Annual Economic Report

AnnuAl economic RepoRt I 2014

EuropEan TElEcommunIcaTIons network operators’ Association

TablE of conTEnT

1/ ETno: EuropE’s dIgITal spInE p4

2/ pErspEcTIvEs on ThE IndusTry p6

a) taking the consumer’s view on digital markets. it’s not the 90’s anymore By Daniel pataki, Director-General, etno p6

b) investing in europe’s digital networks: are we thinking big enough? By luigi Gambardella, executive Board chairman, etno p7

c) note to the new eu leadership: markets have changed, what about regulation? By Didier pouillot, Head of telecom Strategy Bu at iDAte p8 3/ markET TrEnds p10

4/ rEvEnuE and sErvIcE TrEnds p16 5/ InvEsTmEnT TrEnds p18 6/ broadband p20

7/ nExT gEnEraTIon accEss nETworks (nga) p22 8/ InTErnET usagE and rEvEnuEs p24

9/ rankIng In EuropEan and world Top companIEs p28

clic on page

numbers to go directly to the chapter

ETno: EuropE’s dIgITal spInE1

4 5

etno has been the strong and reliable voice of europe’s telecommunications network operators since 1992.

etno’s 36 member companies* and 9 observers* from europe and beyond are the backbone of europe’s digital progress and, in a fully digitised future, they will be enablers of europe’s progress as a whole. thanks to their investment and innovation in new e-communications services, they have been and will continue to be the enablers of a smarter, more competitive and prosperous continent.

etno member companies investment accounted for almost 60% of fixed and mobile capex in 2013 (euR 27.8bn). in 2013, etno member companies employed over 625,000 people, thus being the main employer in the sector.

the telecom industry is instrumental to accelerating the implementation of a european Digital Society, leveraging its assets, expertise and knowledge and serving as a key agent of change. etno closely contributes to shaping the best regulatory and commercial environment for its members so they can continue to deliver top quality services to european consumers and businesses.

*December 2014

pErspEcTIvEs on ThE IndusTry

6 7

they may call us dinosaurs and say we are against innovation, but having been part of the telecom sector for many years, first as a regulator and now as an industry representative, i can say that i do not feel nostalgic for the 90’s. And neither do etno’s member companies. there is, on the contrary, a high level of excitement in the industry that the new market trends – while challenging for traditional business models – bring the promise of a return to growth.this might sound contradictory, as i write to introduce a Report showing a contraction of Service Revenue growth in 2013 and, highly likely, also in 2014.

However, our confidence comes from three main facts.

First, the figures in this report show how excited consumers are about being constantly connected and being able to enjoy online services. the number of subscribers, for both mobile and fixed broadband is on the hike since 2007 and is not showing signs of slowing. At the same time, use of online search tools and social networks is also expected to grow and to continue driving demand.What is more, users are also expected to make advanced use of their mobile and fixed connections, with more and more europeans using e-commerce or location Based Services, for example.clearly, digital is not going away, but – on the contrary – is becoming the driver of a better, smarter society.

Second, etno companies do more than just respond to these trends: they are fully embracing them. You will hear the coos of our companies talking about customer-obsessed companies, driven by consumer needs.the demand profile of customers has become more granular and more individualised in terms of the products and services they need. For this reason companies are adapting in order to be flexible enough to respond to this. etno companies are not only the digital spine of europe, they also empower and deliver highly added-value services such as cloud computing, machine-to-machine or e-health applications.

third, the new eu leadership, which took office in november 2014, has come across as being fully aware of the challenges and opportunities of europe’s digital economy. the very fact that Andrus Ansip has been appointed vice-president for the Digital economy and society, in charge of coordinating various commissioners, is a clear sign that the new commission wants to take a horizontal approach to digital policies.together with the new digital commissioner Günther oettinger, mr. Ansip will steer the work of the college in order to achieve coherent and proactive action on digital.

Further take-up of innovative services, the fast development of companies and a fresh, new approach to policymaking can collectively deliver a stronger digital economy for europe. telcos are essential to achieving this objective, they are ready to play their part and – most importantly – to open a fruitful dialogue with the new eu leadership.

TakIng ThE consumEr’s vIEw on dIgITal markETs. IT’s noT ThE 90’s anymorEBy Daniel pataki, Director-General, etno

2

From the very beginning, etno has been a strong advocate for creating an investment-friendly environment in europe. the reason behind this is double-folded. on the one hand, our companies are the biggest investors in europe’s telecommunication networks. investing in world-class networks is our business, and the figures in this year’s report once again send a strong signal about this.on the other hand, while talking investment might not be so exciting for some, we believe that it is the very strength of our continent. First, because better digital networks will provide european companies, education system and governments with an essential competitiveness factor. Second, because more investment in networks can drive growth per se, but also thanks to the positive externalities that they are expected to generate.

i am a believer in investment as a driver for growth. For this reason, the Annual economic Report 2014 gives me the opportunity to ask an important question, a political one: is today’s level of investment in networks up to our digital ambitions? Are we thinking big enough here?

For years, we have warned stakeholders and policymakers that the pressure on telcos revenues in europe would impact investment. the ability of our companies to create an adequate return is pivotal to current and future investment, especially at a time in which we aim at upgrading our networks to the data age.in this year’s report, you will find that investment growth in eu telecoms has gone slightly negative for the period 2012-2013. this is in sharp contrast with the uS market, where investment growth was 5.7%.i might like thinking too big. However, i am truly convinced that even flat levels of investment growth are unacceptable.

they are unacceptable from the industry viewpoint and i believe that they are also unacceptable from a political perspective.

in this context, i am confident that the new european commission will help the industry return to growth. president Jean-claude Juncker and commissioner Günther oettinger have been very vocal in underlining how investments and infrastructures will be the focus of their political action.currently, our Report estimates that every year there are €45 to €50 billion investments in the sector. clearly, the new commission also believes that this figure should increase. And i share their view.

etno companies are investing more than others not only as far as the absolute numbers are concerned, but also if you look at the share of revenues devoted to cApeX. these figures are highly relevant also from the policy and political standpoint.etno has strong ideas on how to boost those numbers. our companies believe most importantly in reform. the objective, this is our take, should be to update the telecoms regulatory framework, help the single market through an ambitious spectrum reform and address regulatory imbalances in the digital value chain.these changes were tested in various studies and reports published by our Association, repeatedly confirming that reform would result in fresh investments and new growth opportunities for the overall european economy.

the potential gain at stake is big. What is more important, this gain is for all. this is the reason why i will always support all those who think big and push reform and change in the interest of the entire continent.

InvEsTIng In EuropE’s dIgITal nETworks: arE wE ThInkIng bIg Enough?By luigi Gambardella, executive Board chairman, etno

The telecom industry is instrumental to accelerating the implementation of a European digital society.

pErspEcTIvEs on ThE IndusTry

8 9

2

As in previous years, iDAte is delighted at the opportunity to contribute to the current edition of etno’s Annual economic Report. this report will provide a wealth of data delivering a snapshot of the state of the european electronic communications market – and the leading role played by etno members across its various sub-segments.

europeans remain keen users of electronic communications services. As they use an increasing number of different devices to access their favourite services and contents, the number of total access lines continues to grow and demand for fixed and mobile data is rising at an impressive pace. nevertheless, despite being at the core of this digital revolution, the telecoms industry in europe is in the rather paradoxical situation where it is facing a period of five consecutive years of declining revenues. in nominal terms, telecom service revenues in europe were almost 12% lower in 2013 than they were in 2008, while the number of access lines (fixed broadband and mobile) increased by more than 13% over the same period.

At the same time, operators need to invest massively to upgrade their networks to fibre and lte to meet user demand for higher bandwidth, more traffic and more mobility. And indeed operators are actually embracing the challenge of bringing their networks “up to speed” and rolling out the new infrastructures which are vital to europe’s broader economic recovery. Despite shrinking revenues and margins, telecom operators invested virtually as much in

their networks in 2013 as they did back in 2008. the etno member companies are at the forefront of this process, accounting for almost 60% of fixed and mobile capex. one needs to emphasize that telcos are making these sustained investment efforts against the background of substantial uncertainty. these uncertainties do not only arise from an overall difficult economic environment, but major issues are related to the emergence of a new ict ecosystem with telcos to reposition in an extended value chain. telcos are under pressure from players like device makers and otts on their own turf. However they also have a number of levers at their disposal to turn their fortunes around and become growth engines again.

on the one hand, there are promising new ways of doing business. new pricing models like tiered pricing and data sharing can be a means of raising average revenue per user or access line respectively. the development of propositions designed for two-sided markets, like sponsored data offers, will allow telcos to tap into new sources of revenues.

on the other hand, there is a multitude of new markets to be developed. For instance the success of m2m and its potential to create new solutions for vertical markets –think smart meters, healthcare etc. - provide innovative telcos with a myriad of opportunities. therefore, despite going through an adverse market environment for many years already, the telco industry is eventually bound to make comeback – the sooner, the better for the european economy.

noTE To ThE nEw Eu lEadErshIp: markETs havE changEd, whaT abouT rEgulaTIon?By Didier pouillot, Head of telecom Strategy Bu at iDAte

In 2013, ETno members were the biggest employers in the sector

markET TrEnds3

Towards ThE End of ThE slump?

Growth levels to improve

the european telecommunications industry continues to face a difficult situation with revenues falling every year since 2009. in 2013, this decline even accelerated and revenues fell by -4% in the etno perimeter compared to -2.9% in the previous year. the downward trend continued throughout this year and telcos’ revenues will be below 2013 levels by year. Despite this unfavourable development, there are signals that the glass may have ultimately been half-full rather than half-empty in 2014. The downturn seems to be losing momentum and growth levels in Europe have become less negative than before. in the etno perimeter, overall telecom services growth will be -2.7% in 2014 and in the eu-5, telecom services will fall at a rate of -2.5% compared to twice as much the previous year. iDAte expects this improvement to last through 2015 and growth rates to eventually return to positive levels in 2016.

in respect to the different services, revenues from traditional fixed lines continue their long-term decline as ever more users switch to broadband or abandon their fixed line altogether. mobile revenues continue to contract despite the ever-growing popularity of mobile broadband services which contributed to ameliorating the growth rate to –1.8% in 2014, compared to -4.5% in 2013. As in previous years, fixed broadband is the only segment sporting positive growth rates. From the industry’s perspective it is particularly encouraging that growth in 2014 will have been higher than in 2013: while growth seemed to be flattening out, the risk of it becoming negative seemed quite real.

the investment gap is widening

the european market remains less dynamic in terms of growth and investment than its counterparts in the uS and Japan. However, contrary to the european situation, growth in the latter geographies is slowing down. While it remains solidly positive in the uS with 2.4% in 2013 and an expected 1.8% for 2014, growth became negative in Japan in 2013 with -0.4% and is to decrease further in the course of this year. the picture is similar with respect to investment. While in the light of falling revenues, europe’s telcos have been forced to slightly scale back their absolute level of investment in 2013, their peers in the uS have continued to increase their capital expenditures by more than 5% compared to 2012. investments in Japan increased as well, but at a significantly more moderate rate of 0.4%.

10 11

mobile on the hike

Regarding access, long term trends continue to be valid throughout 2013 and 2014: mobile is the dominant form of access, with the number of subscriptions approaching the 800 million mark in europe. compared to 2012, the number of subscribers rose 0.9% to reach 782 million in 2013 and is expected to hit 794 million by the end of this year. Fixed broadband subscriptions have risen from 157.7 in 2012 to 163.8 million in 2013 and are expected to stand at 170 million by the end of 2014. the growth rate is slowing down a little as the penetration rate progresses but still reach 3.9% in 2013. Demand for traditional fixed lines has further decreased by -5.5% and -5.2% in 2013 and 2014 respectively. this means a decline of roughly 10million lines per year, from 189.7million lines in 2012 to 179.3 and 169.9 million lines in 2013 and 2014 respectively. the prolonged growth of the overall number of access lines is definitely a promising trend for the industry and a lever for a return to growth in the future. etno’s members are well positioned in these markets. their share of 51% and 42% of subscribers in fixed broadband and mobile markets, respectively, across the etno perimeter clearly shows they enjoy a high level of user confidence.

etno companies are lead employers

etno member companies are also important players in the labour market. Across their collective footprint, etno’s members employed more than 625,000 people in 2013, accounting for 79% of total sector employment.

Source: iDAte

6.0%

4.0%

0.0%

2.0%

-4.0%

-2.0%

-6.0%

Telecom service revenue growth (%)

20072008

20082009

20102011

20112012

20122013

20132014

20092010

eu-5 eu-15 eu-28 etno perimeter uSA Japan

markET TrEnds3

Source: iDAte12 13

Telecom service revenues in Europe (incl. turkey, excl. Georgia, Russia, ukraine, euR bn)

350.0

300.0

250.0

200.0

100.0

150.0

50.0

0.02007 2008 2009 2010 2011 2012 2013 2014

Data & internet mobile services Fixed telephony

+ 1.1% - 2.5% - 1.0%- 1.6% - 3.1% - 4.0% - 1.8%

European telecom revenue growth vs. IT services vs. Tv (etno perimeter, %)

2012-20132011-2012

3.0%

2.0%

1.0%

0.0%

-2.0%

-1.0%

-3.0%

-4.0%

-5.0%

Telecom services

IT services Tv services

-4.0%

+ 2.1%

+0.2%

- 3.1%

+ 0.8% - 0.3%

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

2012-2013

2013-2014

eu-5 0.5% -2.3% -1.2% -2.1% -3.3% -5.0% -2.5%eu-15 0.4% -2.5% -1.2% -2.1% -3.6% -4.7% -2.3%eu-28 0.7% -2.7% -1.5% -2.2% -3.6% -4.5% -2.1%etno perimeter 1.1% -2.5% -1.0% -1.5% -2.9% -4.0% -1.6%uSA 1.8% -0.7% 1.0% 3.0% 4.1% 2.4% 1.8%Japan -4.4% -2.3% -1.4% -0.8% 0.9% -0.4% -1.0%

Source: iDAte

markET TrEnds3

Source: iDAte14 15

25%

20%

15%

10%

0%

5%

-5%

-10%telecom ott

20122013 2013

2014 20142015 2015

2016 20162017 2017

2018

oTT vs. telecom revenue growth (eu-28, %)

20%18% 17%

13%12%

10%

-4%-2%

-1% 1% 1% 2%

Investment in the European telecoms sector compared to the us and Japan (cApeX growth of the eu telecoms sector vs. cApeX in the uSA and in Japan, %)

20072008

20102011

20092010

20082009

20112012

20122013

0.0%-2.0%

-6.0%-4.0%

-10.0%-8.0%

-12.0%

8.0%

10.0%

4.0%6.0%

2.0%

eu-5 eu-15 eu-28 etno perimeter uSA Japan

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

2012-2013

eu-5 -2.3% -7.3% 3.8% 4.3% 0.7% -1.0%eu-15 -1.8% -7.1% 2.5% 3.8% 0.5% -0.1%eu-28 -1.2% -5.6% 0.4% 4.6% 0.8% -0.4%etno perimeter -1.2% -5.6% 0.4% 4.6% 0.8% -0.4%uSA -3.4% -10.0% 2.3% 2.6% 5.3% 5.7%Japan -1.0% 3.3% -2.6% -4.7% 7.5% 0.4%

access to telecom services in Europe (million lines/subscribers, incl. turkey, excl. Georgia, Russia, ukraine)

1200.0

1000.0

800.0

400.0

600.0

200.0

0.0

Broadband subscribers mobile subscribers Fixed access lines

2007 2008 2009 2010 2011 2012 2013 2014

664.2

246.4

109.6

709.3

236.2

124.0

725.1

223.0

135.2

736.7

213.6

143.5

761.7

201.8

151.5

774.3

189.7

157.7

781.5

179.3

163.8

169.9

793.8

170.0

Source: iDAte

Telecom employment (etno perimeter, 000s)

etno members total sector

2013

0 200 400 600 800 1000

eu-15 nmS-13 eu-28 etno perimeter

RoW total

total 132.9 16.8 149.7 163.4 73.8 237.2o.w. fixed 66.4 5.9 72.3 81.1 17.3 98.3o.w. mobile 66.6 10.9 77.5 82.3 56.6 138.9

ETno members’ retail revenues (euR bn)

markET TrEnds3

16 17Source: iDAte

2010 2011 2012 2013

Fixed mobile internet Broadband

140.0%

120.0%

100.0%

60.0%

80.0%

40.0%

0.0%

20.0%

Teledensities in Europe ( lines/subscribers per population, incl. turkey, excl. Georgia, Russia, ukraine)

ETno members’ market share (% of subscribers)

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

Fixed BB mobile

eu5 eu15 eu28 etnoperimeter

627.4

791.7

41.9%

112.8%

23.3%18.6%

39.9%

119.9%

24.4%20.9%

37.5%

122.0%

25.3%22.8%

29.7%

129.6%

27.7%27.2%

42.4%43.6% 46.0% 45.2%

47.0%43.6%

51.0%

41.6%

in 2014 we can observe the continuation of the major trends that have shaped the telecoms landscape over the last years. The inevitable decline of psTn/Isdn fixed lines goes on, as Ip-based offers and mobile phones are adopted instead. By the end of 2014 we expect fixed broadband subscriptions to outnumber traditional circuit-switched fixed lines for the first time. the margin will be very narrow, 170m broadband lines compared to 169.9m but broadband will rapidly expand its lead. in parallel with this evolution the number of managed Voip customers is also increasing. their number will reach 81m by the end of the year, up from 73.3m in the previous period.

For the operators, however, growing demand does not translate into higher revenues. the volume effect of increasing subscriber numbers is outweighed by falling average revenue per access. in the eu28, mobile ARpu will have lost some 25% of its value between 2008 and the end of 2014. Hence, in spite of the fact that mobile penetration stood at 129% of population in europe in 2013 and will keep growing, operators earn less revenues year after year.

price competition, substitution of traditional services by ott offers (in 2013, the number of SmS sent fell for the first time in 2013 in the uK according to a Deloitte report) but also regulatory intervention with respect to call termination and roaming charges drive this trend. mnos are experimenting with innovative pricing such as tiered pricing or two-sided market offer to boost average revenue per subscription levels. the growing adoption of 4G will help operators in this task as the standard has been designed to facilitate differentiation of quality of service levels.

Average revenues per fixed broadband access are higher today than they were in 2008, but have embarked on a downward trend since peaking in 2012. consequently, the growth of overall fixed broadband revenues has flattened out, although the perceived risk that broadband revenue growth could turn into the negative range has not seemed to materialise so far. broadband will therefore keep its role as the industry’s main growth engine at this point in time.

rEvEnuE and sErvIcE TrEnds

18 19

4

Telephony lines (million)

900.0

800.0

700.0

600.0

400.0

500.0

300.0

200.0

100.0

0.02007 2008 2009 2010 2011 2012 2013 2014

potS lines Volp lines mobile subscribers

30.0

25.0

20.0

15.0

10.0

5.0

0.0

Fixed BB mobile

2008

arpu evolution (eu-28, euR/month)

2009 2010 2011 2012 2013 2014

Source: iDAte

22.3

14.1

22.6

15.1

664,2

169.9

81.0

793.8

22.9

15.9

23.0

16.5

23.6

17.0

24.0

18.2

24.9

19.2

Towards the end of the slump? If we look at telecom service revenues, a return to growth is possible in 2016

For the time being, european telecom operators are weathering the storm and continue to build new ultra-fast fixed and mobile access network and upgrade their backhaul facilities despite the tough economic conditions in the market.european operators have largely maintained their investment levels in absolute (-0.4% in the etno perimeter in 2013) thereby actually devoting more of their resources to new infrastructures in relative terms as the capex to revenue ratio increases. Within the geographic footprint of etno, operators have invested euR 46.7bn in their networks in 2013. As in the preceding years, the majority of investment is coming from etno members, which accounted for more than 59% of total network capex in 2013.the majority of the funds invested is directed to fixed networks, reflecting notably the cost of civil engineering works for deploying fibre closer to the end user. last year, in total euR 26.3bn or 56% of overall capex, were invested in fixed infrastructure. the companies represented by etno contributed euR 16.3bn to this effort which translates in 62% of total fixed capex.in the mobile sector, total capex amounted to euR 20.4bn in 2013. etno members were also the leading investors in this segment, with 56% - or euR 11.4bn - coming from their side.

InvEsTmEnT TrEnds

50.0

etno members’s cApeX

Total sector investment

total sector cApeX

40.0

30.0

20.0

10.0

0.0

2013

5

ETno members’ aggregated investments (euR bn)

35.0

30.0

20.0

25.0

10.0

15.0

5.0

0.02008 2009 2010 2011 2012 2013

eu-15 new member States (eu13) eu-28 etno perimeter

Source: iDAteSource: iDAte20 21

27.8

46.7

Investment in fixed and mobile networks (tangible capex, etno perimeter, euR bn)

35,0

30.0

20.0

25.0

10.0

15.0

5.0

0.02008 2009 2010 2011 2012 2013

etno member operators : fixed mobile

other operators : fixed mobile

12.3

17.8

30.1

16.9

8.4

8.5

11.1

15.9

27.0

17.4

8.7

8.7

10.9

16.1

27.0

17.5

8.1

9.4

11.5

16.6

28.1

18.5

8.5

9.9

11.3

16.6

28.0

19.0

9.0

10.0

11.4

16.3

27.8

19.0

9.0

10.0

30.1

27.0 27.0 28.1 28.0 27.8

take-up of broadband services continues to progress across europe. on the one hand there are still new customers coming to the broadband market, pushing the penetration rate to 27.2 lines per 100 inhabitants in the etno perimeter. on the other end of the market, the transition from legacy broadband to ultra-fast access lines continues. in total we expect the number of fixe broadband lines to hit the 170 million mark in etno territory by the end of 2014.

in terms of access technologies DSl is still by far the most common choice. 72% of all broadband access are based on this technology. However while the total number of DSl subscribers continued to grow, its market share actually fell by 2.5 percentage points in 2013, as competition from cable platforms and fiber-based telecom networks is getting more intense. Going forward we can expect this trend expect to continue and gather momentum over time.

3G reached the mass market years ago and will count 391m subscribers at year-end. this represents a very healthy growth rate of 5.6% in 2014. 4g has clearly moved ahead on the s-curve and has reached the phase of rapid expansion. in 2012, the etno perimeter totalled 3m 4G customers. By 2013 this number had risen to 23m and will reach 65.5m subscribers at the end of this year. this number remains small compared to the total amount of mobile subscriptions in the market, but the trend clearly shows that europe is beginning to realise its catch-up potential in 4G with the world’s leaders in Asia and north America. the fact that with 4G, for the first time, a wireless technology can really compete with some of the best fixed-line broadband products in terms of performance, will further boost its adoption, notably in rural areas where fibre deployment is less likely to happen.

broadband6

fixed broadband vs. mobile broadband take-up (etno perimeter, mln subscribers)

450.0

400.0

350.0

300.0

200.0

250.0

150.0

100.0

50.0

0.0

2007 2008 2009 2010 2011 2012 2013 2014

Fixed broadband subscribers 3G subscribers 4G subscribers

DSl cable modem FttH/B

other technologies (lAn, FBWA, satellite...)

fixed broadband connections by technology (ETno perimeter)

2013

Source: iDAte22 23

72.2%

18.7%

5.9%

3.3%

170.1

65.5

391.2

Take-up of broadband services continues to progress across Europe

So-called “next-generation” access networks keep making inroads into the market to make themselves increasingly “current-generation” access networks. the different networks have expanded their gross coverage to more than 190m homes across etno’s footprint. of these lines, 78.2m are based on docsis3, VDSl accounts for 74.5m lines whereas FttH/B is available to 42.4m households. 1.8m homes are passed by other types of nGA networks.

it is also encouraging to see that the adoption of ultra-fast internet access is making good progress. 34.5m million users have subscribed to an nGA-based offer. this corresponds to a take-up rate of 18% of the homes covered,

thus slightly more than the previous year’s 16%.

Fttx/docsis3 is currently also the most commonly chosen form of access with more than 14m customers. FttH/B has the highest take-up rate with 9.6m actual users across its footprint. VDSl on the other hand totals 8.3m subscribers at the end of 2013.

ETno’s members are amongst Europe’s foremost nga players. collectively they account for 68m or 36% of all nGA lines. in the FttH/B arena, etno members account for no less than 49% of all access lines.

nExT gEnEraTIon accEss nETworks (nga)

24

7

25

standard broadband and nga coverage (% of households)

Standard (1) VDSl (2) (3) Fttx/D3.0 (2) (3) FttH/B (2)

Albania na 7% 0% 0%Austria 100% 62% 36% 7%Belgium 100% 86% 61% 0%Bosnia and Herzegovnia na na 0%Bulgaria 100% 0% 56% 53%croatia 97% 16% na 9%cyprus 100% 0% 0% 0%czech Republic 98% 29% 27% 5%Denmark 100% 49% 61% 40%estonia 96% 39% 79% 41%Finland 100% 0% 68% 25%France 100% 8% 12% 23%FYRom na 0% 16% 18%Germany 100% 32% 56% 4%Greece 100% 26% 0% naHungary 98% 40% 55% 23%iceland 98% 81% 0% 55%ireland 98% 87% 0% 2%italy 99% 17% 0% 11%latvia 99% na 0% 100%liechtenstein na lithuania 98% 0% na 97%luxembourg 100% 94% na 39%malta 100% 0% 0% nanetherlands 100% 80% 37% 28%norway 98% na 0% 40%poland 98% 28% 19% 4%portugal 100% 0% 96% 69%Romania 98% 0% 24% 29%Slovakia 93% 0% 19% 33%Slovenia 98% 3% 36% 42%Spain 99% 4% 54% 35%Sweden 100% 5% 6% 10%Switzerland 100% 96% 40% 19%turkey 100% 28% na 21%uK 100% 72% 49% 1%

Source: iDAteSource: iDAte

FttH/B VDSl Fttx/D3.0 Fttx+lAn

nga coverage

80.0%

40.0%

60.0%

20.0%

0.0%

120.0%

100.0%

Alba

nia

Aust

riaBe

lgiu

mBo

snia

and

Her

zego

vnia

Bulg

aria

croa

tiacy

prus

czec

h Re

publ

icDe

nmar

kes

toni

aFi

nlan

dFr

ance

FYRo

mGe

rman

yGr

eece

Hung

ary

icel

and

irela

nd italy

latv

iali

echt

enst

ein

lith

uani

alu

xem

bour

gm

alta

neth

erla

nds

norw

aypo

land

portu

gal

Rom

ania

Slov

akia

Slov

enia

Spai

nSw

eden

Switz

erla

ndtu

rkey uK

etno

per

imet

er

total eu etno members % etno members

FttH/B 42.4 20.8 49.0%other Fttx* (incl. VDSl, FttlA, lAn…) 154.5 47.9 31.0%

main technologies/network architecture models (homes passed at end 2013)

(1) : as a % of population (2) : homes passed as a % of households (3) : capable of speeds over 30 mbps

the most popular use of the internet is for conducting online searches. Already in 2014 over 90% of internet users perform search activities in France, Germany and uK, whilst over 80% of internet users also perform search in italy and Spain.

social networking is another activity which is highly popular. Social networking is particularly popular in the uK and italy, where its user penetration among internet users is expected to exceed 70% by 2017. Germany and France sees lower penetration, with 59% and 61% internet user penetration respectively in 2017; these two countries have always seen lower penetration since the early days of social networking. nevertheless, social networking continues to become an increasingly important mode of communication, and its growth is expected to continue despite having passed the mass adoption phase.

E-commerce is a market which sees a wide discrepancy between users within the eu5. Already in 2014 the uK sees

80% of internet users also being e-commerce users, with Germany not far behind with 75%. France comes next with 61%, but then Spain and italy sees a noticeable drop in user penetration at 36% and 25% respectively. this can at least in part be thought to be caused by the economic situation of the respective countries, and also the level advancement in it infrastructure on the whole and the associated trust the internet players have in the countries.

the dynamics of the internet market are also reflected on the revenue side. While telcos are struggling to turn the negative revenue trend around, oTTs activities are enjoying substantial and sustained growth, which will certainly decline over the years to 2018, but will remain in the double-digit range nonetheless. While otts are certainly growing the size of the electronic communications pie and are not only eating into the telcos’ share, the contrast between telco and ott growth is certainly striking and underlines the need for a level playing field between the two groups of players.

InTErnET usagE and rEvEnuEs

26

75.0%

50.0%

25.0%

0.0%

2014 2017

uK

use of social networks (% of fixed internet users)

France Germany italy Spain

8

27

use of online search (% of fixed internet users)

use of e-commerce (% of fixed internet users)


68.1% 71.0%

59.1% 60.8%56.8% 58.5%

66.2% 72.0%

63.2% 65.1%

75.0%

50.0%

25.0%

0.0%

2014 2017

uK France Germany italy Spain

100.0% 92.5%95.3% 94.2%

98.6% 97.0% 97.0%

80.8%84.0% 83.9%

87.1%

75.0%

50.0%

25.0%

0.0%

2014 2017


100.0%

79.6% 82.0%

60.6%64.3%

75.0%79.6%

24.7%

32.9% 36.1%

43.1%

InTErnET usagE and rEvEnuEs

28

oTT Ip messages (million messages)

600

500

400

300

200

100

0

2012 2013 2014 2015 2016 2017 2018


oTT voIp minutes (billion minutes)

25

20

15

10

5

02012 2013 2014 2015 2016 2017 2018


8

29

50.0%

25.0%

0.0%

2014 2017

uK

use of location-based services (% of mobile subscribers)

France Germany italy Spain


567

424

507

156

243

18

23

18

15

22

44.5%47.9%

33.1%

40.7%

28.5%

35.0%

24.1%

35.9% 34.6%

40.7%

consumer habits are evolving: use of Ip messaging, Ip calls and location-based services is increasing

rankIng In EuropEan and world Top companIEs

30

Rank company country 2012 sales (billion €)

1 Att uSA 969762 Verizon uSA 907983 ntt Japan 825834 china mobile china 766085 Deutsche telekom Germany 601326 telefonica Spain 570617 Vodafone uK 523738 comcast uSA 48700

Top 50 telecom operators in the world

9

31

9 America móvil mexico 4635910 orange France 4098111 china telecom china 3909412 china unicom china 2900213 KDDi Japan 2826414 Sprint uSA 2673315 Softbank Japan 2607316 telecom italia italy 2340717 Bt uK 2153718 telstra Australia 1867219 Vimpelcom Russia 1698320 Kt South Korea 1666721 time Warner cable uSA 1666122 Bce canada 1492123 telenor norway 1333624 SK telecom South Korea 1162125 Kpn netherlands 1156826 teliaSonera Sweden 1101127 Singtel Singapore 1094528 centurylink uSA 1077229 mtn South Africa 1064830 Bharti Airtel india 1032331 SFR France 1019932 oi Brazil 992933 mtS Russia 939334 Swisscom Switzerland 931735 Rogers canada 929336 Stc Saudi Arabia 915637 telus canada 834138 telkom indonesia indonesia 829739 lG u+ South Korea 801540 etisalat uAe 797541 Hutchison Whampoa Hong Kong 786242 Rostelecom Russia 768743 everything everywhere uK 763444 ooredoo Qatar 698745 megafon Russia 643446 Belgacom Belgium 631847 liberty Global uSA 581148 chunghwa telecom taiwan 560149 turk telekom turkey 5231

Source: iDAte

Rank company country 2012 sales (billion €)

1 Deutsche telekom Germany 601322 telefonica Spain 570613 Vodafone uK 414364 orange France 409815 telecom italia italy 234076 Bt uK 215377 telenor norway 133368 Kpn netherlands 115689 teliaSonera Sweden 11011

10 SFR France 1019911 Swisscom Switzerland 931712 everything everywhere uK 763413 Belgacom Belgium 631814 turk telekom turkey 523115 Virgin media uK 485216 Bouygues telecom France 466417 telekom Austria Austria 418418 tele2 Sweden 345319 portugal telecom portugal 291120 tDc Denmark 2090

Top 20 European telecom operators

: etno members

: etno members

: etno observers

32

sweden The netherlands Turkeyswitzerland

Ireland Italy liechtensteinlatvia lithuania

spainslovakia sloveniaromaniaromania

luxembourg macedonia poland portugalnorwaymalta

austria belgiumalbania bosnia and herzegovina bulgaria

czech republiccroatia cyprus denmark finland

hungarygreece Icelandfrancefrance germany

saudi arabiafinland

usausausa usa

francechina

ETno members

ETno observers prepared by ETno and IdaTE, december 2014

european telecommunications network operators’ Association (etno) www.etno.eu

iDAte: www.idate.org

Graphic design by Aupluriel : www.aupluriel.be

sweden

European Telecommunications network operators’ [email protected] i tel: +32 (0)2 219 3242

www.etno.eu

Documents

Annual Economic Report