Released on = June 12, 2007, 4:12 am

Press Release Author = Bharat Book Bureau

Industry = Financial

Press Release Summary = This annual report offers the latest data, statistics and
analysis on the telecoms markets in Austria, Belgium, Denmark, Finland, France,
Germany, Iceland, Ireland, Italy, Malta, The Netherlands, Luxembourg, Norway,
Portugal, Spain, Sweden, Switzerland and the United Kingdom.

Press Release Body = This annual report offers the latest data, statistics and
analysis on the telecoms markets in Austria, Belgium, Denmark, Finland, France,
Germany, Iceland, Ireland, Italy, Malta, The Netherlands, Luxembourg, Norway,
Portugal, Spain, Sweden, Switzerland and the United Kingdom. Subjects include:

National and European Union Regulatory Issues;
Telecom Market Liberalisation;
National and International Infrastructure;
Network Operators - Strategies and Market Analysis;
Local Loop Unbundling - Status and Policies;
Carrier Preselection and Number Portability;
National Competitive Environments;
Incumbent Market Shares - Strategic Assessments.


Executive Summary

This Europe market report covers the region’s telecom market in 2006. The market
grew steadily on the back of strong underlying economic performances, and greater
market and consumer confidence. The inexorable decline in fixed voice revenue has
shifted operator focus to revenue-rich sectors such as mobile data and to content
delivered over upgraded IP networks. These services, including Video-on-Demand and
IPTV, are nascent in most markets, but promise considerable growth in 2007 and 2008
as consumers gain a greater understanding of the concepts and as broadband
infrastructure to carry the services is expanded. In most markets, mobile telephony
and broadband remain the drivers fuelling the more positive outlook in Europe’s
telecom landscape. This was reflected in the massive investments during 2006 in
ADSL2+ and fibre roll-outs, and in new mobile technologies such as HSDPA, which is
commercially available in 24 of the 27 EU countries. Consumer-driven content and
further refinement in business models focussed on fixed-cost mobile broadband plans
are likely winners in coming years. Other key developments expected in 2007 include
the further progress towards Next Generation Networks (NGN), moving infrastructure
to an IP packet-based, full service typology. The principal innovators in this
sector - British Telecom, KPN, France Telcom and Deutsche Telekom - have set the
pace and will alter the face of the industry by the end of the decade. In addition,
many of the major players having consolidated businesses to strengthen their
positions in the face of increased competition will begin to launch additional
services (such as Vodafone with broadband), capitalising on growth areas in other
sectors and further contributing to the convergence of technologies. The report
presents the latest statistics for Europe’s telecom market in 2006, together with an
assessment of regulatory provisions in the broadband and fixed-line sectors on the
national and European level, including proposed amendments to the New Regulatory
Framework in 2007. It also provides an overview of principal operators, and their
strategies for gaining market share in 2007 and beyond. The report also analyses
emerging trends and expected growth sectors developing in coming years, providing
the background to assess how this important market will progress to the end of the
decade. The report includes the following markets, among others:

Belgium
Belgium’s telecom market is substantially influenced by its larger neighbours, while
its population split between Flemish and Walloon has created endemic opportunities
for content providers. The country also hosts one of the administrative centres of
the EU, which has attracted considerable investment from multinationals and an
influx of workers which has influenced also contributed to exceptionally high mobile
penetration levels. The telecom market was expected to be one of the fastest growing
markets in Europe in 2007, largely due to network upgrades which have rapidly
expanded the triple play and converged services sectors. Belgium is also one of the
most densely cabled countries in Europe, and many cable TV networks have digital
capacity providing a viable alternative to ubiquitous copper-based DSL broadband
services.

Denmark
As with the other Scandinavian countries, Denmark has an advanced telecom market
with both Internet and broadband penetration substantially higher than the EU
average. The country has one of the lowest fixed-line telephony interconnection
tariffs in the EU, though this has not put a brake on the surging mobile market
which continued to grow by about 7% in 2006. The ongoing consolidation of telcos
accelerated in Denmark during 2006, with larger international operators purchasing
smaller ones. The two major cable TV operators are owned by the two largest telcos,
while an increasing trend sees the packaging of services and various price schemes
in an effort to retain customers. Nevertheless, the maturity of Denmark’s telecom
market has slowed major investments in the sector, as opportunities in less
developed markets in other countries offer greater returns. A large part of planned
or ongoing investments in communications infrastructure can be attributed to the
roll-out of 3G-networks, while plans by utility companies to connect households with
fibre also represent major investments in fixed networks.

Germany
Germany has Europe’s largest population and largest telecom market, worth an
estimated €69 billion in 2006. Much of this revenue has been generated by
alternative operators as they continue to slice away at the market share of a
struggling Deutsche Telekom: the number of fixed telephony customers served by
alternative operators reached about 28 million by the end of 2006 while a growing
number of independent municipal networks have stripped the incumbent of much needed
line rental income. The outlook for 2007 is less positive than in former years, with
data services and mobile telephony likely to outgrow the fixed-line telephony sector
by 9%, but lacking sufficient growth to prevent a stagnant market which may show
zero growth in 2007. Broadband take-up has increased well in recent years, with
competitors accounting for about 45% of the DSL market in 2006. Further growth in
2007 and 2008 may be affected by the Bundesrat having granted Deutsche Telekom a
regulatory holiday for its VDSL network, as competitors are denied wholesale access
- unless EC intervention enforces it during 2007 - and so lose commercial viability
to build alternative networks. Nevertheless, consolidation in the cable sector has
resulted in increased investment in network upgrades, providing a realistic
alternative to the dominance of Deutsche Telekom.

Italy
Italy has the fourth largest telecom market in Europe. Although the country’s huge
mobile market grew strongly in 2006, despite evident saturation, a stagnant
fixed-network sector, reflected in dwindling revenue from dial-up Internet access
and the propensity among Italians to favour mobile telephony, caused overall market
growth to fall to 2% in the year. Nevertheless, the resilient broadband sector has
encouraged operators to build out in some of the most extensive fibre in Europe,
which in turn has enabled content providers to meet growing consumer demand for
IP-delivered entertainment. Yet despite the great potential in the telecoms market,
the country has continued to struggle with innovation and adaptability. The
government has introduced few policies and investment incentives to ensure that the
country takes full advantage of developments, and can properly integrate the entire
production chain ranging from technology and products to services. In addition, 90%
of the telecom market retail revenue is shared by only four operators. The main
player, Telecom Italia, endured an extraordinary end of year in which the decision
to split off its mobile division was reversed under considerable political pressure,
and the commitment to convergence was reaffirmed. In October 2006 the Italian
Cabinet approved a new media law that was expected to open the broadcasting market
to competition, establishing new rules governing the changeover from analogue to
digital television broadcasting, set for 2012.

Netherlands
The Dutch telecom market remains one of the most advanced in Europe, particularly in
broadband use and infrastructure. More than two thirds of the population uses the
Internet, while the high broadband take-up has benefited from government support and
competing cable and DSL platforms. Fibre networks are also among the most extensive
in Europe, with a unique collaboration between national, regional and municipal
governments working with the industry and with academic institutions and housing
associations. The mobile sector has proved at least as popular as elsewhere in
Europe, largely due to strong competition among network operators and the range of
MVNOs which has kept consumers prices low. The incumbent KPN planned to switch to an
open access all-IP network before 2010, with a view to meeting the increasing demand
for bandwidth, reduce costs, and develop flexibility in implementing and launching
new triple play and multimedia services. The all-IP network will affect the dynamics
in both retail and wholesale markets, and may because KPN’s competitors buy
unbundled access to the access network (MDF access) for their broadband services,
and may have a negative market effect, at least potentially, by phasing out MDF
access for competitors.

The UK
The UK’s valuable communications sector is expected to see relatively modest and
stable revenue growth to 2010, with falling fixed-line voice call volume being
offset by higher usage of mobile voice calls and increased data traffic. Overall,
the volume of telecoms traffic will grow to 2010 but price erosion in all markets,
caused by competition more than regulatory intervention, will keep revenue growth at
modest levels. The focus has shifted from fixed-line voice services to the mobile
and triple play sectors. BT’s Openreach was an important innovation in 2006 which
has resulted in more accessible broadband and influenced plans for structural
separation elsewhere in Europe. Competitive pressures will be intense in 2007, with
operators struggling to build and retain market share. The degree of consolidation
is likely to vary across the main market segments: the mobile market is effectively
controlled by five main operators, whereas the fixed-line market is fragmented,
albeit dominated by BT. Convergence between mobile and fixed-line services is also
expected to be an important component in the market, with companies such as BT
developing hybrid fixed-line and mobile handsets and services, while Vodafone has
branched into broadband using BT’s lines. In coming years the UK’s telecom landscape
will be transformed by BT’s 21CN all-IP network, foreshadowing similar if less
ambitious developments elsewhere in Europe.

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