the value proposition of the digital telco...the value proposition of the digital telco idate –...

Corporate Strategy

18.11.2015

The value proposition of the digital telco

IDATE – DIGIWORLD SUMMIT 2015

DISCOVER. DISRUPT. DELIVER

1. Customer view and roles in the ICT value chain

2. Convergence and scenario analysis

3. Winning strategy of a digital telco

2

DISCOVER. DISRUPT. DELIVER 3

The digital revolution is bringing the opportunity to redefine our

business as Digital Telcos

APPLICATIONS AND CONTENT DEVICES CONNECTIVITY

All the world’s

information online

A mobile

supercomputer in

your pocket

The magic glue that

makes it happen

CUSTOMER EXPERIENCE


ICT exports deflation and displaces consumer good companies – over

65% value share of top 25 global brands

ICT

Source: Millward Brown 2015 and team analysis

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

25

24


Learning to deal with “Frenemies” – there are multiple examples of

disruptive announcements with increased regularity


Product vs. Services – Sustainability is a concern, even for the most

powerful player (Apple vs. Amazon, Facebook and Google)

x% YoY rev growth

x% EBITDA %

NOTE.- Apple: FY ended in Sept and AMZN, GOOG and FB in Dec

Revenues – Q3 2015 ($Bn)

$51.5bn

32.2

19.3

3Q15

+36% 25.4

3Q15

18.7

3Q15

+23% +13%

34%

32%

8%

EV / OpFCF

7x

4.5

3Q15

+41%

43% iPhone

EV / OpFCF

40x

EV / OpFCF

19x

EV / OpFCF

26x


Analysing the entire value chain – connectivity plays a very relevant

role according to investor community …

CONNECTIVITY

(TELECOMS)

CONTENT CREATION

& MGMT (MEDIA)

DEVICES

(TECH)

IT SERV. & NETWORK

COMPONENTS (TECH)

DIGITAL SERVICES

(INTERNET)

Top 50 largest

Telcos

Apple

Lenovo

Samsung

Sony

ZTE

Cisco

Juniper

Nokia-

Alcatel

Ericsson

Accenture

ADP

Amdocs

HP

IBM

SAP

Amazon

Alibaba

eBay

Google

Baidu

Netflix

Tencent

Priceline

Linkedin

Facebook

Twitter

Tripadvisor

Yahoo

Viacom

Sky

Naspers

CBS Corp

Timw Warner

Walt Disney

Televisa

Vivendi

Oracle

VMWare

Salesforce

Microsoft

Adobe

ARM

ASML

Corning

Broadcom

Qualcomm

Intel


… with Telcos accounting for 41% of total enterprise value (€7.0Trn) and

70% of total capital employed (€3.0Trn) of the ICT value chain

8 Data as of 23.10.2015. Source: Bloomberg

CONNECTIVITY

(TELECOMS)

CONTENT CREATION

& MGMT (MEDIA)

DEVICES

(TECH)

IT SERV. & NETWORK

COMPONENTS (TECH)

DIGITAL SERVICES

(INTERNET)

9.3% 40.8% 21.3% 20.7% 7.7%

4.5% 70.5% 12.8% 4.6% 7.6%

x

x

% o/ TOTAL EV

% o/ TOTAL CE

Fair and stable

regulatory framework

that incentivises network

investment is a must





9


Telecoms involved in three flavors of convergence

FIXED-MOBILE TELECOM-INTERNET-MEDIA TELECOM-IT

• Customers: Fixed and Mobile

access used indistinctly for

many applications

• Networks: Fixed and Mobile

becoming more alike, as Fixed

improves efficiency and

Mobile improves capacity

• Commercial: Many operators

leveraging trends, selling F+M

together to reduce churn

• Content becomes an

application: Content offers

increasingly decoupling from

distribution infrastructure

Video: from specific

infrastructure (cable, DTH)

to (1) telecom networks,

and (2) internet

• Commercial: Video becoming a

key ingredient in telco bundles

• Cloud technology enabling

network resources to be

virtualized (increasing

flexibility and efficiency)

• Disruptive new network

architectures to be based on

software running on general

purpose hardware

• Some operators starting to

adopt the new paradigm


Customers want full connectivity solutions (ubiquity and capacity) and

use more services as networks develop

AVERAGE SMARTPHONE TRAFFIC PER APP: KOREA vs. BRAZIL (JUN 2015)1

1. Source: Pricing – Global Marketing CCDO. Original data from

Mobidia, selecting apps with most MAUs


What is the optimal infrastructure balance? Wireline capillarity

(GB/month, Mbps) vs. Network cost (Cost/GB)

Capacity (max.

monthly usage)

Customer demand

vs. Capacity FBB + WiFi (= 1

wireless access

point per home)

Macro-based MBB

(improvements

from technology

+ more spectrum,

e.g. 5G)

+ Potential

densification

benefits

• FBB+WiFi today: ~10,000x Capacity vs. Macro-based MBB

• Technology, additional spectrum, densification: MBB up to ~1,000x (still far from FBB)

• Fixed networks will become less dense in some areas, and Wireless networks will become more

dense. The key issues conditioning the “right” balance are:

1. How will demand evolve in each market

2. What is the cost-balance of FBB vs. MBB in each market

Time

• FBB vs. MBB cost/GB in

each market (and

expected evolution)

• Demand patterns /

expectations for the

next 5-10 years

Speed and monthly

usage, in/outdoor

• Competitive structure

(e.g. markets where all

players are convergent

will probably remain

so)

• Fixed Wholesale

network availability

Time TODAY FUTURE TODAY FUTURE

(Scenario 2)

(Scenario 3)

?

(Scenario 1)

? Customer

demand

~10,000x

KEY ASSUMPTIONS

~10-100x?


Scenario analysis – potential competitive strategies within the industry

13

• Operators in different markets may

adopt different strategic positions,

depending on:

Customer behavior: demand

patterns / expectations

Cost/GB per technology (e.g.

FBB vs MBB) in each market

Available assets for each player

(including wholesale market)

Competitive market structure

Cellular as last-resort

connectivity option

Cellular as default

connectivity option

Commoditization of

connectivity

Ability to differentiate

connectivity experience

Main

Question

Potential

Scenario

Frameworks

How will operators capture value in an “all-IP” era?


Cellular will have different roles to provide “full connectivity”,

depending on players and markets

Cellular as

last-resort

connectivity

option

Cellular as

default

connectivity

option

“Fixed-first” networks Combination of strong

Fixed and Mobile networks

“Mobile-first” networks

• Indoor + outdoor:

Fiber + WiFi

• Complemented with

WiFi hotspots and

MVNO as “coverage

backup”

• Indoor + outdoor:

cellular (macro + small

cells)

• Backhaul: potential use

of high speed radio (+

spectrum) - 5G, or

wholesale fixed links

“Base case” in more advanced markets Typical of emerging markets

(US Cable) (European Incumbents) (India, Indonesia, …)

• Indoor: Fiber + WiFi

• Outdoor: Cellular

(macro + small cells)

• Mobile backhaul

leveraging Fixed


Tools to differentiate connectivity will be different, depending on

markets & business models

“Fixed-first” networks Combination of strong

Fixed and Mobile networks

“Mobile-first” networks

Ability to differentiate connectivity experience

Best

customer

experience

Best

network

Best

operating

model

• Channels

• Customer care

• BI and analytics

• Technology

• Coverage

• Spectrum

• Fastest time to market

• Highest quality (lowest failure rate)

• Lowest cost / GB





16


Transformation into a digital telco requires to excel in four key areas

always with user experience as the top priority

Best Access Network (UBB)

Bundling Best Digital Services (3rd party and owned)

Best Channel and Customer Knowledge

Excellent User / Client Experience

Operational

Efficiency

• Single customer vision and data analytics

• Consistent customized-omnichannel experience

• Best-in-class digital channel

• Operating model to

become the most

efficient provider

• Process simplification

and IT as key levers

to optimize ways of

doing business

CORE BUSINESS

Provide optimal connectivity to anything and anywhere for any use case 1

4

2

3

• Big Data to

optimize everything

we do end to end

• Offer enhanced connectivity to residential and enterprise customers

• B2C offer includes best devices and digital services bundles (i.e. video and others)

• B2C focus on cloud, security, managed mobility services among others

the value proposition of the digital telco...the value proposition of the digital telco idate –...

Documents