O2 – Ready to disrupt the German tight oligopoly market
April 2017

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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2017
networkeconomics
mobile-first
pricing
merger
spectrum
5G
massiveMIMO
Germany
Telefonica
DeutscheTelekom
Vodafone


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March 2017
When LTE base stations are upgraded to 'Gigabit' speed the gigabyte volume capacity of the networks also greatly expands. We modelled LTE network capacity based on existing FDD and TDD spectrum holdings (and potential acquisitions in 2.3 and 3.4-3.8 GHz bands) and sizes of the macro site grids. Without and with Massive MIMO in the TDD bands. Topical for operators contemplating fixed-to-mobile broadband substitution ahead of upcoming 700, 1500 (SDL), 2300, 3400-3600 MHz spectrum auctions.

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