From the Telco 2.0 Initiative (www.telco2research.com): Next generation telco business models and strategic growth opportunities. Latest core slide set. Contact@telco2.net
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Telco2 business models and opportunities briefing may 2013
1. - 1 -Š STL Limited ⢠Proprietary and Confidential
Business Model Innovation for the Digital Economy
The Telco 2.0 growth opportunity
Telco 2.0 business models and how to enable them
Simon Torrance, CEO, STL Partners/Telco 2.0 Initiative
Simon.torrance@stlpartners.com
www.telco2research.com
New Telco Business Models & Growth
Opportunities
STL Briefing â May 2013
www.stlpartners.com
www.telco2research.com
2. - 2 -Š STL Limited ⢠Proprietary and Confidential
Summary
⢠Market getting harder fast
⢠Cost reduction #1; Smart Network #2
⢠Service Innovation takes time
⢠Role of vendors/partners changing
3. - 3 -Š STL Limited ⢠Proprietary and Confidential
Voice, messaging and connectivity revenues are falling fast (EU)
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
2009 2010 2011 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F
âŹMillions
Euro-5 Core services revenues
Sp
It
Fr
Ger
UK
The âhunger gapâ
4. - 4 -Š STL Limited ⢠Proprietary and Confidential
Data revenues insufficient to offset voice decline (EU)
Source: Ofcom, Company accounts, Barclays Capital, STL Partners analysis
0
5,000
10,000
15,000
20,000
25,000
30,000
Q1
2009
Q1
2010
Q1
2011
Q1
2012
Q1
2013
Q1
2014
Q1
2015
Q1
2016
Q1
2017
Q1
2018
Q1
2019
Q1
2020
âŹMillions
Quarterly Mobile Core Services Revenues - EU-5 countries
Data inc SMS
Voice
36% fall from 2009-2020
5. - 5 -Š STL Limited ⢠Proprietary and Confidential
New business models & services must generate very large
revenues to close the 36% gap in 2020 (EU)
Rises to âŹ59bn if service revenues are to rise by 2% annually between 2009 and 2020!
6. - 6 -Š STL Limited ⢠Proprietary and Confidential
Operatorsâ response to date
Pressure on core business
Reduce opex and capex
Chinese suppliers
Prioritisation and shaping
Wifi offload
Network sharing
Reduced workforce
Multicast and CDNs
Femto/Pico underlay
Device management
Seek growth
Voiceandmessagingâ
RCSeetc.
Retailbroadband&data
Advertising&marketing
Billing,paymentsand
collection
M2Mandembeddedmobility
Enterpriseservices
7. - 7 -Š STL Limited ⢠Proprietary and Confidential
OTT threat to future business as well as current
Devices,
OS, apps &
software
Data
connectivity
Voice &
messaging
Online
advertising
Online sale
of physical
goods
Online Sale
of content
Payments
Enterprise
IT
$ Traditional $ New profit $ New non-profit
$
$
$
$
$
$ $ $ $ $
$$$$
$$$$$
$$$$$
$$$
8. - 8 -Š STL Limited ⢠Proprietary and Confidential
Telco strategies in the big 5 battlegrounds
Devices, OS, apps &
software
1. Divide and rule
2. Support Microsoft and
Nokia (& others)
3. Support those that fork
Android
Online advertising
1. Disrupt
2. Leverage customer
data
3. Protectorate role for
consumer data &
privacy?
Online Sale of content
1. Fragment
2. Support Amazon &
independent stores
3. Leverage data, &
payments
Payments
1. Compete via
collaborative approach
2. Create complete
joined-up solution.
Voice & messaging
1. Block
2. Bundle services
3. Improve voice &
messaging
4. Partner with value
sharers to block
destroyers
boss
challengers
boss
challengers
ď
Critical need for joined-up telco approach to commerce platforms
9. - 9 -Š STL Limited ⢠Proprietary and Confidential
Telco 2.0: Two-Sided Telecoms Business Model
$ $
Source: STL Partners Analysis
10. - 10 -Š STL Limited ⢠Proprietary and Confidential
Telecoms industry
Consumers
SMEs
Enterprises
Devices
Downstream Customers
Web Players
Media
Government
Retailers
Devices
Healthcare
Industrial
Other Telcos
Upstream Customers
Six opportunity areas in the Telco 2.0 platform
Core services
Vertical industry solutions (SI)
Infrastructure services
Embedded communications
Third-party business enablers
Own-brand OTT services
Current focus
Additional
focus
11. - 11 -Š STL Limited ⢠Proprietary and Confidential
Telco 2.0 âHappy Piperâ vs Telco 2.0 Service Provider?
⢠Reduce capex and opex
⢠Route & offload traffic efficiently
⢠Balance cost vs quality
⢠Right network for service at right time
⢠Service assurance
⢠Network QoS
⢠Congestion mgt
⢠Provisioning
⢠Low cost
Telco 2.0
Happy Piper
Telco 2.0
Service
Provider
⢠Invest in services
⢠Deep customer knowledge
⢠ID and authentication provider/agent
⢠Integrate network & services
⢠Flexible charging
As above plus:
⢠Service development
⢠Customer experience mgt
⢠Customer data
⢠Real-time rating & billing
Generic strategy Key success factors Skills and assets
13. - 13 -Š STL Limited ⢠Proprietary and Confidential
Priorities vary by Telco segment
Large
international
players
Regional players
Tier 2/3
challengers
Business &
wholesale telcos
Smaller national
leaders
Examples
Vodafone, Verizon,
AT&T, Telefonica,
NTT Docomo
BT, TeliaSonera,
Sprint, SK Telecom,
Singtel
3, Tele 2, Virgin
Media, Cricket
Wireless
C&W, Global
Crossing, Level 3,
Interoute
Swisscom,
Belgacom, Telecom
Portugal, Telecom NZ
Core services
Vertical industry
solutions (SI)
Infrastructure
services
Embedded
communications
Third-party
business enablers
Own brand OTT
services
Top priority Significant but selective approach required Limited or no opportunity
14. - 14 -Š STL Limited ⢠Proprietary and Confidential
Happy Piper can be revolutionary â Free in France
Cost-cutting wonât grow the overall market for operators but it can enable aggressive share gains and/or
margin benefits.
0%
2%
4%
6%
8%
10%
12%
14%
16%
0 1 2 3 4 5 6
Marketshare%
Years after inception
4th mobile player into the market: market share
P4 Poland
BitĂŠ Latvia
H3G Italy
H3G Sweden
H3G Denmark
H3G Ireland
Yoigo Spain
H3G Austria
Q-Telecom Greece
Televorgu Estonia
Mobilkom Czech Republic
Free France
15. - 15 -Š STL Limited ⢠Proprietary and Confidential
Difficult to be a platform player?
Telco 2.0 Happy
Piper
Telco 2.0 Service
Provider
Low cost ďź ďź
Service assurance ďź ďź
Network QoS ďź ďź
Congestion management ďź ďź
Provisioning ďź ďź
Service development ďź
Customer experience mgt. ďź
Software & design ďź
Brand ďź
Customer data ďź
Ecosystem Development ďź
Infrastructure
business
Product innovation
business
16. - 16 -Š STL Limited ⢠Proprietary and Confidential
Different approaches to building new digital services units
Telco 2.0
Strategy Unit
Telco 2.0
Innovation Unit
Telco 2.0
Business Unit
Ideation ďź ďź ďź
Evaluation ďź ďź ďź
Piloting ďź ďź
Investments/M&A ďź ďź
Product development (ďź) ďź
Ecosystem/partner development ďź
Launch ďź
In-service delivery ďź
Easiest and
least ambitious
Hardest and
most ambitious
17. - 17 -Š STL Limited ⢠Proprietary and Confidential
Operator partnering needed to build scale
Niche platforms and services are unlikely to generate material economic benefit to operators â they have to
go big.
Google
Microsoft Online
Services
Division
-20
-10
0
10
20
30
40
50
60
0 50 100 150 200
OperatingProfit2004-2011($bn)
Revenue 2004-2011 ($bn)
18. - 18 -Š STL Limited ⢠Proprietary and Confidential
Partnering for operators â the prisonersâ dilemma
19. - 19 -Š STL Limited ⢠Proprietary and Confidential
Prisonersâ dilemma
Working
with third-
parties
(OTT etc.)
Compete
Open-access
â collaborate
with all
Working with other operators
Compete Collaborate
Collaborate
with specific
players
Steal the Crown Defence of the Realms
Self-appointed King-
maker
Collaborative King-
maker
Isolated revolutionary Republicanism
RCSeOwn VoIP service
Own payments
solution
ISIS
Own API
programme
WAC
20. - 20 -Š STL Limited ⢠Proprietary and Confidential
Value-destroying strategies versus value-creating ones
Working
with third-
parties
(OTT etc.)
Compete
Open-access
â collaborate
with all
Working with other operators
Compete Collaborate
Collaborate
with specific
players
Steal the Crown Defence of the Realms
Self-appointed King-
maker
Collaborative King-
maker
Isolated revolutionary Republicanism
21. - 21 -Š STL Limited ⢠Proprietary and Confidential
Increasing attempts by operators to work together to build scale on
infrastructure & digital servicesâŚbut very difficult to pull off
MENA US Europe APAC
22. - 22 -Š STL Limited ⢠Proprietary and Confidential
MNOs Customers
Upstream
Sales&BusinessDevelopment
Coreteam
Advertising
Platform
Content
Platform
Payments
Platform
CommonPlatforms(e.g.Reporting,Profiling)
Content & Apps Players
Merchants
Brands & Media Co.âs
Banks
MENA JV: Example of Telco 2.0 in practice
23. - 23 -Š STL Limited ⢠Proprietary and Confidential
Invested
Capital
(IC)
Sales Sales/ IC EBITDA
%
EBITDA Free
Cash
Flow
CROIC*
%
Different operational & financial models: new metrics needed
Core services
Vertical industry
solutions (SI)
Infrastructure
services
Embedded
communications
Third-party business
enablers
Own brand OTT
services
$1,000 $500 0.5 45% $225 $64 6.4%
$500 $350 0.7 30% $105 $26 5.2%
$500 $350 0.7 30% $105 $26 5.2%
$200 $200 1.0 28% $55 $21 10.3%
$100 $200 2.0 15% $30 $12 12.3%
$25 $35 1.4 20% $7 $3 10.7%
* Cash return on invested capital
CurrentoperatorfocusNewoperatorareas
24. - 24 -Š STL Limited ⢠Proprietary and Confidential
Top 6 âStrategic Opportunitiesâ for Telcos
2. Re-define fundamental telco business model
and innovation processes
1. Global Trust Network for Personal Data
and Digital Identities
5. Case for Infrastructure investment
6. Role in Cloud Computing
3= Partner better with other industries
3= Regulation for cross-border,
cross-industry collaboration
25. - 25 -Š STL Limited ⢠Proprietary and Confidential
How to extract value?
âData is the new oil of the
Internet and the new
currency of the digital
world.â
Meglena Kuneva, European Consumer
Commissioner 2009
26. - 26 -Š STL Limited ⢠Proprietary and Confidential
Telcos have access to uniquely rich and persistent data
27. - 27 -Š STL Limited ⢠Proprietary and Confidential
World Economic Forum principles
⢠People are producers, not
just consumers
⢠Give people control, access
and choice
⢠Embed rights in code
⢠Make data practices a point
of competitive differentiation
⢠New ârules and toolsâ
weforum.org/personaldata
28. - 28 -Š STL Limited ⢠Proprietary and Confidential
Big Data: Five opportunity areas for Telcos
Opportunity grouping Description
Internal Services
Upsell, cross-sell, reduce churn, create & reward advocates, deliver
better customer experience
Raw Big Data
Professional
Services
Real-time
3rd party process
enablement
Personal Cloud
1.
2.
3.
4.
5.
29. - 29 -Š STL Limited ⢠Proprietary and Confidential
Business Model Innovation for the Digital Economy
The Telco 2.0 growth opportunity
Telco 2.0 business models and how to enable them
Simon Torrance, CEO, STL Partners/Telco 2.0 Initiative
Simon.torrance@stlpartners.com
www.telco2research.com
Thank you
Hinweis der Redaktion
Mention data only packages with unlimited voice in Denmark and Germany
Currently operators provide core services to individuals within their customer segments (P2P) communications and they collect money from millions of customers in thousands of segments using hundreds of devices. In doing this they have a collection of assets and skills that can be reused to develop new platform services for delivery to upstream customers (like the merchants in amazon model). Operators can be paid for these services by new upstream customer group.Now going to cover what they are and challenges of realising the opportunityâŚ
MNOs strengthen their position via a single contact point with upstream players; easier for upstream players to contract â one contract; More high-quality mobile services for consumers. Ours is a 2-sided business opportunityThis is our business model:Anayou is organised and focused on meeting the needs of Business and Commerce. It is a B2B profit-seeking company with a strategic asset in customer profilingAs well as providing a shared commercial and technical platform, anayou passes on aggregation cost benefits to offer MNOs advantageous commercial terms for the core servicesMNOs are organised and focused on meeting the needs of their consumers (and business custtomers-as-consumers)MNOs are anayou shareholders
Currently operators provide core services to individuals within their customer segments (P2P) communications and they collect money from millions of customers in thousands of segments using hundreds of devices. In doing this they have a collection of assets and skills that can be reused to develop new platform services for delivery to upstream customers (like the merchants in amazon model). Operators can be paid for these services by new upstream customer group.Now going to cover what they are and challenges of realising the opportunityâŚ