O2 – Ready to disrupt the German tight oligopoly market
In March 2017 Telefonica O2 Germany announced 3.5 GHz (they have 83 MHz) Massive MIMO (= very high capacity LTE macro sectors) field trials with Huawei for wireless home broadband and 4K video. Our models predict that O2's macro site grid and spectrum resources (FDD+TDD) could allow it to drive fixed-to-mobile broadband substitution in Germany by connecting millions of households with HD TV service on its high capacity LTE network.
Key issues addressed in the report:
- The ‘me too’ strategy that O2 executed after the 4 to 3 German merger has been a failure
- Can O2 escape the self-inflicted distraction of ultra-low MVNO prices for data-light plans (i.e. €7.99 for 2GB)?
- Can it neutralize Drillisch’s ultra-low fixed cost advantage?
- Can it turn its fortune around in the broadband market and start growing again?
- Can it return to revenue and profitability growth?
- Will O2’s 84 MHz of 3.5 GHz spectrum become a game changer if deployed with LTE massive MIMO?
- Can O2’s high capacity LTE network support large scale deployment of 4K TV in the foreseeable future?
- What are the valuation drivers in the upcoming 700 (SDL), 2100 and 3.4 GHz – 3.8 GHz German auctions?
- Will O2 significantly boost its low frequency capacity by acquiring 5, 10 or 15 MHz of 700 SDL spectrum?
- Who will be the winners and losers if O2 executes a mobile-centric ‘unlimited everything’ strategy?
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