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Sonaecom Plans $350M FTTH Build

Europe to get more FTTH action as Portuguese competitive carrier plans €240 million investment in fiber access network

February 21, 2008

3 Min Read
Sonaecom Plans $350M FTTH Build

Portuguese alternative operator Sonaecom is to invest €240 million (US$354 million) during the next three years in an open-access fiber-to-the-home network that will reach a quarter of Portugal’s population. (See Sonaecom Plans FTTH.)

The competitive carrier, which failed in its 2007 bid to buy national operator Portugal Telecom SGPS SA (NYSE: PT), plans to pass 1 million homes with a new GPON rollout using equipment from Huawei Technologies Co. Ltd. and Nokia Networks , and construction services from Redtel and CBE. That rollout will cover about 25 percent of Portugal’s population of around 10.6 million. (See Portugal Telecom Rejects Sonaecom Bid.)

And to ensure it doesn’t fall afoul of any competition or telecom regulations, the operator is to make it an “open network that promotes competition… allowing access to the new network by all operators, under reasonable economic conditions.”

The operator, which plans to spread the capital expenditure equally across the three years of investment, believes it can reach breakeven from its FTTH operations within five years and cover the cost of its investment in nine.

“This is a natural evolution for Sonaecom, since we are the leading alternative operator in direct broadband access, with over 15 percent market share,” notes Sonaecom’s CEO Ângelo Paupério in the operator’s press release.

Sonaecom currently has about 240,000 DSL customers, of which 212,000 are connected to the operator’s own DSL gear. In total, the carrier has nearly 800,000 fixed-line customers (end of September 2007), of which 471,000 are connected to Sonaecom’s network (the rest being resale). Its mobile operation, Optimus Telecomunicações , has 2.7 million customers.

In its third quarter 2007, the company generated revenues of €644 million ($950 million).

Sonaecom’s plan is to offer broadband access at up to 100 Mbit/s, VOIP services, and IPTV (which it has already launched on its existing DSL network). (See Sonaecom Deploys Orca.)

It also plans to hook up its mobile base stations with fiber to have failsafe backhaul capacity to cope with rising data volumes, as well as provide wholesale access to other fixed and mobile operators.

The move “highlights the fact that, as in many other markets, it’s not the incumbent operator that is making the first move with FTTH -- there’s a land-grab going on, with utilities, alternative operators, and even cable operators planning FTTH rollouts,” says Graham Finnie, chief analyst at Heavy Reading and author of a new report, "FTTH Worldwide Technology Update & Market Forecast." (See FTTH Technology Fracas Continues and GPON Driving Worldwide Growth of FTTH.)

It’s also another sign that the European FTTH scene is heating up, though the region could be much further forward than it is currently. “There are a lot of initiatives in Europe, but it’s slow going,” says Finnie. "Carriers have been missing their targets. Europe is lagging other parts of the world, such as Japan, Korea, and the U.S., and that’s a cause for concern." (See Dutch Feast on Fiber, Iliad Tempers Its FTTH Target, Telenor Plans FTTH, IPTV in 2008, PacketFront Lands Vienna Deal, and Parisians Plan EPON Network.)

His report shows that at the end of 2007, only 1.3 million of the world’s 20.1 million FTTH connections were in the Europe, Middle East, and Africa (EMEA) region, compared with 16.4 million in Asia/Pacific and 2.4 million in the Americas.

Finnie also has concerns about Sonaecom’s financial plans: “The cost projection works out at €240 ($354) per home passed, and that’s very low -- it’s unclear how they can achieve that. They’re also planning to use GPON technology for an open access network, and GPON isn’t proven for that kind of environment. That’s not to say it won’t work, but it’s going to be interesting to see how they do it."

According to Finnie's report, the only other notable FTTH project in Portugal is being run by cable operator TVTEL Comunicações S.A. , which plans to pass 60,000 homes with a GEPON network in Oeiras, on the outskirts of Lisbon, starting this year.

— Ray Le Maistre, International News Editor, Light Reading

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