks to our target price and rating arise if the company fails to realise these synergies and if growth slows, we could see a derating of the shares. Target Price and Rating Valuation Methodology and Risks: (12 months) for Comcast Corp. (CMCSA.OQ)

Method: Our $50 target and Outperform rating for CMCSA are derived via DCF, using an 7.7% cost of equity, 3.5% pre-tax cost of debt and no terminal growth. We rate CMCSA Outperform based on the total potential return to our target price and because we expect it to perform above the level of its peers.

Risk: Risks to our Outperform rating and $50 TP for CMCSA are disappointing subscriber or wireless performance, increased replacement of broadband internet with 5G Fixed Wireless service, programming cost increases, margins or capital intensity materially above expectations, changing consumer behavior, further impacts to leisure or advertising, and dilutive M&A. Target Price and Rating Valuation Methodology and Risks: (12 months) for Deutsche Telekom (DTEGn.F)

Method: Our target price of €18 is based on a DCF. In our forecasts we assume modest growth in EBITDA in the ex-US business and strong growth in the US business. We also assume large but reducing special factors and NWC drag. We use a WACC of 6.7%. We use a long-term growth rate of 0% reflecting a mix of mobile (which we expect to grow long term) and fixed (which we expect to shrink long term). Our TP implies limited upside potential, hence our Neutral rating.

Risk: Downside risks to our €18 target price and Neutral rating include a new entrant in German mobile and competition picking up in other key markets, as well as the risk the US business stops growing and/or the German operations worsen. We see upside risks if TMUS or Germany grow faster than we forecast.

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Target Price and Rating Valuation Methodology and Risks: (12 months) for Elisa (ELISA.HE)

Method: We value Elisa on a DCF basis. We assume a 6% WACC with a perpetuity growth rate of 0.5%. This gives a valuation of eur53 per share, which is also our target price. This is close to the current share price leaving little potential upside/downside on valuation leading us to rate the stock Neutral.

Risk: The main upside risks to our eur53 target price and Neutral rating are 1) mobile growth as customers spin up to higher speeds; 2) value creation through further fixed line acquisitions; 3) stronger DPS growth than we forecast. The main downside risks to our target price and rating are: 1) Valuation looks expensive on a relative basis so the stock could de-rate. 2) Migration to unlimited data slows. Target Price and Rating Valuation Methodology and Risks: (12 months) for Ericsson (ERICb.ST)

Method: Our TP of SKr110 ($12.1) and Outperform rating are based on the assumption that the ongoing cost cutting plan can potentially drive EBIT margins (excl restructuring) of ~13% by 2021 driving EPS of SKr6.1. Based on average of 1.3x EV/sales and 17x P/E (slightly over 15x FY2 P/E average since 2010) on 2021 estimates and adding back net cash ending Q220 would imply TP of SKr110. Given potential upside from current levels along with ongoing execution on margin improvement, we rate shares as Outperform.

Risk: Risks to our TP of SKr110 ($12.1) and Outperform rating for Ericsson include i) lower levels of capex spending in Ericsson's key markets such as US, Europe and China, ii) FX headwinds (weak USD vs. SEK), and iii) a worse pricing environment in the industry. Given Ericsson's business is highly linked to wireless capex spending environment, any deterioration in spending trends at telecom operators or material move in FX (weak USD vs. SEK) could negatively impact overall valuation and impact our PT and/or rating. Target Price and Rating Valuation Methodology and Risks: (12 months) for Ericsson (ERIC.OQ)

Method: Our TP of SKr110 ($12.1) and Outperform rating are based on the assumption that the ongoing cost cutting plan can potentially drive EBIT margins (excl restructuring) of ~13% by 2021 driving EPS of SKr6.1. Based on average of 1.3x EV/sales and 17x P/E (slightly over 15x FY2 P/E average since 2010) on 2021 estimates and adding back net cash ending Q220 would imply TP of SKr110. Given potential upside from current levels along with ongoing execution on margin improvement, we rate shares as Outperform.

Risk: Risks to our TP of SKr110 ($12.1) and Outperform rating for Ericsson include i) lower levels of capex spending in Ericsson's key markets such as US, Europe and China, ii) FX headwinds (weak USD vs. SEK), and iii) a worse pricing environment in the industry. Given Ericsson's business is highly linked to wireless capex spending environment, any deterioration in spending trends at telecom operators or material move in FX (weak USD vs. SEK) could negatively impact overall valuation and impact our PT and/or rating. Target Price and Rating Valuation Methodology and Risks: (12 months) for Eutelsat Communications (ETL.PA)

Method: Our target price of €10.1 for Eutelsat is based on a DCF valuation with 6.7% WACC and a 0% terminal growth rate. We rate Eutelsat Neutral relative to the Eu Telecoms sector which is broadly consistent with broadly flat EBITDA estimates from FY22 post the FY20-21 impact of Covid-19.

Risk: We see upside risk to our €10.1 target price and Neutral rating from better than expected take-up of Eutelsat's capacity in Africa, middle east and Latin America. The main downside risk to our investment view is greater risk from overcapacity in Data services, particularly in emerging markets, where Eutelsat is more exposed than its peers. Target Price and Rating Valuation Methodology and Risks: (12 months) for Facebook Inc. (FB.OQ)

Method: We use the discounted cash flow (DCF) method to calculate our $315 target price for Facebook. Our five-year DCF uses a 3% terminal growth rate and 10.5% discount rate. We apply this discount rate to our 2021-2026 unlevered free cash flow estimates for Facebook. We use our discounted unlevered FCF (free cash flow) estimates from 2021 through 2026 to arrive at the stock's current trading price. Drivers to our investment thesis and Outperform rating include: 1) Facebook will be able to drive long term revenue growth without a material lift in ad loads, with near-term growth drivers including Instagram, Premium Video, and DPA (via price inflation for core mobile/desktop newsfeed) 2) Street models are too conservative and underestimate the long-term monetization potential of upcoming new products 3) Optionality and upward bias to estimates, which do not contemplate contributions from multiple other products including WhatsApp, Messenger, and Offers/Local.

Risk: Risks to our $315 target price and Outperform rating for Facebook are: growth in mobile engagement which currently has limited monetization, future monetization initiatives do not materialize, limited ability for public shareholders to influence key decisions because of dual class voting stock, deteriorating global economy, competition, unpredictable investment spending, and potential impacts from data privacy and data protection regulations/laws.

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Target Price and Rating Valuation Methodology and Risks: (12 months) for Fujitsu (6702.T)

Method: We base our ¥9,340 target price for Fujitsu by applying an SOTP-derived P/E referencing the valuations of global competitors in each business of 13.5x to our FY3/21E EPS of ¥692.72 (as of January 2020, when we set our target price). We derive our multiple from a sum-of-the parts (SOTP) model, referencing the latest segment-specific valuations for between top 5-10 overseas and domestic companies (DELL, Cisco, NTT date, etc.). New management has made little headway on the long-standing issue of improving overseas services earnings. Our OUTPERFORM rating is based on a comparison of the company's 12-month potential total return versus our coverage universe.

Risk: Upside risks to our ¥9,340 target price and UNDERPERFORM rating for Fujitsu are enhanced shareholder returns using funds from the sale of a subsidiary and a buyback announcement (over ¥100bn, or about 5% of issued capital). Target Price and Rating Valuation Methodology and Risks: (12 months) for INWIT (INWT.MI)

Method: We base our €11 target price for Inwit on a DCF for combined business. We use a 5.1% WACC derived form a 8% equity risk premium, a 2.1% interest spread for and -0.5% risk free rate. In addition we use a 1.5% terminal growth rate, which is our standard towers terminal growth rate. Our standalone Inwit forecasts are ahead of consensus revenue EBITDA forecasts and thus we rate Inwit Outperform.

Risk: The main near term risks to our Outperform rating and €11 target price we believe is failing to integrate the Vodafone tower assets. More fundamentally our forecasts are highly sensitive to continued tenant growth as well as Inwit executing on its small cell and other additional services roll-out plans. Target Price and Rating Valuation Methodology and Risks: (12 months) for Iliad (ILD.PA)

Method: We derive our €111 target price using a DCF. We use a 0.4% risk free rate, a beta of 1.0x, an equity risk premium of 8.3%, a long term tax rate of 28% and a target capital structure with 30% in the long term. We also use a 1.0% interest spread on Iliad's net debt. We believe Iliad’s operating performance is improving. But our OpFCF estimates are still below consensus, particularly as longer term consensus capex still looks low to us compared to our estimates, hence our Neutral rating.

Risk: Upside risks to our Neutral rating and €111 TP are French consolidation, capex falling or successful execution in France. Downside risks are a fairly to generate cash flow long term in Italy and a failure to drive growth on the back of investments in France. Target Price and Rating Valuation Methodology and Risks: (12 months) for KPN (KPN.AS)

Method: Our price target of €3.00 is driven by a 10-yr DCF valuation of €3.04 rounded down to €3.0. Key drivers or our DCF valuation are the following assumptions: Risk-free rate 0.5%; Interest rate spread of 1.3%; Equity risk premium of 8.3%; WACC of 6.6% and a perpetual growth rate of -0.75%. We rate KPN Outperform as we are confident in KPN returning to sustainable EBITDA growth from 2019 consistent with an Outperform rating compared to its European Telecom peers.

Risk: The main risk to both our €3.00 target price and Outperform rating is the newly merged Tele2/T-Mobile acting irrationally on pricing or KPN not executing on its cost cutting plan over 2019-21E. Target Price and Rating Valuation Methodology and Risks: (12 months) for NOS (NOS.LS)

Method: Our €3.5 target price is based on a DCF with a 7.4% WACC (-0.3% risk free rate reflecting 10 year German government bond yields and 10.4% equity risk premium) and 0.5% perpetual growth (reflecting mix of cable and mobile assets). Our implied valuation is close to the current share price hence our Neutral rating.

Risk: The main risks to our €3.5 target price and Neutral rating are: Increasing competition in the Portuguese market from PT and Vodafone rolling out more fibre than expected reducing NOS' network advantage; Failure to keep costs under control leading to downgrades to our EBITDA forecasts; and Macro economic pressure on Portugal materially putting pressure on consumer spending. Target Price and Rating Valuation Methodology and Risks: (12 months) for Netflix Inc. (NFLX.OQ)

Method: Our $525 target price and Neutral rating are derived via DCF, using a 10.2% cost of equity, 5% pre-tax cost of debt, and 3% terminal growth.

Risk: Risks to our Neutral rating and $525 target price include missing quarterly subscriber guidance, DTC competition, access to content, successfully scaling in-house production, cost of content, regulations, and recessions.

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Target Price and Rating Valuation Methodology and Risks: (12 months) for Nokia (NOKIA.HE)

Method: Our TP of €4.00 (or $4.68) is based on average of 1.0x EV/Sales and 12.0x P/E on our 2021 EPS of about €0.28 adjusted for current net cash. We rate the stock Neutral as we see limited upside from current levels as Nokia is struggling to deliver decent top-line growth.

Risk: Key risks to our €4.00 (or $4.68) TP and Neutral rating for Nokia include i) better/worse environment for networks business resulting in higher growth/decline in top-line and margin levels than expected, ii) acceleration/slowdown in licensing activities, and iii) decreasing/increasing pricing pressure in the industry. Target Price and Rating Valuation Methodology and Risks: (12 months) for Nokia (NOK.N)

Method: Our TP of €4.00 (or $4.68) is based on average of 1.0x EV/Sales and 12.0x P/E on our 2021 EPS of about €0.28 adjusted for current net cash. We rate the stock Neutral as we see limited upside from current levels as Nokia is struggling to deliver decent top-line growth.

Risk: Key risks to our €4.00 (or $4.68) TP and Neutral rating for Nokia include i) better/worse environment for networks business resulting in higher growth/decline in top-line and margin levels than expected, ii) acceleration/slowdown in licensing activities, and iii) decreasing/increasing pricing pressure in the industry. Target Price and Rating Valuation Methodology and Risks: (12 months) for Orange (ORAN.PA)

Method: We use a DCF to derive our €13.5 target price. We use a risk free rate of 0.4%, a 1.8% interest spread, a 1.0x beta, an ERP and a 30/70% debt equity mix in the long term with a 33% tax rate. This implies a 6.5% WACC. We use a long term growth rate of 0.5% based on an even mix between fixed (standard assumption of -1%) and mobile (0% standard assumption). Given the upside potential indicated by our target price and the dividend outlook and balance sheet position, we rate the stock Outperform.

Risk: The main risk to our Outperform rating and €13.5 target price is more competitive pressure in mobile through Iliad becoming stronger in 4G. This could be through it building a network or potentially buying one. Competitors accelerating fibre build or improving commercial performance could also pose a risk. We also view footprint expansion deals by Orange as a risk. Target Price and Rating Valuation Methodology and Risks: (12 months) for Proximus (PROX.BR)

Method: Our €19 target price is based on our base case scenario which assumes 1) a 4th entrant in Belgian mobile (we attach a likelihood of 50% to such a new entrant). At our new price target Proximus would trade on a on an adjusted sector 2020E FCF yield of c.8%. Proximus is trading on a 2020E adjusted EV/EBITDA multiple of c.5x which is consistent, in our view, of an operator with declining EBITDA under our base case scenario. Given we expect the sector to deliver broadly stable to slightly growing EBITDA over the next few years we rate Proximus Underperform with its inferior EBITDA growth vs. the sector.

Risk: The main risk to our Underperform rating and €19 target price on Proximus is (1) worse than expected execution by both Telenet and Orange Belgium over 2020-22 on their new 4play and 3play offers; and (2) No 4th entrant entering the Belgian mobile market (which would suggest an upside case valuation of €28), all other base case assumptions being equal, with Proximus EBITDA over 2019-23E remaining broadly stable on this scenario. Target Price and Rating Valuation Methodology and Risks: (12 months) for Rolls-Royce (RR.L)

Method: Our target price comes to 200p, based on the average of a 2024e FCF yield (8%, discounted back at 12%) and our SOTP (10x for Civil Aerospace EBIT multiple, and discounted back at 12%). Given the level of risks attached to the numbers, the lack of upside potential, the wide range between Grey Sky / Blue Sky valuations and the specific market segment of civil aerospace in which the group is active, we do not see Rolls-Royce as offering an attractive investment case in the current environment. We rate the stock Underperform as a result.

Risk: Risks to our 200p target price and Underperform rating: Execution on the restructuring and avoiding in-service issues on the Trent XWB are critical. The softer cycle for widebody aircraft is another risk, as are GBP/USD fluctuations and issues with the Trent 1000 if they were to persist. Issues with the Trent 7000 would be damaging. Stronger-than-expected cash flows would be a significant positive, possibly from a faster-than-expected recovery in flight hours. Execution on the transformation plan could be a risk. Target Price and Rating Valuation Methodology and Risks: (12 months) for SES (SESFd.PA)

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Method: We set our 12mth SES target price at €10.5/share putting SES's core business on 6x 2021E EV/EBITDA (consistent, in our view, with stable EBITDA) treating the hybrid instrument as 50% debt. Furthermore we value SES discounted C-Band proceeds at € 4.58/share. We rate SES Outperform given its expected slight EBITDA growth combined with our expection of substantial discounted C-Band spectrum proceeds of c.€2.1bn over the next 4 years.

Risk: The main risks to both our SES target price of €10.5 and Outperform rating are (1) further delays to new satellite launches (delaying the launch of revenue generating capacity), incremental pressure on the Global Video market from Over-the-top viewing (particularly Western Europe and the USA); (2) the risk from overcapacity, particularly in emerging market Fixed Data; and (3) the risk that the C- band process is disrupted by legal challenges or poor execution of the exiting of the 300MHz band. Target Price and Rating Valuation Methodology and Risks: (12 months) for Samsung Electronics (005930.KS)

Method: Our 12-month target price of W75,100 for Samsung Electronics is based on 1.7x FY21E up-cycle P/B. The dividend yield should rise for the next few years, driving P/E multiple expansion as Samsung Electronics’ yield approaches the global tech average of about 2.5%. We assign an OUTPERFORM rating to the stock given our confidence on higher earnings and dividends led by, resilient DRAM profitability, OLED or 3D NAND top-line growth, smartphone recovery with new product-cycle, and a more proactive shareholder return policy.

Risk: Risks that may impede the achievement of our 12-month target price of W75,100 and our OUTPERFORM rating for Samsung Electronics include: (1) smartphone margin sustainability given intensifying competition, (2) an earlier China entrance into 3D NAND, and (3) worse-than-expected memory pricing. Target Price and Rating Valuation Methodology and Risks: (12 months) for Swisscom (SCMN.S)

Method: We derive our SFr430 target price using a DCF. We assume a WACC of 6.2% (risk free rate 0.4%, 0.2% interest spread, 1.0x beta, 8.3% ERP, 30% target leverage and 20% b lended tax rate) and a terminal growth rate of -0.7% (reflecting two-thirds fixed with -1% terminal growth and one-third mobile with 0% terminal growth). Our estimates are below consensus, and with the stock trading at a premium to our valuation and target price, we continue to rate the stock Underperform.

Risk: The risk factors that could positively affect our SFr 430 target price andUnderperform rating are 1) Domestic consolidation leading to market repair; 2) stabilisation of the fixed line business; 3) significant value-creation in Italy through the possible sale of FWB or an attractive remedy package. Target Price and Rating Valuation Methodology and Risks: (12 months) for TalkTalk (TALK.L)

Method: Our price target of 80p is driven by a 10-yr DCF valuation of 80p. Key drivers or our DCF valuation are the following assumptions: Risk-free rate 0.5%; Interest rate spread of 4.9%; Equity risk premium of 8.3%; WACC of 7.5% and a perpetual growth rate of -1%. We rate TalkTalk underperform as we forecast declining EBITDA forecasts over FYMar21-23E which is consistent with an Underperform rating.

Risk: Upside risk to our target price of 80p and Underperform rating would from less competitive pressure from network competition and less downward pressure on the UK broadband market from a weakening UK economy. Target Price and Rating Valuation Methodology and Risks: (12 months) for Tele2 AB (TEL2b.ST)

Method: Our target price of SEK162 per share is derived on a DCF using +0.5% terminal growth 2.4% cost of debt and an 8.1% ERP leading to a 6.1% WACC. We are 4-5% ahead of consensus 2021-22E Equity FCF estimates which is consistent with our Outperform rating on Tele2.

Risk: The main upside risk to our Outperform rating and target price of SEK162 is better synergy execution and better pricing power leading to upside to our forecasts of Swedish growth. Similarly we see the main downside risk being weaker or delayed synergy realisation and increased price competition in the Swedish market. Target Price and Rating Valuation Methodology and Risks: (12 months) for Telefonica (TEF.MC)

Method: We calculate our eur4.2 target price on a DCF basis. We use a 0.4% risk free rate, a 3.7% interest spread, a beta of 1.0x and an equity risk premium of 8%. This implies a WACC of 6.0%. We use a terminal growth rate of -1.0% to reflect the fact that most of its revenues are mostly mobile and/or emerging markets with slightly higher underlying growth prospects than fixed line (where we assume -1.0%). Our estimates are in line with consensus, hence our Neutral rating.

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Risk: Downside risk to our eur4.2 price target and Neutral rating: continued price pressure in Spain (down-shifting pressuring ARPU) and macro pressure in Latam (esp FX), balance sheet levered. Upside risks to our eur4.2 price target and Neutral rating: Potential 4-to-3 consolidation in Spain and Brazil which could drive market repair. Some recovery in the Latam FX (in particular the BRL), eg if economy stabilises. Target Price and Rating Valuation Methodology and Risks: (12 months) for Telefonica Deutschland (O2Dn.DE)

Method: Our target price for TEFD of eur2.9 per share is based on a DCF where we assume a risk free rate of 0.4%, a 1.2% interest spread, a beta of 1.0x, an equity risk premium of 8.3%, a 30% long term capital structure, 33% blended corporate tax rate (effective) and 0% terminal growth. This implies a target price above the current share price. We rate the shares Outperform and are above consensus for 2021 EBITDA.

Risk: Risks to our eur2.9 target price and Outperform rating: The main downside risk is that TEF loses the wholesale revenues over time through a 4th MNO build, and that the dividend is cut again. Target Price and Rating Valuation Methodology and Risks: (12 months) for Telenor (TEL.OL)

Method: We base our NOK162 per share target price on a DCF. We assume a 6.2% WACC based on a 9.1% equity risk premium, 1.0% cost of debt, 30% target leverage ratio and 30% blended corporate tax rate. We rate Telenor Neutral as we are broadly in line with consensus 2020-22E revenue and EBITDA forecasts and believe upside risk and downside risks are fairly balanced.

Risk: Risks to our Neutral rating and NOK162 target price: We see worsening customer perception leading to weaker operational trends in Telenor's Asian businesses from falling behind on 4G network quality being a key downside risk. We see upside risk to our NOK162 per share target price and Neutral rating from a faster turnaround in the Thai business on the back of the 2.3GHz network upgrade and Telenor accelerating the releveraging of the business to get within its target leverage range. Target Price and Rating Valuation Methodology and Risks: (12 months) for Telia Company (TELIA.ST)

Method: Our SEK28 per share target price is based on a DCF, in line with the methodology for the rest of the sector. We apply a 5.9% WACC, based on current market cost of capital and equity risk premium. We further apply a terminal growth rate of 0%, reflecting the mix of mobile and fixed line revenues at Telia. We see downside to consensus forecasts from a weaker outlook for the Swedish business and rate Telia Underperform.

Risk: The main risks to our SEK28 target price and Underperform rating are: The main upside risk to our forecasts is a bigger than we anticipate cost cutting programme, and better Swedish fixed wireline trends leading to EBITDA and FCF upside versus our forecasts, rating and target price. Furthermore Telia consolidating fibre networks in Sweden could further strengthen the outlook of the business. Target Price and Rating Valuation Methodology and Risks: (12 months) for Tesla Inc (TSLA.OQ)

Method: Our $280 target price and Neutral rating are derived via a probability-weighted valuation methodology, weighing our base case against bull and bear ‘end states.’ Our base case uses our 2025 estimates and our target price is nearly 2/3rds weighted to our base case scenario.

Risk: Risks to our $280 target price and Neutral rating include a significant uptake in U.S. EV demand, TSLA achieving advanced autonomous capabilities earlier than expected, lack of desirability from competitor’s upcoming EV models. Downside risks include Model Y and Pickup launch difficulties, potential Gigafactory 3 delays, a lack of demand in international markets, service center shortages, and a heavy reliance on TSLA's CEO. Target Price and Rating Valuation Methodology and Risks: (12 months) for Vodafone Group (VOD.L)

Method: Our 170p target price is based on a DCF where we assume a 0.4% risk free rate, a 2.7% interest spread, a beta of 1.0x, an 8.3% equity risk premium and a 20% long term tax rate. We also assume a long term capital structure of 70% equity/30% debt and a terminal growth rate of 0%. This implies our valuation of 170p which is well above the current share price, hence our Outperform rating.

Risk: Key risks to our Outperform rating and 170p target price include: Vodafone losing network leadership as #3 networks catch-up in Europe, United Internet putting pressure on pricing in Germany (post spectrum auction) and Germany slowing. These headwinds could offset growth in fixed line and in Vodacom and cost-cutting, leading to slowing EBITDA growth and a de-rating of the valuation multiples. We see potential upside risk from: Vodafone retaining its pricing power in mobile post Project Spring, Iliad having fading impact in Italy, United Internet having little room for disruptive behaviour due to the MBA-MVNO, Vodafone Europe taking share in fixed line and South Africa remaining largely stable from a competitive point of view.

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Companies Mentioned (Price as of 03-Sep-2020) 1&1 Drillisch (DRIG.DE, €23.22) Altice Europe (ATCA.AS, €3.6) Amazon com Inc. (AMZN.OQ, $3531.45) American Tower (AMT.N, $256.5) Apple Inc (AAPL.OQ, $131.4) BMW (BMWG.F, €60.48) BT Group (BT.L, 103.4p) Bosch (BOSH.NS, Rs13064.25) Bouygues (BOUY.PA, €33.57) CK Hutchison Holdings Limited (0001.HK, HK$50.15) Cellnex Telecom (CLNX.MC, €52.94) CityFibre Infra (CITYC.L^F18) CityFibre Infra (CITYC.L^F18) CityFibre Infra (CITYC.L^F18) Comcast Corp. (CMCSA.OQ, $45.17) Deutsche Telekom (DTEGn.F, €15.39) Elisa (ELISA.HE, €50.28) Ericsson (ERICb.ST, Skr100.5) Ericsson (ERIC.OQ, $11.68) Euskaltel (EKTL.MC, €7.71) Eutelsat Communications (ETL.PA, €9.08) Facebook Inc. (FB.OQ, $302.5) Fastweb (FWB.MI^C11) Fastweb (FWB.MI^C11) Fastweb (FWB.MI^C11) Fujitsu (6702.T, ¥14,025) INWIT (INWT.MI, €8.4) Ibercom (MASM.MC, €22.44) Iliad (ILD.PA, €173.95) KPN (KPN.AS, €2.24) Liberty Global (LBTYA.OQ, $23.61) NOS (NOS.LS, €3.4) Netflix Inc. (NFLX.OQ, $552.84) Nokia (NOKIA.HE, €4.0) Nokia (NOK.N, $4.78) Orange (ORAN.PA, €9.32) Proximus (PROX.BR, €16.57) Rolls-Royce (RR.L, 218.3p) SES (SESFd.PA, €6.2) Samsung Electronics (005930.KS, W56,400) Sunrise (SRCG.S, SFr107.0) Swisscom (SCMN.S, SFr503.0) TalkTalk (TALK.L, 73.1p) Tele2 AB (TEL2b.ST, Skr124.25) Telecom Italia (TLIT.MI, €0.4) Telefonica (TEF.MC, €3.33) Telefonica Deutschland (O2Dn.DE, €2.33) Telenor (TEL.OL, Nkr146.9) Telia Company (TELIA.ST, Skr33.91) Tesla Inc (TSLA.OQ, $447.37) Uber (UBER.N, $34.37) ViaSat Inc. (VSAT.OQ, $39.1) Vodafone Group (VOD.L, 107.7p) Volkswagen (VWAGY.PK, $19.41) Walt Disney (DISN.BA, A$4266.0)

Disclosure Appendix Analyst Certification Jakob Bluestone, CFA, and Paul Sidney each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

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3-Year Price and Rating History for Samsung Electronics (005930.KS)

005930.KS Closing Price Target Price Date (W) (W) Rating 31-Oct-17 55,080 72,400 O 09-Mar-18 49,740 70,800 27-Apr-18 53,000 74,000 11-Jun-18 49,900 72,000 21-Sep-18 47,400 70,000 13-Dec-18 40,000 64,500 08-Jan-19 38,100 53,000 31-Jan-19 46,150 58,000 15-Mar-19 44,200 54,800 OUTPERFORM 19-Sep-19 49,150 61,300 31-Jan-20 56,400 82,000 02-Apr-20 46,800 66,000 29-Apr-20 50,000 65,000 30-Jul-20 59,000 75,100 * Asterisk signifies initiation or assumption of coverage. As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most att ractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as Europea n (excluding Turkey) ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin America, Turkey and Asia (excluding Japan and Australia), stock ratings are based on a stock’s total return relative to the average to tal return of the relevant country or regional benchmark (India - S&P BSE Sensex Index); prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analys t’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time. Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products. Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward. Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cov er multiple sectors. Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 50% (33% banking clients) Neutral/Hold* 37% (28% banking clients) Underperform/Sell* 12% (19% banking clients) Restricted 2% *For purposes of the NYSE and FINRA ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdin gs, and other individual factors.

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See the Companies Mentioned section for full company names Credit Suisse currently has, or had within the past 12 months, the following as investment banking client(s): TLIT.MI, ORAN.PA, DTEGn.F, TEF.MC, BT.L, KPN.AS, SCMN.S, TEL.OL, ATCA.AS, LBTYA.OQ, O2Dn.DE, CMCSA.OQ, TSLA.OQ, FB.OQ, AAPL.OQ, AMZN.OQ, INWT.MI, ETL.PA Credit Suisse provided investment banking services to the subject company (TLIT.MI, ORAN.PA, DTEGn.F, TEF.MC, BT.L, KPN.AS, SCMN.S, TEL.OL, ATCA.AS, LBTYA.OQ, O2Dn.DE, CMCSA.OQ, TSLA.OQ, FB.OQ, AAPL.OQ, AMZN.OQ, INWT.MI, ETL.PA) within the past 12 months. Within the last 12 months, Credit Suisse has received compensation for non-investment banking services or products from the following issuer(s): TLIT.MI, ORAN.PA, DTEGn.F, KPN.AS, PROX.BR, SCMN.S, TEL.OL, ATCA.AS, BOUY.PA, LBTYA.OQ, CMCSA.OQ, TSLA.OQ, AAPL.OQ, NOKIA.HE, AMZN.OQ, 005930.KS, NOK.N Credit Suisse has managed or co-managed a public offering of securities for the subject company (TEF.MC, SCMN.S, ATCA.AS, LBTYA.OQ, O2Dn.DE, CMCSA.OQ, TSLA.OQ) within the past 12 months. Within the past 12 months, Credit Suisse has received compensation for investment banking services from the following issuer(s): TLIT.MI, DTEGn.F, TEF.MC, BT.L, KPN.AS, SCMN.S, TEL.OL, ATCA.AS, LBTYA.OQ, O2Dn.DE, CMCSA.OQ, TSLA.OQ, FB.OQ, AAPL.OQ, AMZN.OQ, INWT.MI Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (TLIT.MI, ORAN.PA, DTEGn.F, TEF.MC, BT.L, ELISA.HE, KPN.AS, ATCA.AS, BOUY.PA, ILD.PA, 0001.HK, LBTYA.OQ, NOS.LS, O2Dn.DE, CMCSA.OQ, TEL2b.ST, RR.L, TSLA.OQ, FB.OQ, AAPL.OQ, ERICb.ST, 005930.KS, INWT.MI, CLNX.MC, ETL.PA, SESFd.PA, AMT.N, ERIC.OQ, VOD.L) within the next 3 months. Credit Suisse currently has, or had within the past 12 months, the following issuer(s) as client(s), and the services provided were non- investment-banking, securities-related: TLIT.MI, DTEGn.F, PROX.BR, SCMN.S, TEL.OL, ATCA.AS, BOUY.PA, LBTYA.OQ, CMCSA.OQ, TSLA.OQ, AAPL.OQ, NOKIA.HE, 005930.KS, NOK.N Credit Suisse currently has, or had within the past 12 months, the following issuer(s) as client(s), and the services provided were non- investment-banking, non securities-related: ORAN.PA, DTEGn.F, KPN.AS, PROX.BR, SCMN.S, TEL.OL, ATCA.AS, LBTYA.OQ, CMCSA.OQ, TSLA.OQ, AMZN.OQ, 005930.KS Credit Suisse acts as a market maker in the shares, depositary receipts, interests or units issued by, and/or any warrants or options on these shares, depositary receipts, interests or units of the following subject issuer(s): 0001.HK. Credit Suisse or a member of the Credit Suisse Group is a market maker or liquidity provider in the securities of the following subject issuer(s): DRIG.DE, ATCA.AS, AMZN.OQ, AMT.N, AAPL.OQ, BT.L, BOUY.PA, 0001.HK, CLNX.MC, CMCSA.OQ, DTEGn.F, ELISA.HE, ERICb.ST, ERIC.OQ, ETL.PA, FB.OQ, 6702.T, INWT.MI, ILD.PA, KPN.AS, LBTYA.OQ, NOS.LS, NFLX.OQ, NOKIA.HE, NOK.N, ORAN.PA, PROX.BR, RR.L, SESFd.PA, 005930.KS, SRCG.S, SCMN.S, TALK.L, TEL2b.ST, TLIT.MI, TEF.MC, O2Dn.DE, TEL.OL, TELIA.ST, TSLA.OQ, VOD.L A member of the Credit Suisse Group is party to an agreement with, or may have provided services set out in sections A and B of Annex I of Directive 2014/65/EU of the European Parliament and Council ("MiFID Services") to, the subject issuer (TLIT.MI, ORAN.PA, DTEGn.F, TEF.MC, BT.L, KPN.AS, SCMN.S, TEL.OL, ATCA.AS, LBTYA.OQ, O2Dn.DE, CMCSA.OQ, TSLA.OQ, FB.OQ, AAPL.OQ, AMZN.OQ, INWT.MI, ETL.PA) within the past 12 months. As of the date of this report, Credit Suisse beneficially own 1% or more of a class of common equity securities of (BT.L, ELISA.HE, SCMN.S, SRCG.S, ETL.PA, VOD.L). Credit Suisse is acting as financial adviser to Liberty Global PLC (LBTYA.OQ) on the announced pending acquisition of Sunrise Communications Group (SRCG.S).

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Credit Suisse is acting as financial adviser to Liberty Global PLC (LBTYA.OQ) on the announced pending acquisition of Sunrise Communications Group (SRCG.S). For date and time of production, dissemination and history of recommendation for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to the link: https://rave.credit-suisse.com/disclosures/view/report?i=548150&v=- zo6ncgd0lf811ooyzvpd0wh3 . Important Regional Disclosures Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from, or in connection with, this research report. The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html. Investors should note that income from such securities and other financial instruments, if any, may fluctuate and that price or value of such securities and instruments may rise or fall and, in some cases, investors may lose their entire principal investment. This research report is authored by: Credit Suisse International ...... Ben Lyons ; Jakob Bluestone, CFA ; Evgeny Kudinov ; Paul Sidney To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the FINRA 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Credit Suisse International ...... Ben Lyons ; Jakob Bluestone, CFA ; Evgeny Kudinov ; Paul Sidney Important disclosures regarding companies that are the subject of this report are available by calling +1 (877) 291-2683. The same important disclosures, with the exception of valuation methodology and risk discussions, are also available on Credit Suisse’s disclosure website at https://rave.credit-suisse.com/disclosures . For valuation methodology and risks associated with any recommendation, price target, or rating referenced in this report, please refer to the disclosures section of the most recent report regarding the subject company.

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