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05/18/11www.informatm.com ©Confidential 1

Make better business decisions

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Learning from globalpeers: new operatingmodels and business

transformationA look at possible avenues for revenue growthand resource management models of other operators’

8/6/2019 SG & KL Jul 2010.v1



Contents

Section 1: Overview of developed markets in Asia Pacific

Section 3: Shared issues for operators

Section 2: Overview of SEA region

Section 4: Pricing to increase volume

Section 5: Leveraging service providers to expand subscription base

Section 6: New opportunities through converged contents

Section 7: Role of managed services

Conclusion: Informa viewpoint

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Overview – a glance at developed markets inAsia Pacific (1Q10 data)

:apan• : . %SIM Penetration 89 1•Five physical MNOs• -Recent licensing of new spectra for DC HSPA•

:orea: . %netration 102 9

physical MNOs regulatory intervention on price and MVNOs

:aiwan• : . %SIM Penetration 112 5•Five physical MNOs

:ong Kong• : . %SIM Penetration 134 9•Five physical MNOs• Market remains highly competitive with regulator adopting a

•••

:gapore: . %M Penetration 155 8

ree physical MNOs nal 3G spectrum licence to be auctioned in 2H10

:ustralia• : . %SIM Penetration 124 7•Three physcial MNOs•

:e w Ze al an d• : .

%SIM Penetration 121 0•Three physical MNOs•Change in market dynamics following entry of third operator

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Common characteristics of developed markets inAsia Pacific

• Markets that have relatively few operators (5 key players or fewer) with a maximum of three operators controlling the lion’s share of the entire market’s subscription base

•

• Economies with mobile markets, in which 3G penetration and 3G coverage offered bydominant operators are well above regional average

•

• Markets with well developed regulatory body that closely observes the state of the marketand intervenes as and when necessary with view to maintaining healthy competition

•

• Markets that have committed to transition to LTE with launch dates ranging from 2010 to2012 with spectrum licences for the technology already being awarded or in the processof being granted by the regulator

•

• Stagnant growth in subscription has led to extreme measures including periodic pricecompetition in and high handset subsidies

•

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Statistical overview – unique subscriber penetration forecasts, 2009 - 2014

Source: Informa Telecoms & Media

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A look at the diverse region of southeast Asia

:ietnam Developing market in SEA

with the fastest growth in SIM card penetration over

,the past two years with the. %rate rising from 39 3 at

- . % -end 2007 to 116 2 at end2009

:ndonesia

,The first market in SEA in which major operators

suffered shrinkage of,subscription bases

-following a full on price and promotion war in 2008

:hilippines The only market in, -SEA where non

voice revenue has accounted for over

%50 of total service revenue

:hailand The only major

marketin SEA where key players

have to access to 2100MHz Spektrum

:alaysia Fastest growing

market for MVNOs in SEA

:ingapore The first market in SEA

+to launch HSPA and recently successfully

trailed LTE

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Statistical overview – net additions andsubscriptions

• Annual net addiitons more than doubledbetween 2005 and 2007 – from around28 million in 2005 to over 77 million in2007

• Although natural adjustment of subscriptionbase led to a decline in net addition in

2009, the count remained at roughly thesame level as that for 2007

•

• Dramatic growth in subscription countbased on SIM card in circulation wasobserved: at end 2009, collectivesubscription base for the region was323% of the base at end-2005

• Annual growth rate has been consistentlyhigher than 20% throughout the five-year period

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Statistical overview – historical and forecast SIMcard penetration and subscriptions

•

•

• Indochina (Cambodia, Laos and Vietnam)will account for upwards of 27% of theregional subscription count by 2015, upfrom just over 7% in 2005

•

•

• Rapid growth in SIM card penetration:collective penetration rate for the regionroughly tripled between 2005 and 2009

•

• SIM card penetration in all markets withpopulation over 20 million people with theexception of Myanmar exceeded 70% atend-1Q10

–

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Regional growth drivers – competition led byoperator boom

• The entry of major operator groups as wellas emergence of new ones to takeadvantage of business opportunities intothe region including Saudi Telecom,Vimpelcom, Viettel

•

• The growing number of independentoperators and niche service providersparticularly in Indochina and Indonesia

•

• Downward pressure on price due to marketcrowding

•

• Pressure to remain competitive by offeringrobust, most technologically advancedand extensive networks

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ARPU timeseries – market leader in five biggestdeveloping SEA countries

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Shared issues for operators – revenue growthand cost rationalisation

• High subscriber penetration across the board makes it increasingly difficult for operators toexpand solely through volume building by offering traditional, basic mobile voice andSMS services

•

• Nevertheless, there continues to be a need for revenue growth and cost control in order topreserve and possibly increase operating margins

•

• Companies can explore new business models that enhance existing revenue streams or generate new ones by examining practices of global peers, in particular in mobileInternet :

– Pricing to increase volume

– Improving reach by collaborating with service providers

–Realising the opportunities from the shift to “converged” contents and applications for

broadband Internet

–

• Operators could conserve corporate resources for development of core competencies andfine-tuning of customer service and look to outsourcing of maintenance of infrastructure

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Pricing to increase volume – two-tiered tariff for mobile Internet

• Softbank pioneered the two-tiered chargingfor data service at the launch of iPhone inAugust 2008

•

• NTT DoCoMo shifted to a structurallyidentical data price plan from a flat-rate

tariff in October 2008

• Low entry point encourages casual users tosubscribe to the tariff, which helps toexpand monetisable customer base

•

• There is no need to select data bundles,which may put unnecessary constraints

on usage during months when datarequirement exceeds normal level

•

• Policy control solution may not benecessary as all customers pay the samerate for usage (except for very heavy

users)•

• Following the tariff revision, NTT DoCoMo’sPake-Hodai subscription base doubled in18 months to end-1Q10

•

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Leveraging service providers to expandsubscription base – the case of Japan

• Device-based strategy involving electronicsretailers:

– Electronic stores stock newtechnological communicationsdevices and attract technologicallysavvy customers

– The customer base makes for apotential user base of new mobiledata service

–

The retailers are responsible for sourcing and selling the devices,while the operators provide thecapacity in the network: the operator wholesales the mobile broadbandconnection

– Mobile data specialist, EMOBILE, hasbeen very successful with this

strategy.–

–

• Positioning-based strategy that targetsfixed broadband users:

– Fixed broadband providers alreadyhave a subscription base that theycan monetise

– Mobile broadband is positioned as acomplementary service to fixedbroadband, in particular DSLconnections, to ensure completemobility

– This is particularly favoured by DSLoperators, who are losing ground toFTTH companies: mobility gives thebundled pr oduct and edge

The arrival of ultra-mobile PCs such as netbooks that cater to the lower-income segment of the market made it possible to commercialise attachment-based mobile broadband productand offer it to the mass, and there are two means of improving reach:

http://www.so-net.ne.jp/index.html

http://www.so-net.ne.jp/index.html

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Mobile social gaming in Japan – DeNA

• Introduction of games that have elementsof social networking over a mobile portalhave resulted in substantial revenuegains for “mobile community” platformdeveloper DeNA

• Social games were added to the line-up of games in late 3Q09

•

• Micro-transactions for in-game items madethe greatest contribution to revenuesgenerated from social games from 3QFY2009 (4Q09) onwards

•

• It is difficult to say if social gamesencourage existing users to spend moreor if social games enable the existingplatform to attract new members who

spend heavily on games, but there is astrong correlation between the launch of social games and rise in revenue

•

•

Source: DeNA

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Converged contents – social games may havethe potential to become a new revenue stream

• Social networking services provide aplatform for social games, which, in turn,are designed to enhance the interactiveexperience of the service

•

• Smartphones and mobile networks that

offer increasingly higher speed mean thatfxied and mobile Internet contents arebecoming more converged

•

• Opportunities exist for mobile operators inE-commerce that arises from

“microtransactions” or trading of virtualgoods in these gaming environments

•

•

Operator

Mobile network

Game developer

End-user

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Role of managed services 1 – a new paradigm for network operation and service delivery

• Possible improvement of operational processes in product delivery and greater costefficiency could be achieved through involving external providers of managed services,with managed services defined principally by the attainment of improvement of operational processes and cost advantages

•

•

•

•

•Vendor

Traditional model

Product/s

erviceconsumptio

n

Product/s

erv

icepro

visioning

Operator

User

Operator Vendor

User

Managed-service model

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Role of managed services 2 – types of managedservices

• Network-led services: – These are services that focus on creating greater efficiency in managing the overall running,

enhancing the network

•• Service-led services:

–These are services that focus on network resource allocation for VAS offerings as well asenabling such services including streaming, capacity management, content procurement

•• Consultancy-led services:

– These are services that focus on providing strategic advice to respond to the need for business transformation

•

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Role of managed service 3 - examples of implementation from other developed markets

• MBNL (Mobile BroadbandNetwork Ltd):

– Joint venture formedby 3 UK and T-Mobile UK tointegrate andmanage their 3GRAN

– Responsible for managingoutsourcedservices of networkequipmentproviders (BT and

Ericsson)– Managed-service-

based networksharing conferscost savings onnetwork roll-outand advantage oncoverage

expansion–

• Sprint’s Network Advantagedeal:

– Ericsson wascontracted toprovide acomprehensivenetwork solution

– The solution includes:overseeing andmanaging the day-to-day serviceprovisioning andmaintenance of Sprint’s mobile and

fixed networks;optimising Sprint’stransmissionequipment;providingprocesses andtools for management of

national networkplatforms andoperational support

• Orange Switzerland &Alcatel Lucent:

– Orange entlisted theexpertise of Alcatel-Lucent innetworkmanagement,maintenance andoptimisation as wellas physicalnetwork expansion

– Day-to-day running of network iscontracted to

Alcatel-lucent,while Orangecontinues to makestrategic directionsin networkdevelopment andcustomer support

–

–

•

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Role of managed services 4 - potentialdrawbacks

• Disparate operational management of various parts of network against the backdrop of agreater need for integrated network for convergence of different platforms means that in-house management of managed services may be required for overall steerage of thestrategy in the right direction

•

• Domination of operators by vendors could arise due to market for particular outsourced

services being uncompetitive

•

• Vendors may assume reduced accountability since it outsourcing different parts of serviceprovisioning to different parties means that it may not be easy to identify where in thesupply chain the initial problem originated

•

• Difficulty in devising an incentive scheme and devising into the contract to realign theinterests of the the operator and the vendor since simple risk sharing through revenuesharing may not be acceptable to the vendor

•

•

•

•

•

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Informa viewpoint

• Growth of subscriber penetration of the population will become ever more stagnant indeveloped markets in Asia Pacfic as they continue to further mature

•

• Ensuing lack of sustainability of traditional business model of revenue generation throughvolume sales of voice and SMS service prompts operators in developed markets toexamine opportunities in data network as well as to look to possibilities of resource re-

allocation

•

• Stagnating Japanese market, where it is true that necessity is the mother of invention,offers some examples of interesting ways to approach the data market

•

• Utilisation of managed services can provide an opportunity to rationalise costs and

redistribute resources to where they are most needed•

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/ /11 09 2009

Click to edit Master titlestyle

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/ /18 05 2011

Thank you.

Sarongrat Wongsaroj

Senior Analyst | Informa Telecoms & Media

Email: [email protected]

www.informatm.com

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