© Oliver Wyman
TELCO 2025: TOWARDS A NEW DNATRUST IN THE DATA WORLD: THE NEW FRONTIER
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FEBRUARY 14TH ,2019
© Oliver Wyman 2
8 markets
Age groups
We surveyed 8,000 consumers on their perception of Tech and Telcos’ role
How is digital changing daily lives?
Which feeling about data security?
How are Telcos perceived in this world?
15%
24%
16%
21% 24%
18–24
25–34
55–65
35–44
45–54
FocusSample
×1,000
Per market
48% 52%
© Oliver Wyman 3
53
4240
3938
36
51
31
27
31
28 28
Saving for laterGym
Membership
Eating out Buying
presents
for a family
Shopping for
new clothes
Travelling
Phones are life platforms, and are gaining weight in budget arbitrage
What best describes your smartphone usage?% of all, total respondents
I’d rather spend money on phones & contracts than…% of all, total respondents
51%
35%
14% It’s a necessity
It’s my life
It’s a tool
FranceAll countries
44%
37%
19%
All countries France
Source: Oliver Wyman Telco 2025 survey, including 8,000 participants from 8 countries (2018)
© Oliver Wyman 4
Consumers are excited by new technologies, yet some fear personal data services
How do you feel about the following services and technologies being developed and soon being available?Share of ‘excited’ consumers minus share of ‘scared’ consumers, % of total
3rd generation care
Autonomous driving
Fitness & health
Virtual reality
Connected home security
Augmented reality
Smarter AI
Connected devices at home
50
54
61
50
47
46
41
20 19
69
78
62
62
46
70
47
FranceVery scared Rather scared Excited
Source: Oliver Wyman Telco 2025 survey, including 8,000 participants from 8 countries (2018)
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Are OEMs credible alternatives to Telcos as connectivity services provider?
Should all the following companies provide mobile or internet services, which one would you prefer? % of respondents who rated the respective player with “1”
26
9
49
4
6
5
Other telco
operator
Your current
mobile/telco
operator
Other tech
companies
(Google,
Facebook)
OEM
(Apple,
Samsung)
Amazon
Other non-tech
companies
(bank,
grocieries, etc)
33
10
38
5
8
6
42
5
33
7
7
6
59
11
20
3
3
4
65
8
16
2
1
8
45
9
31
4
5
6
> 30% 10–30% < 10%
France
18–24 25–34 35–44 45–54 55–65 Avg.
Source: Oliver Wyman Telco 2025 survey, including 8,000 participants from 8 countries (2018)
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2%
4%
6%
8%
10%
12%
14%
16%
RO
CE
cu
rve
s
+
-
Net revenue/Capital employed (%)
Telcos and Media need more capital for the same $1 revenues with less margin vs. Tech giants…
Decreasing value of tangible assets
Breakdown of S&P 500 market value
Evolution of Return on Capital Employed
2013–2016
Tangible
Assets
Intangible
Assets
1975 1995 2015
17%
83%
68%
32%
84%
16%
8
20
18
1000 20050 150
10
6
0
2
4
14
12
16
2016
201620152014
2013
2013
2015
2014
2016 2015
2014
2013
Tech TelcoMedia
NOPAT1 Margin (%)
1. NOPAT = EBIT less income taxes; Capital employed = Total assets – current liabilities excluding short term debt – Cash, equivalents and short term investments – long term investments
2. Amount investors pay for every $1 of revenue | 3. % physical assets as vs total assets
Source: Taival, Symbol surfing, Annual reports and Factiva financials. Selected companies: TEF - Spain, Cellnex - Spain, Verizon - US, AT&T - US, Orange - France, SFR France, Turkcell – Turkey, Turk Telekom - Turkey, MegaFon - Russia, MTS -
Russia, ChinaUnicorn - China, China Mobile - China, Vivo - Brazil, TIM – Brazil and Oi – Brazil, Oliver Wyman analysis
© Oliver Wyman 7
Yet Telcos continue to have massive Capex needs to invest in 4G, Fibre and 5GExample for France
Source: Cisco; Oliver Wyman analysis
54
357
20202015
Mobile traffic 2015-2020, in PB/mo
500
1,000
1,500
2017 2018 19 - 22
x7 Mobile data traffic from ‘15 to ‘201
Number of new mobile sites per operator
7000New 4G sites per operator to deploy
in rural area
Target HH connectable in France, in million
X1,6 Connectable HH from 2018 to 2022
Estimated yearly investment in France, in €Bn
+20%yearly investments on FTTH
deployment
Ambitious deployment plan in France
Maximum speed versus distance, in Mbps & km
x2sites density
for 5G vs 4G x4to
19
30
20222018
6.78.1
2018 2020
Spectrum
attribution
Pilot city
covered
All transport
axes covered
2020 2022 2025
10.000
100
15
0,3
5G (3,5 GHz)
4G (1800)
3G (800)
2G
© Oliver Wyman 8
5G will pave the way for new use cases; a clear killer case is yet to emerge short term
5G vs. 4GMain differentiators
Overview of potential use cases
4G Mobile Capacity/Small Cells
Enterprise Fiber Network Deployment
5G Fixed Wireless Broadband/Small Cells
Smart Cities Use Cases
5G Mobile Broadband
AR/VR/Cloud Gaming
Autonomous Vehicles
Other IOT
New Innovation /
Edge Computing
Timing
Uncertainty
of Value
20 - 50x download
speed
1/5th to 1/10th latency
5x # connected devices
© Oliver Wyman 9
Telcos need to evolve their DNA to succeed in this new world
1
2
3
Become a Data Telco
Become an ecosystem player
Build emotional ties
It is all about
Trust
© Oliver Wyman 10
Permission to data intimacy yet to be won; 13% fully trusts Telcos in France to protect personal data
How do you feel about companies storing your data
to personalize services?
I fully trust technology providers to protect my personal data
and to be transparent with its use, %
37
14
13
13
10
8
My mobile/
telco operator
My bank
Amazon
44%56%
36%
56%44%
64%
Above 35
years old
All age
brackets
Below 35
years old
Reluctant and scared: Don’t trust how companies will use my data Reluctant and afraid of “Big Brother” Indifferent: Personalized services do not make a difference, Offers and deals are annoying. Open & excited: Very excited about hese offers,
Open to it as long as I get savings and deals
Source: Oliver Wyman Telco 2025 survey, including 8,000 participants from 8 countries (2018)
34
13
10
12
10
8
Reluctant and scared / Indifferent
Open & Excited
42%54%
35%
58%47%
65%
Above 35
years old
Below 35
years old
All age
brackets
FranceFrance
Become a Data Telco
Open & Excited
Reluctant and scared / Indifferent
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GDPR can be a way to win data permission by going beyond the compliance play
Become a Data Telco
Rights for customers – GDPR Implications for Data players
Comply to the regulation
Leverage GDPR as a
business opportunity
Source: GDPREU.org, The Guardian, Oliver Wyman Analysis
1
2
Right to access
and inspect
Right
to erase
Right
to edit
Right to
Transfer data
Data breach for ~ 500 M
customers
Example companies at risk
Customers “OWN”
their personal data
GDPR
Security bug for ~ 50M
account, $1.6 Bn fine risk
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AI muscles build up is a high stakes game: 77% of total A.I. investments in 2016 were made by a few digital giants
A.I. funding, number of patents per country(From Q1 2012 to Q2 2016)
Funding ($US BN)
0.80.21.40.3
4.8
0.50.50.5
4.9
14.915.7
27.0
17.0
2.6
# of patents (’000)
Source: Goldman Sachs, New York Times
Become an ecosystem player
Digital giants made
77%of total A.I. investments in 2016
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Coalition might be a way to outplay limited access to data and investment capacity
Acceleration
Ecosystem
leverage
More
clients
More
data
Better
algorithms
and analytics
Virtuous data cycle
Better
infrastructure
leverage
Source: Oliver Wyman Analysis
Become an ecosystem player
© Oliver Wyman 14
Coalitions can be fully local: case in point Verimi; is there a potential for a wider European coalition such as Amadeus on Digital Identity?
Become an ecosystem player
Case of Verimi, a coalition of German multinationals on a common digital identity project
Common Digital Identity
Stored and secured dataUniversal login
User friendly interface Flexible data management
For Users
Easy and modular
integration
Increase in transaction
conversion
Enhanced customer
experience
Reduction of barriers
to entry
List of companies not exhaustive
Source: Verimi.de, lit search
© Oliver Wyman 15
In summary, for Telcos to strive as consumer behaviour changes, they need toevolve their DNA
• ~50%1 of youngsters see Apple or Samsung
as potential providers of telco services
• 75%2 of consumers are open/indifferent
to share personal data for more
personalized services
• 13%1 of consumers trust Telcos to protect
personal data
1
2
3
Become a Data Telco
Become an ecosystem
player
Build emotional ties
Key learnings
Notes: 1) France survey results 2) Across all the surveyed countries
Source: Oliver Wyman Telco 2025 survey, including 8,000 participants from 8 countries (2018)
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