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Overview 2014, Outlook 2015

Wednesday 31 December 2014 | 12:32 CET | Market Commentary
What happened in 2014 and what can we expect in 2015? Telecompaper offers below an overview of the most important developments in the past year and our expectations for the new year. The roll-out of 4G networks took centre stage in 2014, alongside the takeovers of Ziggo by Liberty Global and Reggefiber by KPN. Four operators with their own networks will keep competition intense and innovation on the mobile market going, but what is the outlook for the fixed market, dominated by KPN and the new Ziggo?

In 2015, the pressure will be on Vodafone, Tele2 and T-Mobile to challenge the pending duopoly of KPN and Ziggo. Who will be the number three on the market? Is Tele2 just focusing on building its own mobile network and leaving the fixed market for what it is? And which direction will mobile-only provider T-Mobile choose, given the strength of LTE and the ever-increasing penetration of smartphones.

The big question for Ziggo will be whether it can succeed in a smooth integration of the networks and services of UPC and the old Ziggo. For KPN, how much longer will it remain active outside the Netherlands? Will it sell Base, iBasis and its stake in Telefonica Deutschland? And what can KPN do with the eventual war chest of EUR 5 billion in cash?

This combined overview and outlook focuses on these and many other issuers. We also speculate on the future of KPN, analogue TV and whether some players can continue independently on the Dutch telecom market.

 

KPN

  • 2014: Won share on the TV market, helped by innovations (Videoland Unlimited, restart from the beginning, Compleet (quad play), watching recordings on mobile devices). Renewed its management board (CFO Jan-Kees de Jager, CCO Frank van der Post). Completed the takeover of Reggefiber.
  • 2015: New strategic plan for the coming years.
  • Speculative: Start structural separation of the fixed network and network virtualisation with the implementation of NFV (network functions virtualisation) and SDN (software-defined networking). Merge with Belgacom. Sell Base (to Tele2), iBasis and the stake in Telefonica Deutschland (20.5%). Book a profit from the IPO of Jasper Technologies (machine-to-machine). Buy M7 Group (CanalDigitaal, Online.nl) and SBS Netherlands.

Ziggo/UPC

  • 2014: The takeover of Ziggo by Liberty Global and merger of Ziggo and UPC received regulatory clearance. Won market share in broadband. Reduced churn in the TV market. UPC stuck with the hybrid Horizon box and improved the functionality with software updates.
  • 2015: The start of integrating Ziggo and UPC.
  • Speculative: Announce the end of analoge TV to free up capacity for other services (broadband, VOD, digital TV) - although UPC still has a relatively low digital TV penetration. Acquire T-Mobile NL (a first for Liberty Global to buy a mobile operator).

Tele2

  • 2014: Rolling out LTE (in network cooperation with T-Mobile). Won market share in mobile. Renewed its management, including CEO (Jeff Dodds, from Virgin Media in the UK).
  • 2015: Introduction of LTE in March, starting transition from MVNO to MNO. Tele2 Group to start an efficiency programme.
  • Speculative: Sells Dutch fixed network to Vodafone. Tele2 Group buys Base from KPN.

Vodafone

  • 2014: Won market share from KPN.
  • 2015: Focus on fixed, likely through an acquisition. Introduction of quad play. Complete back-office consolidation. Start unbundling FTTH.
  • Speculative: Acquire a fixed network such as Tele2 NL, Eurofiber, Caiway.

T-Mobile

  • 2014: Established as mobile-only challenger, with Tele2 as network-sharing partner.
  • 2015: Take LTE network nationwide.
  • Speculative: Acquisition by Ziggo.

Mobile networks

  • 2014: 4G becomes big (after launch in 2013 by KPN). KPN and Vodafone reach national coverage, MVNOs launch first 4G services. Wi-Fi expands to become extension of fixed lines and act as substitute for mobile (for Ziggo/UPC).
  • 2015: Arrival of LTE-A (carrier aggregation), also known as 4G+. Small cells breakthrough, led by Vodafone.
  • Speculative: KPN launches LTE Broadcast.

Mobile services

  • 2014: Data traffic almost doubled compared to 2013. Buckets (data allowances) getting bigger and prices lower. Month-to-month contracts introduced. MVNOs win market share from MNOs, budget brands winning customers from premium brands. SIM-only becoming more popular than contacts with handsets and postpaid gains market share.
  • 2015: MNOs must increase transparency (service plan and handset prices displayed separately). Arrival of freemium MVNOs (Choozze, FreedomPop), launch of VoLTE and emergence of the second-hand (refurbished) smartphone market.
  • Speculative: KPN launches mobile TV 2.0 over LTE Broadcast.

Devices

  • 2014: Smartphone penetration continues to increase (now ~75%). Screens get bigger and 'phablets' (screens from 5.5 inches) become popular, while resolution improves. Rise of Chinese manufacturers such as Xiaomi. Samsung keeps market lead, Apple number 2 and the rest follow at a distance. Huawei and LG grow the fastest, while Nokia, BlackBerry and HTC lose share. Introduction of 'wearables' by a number of manufacturers.
  • 2015: The internet of things (IoT) gets bigger, connecting people and machines to make everything 'smart' and connected. Headed towards 100 billion connected devices (of which half sensors) in 2020 according to ZTE. IoT brings opportunities (Big Data), as well as threats (security). Definite breakthrough with wearables, launch of Apple Watch to stimulate interest in smartwatches, more fitness trackers also to hit the market.
  • And more: smartphones to get faster (64-bit to become standard, rise of 8-core) and resolution to improve further (QHD and later 4K in smartphones; 4K in tablets). Biometric security and flexible screens will be the next new thing. Price pressure from China to intensify.

Fixed services

  • 2014: Fixed telephony market contracts.
  • 2015: Delta to switch off analogue TV. Duopoly of KPN and Ziggo to dominate, with room for a third player (Vodafone, Tele2). Broadband market to expand, fixed telephony to contract, TV market flat.
  • Speculative: Rise of single-play/broadband-only providers such as Jonaz. Early adoption of 'cord cutting' (canceling TV subscription in favour of online content).

OTT services

  • 2014: Netflix breaks open the (S)VOD market, with Videoland Unlimited (RTL) runner-up. Facebook a big winner, after acquisitions of WhatsApp and Instagram.
  • 2015: Mobile payments takes off, with services such as Apple Pay (NFC-based payment: 'wave and pay'). WhatsApp launches WhatsApp Voice and other chat/VoIP apps add new features (eg games). Facebook adds more stand-alone apps. HBO Go (Time Warner) launches as a standalone service, without the need for a TV subscription.
  • Speculative: Amazon (SVOD), Wuaki (PPV) and Magine (live TV) enter the Dutch market.

Convergence

  • 2014: KPN Compleet (quad play) expands.
  • 2015: Vodafone introduces its own quad-play offer.
  • Speculative: T-Mobile acquired by Ziggo.

Other themes

  • 2014: Start of portfolio and systems simplification.
  • 2015: Growing focus on broadband in rural/outlying areas results in new projects based on LTE, LTE Broadcast (KPN) and Wireless Docsis (Delta in 10 and 25 GHz bands), as well as FTTH. The 700 MHz band dedicated to mobile broadband and the other Digitenne frequencies reserved for DVB-T2.
  • Speculative: CIF buys Delta Kabel and sells Caiway to Vodafone. Amazon expands in the Netherlands. Google Fiber launches outside the US, possibly in Netherlands. Facebook launches enterprise and children's versions. 'One-trick ponies' takeover candidates (Netflix, Vimeo, Spotify, Soundcloud, Deezer, Evernote, Dropbox, Pinterest by eg Google, Facebook, Amazon, Yahoo, Microsoft, Rakuten).
  • And more: what will Dik Wessels do with the proceeds from selling Reggefiber (EUR 800 mln)? Who will buy Film1 from Ziggo (RTL and KPN)? Who is interested in buying iBasis from KPN?


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