DT Completes All-IP Move in Croatia

Deutsche Telekom has completed its migration off PSTN systems and on to all-IP networks in Croatia, bringing the number of countries in which it is now an all-IP operator to three.

The German incumbent had previously hit the all-IP milestone in Macedonia and Slovakia and is committed to shutting down all of its European PSTN networks by the end of 2018, making it arguably the region's most ambitious telco when it comes to all-IP transformation. (See Does BT Lag European Peers on All-IP?)

Deutsche Telekom AG (NYSE: DT) believes it can realize savings of about €10 ($10.6) per customer per year from the move but has also positioned all-IP as a platform underpinning investments in virtualization and SDN -- which are sometimes described as New IP technologies.

In the short term, however, the all-IP plan is forcing Deutsche Telekom to pump more funds into capital expenditure. The operator has previously indicated it will cost between €30 ($31.8) and €60 ($63.6) per customer to complete the all-IP migration.

In Croatia, where Deutsche Telekom currently maintains about 1 million fixed lines, that implies a total cost of between €30 million ($31.8 million) and €60 million ($63.6 million). But it should allow the operator to save about €10 million ($10.6 million) a year in the long run.

Deutsche Telekom claims to have spent about 400 million Croatian kuna ($55 million) on overhauling its Croatian systems over the last five years, which tallies with earlier estimates.

Its all-IP transformation has included the replacement of 72 old local exchanges throughout Croatia with just two state-of-the-art facilities -- one in the capital city of Zagreb and the other in the major seaport of Rijeka.

However, Deutsche Telekom also said it expects to continue making investments in this area in the future to improve its service capability.

"Such investments allow us to offer innovative products and the fastest top-quality services on the Croatian market," said Davor Tomašković, the CEO of T-Hrvatski Telekom (HT), Deutsche Telekom's Croatian subsidiary, in a statement. "In 2015, HT is to invest more than thirteen hundred million kuna [$180 million], which is 25% more compared to 2014."

In euro terms, HT spent about €123 million ($130 million) on capital expenditure last year. It has invested €109 million ($115 million) over the first nine months of this year.

Much of the investment in the future is likely to go into NFV and SDN technologies as part of Deutsche Telekom's TeraStream initiative, the name the operator has given to its next-generation network project.

For more NFV-related coverage and insights, check out our dedicated NFV content channel here on Light Reading.

TeraStream has already been piloted in Croatia and Greece and is aimed at allowing Deutsche Telekom to launch services with web-like agility and to improve overall efficiency.

The operator's ultimate vision is a pan-European network that will include a small number of production facilities serving multiple markets, instead of one "factory" for each country.

As a result of this current complexity, Deutsche Telekom now maintains about 50 platforms for each country in which it operates, or 650 in total (excluding T-Mobile US), according to a spokesperson for the company. "In the future, there will be just 50 -- including TV, messaging, voice and so on -- to offer across the footprint, instead of 650," he says. "So with more and more countries switched to IP, we are able to expand these new services step by step."

Deutsche Telekom began trialing this approach in March this year, offering the same IP-based TV and VPN services across the markets of Croatia, Hungary and Slovakia. (See Deutsche Telekom Turns On Pan-European IP.)

The TV service includes a data analytics feature that allows Deutsche Telekom to make recommendations to customers based on their usage profiles, while the VPN is aimed at reducing time to market for business customers.

During the SDN & Openflow World Congress in October, Axel Clauberg, Deutsche Telekom's vice president of aggregation, transport, IP and fixed access, said the operator was planning on extending the pilot to a "broader footprint." He told Light Reading that feedback from customers had been very positive. (See DT, Vodafone to Launch SDN-Based VPNs.)

Deutsche Telekom has also been offering New IP-like services in the all-IP market of Macedonia, allowing customers to subscribe to a broadband service on tap without having technicians visit their premises.

In Croatia, meanwhile, it has developed an IP-based offer that it calls HP Business Connect, which it says allows customers to use a landline on a mobile device.

According to Hrvatski Telekom, call set-up speeds and quality are dramatically better across what it calls "post-migration services."

"It is much easier to connect customers -- changes to be made after a relocation, for instance, can be done in no time," says Deutsche Telekom's spokesperson in describing some of the broader benefits of the all-IP migration. "So the technical relationship between customer and provider is less complex."

— Iain Morris, , News Editor, Light Reading