Tele2 NL finally adds fibre services, at a transparent price

Monday 27 August 2012 | 16:11 CET | Market Commentary
Tele2 Netherlands announced the launch of its services over fibre networks. Customers can sign up for a basic package and eventual add-on services from 28 August, and the services will be delivered from November. The operator will give further details on the packages on 28 August, but has already said a basic quad-play will cost EUR 42.50 per month. This includes broadband at 40/40Mbps and a Sim-only mobile plan with 100 minutes. Customers can customise the packages with extra TV channels and higher speeds. Tele2 will initially offer services in four large cities: Leeuwarden, Enschede, Hoofddorp and Almere. It will also participate in local demand aggregation projects for new fibre networks. 

The four cities together count around half a million residents and around 215,000 homes passed by FTTH. Across the country, FTTH is currently available to around 1.1 million households. Tele2's limited launch is an attempt to manage the cost and effectiveness of marketing the new service. 

Tele2's entry on the Dutch fibre market has been expected for some time. Initially only KPN and a number of small, local brands offered fibre services. Later KPN added its brands Telfort and XS4All, and a year ago Vodafone entered the market. Vodafone has now also said it will offer VDSL services. The only major player missing on the market now is T-Mobile NL. KPN's network company will profit from the growing number of strong brands offering services, which should drive uptake of fibre and help improve capacity utilisation on the network. KPN 's FTTH venture Reggefiber should also improve its margins. 

Tele2 is already active on the Dutch DSL market as an unbundler in ADSL and VDSL. Its broadband base peaked in September 2010 at 438,000, and it later added 75,000 through the takeover of Telecom Italia's BBned. However, since then the total has fallen to 451,000 at the end of June 2012. The company needed to act to avoid any further marginalisation on the market, as cable has been steadily gaining share from DSL, making a fibre offering only a question of time. 

A few observations can be made based on Tele2's basic price. Its basic offering on DSL, with 20Mbps, costs EUR 40 per month (excluding any promotions). Assuming the Sim and 100 minutes is worth EUR 2.50 (see for example, Simpel.nl), the price of the new quad-play is roughly the same as its existing basic plan, with the extra benefit of 40Mbps instead of 20. With the fibre offer based directly on the existing copper offer, Tele2 itself will contribute to the erosion of the DSL customer base. Tele2 NL's modular approach is also very transparent. Add-ons can be selected individually. For example, a speed increase of 20Mbps costs EUR 2.50 more per month, and 100 Mbps is EUR 10 dearer per month than 40 Mbps. The radio and TV Plus package costs another EUR 5 per month, the same as under its DSL offer. For a comparison with the competition, we can look at a quad-play offer with 100/100 Mbps, a basic TV package (around 70 radio and TV channels, of which 10 in HD, plus catch-up services), basic telephony and a Sim card with 100 minutes. At Tele2, this costs EUR 55 per month. At XMS, a comparable package is available for the same price (excluding the Sim card, but with analogue TV). As XMS is among the cheapest providers on the market, Tele2 should also appear favourably priced.

In the four cities where Tele2 is launching, a switch to fibre appears an obvious choice for local residents. The market there is already divided up to a certain extent, so it will mainly be cannibalisation of Tele2's own DSL customers. What's positive is the operator's participation in new FTTH projects. It's also good to see the transparency and competitive price proposition. 

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