Equity Research 3 May 2018 European Telecom Services INDUSTRY UPDATE The rise of the Wholesale-Only model European Telecom Services Until recently it was almost unthinkable that any company would consider creating POSITIVE a third expensive parallel Telecom infrastructure, competing with EU incumbents Unchanged and cable, given the high barrier to entry/cost of rollout, relatively stable competition plus mature nature of the industry. However, we are now seeing European Telecom Services strategic moves across a number of European markets, with Open Fiber in Italy the Maurice Patrick highest profile case study, and others following. In this detailed report we analyse +44 (0)20 3134 3622 Open Fiber’s prospects, its key success factors, and identify risks to other EU
[email protected] markets. We conclude that Italy is in many ways a “perfect storm”, creating a fertile Barclays, UK investment opportunity for alternative infrastructure. Only Germany and the UK are Mathieu Robilliard likely to see wholesale only on a similar scale, given low incumbent FTTH builds and +44 203 134 3288 high service provider interest. Today we downgraded BT to EW and upgraded TEF
[email protected] DE to OW, and we believe OW-rated VOD and ORA are de-risked vs. peers. Barclays, UK Open Fiber – Driving cost-effective rollout and high penetration. Open Fiber will Daniel Morris double its FTTH footprint to c5m homes by end-2018, and 19m by 2023. The company +44 (0)20 7773 2113 sees c.50% penetration in “mature” areas, with newly built areas at c.10% and rising,
[email protected] per our recent meeting.