DT Revamp Puts FTTH in Focus

Deutsche Telekom has unveiled its new strategy, with a focus on five growth areas and a target of millions of FTTH homes by 2012

March 17, 2010

4 Min Read
DT Revamp Puts FTTH in Focus

Deutsche Telekom AG (NYSE: DT) today unveiled a new strategy that further reinforced its focus on mobile data, high-speed broadband, and IT services, and which, it hopes, will enable it to double revenue from five specific growth areas by 2015.

The European giant also unveiled plans to add fiber access to its current DSL-based fixed broadband access strategy.

The new strategy, which DT says will turn it from a telco into a "telco plus," involves a sustained push to boost revenues from Mobile Internet, the Connected Home (double and triple play), Non-Access Business (online services including app stores and Web hosting), IT Services (including cloud services from its T-Systems International GmbH division), and Intelligent Network Solutions (in verticals such as energy, healthcare, media, and transport).

These lines of business generated revenues of €15.8 billion (US$21.7 billion) in 2009, but DT is looking to boost these to a collective €29 billion ($39.8 billion) by 2015.

Although the new strategy "is a development, rather than a reinvention, of the 'focus, fix and grow' approach the operator introduced in 2007," says Matt Hatton, research director at Analysys Mason , in a research note, "the plan recognises economic and market realities by emphasising the need to maximise efficiency and secure a leadership position in low-growth markets."

Hatton also notes that the operator "acknowledges the paramount importance of infrastructure as a differentiator and the key role for the CSP [communications service provider] as a service enabler."

Indeed, in the next three years, DT says it will invest more than €10 billion ($13.7 billion) in three areas -- a new fiber access network, upgrades to its mobile infrastructure, and enhancements to its Service Provider Information Technology (SPIT) processes. (See The SPIT Manifesto.)

The announcement that it will build a fiber access network is of particular interest, signaling that the German operator plans to move beyond its existing focus on VDSL technology for high-speed broadband services. It says it will roll out fiber-to-the-home (FTTH) to 4 million households, representing 10 percent of all German households, by 2012.

In response to emailed questions, a spokesman confirmed that fiber will be rolled out to the home or residential buildings (FTTB) depending on the area: German cities typically have a high proportion of multi-tenant buildings.

The spokesman added that GPON will "most likely be the technology for FTTB, as first test environments have shown good results.”

He said more would be revealed about GPON and the upgrade of VDSL networks later in the year, presumably once the company has made some progress with the 1-Gbit/s broadband trial planned in Dresden this year.

The carrier's mobile network will continue to be upgraded with HSPA and HSPA+ technology up to 21 Mbit/s on the downlink. "HSPA+ 42 [Mbit/s] on the downlink will largely depend on the availability of appropriate terminal devices," the DT spokesman said. Its plans for investment in Long Term Evolution (LTE) will depend on the release of new spectrum in Germany.

Five focus areas
Of the five areas Deutsche Telekom believes will be the main engines of its future revenue growth, the mobile Internet business is expected to generate the highest revenue volume -- €10 billion by 2015, up from less than €4 billion ($5.5 billion) in 2009.

Revenue from double- and triple-play services and home gateway and communication suite services is expected to grow from €5 billion ($6.9 billion) to €7 billion ($9.6 billion) in the same timeframe. The "non-access business" will account for €2 billion to €3 billion ($2.7 billion to $4.1 billion), and intelligent network solutions around €1 billion in revenues from almost nothing today.

T-Systems, meanwhile, will be given a much greater focus on so-called cloud services. DT has identified IT services, such as systems integration and computing services, as a key growth market for the future. The carrier cites forecasts that total market revenues for all service providers from IT services in Germany, the European Union, Central and Eastern Europe, and the U.S. will grow to €139 billion ($191 billion) by 2014 from €117 billion ($161 billion) in 2009. It adds that T-Systems will be able to address a market worth €10 billion in Western Europe by 2014.

Today’s announcement did not just concern plans for Germany: Deutsche Telekom also said it plans to expand the HSPA+ network of T-Mobile US Inc. to 185 million points of presence by the end of 2010, boosting downlink speeds to 21 Mbit/s. The company is targeting a 4-percentage point increase in the US mobile operator’s operating margin by 2012.

It had little to say about the UK unit, other than to comment that the joint venture with Orange UK was approved on March 1 and expects to achieve joint synergies of £3.5 billion ($5.4 billion).

At the end of 2009, the Deutsche Telekom group had 51 million mobile customers, more than 38 million fixed-network lines, and more than 15 million broadband lines. Revenue was just less than €65 billion ($89.3 billion) in 2009, of which more than half now comes from outside of Germany.

— Anne Morris, Freelance Editor, special to Light Reading

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like