brand finance telecoms 500 generic snapshot 2

8/3/2019 Brand Finance Telecoms 500 Generic Snapshot 2

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Bridging the gap between

marketing and finance

2011 BrandFinanceTelecoms 500Summary brand valuation report

Prepared for: -

Brand Finance plc, May 2011


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1. Introduction to 2011 BrandFinance Telecom 500

2. Global results Executive Summary Top 10 most valuable telecoms brands Top 10 most valuable telecoms brands in [relevant country] Top 10 most valuable telecoms brands in [relevant region] Most valuable brand by business segment

3. [Name of company]s results Valuation Results Valuation Schedule & Assumptions Brand valuation by region Brand valuation by business segment Brand valuation reconciliation Applied royalty rates Change in randeta Index Competitor review

Competitor review historical brand values Portfolio value Market cap composition

4. Brand Valuation Analysis

5. About Brand Finance

Appendix IValuation Methods

IVSC Recognised Valuation Approaches IVSC Recognised Valuation Methods International Brand Valuation Standard (ISO 10668) Summary of Royalty Relief Method Overview of the BrandFinance Methodology Comparison of other brand valuation approaches

Appendix II2011 BrandFinance Telecom Intangibles Financial Tracker

(GIFT)

Appendix IIIAdditional Materials

Contents 2

Table Of Contents2011 BrandFinance Telecoms 500 Summary Brand Valuation Report


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sectionone

sectionone

Introduction to 2011 BrandFinance Telecoms 500


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Dear Sir/Madam,

Welcome to the 2011 BrandFinance Telecoms500report on Telecom brand values (published inTotal Telecom magazine on Monday 7th March 2011).

Brand Finance plc has been producing this study for 3 years in association with Total Telecom, andthe subject of brand and reputational values has never been more important. Wise management ofcorporate and product brands is now a major issue for every global CEO. I hope you find our reportof interest as a starting point for better brand management.

Brand Finance is the worlds leading independent brand valuation firm. We specialize in the global

sector and bring unique comparative insight to the performance of global brands worldwide. Eachbrand has been carefully analyzed by our global team to assess the point in time value of eachglobal brand. The report attached is conducted using publicly available information only, so ourconclusions are, through necessity, of high level. It is a snapshot valuation as at 1st January 2011.We have used the Relief from Royalty valuation method, a widely recognized Income approach tobrand valuation.

This year the ISO 10668 global standard on brand valuation was released, after 3 years of detaileddeliberation. I had the privilege of Chairing the UK committee which promulgated the ISO standard,

and representing the British Standards Institute in the global committee. The ISO standard isimportant because for the first time brand valuation has been recognized as a major managementdiscipline. Brand Finance is now one of the very few companies in the world to be certified toproduce ISO compliant brand valuations.

Message from David Haigh, CEO of Brand Finance plc

Introduction 4


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The ISO standard on brand valuation recognizes a number of different brand valuation approachesand methods, for different technical and strategic purposes. The attached report simply explains

them.

We have found that Relief from Royalty valuations are excellent for balance sheet reporting, taxplanning and compliance, litigation support and similar technical and legal valuations. The Marketand Cost approaches, and the Price Premium, Volume Premium and Income Split methods,together with brand substitution analysis are often more useful for brand strategy, brandarchitecture and complex decision support projects.

When conducting such valuations detailed segmentation, brand equity drivers research and

scenario analysis are typically included to provide deeper insight. Many of our clients follow a brandvaluation migration path from straight-forward point in time valuations, as shown in this report, tomuch more complex exercises which explore brand value in granular detail.

If you or one of your colleagues would like to complete an ISO 10668 compliant brand valuation, orexplore how to build brand strength and brand value by moving along the brand valuation migrationpath, I would be delighted to have an initial chat.

Yours sincerely

David HaighChief Executive OfficerBrand Finance plc

Message from David Haigh, CEO of Brand Finance plc

Introduction 5


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BrandFinanceTelecoms 500In association with Total Telecom

The BrandFinanceTelecoms 500, now inits third year, directly compares the valuesof the worlds leading Telecom brands. Itis the only direct comparison of brandvalue within the Telecom industry.

Brand Finance has teamed up withTotal Telecom, the monthlyinternational telecoms magazine, forthe third year running to publish theresults.

The BrandFinanceTelecoms 500

provides an opinion on the point-in-timevalue of the worlds leading telecomsbrands. This report illustrates how ourmethodology, findings and value-basedmarketing techniques can be used fordecision-making and to determine theimpact of brand equity on businessperformance.

Introduction 6


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Summary BrandValuation Report

Detailed BrandValuation Report

Strategic BrandValuation

Scenario BasedValuation

Brand ValuationScorecard

Free $4,000 Price variable Price variable Price variable

Based on publicinformation

Point in time valuation

Relief From Royalty

valuation method

High level results

Summary ISO 10668requirements

Disclosure of detailedvaluation assumptions

Comparative performanceanalysis

Commentary on brandrating

Brand rating certificate

Full ISO 10668 standardtext

ISO 10668 compliantvaluation

Brand equity analysis

Visual identity audit

Trademark and brand IPaudit

Detailed segmentation bygeography , product andconsumer type

Strategyrecommendations

Multiple scenariomodelling

Marketing budgetanalysis

Trade off research

What if? analysis

Brand extension analysis

Decision support

Periodic reporting

Balanced scorecard ofbrand marketing andfinance KPIs

Intranet based

Econometric andstatistical analysis

Brand managementsupport

Published studies Bespoke studies

The Brand Valuation Migration Path

Introduction 7


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sectiononesectiontwo

Global results


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Excluded from sample report

Additional sections included in the full report :

Top 10 most valuable telecoms brands in [relevant country]Top 10 most valuable telecoms brands in [relevant region]

9Global results


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Rank2011

Rank2010

BrandBrand Value

2011Brand Value

2010EnterpriseValue 2011

EnterpriseValue 2010

Brand Value/EnterpriseValue 2011

Brand Value/EnterpriseValue 2010

Brand Rating2011

Brand Rating2010

1 1 30,674 28,995 195,989 178,604 16% 16% AAA+ AAA

2 2 28,884 26,585 235,987 229,793 12% 12% AA+ AA+

3 3 27,293 23,029 571,640 196,293 5% 12% AA AA

4 5 19,317 18,673 170,543 153,077 11% 12% AA AA+

5 6 18,622 18,352 111,581 120,119 17% 15% AA+ AA

6 10 14,935 9,666 142,731 203,347 10% 5% AA AA+

7 8 11,667 11,480 90,446 110,003 13% 10% AA- AA+

8 9 11,553 10,126 76,498 140,070 15% 7% AA AA

9 10,338 8,802 60,334 79,787 17% 11% AA AA+

10 9,801 8,187 73,144 64,997 13% 13% AA+ AA+

Most Valuable Global Telecoms Brands

Global results 10

Your company here


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Brand Value 26,819

Brand Rating AAA+

Cellular Telecoms &

Data

Telecoms Equipment

Brand Value 11,667

Brand Rating AA-

Telecoms Infrastructure

Brand Value 10,706

Brand Rating AA

Peripherals

Brand Value 10,706

Brand Rating AA

Fixed Line

Brand Value 28,884Brand Rating AA+

Broadband

Brand Value 24,360Brand Rating AAA

Telecoms Services

Brand Value 10,706Brand Rating AA

Most Valuable Telecoms Brand by Sector

11Global results


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sectiononesectionthree

[Name of company] results


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Enterprise Value Brand Value

Brand Strength Index

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2007 2008 2009 2010 2011

XXXXXX

XXXXXX

XXX

BrandValu

e$millions

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2007 2008 2009 2010 2011

XXXXXX

XXX

XXXXXX

EnterpriseValu

e$millions

0

10

20

30

40

50

60

70

80

2007 2008 2009 2010 2011

XXX XXX

XXX XXXXXX

Brand

StrengthIndex

Valuation Results

Valuation results 13

Parent Company: XXXXXXDomicile: XXXXXX

Brand Value $XX,XXXMarket Capitalisation Value $XXX,XXBrand Value/Market Capitalisation XX%Brand Rating XXX


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TOTAL BRAND VALUE

XXXX

VALUE IN EXPLICIT

PERIOD

VALUE IN

PERPETUITY

CORPORATE

VALUE

XXXX XXXX XXXXX

DISCOUNT RATE XXXX XXXX REVENUE FORECAST CAGR

TAX RATE XXXX XXXX ROYALTY RATE

PERPETUITY RATE XXXX XXXX BRAND SPLIT

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

BRAND SPLIT %REVENUE

growth %

ROYALTY RATE

BRAND

CONTRIBUTION

TAX

DISCOUNT FACTOR

NPV

Valuation Schedule & Assumptions





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- 2,000 4 ,000 6 ,000 8 ,000 10,000 12,000

Europe

South America

North America

Rest of the World

/ Other

Pacific

XXX

XXX

XXX

XXX

XXX

Brand value $ millions

X%

X%

X%

X% X%Europe

South America

North America

Rest of the World / Other

Pacific

Regional brand value segmentation





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Product brand value segmentation




0 5,000 10,000 15,000 20,000

Cellular Telecoms

Broadband

Fixed Line

Peripherals

XX,XXX

X,XXX

X,XXX

X,XXX

Brand value $ millions

X%X%

X%

X% Cellular Telecoms

Broadband

Fixed Line

Peripherals


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Valuation Comparison with Last YearLast Historical

Revenue

Last

Forecasted

Revenue

Brand

Split

Royalty

Rate

Perpetuity

Rate

Discount

RateTax Rate

Corporate

Value

Brand

Value

Effective

Change% Change

2010 Brand Finance Valuation X X X X X X X X X X X

Change in Revenue X X X X X X X X X X X

Change in Brand Split X X X X X X X X X X X

Change in Royalty Rate X X X X X X X X X X X

Change in Perpetuity Rate X X X X X X X X X X X

Change in DiscountRate

X X X X X X X X X X X

Change in Tax Rate X X X X X X X X X X X

Change in Corporate Value X X X X X X X X X X X

2011 Brand Finance Valuation X X X X X X X X X X X

Value reconciliation (2010 to 2011)





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Financial Measures Security/ Risk Measures Brand Equity Measures Brand Rating

Net Revenue Visual Identity Function

AAA+

Forecasted Growth %ESG Score

Emotion

Net Income GMI Governance Conduct

Margin % Credit Rating Loyalty

Change in randBeta Index




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Brand Value X X X X X X X

Market Cap X X X X X X X

Global Rank X X X X X X X

BV/MC X% X% X% X% X% X% X%

XXX XXX

XXX

XXX

XXX

XXX

XXX

XXX XXX XXX XXX XXX XXX XXX

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Brandvalue$

millions

Enterprise Value Brand Value

Your Brand Comp 1 Comp 5Comp 4Comp 3Comp 2 Comp 6

Market Cap

Competitor review





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0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2007 2008 2009 2010 2011

Brandvalue$millions

Year

Your Brand

Comp 1

Comp 2

Comp 3

Comp 4

Comp 5

Comp 6

Competitor review historical brand values





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0

20,000

40,000

60,000

80,000

100,000

Brand 1 Brand 2 Brand 3 Brand 4 Totalportfolio

XXX XXX

XXX

XXX

XXX

XXX

XXX

XXX

Brandvalue$million

s

X%

X%

X%

X%

0%

20%

40%

60%

80%

100%

Brand Value Contribution

Brand 4

Brand 3

Brand 2

Brand 1

Portfolio value





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XXXXXX

XXX

XXX XXX

XXX

XXX

XXX

XXX

-

20,000

40,000

60,000

80,000

100,000

120,000

MC Analyst Mcap Asset Break Down Intangible Asset

Value

Brand Value

$millions

Undisclosed Value

Disclosed Intangibles

(less GW)

Disclosed Goodwill

Tangible NAV

Composition of market cap





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sectionfourBrand valuation analysis


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How can brand valuation enhance shareholder value?

Better understand the value of key customer segments (bygeography, product, channel and customer type)

Understand the relationship between brand equity and key valuedrivers in the business model

Understand the strengths and weaknesses of the brand comparedwith key competitors

Provide a planning framework for long term strategic marketinginvestment

Create a framework for marketing mix modelling

Create the framework for better reporting and managing brandperformance (brand scorecard or dashboard)

Create a body of information about brand performance for use ininvestor and banking presentations

Why conduct a more detailed brand valuation study


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FOCUS

25Why value your brand?

There are a number of different reasons for valuing brands. These range from highly technical tocommercially-focused reasons:

Technical:

Balance sheet reporting and impairment reviews

Tax valuations and transfer pricing compliance

Litigation and dispute resolution

Commercial:

M&A and financing

Licensing and JVs

Establishment of brand management company

Brand strategy formulation Brand architecture review

Portfolio management

Brand performance tracking (scorecards)

Investor relations

FOCUS

TrademarkValuation

Branded BusinessValuation

Brand valuation analysis 25


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MarketingMix

Optimisation

BrandScorecard

DynamicValuation

Model

Brand EquityMeasurement

StrategicBrand

Valuation

MarketResearch

BusinessData

Value Drivers

Analysis

Continuous feedback

BrandDiscovery

Brand Finances approach has been designed to allow clients to manage their brands moreintelligently and deliver improved business results

Each step in the process is tailored to the clients specific needs and the level of sophisticationrequired, from high level to highly granular

Brand Finance approach overview strategic projects

Brand valuation analysis 26

Brand Strategic D namic


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27Brand valuation analysis

BrandDiscovery &

Value Drivers

Brand EquityMeasurement

StrategicBrand

Valuation

Marketing MixOptimisation

BrandScorecard

DynamicValuation

Model

What is legal &economic status ofthe brand?

What are the mostimportantcompetitivepressures in themarkets the brand is

operating in?

How is marketingbudget allocatedand how does thiscompare with thecompetition?

What data gapsmust be addressed?

What are key driversof brand equity?

What is the relativeimportance of eachdriver to mycustomers (bysegment)?

How do I performversus mycompetitors on keydrivers?

How strong is mybrand relative to itscompetitors?

What is the value ofmy brand and whatdoes it contribute tobusiness value?

Which segments ofmy business aregenerating the mostvalue?

How should Iallocate myresources?

How does brandequity link tobusiness results andbranded businessvalue?

What is the optimalmarketing mix tomaximise short termsales?

What is the returnon my promotionalmarketing spend?

Can we connectmarketinginvestments, drivers,& health indicatorsto financial KPIsand shareholdervalue?

How can we track

performance overtime and capturedata systematicallyfor improveddecision-making andin-depthunderstanding ofvalue drivers?

Which markets,customers, brandsand channels willgenerate the highestreturn and maximiseshareholder value?

What value is at riskif we fail to

adequately supportthe brand?

What is the impacton customerbehaviour andfinancialperformance ofimproved customerperception on keydrivers?

Brand Insight report

Marketingcommunicationreview

MarketAttractiveness Index

Market researchreview

Data gap analysis

Brand Equity Driveranalysis

Brand Strengthanalysis(BrandetaIndex)

Competitorbenchmarking

Business and brandvaluation framework

Brand ValuedAdded

Portfolio analysis

Budget setting

Resource allocationmatrix

Demand Driveranalysis

Econometricmodelling

Marketing ROI

Brand Dashboard(high level snapshotfor management)

Brand Scorecard (indepth diagnostic toolfor marketers)

Strategy selection

Portfoliomanagement

Brand architecture

Resource allocation

Value at riskanalysis

Scenario modelling

Services

Quest

ions


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sectionfive

About Brand Finance


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We perform valuations forfinancial reporting, taxplanning, M&A activities,joint ventures, IPOs andother transactions. Wework closely withauditors, tax authoritiesand lawyers.

Our analytical serviceshelp clients to betterunderstand the drivers ofbusiness and brandvalue. Understanding howvalue is created, where itis created and therelationship betweenbrand value and businessvalue is a vital input tostrategic decision making.

Valuation Analytics

We give marketers theframework to makeeffective economicdecisions. Our value-based marketing serviceenables companies tofocus on the bestopportunities, allocatebudgets to activities thathave the most impact,measure the results andarticulate the return onbrand investment.

We help private equitycompanies, venturecapitalists and brandedbusinesses to identify andassess the valueopportunities throughbrand and market duediligence and brandlicensing.

Strategy Transactions

At Brand Finance, we are entirely focussed on quantifying and leveraging intangible asset value.Our services compliment and support each other, resulting in robust valuation methodologies,which are underpinned by an in-depth understanding of revenue drivers and licensing practice.

Our services

Financial reporting

Tax and transfer pricing

Litigation

Investor relations

Brand equity drivers

Brand strength analysis

Brand risk analysis(randeta)

Brand scorecards

Marketing mix modelling

Marketing ROI

Brand strategy

Brand architecture

Brand extension

Budget setting and allocation

Brand value added (BVA)

Brand due diligence

Brand licensing

Fundraising

About Brand Finance 29


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Canada

USA

Brazil

South Africa

Spain

Portugal

Turkey

Greece

SwitzerlandCroatia

Holland

U.K. (HQ)

France

Finland

Russia

Dubai

Sri Lanka

India

Singapore

Hong Kong

Australia

Our global footprintWith 20 offices worldwide



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Brand Finance plc is the leading independentintangible asset valuation and brand strategyfirm, helping companies to manage theirbrands more intelligently for improvedbusiness results.

For further enquiries relating to this report,please contact:

David HaighCEO

[email protected]

Mike RochaManaging Director

[email protected]

For further information on Brand Finances servicesand valuation experience, please contact your localrepresentative.

Contact details


Country Name of Contact Email address

Australia Tim Heberden [email protected]

Belgium Richard Yoxon [email protected]

Brazil Gilson Nunes [email protected]

Canada Edgar Baum [email protected]

Croatia Borut Zemljic [email protected]

Dubai Gautam Sen Gupta [email protected]

East Africa Jawad Jaffer [email protected]

France Xander Bird [email protected]

Holland Marc Cloosterman [email protected]

Hong Kong Rupert Purser [email protected] Unni Krishnan [email protected]

Portugal Pedro Tavares [email protected]

Russia Alexander Eremenko [email protected]

Singapore Samir Dixit [email protected]

South Africa Oliver Schmitz [email protected]

Spain Pedro Tavares [email protected]

Sri Lanka Ruchi Gunewardene [email protected]

Switzerland Mike Rocha [email protected]

Turkey Muhterem Ilguner [email protected]

United Kingdom James Park [email protected]

USA Bill Barker [email protected]

USA Elise Neils [email protected]


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Brand Finance works for a wide range ofclients conducting national andinternational brand valuation and brandstrategy assignments. Here is a small

selection of the clients we have workedwith.

Our clientsBlue chip clients



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Brand Finance has extensive experiencein the telecoms industry and our clientsinclude some of the worlds leadingbrands.

Our work with telecom brands hasspanned the full spectrum of our service

offering, from marketing and strategy tofinancial and transactional applications.

Our clientsTelecoms clients

http://3.bp.blogspot.com/_H1O3K-BtA0E/SVqfsFSqqVI/AAAAAAAAAIs/U9hBVNKFbd8/s320/nawras.bmphttp://images.google.co.uk/imgres?imgurl=http://gina2010.files.wordpress.com/2009/09/1.jpg&imgrefurl=http://gina2010.wordpress.com/2009/09/11/with-wataniya-new-international-top-up-service-customers-can-send-mobile-credit-internationally/&usg=__xkEC0jPTQaQlprwff89j5zpfQbc=&h=488&w=486&sz=79&hl=en&start=1&itbs=1&tbnid=FYNJY2iCWX5sHM:&tbnh=130&tbnw=129&prev=/images?q=wataniya&hl=en&gbv=2&tbs=isch:1http://images.google.co.uk/imgres?imgurl=http://kalaweitfm.com/web/images/indosat_copy.jpg&imgrefurl=http://www.kalaweitfm.com/web/forum/viewthread.php?forum_id=18&thread_id=120&usg=__4rFGtIP3vWVEFIG01OdH2IHqtEM=&h=338&w=1155&sz=58&hl=en&start=1&itbs=1&tbnid=cPxDGuVchM5TdM:&tbnh=44&tbnw=150&prev=/images?q=indosat&hl=en&gbv=2&tbs=isch:1


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Every year Brand Finance producesGlobal Brand Studies, which provide anopinion on the point-in-time value of thestrongest and most valuable brands in theworld.

Over the years Brand Finance hasteamed up with all the major publicationsto publish the results. Studies include:

BrandFinanceGlobal 500

BrandFinanceGlobal IntangibleFinance Tracker (GIFT)

BrandFinanceNation Brands

Sector specific studies(e.g. Banking, Telecoms and Insurance)

Our studies illustrate the value of brandsand the financial impact of a brand on itsrespective business. Additionally, thestudies illustrate how our methodology,findings and value-based marketingtechniques can be used for decision-making and to determine the impact ofbrand equity on business performance.

Thought LeadershipGlobal Brand Studies

in association with:



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Global recognition

Global press coverage:

Publications:

Media commentators:



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Our work is frequently peer-reviewed byindependent audit practices and our

approach has been accepted byregulatory bodies worldwide.

Technical recognition



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In December 2010, Brand Financebecame one of the very few companiesin the world to be accredited with theISO 10668 global standard for brandvaluations.

ISO 10668 is the international norm thatsets minimum standard requirements forthe procedures and methods used to

determine the monetary value of brands.David Haigh, CEO Brand Finance, wasthe UK representative on the ISOworking party and chaired draftingmeetings over a 2 year period to shapeISO 10668 Brand valuation Basicrequirements for methods of monetarybrand valuation

The certification program was developedin collaboration with the AustrianStandards plus Certification, which hasattested that Brand Finance conducts itsbrand valuations in accordance with thenew standard, which requires three keyphases of work:

IP audit and review (legal review)

Behavioural analysis (market researchreview)

Valuation (financial review)

Technical recognitionISO 10668 global standard for brand valuations



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appendixone

Our approach


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IVSC International Valuation Standards Council

As the established international standard setter for valuation, the IVSC developsand maintains standards for the reporting and disclosure of valuations, especiallythose that will be relied upon by investors and other third party stakeholders.

In 2006, the IVSC was commissioned to produce a Guidance Note on thevaluation of intangible assets for IFRS financial reports by the following bodies:

The Securities and Exchange Commission (SEC) American Institute of Certified Public Accountants (AICPA) International Accounting Standards Board (IASB)

Consultation responses received in 2009 and final guidelines have been publishedas of February 2010

The purpose of this Guidance Note was to:

Address valuation issues not covered by IFRS

Codify existing best practice Address strengths and weaknesses of different valuation methods Improve consistency and reliability of results

Our approach 41


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IVSC Recognised Valuation Methods

Price premium

Excess margin

Economic substitution

Earnings split

Royalty relief

Cost Approach Income Approach

Comparable market transactions

Market Approach

Cost to create

Cost to recreate

There are several different methods available for determining the fair value ofintangible assets, each falling within one of the three fundamental approachesidentified in current international valuations standards. These are:

Our approach 42


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Cashflow or earnings generated by the

intangible asset or expenses saved bythe intangible are estimated directly by

reference to market benchmarks

MarketApproach

Valuation Approaches

CostApproach

Indirect orResidual Methods

Income Split

IncomeApproach

present value of earningsattributable to the asset or costsavoided as a result of owning the

asset

reproduction/ replacement cost-adjusted for depreciation and

obsolescence

based on multiples or prices frommarket transactions involving the

sale of comparable assets

Recommended by IVSC Guidance Note 4 and 16 asthe primary method for valuing brands, patents,secret formulae, technology

Direct Methods

Price Premium

Method

Margin or EarningsUplift Method

Relief-from-RoyaltyMethod

Residual earnings left after deducting fromafter-tax operating earnings the fair returns on

all other assets employed

IVSC Recognised Valuation Methods

Our approach 43


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ISO 10668 International Standard for Brand Valuation

In 2006, Deutsches Institut fr Normung(DIN) produced a German standard onbrand valuation. DIN proposed to ISO to expand this initiative globally and thisproject was completed in 2010.

The purpose of the ISO Draft Standard 10668 is:

To create a universal standard for all applications in all territories.

To create an accepted, transparent methodology which is reproducible.

To ensure that all important analysis should be included in a brand valuation

exercise, namely legal issues, behavioural issues, and financial analysis.

On 20th December 2010, Brand Finance was certified to produce brandvaluations in compliance with ISO by Austrian Standards plus.

ISO (International Organization for Standardization) is the world's largest developerand publisher of International Standards. It is a network of the national standardsinstitutes of 162 countries, one member per country, with a Central Secretariat inGeneva that coordinates the system.

Our approach 44


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Valuation modellingand opinion

This involves forecasting andanalysis of financial data and

cost of capital

Market trend analysisand Market Research

analysis

This involves a detailed reviewof all desk, tracking and

bespoke research

Trademark and IPReview

This requires a detailedinternal audit of all IPsupporting the brand

NOTE: The BrandFinanceTelecoms 500 brand valuations are based on publicly available data and are indicativeonly. They follow IVSC guidance but will only comply with ISO 10668 Monetary Brand Valuation Standard when

accompanied by detailed Legal and Behavioral analysis

LegalAnalysis

BehaviouralAnalysis

FinancialAnalysis

ISO 10668 Required Brand Valuation steps

ISO-compliantBrand Valuation

Our approach 45


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Introduction to Royalty Relief methodology

X RR tax12

3

4

5

Rev Forecast- X

Discount Rate

NPV

The Royalty Relief approach is based on the assumption that if a company did not own anytrademarks it would need to license them from a third party trademark owner instead.Ownership therefore relieves the company from paying a license fee (the royalty) for the useof the third party trademarks

The royalty relief method involves estimating likely future sales, applying an appropriateroyalty rate to them and then discounting estimated future, post-tax royalties, to arrive at a NetPresent Value (NPV). This is held to represent the brand value.

Brand Finance uses the Royalty Relief methodology for three reasons:

Firstly, it is the approach that is most recognised by technical authorities worldwide andfavoured by accounting, tax and legal users because it calculates brand values by

reference to comparable, third-party transactions. Secondly, it ties back to the commercial reality of brands - their ability to command apremium in an arms length transaction.

Finally, because it can be performed on the basis of publicly available financialinformation.

Our approach 46


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Five Steps - Royalty Relief Valuation

Introduction to Royalty Relief methodology

X RR tax12

3

4

5

Rev Forecast- X

Discount Rate

NPV

1. Determine forecast revenues

Determine future revenues attributable to the brand over a five yearexplicit forecast period. This is done by referencing historic trends,

market growth estimates, competitive forces, analyst projections andcompany forecasts.

2. Assess the Brand Strength Determine the strength of the brand using the randeta Index.

3. Establish Royalty Rate

Review comparable licensing agreements. Analyse margins and valuedrivers. Establish average royalty rate range for relevant sector. Applyrandeta Index to royalty rate range to determine royalty rate for thebrand.

4. Determine the Discount RateDetermine discount rate to calculate the net present value (NPV) offuture brand earnings (accounting for the time value of money and theassociated risk).

5. Brand Valuation Calculation The NPV of post-tax royalties equals the brand value

Our approach 47


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Obtained historic brand-specific revenues

Each revenue stream was then classified into nine key product segments:

1. Cellular Telecoms2. Fixed Line3. Telecoms Equipment4. Telecoms Services5. Peripherals6. Broadband7. Telecoms Infrastructure8. Data

Revenue forecasts for a five-year period (2011-2015) were created based on IBES forecasts and aperpetuity growth rate determined by reference to GDP growth in geographic regions of operation.

Revenues attributed to the different sectors are based on publicly available and reported data. In anumber of cases this simplifies the breakdown from the possible categories above.

IBES (Institutional Brokers' Estimate System) is offered on a summary (consensus) level or detailed

(analyst-by-analyst) basis. With over 26 data items that are updated as often as five times a day, it isdesigned to help portfolio managers and analysts identify, manipulate, and analyze exceptionalinformation for over 25,000 equities worldwide.

Brand Finance uses the IBES forecast for the company to determine the compound annual growth rate(CAGR) of the future years.

ValuationDate

Future Cash FlowsOver Planning Period

Perpetuity

Time

Yr4

Yr2

Yr3

TerminalValueYr

1

Yr5

Step 1 Determine forecast revenue

Our approach 48


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AAA Extremely strong

AA Very strong

A Strong

BBB-B Average

CCC-C Weak

DDD-D Failing

Step 2 Brand Strength Rating determination

This is calculated using Brand Financesrandeta analysis, which benchmarks thestrength, risk and future potential of a brandrelative to its competitors on a scale rangingfrom AAA to D. It is conceptually similar to acredit rating.

The data used to calculate the ratings comesfrom various sources including Bloomberg,annual reports and Brand Finance research.

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1. VI BasicsThe basic components and architecture of VI elements and their application acrossthe business entity which should all adhere to a basic VI structure. As applied to allvisible brand carriers - vehicles, signage, store, print, advertising, products,packaging, etc.

2. VI RiskEvaluated on observations based on actual experiences. The purpose being tohighlight known issues that may detrimentally affect the visual impression forstakeholders.

3. VI Best Practice

The use of visual identity in an international context. It is an evaluation of

performance of all visual components relative to perceived best practice and incomparison with peers in the same business sector.

4. VI Impact

The overall VI visual impression of all visual components. This is a subjective viewbased on experience and industry best practice. They are evaluated on aspectssuch as how well the visual elements reflect the corporation, and how appropriate itis to the specific business / sector.

VI360 is a specialist visual identity management company and is part of the Brand Financegroup. We have a close and formal working relationship driven by the recognition that there is

a strong link between visual identity management and brand value.

VI360 works with national and international organisations to implement, monitor and controlthe visual elements of their brands and manage the holistic view of their visual identities.

Using a robust formula and benchmarking against industry best practice, VI360 uses availabledata to assess the visual identity and the management performance.

Visual Identity determination VI360

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EXAMPLE OF ROYALTY

DETERMINATION WITH

randeta INDEX randeta

Royatly

ranges

BrandIndex:

CellularTelecoms

max%

90X%

X%X%

min%

Broadband

max%

90X%

X%X%

min%

Fixed Line

max%

90X%

X%X%

min%

To establish royalty rate ranges BrandFinance:

Reviewed comparable licensingagreements

Analysed margins and value drivers intelecoms categories

Established specific high and low royaltyrate ranges for each of the differentproduct categories

The randeta Index is then applied toeach royalty rate range to get a royalty ateach product segmented level.

The profitability of the company is thenanalysed in accordance with the 25% ruleand the royalty rate may be adjusted basedon this profitability analysis.

25% Rule

The 25% rule exists as a rule of thumb in licensingagreement formation. The idea is that a reasonableroyalty rate will usually be about 25% of theoperating margin of the company.

Step 3 Determine the royalty rate

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KD = Cost of DebtPD = Proportion of Debt

RF = Risk Free Rate

BR = Brand Risk Premium

randeta Brand Risk Premium

KE = Cost of EquityPD = Proportion of DebtRF = Risk Free Rate

RE = Equity Risk PremiumS = Sector BetaB = Brand Beta KE = RF + ((RE x S) x B)

WACC = (KE x (1 PD)) + (KD x PD)

KD = (RF + BR) x (1-Tax)

Step 4 Determine the discount rate

The discount rate is used to calculate the net present value of future brand earnings(accounting for the time value of money and the associated risk of achieving these earnings).

Weighted Cost of Capital (WACC) is used as a discount rate in the valuation, after adjustingfor brand specific risk, as determined by the randeta.

WACC represents the average costs of a firms sources of financing. It also is the overallrequired rate for the firm.

WACC is calculated as:

(proportion of debt funding * cost of debt + proportion of debt funding * cost of equity)

The WACC calculation is done for each geographic segment and then weighted averageacross these segments is calculated and used.

Our approach 53

S


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ValuationDateFuture Cash Flows

Over Planning PeriodPerpetuity

Time

Yr4

Yr2

Yr3

TerminalValueYr

1

Yr5

Discounted at Cost of CapitalBrandValue

NPV of (post-tax) royalties = brand value

[Sales Revenuet * Royalty Rate * (1-Tax)]

(1+ Discount Rate)tt=1

T

[Sales Revenuet * Royalty Rate * (1-Tax)]

(1+ Discount Rate)tt=1

T

Step 5 Brand valuation calculation

Our approach 54

Vi l i f h h l di h d l i


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ROYALTY RELIEF: Determine sales forecast, multiply sales forecast by royalty rate, deduct tax. Net Present Value (NPV) of brand contribution = BrandValue (Favoured by Brand Finance plc)

EARNINGS SPLIT (Role of branding): Determine forecast earnings, deduct charge for capital employed to give intangible earnings (EVA), applyrole of brand to determine brand contribution. NPVof brand contribution = Brand Value

3

Forecast Earnings Brand Contribution (%)Role of Branding

Deduct

Charge for Capital

Employed

1

2 4

5 RoBX = % NPV =BrandValue

1

2

3

45

Discount Rate

X RR tax1

2

3

45

Revenue Forecast

- XDiscount Rate

NPV =BrandValue

X

$

$

$

Corporate

Earnings

Intangible

Earnings

Allocated

Intangible

Earnings

% BX = BrandValue

Intangible Earnings ($M) Brand Contribution (%) Brand Multiple (x)

EARNINGS SPLIT : Determine current year earnings, deduct charge for capital employed to give intangible earnings (EVA), determine brand

contribution. Apply brand multiple = Brand Value

Earnings split method 1

Earnings split method 2

Royalty Relief approach

Visual representation of the three leading methodologies

Our approach 55

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Definition of Brand Value

Brand Value is the Net Present

Value of the estimated futurecash flows attributable to thebrand

The dollar value of a brand iscalculated as Net PresentValue or todays value of theearnings the brand is expectedto generate in the future

The financial value of a brandis defined as the sum of allearnings that a brand isexpected to generate

Valuation based on which keyfinancial metric?

Net Sales Intangible Earnings Intangible Earnings

Forecast of future EconomicValue Added

Royalty Rate study based onthird party arms lengthcomparables, brand strengthand margin analysis

Based on drivers of demandanalysis (Role of Brand Index)

Based on % of committedconsumers base

Time scale (modeling)DCF of five year explicitforecast and perpetuity

DCF of five year explicitforecast and perpetuity

Not explicitly taken intoaccount; Uses currentIntangible Earnings

How is risk accounted for?

Discount rate calculated fromfirst principles using CapitalAsset Pricing Model (CAPM)producing Weighted AverageCost of Capital (WACC) thattakes into account brandspecific risk

Discount rate determined byestimating brand risk using aBrand Strength Index (BSI)and applying the answer to anS curve of possible rates.

Multiple (short term growthindicator)

BV Calculation

BV = (Si * RR*(1-tax))/(1+r)i

Where S = Sales Forecasts;RR = Royalty Rate; r =Discount Rate; i = number ofyears

BV = (EVAi * RBI)/(1+r)i

Where EVA = IntangibleEarnings; RBI = Role of brandIndex; r = Discount Rate (Scurve); i = number of years

BV = EVA * (%) * M

Where EVA = intangibleEarnings; % = BrandContribution);

M = Brand Momentum

Earnings split method 1 Earnings split method 2Royalty Relief method

Methodology summary

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Earnings SplitRoyalty Relief

Pros & cons

Our approach 57

Pros This is an accepted methodology for valuing brands,

that is widely used and based in commercial reality. Itis commonly used in legal cases and tax disputes;

It ties back to the commercial reality of brands - theirability to command a premium in an arms lengthtransaction.

The methodology specifically recommended by theIVSC for use in IFRS reporting;

It relies on verifiable third party data (licensingagreements) and therefore less judgment is involved;

It recognises that brands can have a value evenwhere the underlying business is unprofitable.

It can be performed on the basis of publicly availablefinancial information.

Also a generally accepted methodology for valuing brands

With sufficient market research, it can provide insight into impactof drivers of demand on the value of different intangible assets inthe business

Cons At times it is difficult to source comparable licenseagreements for a particular sector.

Unless the Royalty Range is analysed carefully, itcould lead to a conservative or even an aggressivebrand valuation.

Highly judgmental, particularly when done without specific,detailed market research into drivers of demand

Calculations based on profit can lead to volatile results which donot reflect the underlying value of the brand; businesses that areloss-making will have zero or negative brand value, which isinappropriate in many cases

Approach to determining discount rate has been criticised aslacking transparency and not being applicable to all situations

Generic approach for brand strength may lack cohesion withparticular sectors

Calculations of EVA are notoriously complex and hard to audit.E.g. Stern Stewart claim to make 167 adjustments betweenaccounting profits and EVA (EVAs of many brands from time totime can be negative)

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appendixtwo

2011 BrandFinance Telecom Intangibles Financial Tracker (GIFT)

B dFi Gl b l I t ibl Fi i l T k (GIFT)


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010

20

30

40

50

60

70

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

$USDt

rillion

Undisclosed Value Disclosed Goodwilll

Disclosed Intangible Assets (ex g/w) Tangible Net Assets

36%44% 38% 37% 35% 35% 37%

60%48% 42%

4%5%

4% 4% 4% 4% 5%

8%

7%5%7%

9%8% 8% 8% 8% 8%

11%

8%9%

53%42%

50% 51% 54% 53% 51%

20%37% 43%

0%10%20%30%40%50%60%70%80%90%

100%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

This years GIFT study is themost extensive report evercompiled into the worldsintangible asset value andcovers over 50,000 companiesin over 80 countries.

It demonstrates the importanceof intangibles and highlights thesignificant rise in their valueover a ten-year period.

Even once commoditisedsectors that were driven entirelyby functional factors are movingrapidly up the intangible valuecurve.

BrandFinanceGlobal Intangible Financial Tracker (GIFT)An annual review of the worlds intangible value

BrandFinanceGlobal Intangible Financial Tracker 59

B dFi Gl b l I t ibl Fi i l T k (GIFT)


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- 2,000 4,000 6,000 8,000

Banks & DFS

Oil&Gas

Telecommunications

Electric

Mining

Retail

Pharmaceuticals

Food

Insurance

Chemicals

$USD billion

Tangible Net Assets

Disclosed Intangible Assets (ex g/w)

Disclosed Goodwilll

Undisclosed Value

0% 20% 40% 60% 80% 100%

Banks & DFS

Oil&Gas

Telecommunications

Electric

Mining

Retail

Pharmaceuticals

Food

Insurance

Chemicals

TELECOMMUNICATIONS

Enterprise Value $3,836 bn 6%*

Tangible Net Assets $1,276 bn 2%*

Disclosed Intangible Assets $531 bn 1%*

Disclosed Goodwill $551 bn 1%*

Undisclosed Value $1,478 bn 2%*

* % of Global Enterprise Value

BrandFinanceGlobal Intangible Financial Tracker (GIFT)Global Sectors Summary

BrandFinanceGlobal Intangible Financial Tracker 60


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appendixthreeAdditional materials

Additional Materials


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In addition to the Detailed Brand ValuationSummary, you will receive:

A signed certificate which states itsbrand rating, brand value and rank withinthe Telecoms 500 (pictured)

An electronic copy of the ISO 10668Brand valuation Standard

Additional Materials

Brand Rating Certificate 62


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Brand Finance works for a wide range of clients conducting national and international brandvaluation and brand strategy assignments. Brand Finance has a global footprint over 20 officesworldwide. For more information please refer to our website: www.brandfinance.com

Thank you

Brand Finance plcFinland House56 HaymarketLondonSW1Y 4RNUnited Kingdom

Tel: +44 (0) 20 7389 9400Email: [email protected]

brand finance telecoms 500 generic snapshot 2

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