2016 "Economics of Telecoms" Report - Update of key economic metrics

Core presentation – Fédération Française desTélécoms
2016 “Economics of Telecoms” Report
– Update of key economic metrics
December, 2016

2
Agenda
1 Global digital ecosystem: which dynamics?
2 French digital ecosystem: which dynamics?
3 Key takeaways

3
Globally, the digital ecosystem has experienced a strong growth mostly
driven by internet players and device manufacturers
Source: Thomson Reuters, Arthur D. Little analysis
1Top 30 per category by 2015 revenues
2Euro vs 2015 local currency, applied to the local current currency value
Global digital ecosystem: which dynamics?
Illustrative
companies
Network
operators
Telecom
equipment
IT and
software services
Internet
Content
Devices
1 332
270
185
334+6%
1 237
2014 2015
1 301
3 915
493
3 709
175
1 271
2013
3 526
1 176
174
460
269
233
262
1 215
2012
481
3 358
1 106
1 165
283
442
184
828
255
86
984
3 128
2 649
188
960
951
2 882
20102009
371
343
2008
274
277
145
2011
1 054
412
189
108
187
1 052
269
179
2 642
198
273
74
927
357
869
820
2007
200
2 459
746
326
252
66
Revenues of the digital ecosystem by sector1
World, 2007-2015, billions of constant euros2
CAGR
2007-2015
+1%
-1%
+8%
+5%
+22%
+5%

4
Network operators and device manufacturers have driven 70% of the
world ecosystem’s growth over the period
1Top 30 per category by 2015 revenues
2Euro vs 2015 local currency, applied to the local current currency value
Revenues of the digital ecosystem1
World, 2007-2015, billions of constant euros2
268
Internet
18
Telecom
equipment
167
15
Content Ecosystem
2015
IT and
software
services
Network
operators
Devices
432
Ecosystem
2007
2 459
3 915
586
(31%)
(-1%) (40%)
(11%)
(1%) (18%)
(x%) : weight in the growth of the digital ecosystem

5
The digital ecosystem continues to grow at a slightly higher rate than the
world GDP
1In PPP dollars
GDP growth
Growth of the
digital ecosystem
CAGR
2007-2015
+6%
+5%
144
159
90
100
110
120
130
140
150
160
2007 2008 2009 2010 2011 2012 2013 2014 2015
GDP growth1 vs revenues of the digital ecosystem
Monde, 2007-2015, base 100 in 2007

6
Europe is the only region which does not benefit from the growth of the
digital ecosystem
North America
+6%
Europe
South America
Oceania
2015
Asia
1 601
47
2013
1 361
18
2012
483
3 358
3 709 18
1 460
2014
1 790
51
1 697
173 526
3 915
514
54
1 539
499520
1 228
1 150
17
17
1 391
508
17
2011
530
46
1 057
531
2009
40
36
3 128
1 267
2 642
2010
1 081
1 497
2 882
2 649
22
2008
17
2007
2 459
997
25
921
18
523506
16
1 015
19
1 073
1 035
Revenues of the digital ecosystem by sector
World, 2007-2015, billions of constant euros
+7%
0%
+8%
+14%
+1%
CAGR
2007-2015

7
Apart from telecom equipment vendors, all other digital ecosystem players
have exceeded their before-downturn capitalization levels
CAGR
2012-2015
Market capitalization value by sector
1 264
4 020
269 300
4 577
558
520
1 154
980
894
350
1 026
1 280
1 197
1 149
1 020
2012
517
2009
1 099
538
4 544
1 079
391
1 149
249
287
159
3 713
2008
233
2 794
829
302
870
2007
312
4 044
313
2010
895
420
970
337 326
447
936
816
329
1 587
430
2014
0%
415
Content
1 552
408
353
Network
operators
6 656
537
1 484
2013 2015
6 923
1 629
5 946
1 219
1 398
Telecom
equipment
Internet
1 542
522
1 362
1 511
Devices
IT and software
services
+15%
2011
1 506
+14%
+11%
+6%
+14%
+39%
+11%
CAGR
2007-2012
-4%
-8%
+4%
+5%
+11%
-5%

8
All telecom operators, except European ones, have benefited from a
strong growth over the period
1Nationality according to HQ location
Evolution of telecom operator revenues per region1
+5%
Europe
North America
South America
Asia
273
2013
1 176
391
48
18
428
442
18
283
2012
1 106
349
Oceania
2014 2015
474
1 237
17
290
42
295
492
45
1 301
453
21
18
2008
329
927
291
279
2011
17
35
372
299
2010
295
2009
41
333
17
297
951
291
292
341
1 054
984
403
32
17
322
2007
17
16
17
265
288
869
18
282
+7%
0%
+7%
+14%
+1%
CAGR
2007-2015

9
European telecom operators’ capitalization is still far lower than pre-
downturn level
1Nationality according to HQ location
53
442
404
1 154
45
426
314
23
2009
357
51436
44
38
1 197
41
2011
552
385
251
28
2010
290
1 149
407
1 506
2012
355
32
2007
1 079
33
1 099
24
29
2008
1 587
434
316316
423
445
314
387
304
635
32
+11%
North America
-5%
Europe
40
Asia
2015
Oceania
1 629
339
640
577
27
South America
2013
39
545
46
593
49
317
2014
1 542
-8%
-10%
0%
0%
+2%
CAGR
2007-2012
+11%
+11%
+13%
-13%
+8%
CAGR
2012-2015
Evolution of telecom operator market capitalization per region1

10
Agenda
3 Key takeaways

11
The French mobile market is very dynamic in terms of equipment and
data consumption
French digital ecosystem: which dynamics?
Source: comScore, ARCEP, network operator, AT&T, Arthur D. Little analysis
1Active 3G or 4G broadband clients
Average monthly
data consumption1
Smartphone installed base
(Millions de smartphones)
4G cards
(Millions of active cards)
34
Jan.-15 Jan.-16
+8% 37
25
13
4
Q1 2015
+157%
Q1 2014 Q1 2016
X%
5% 19%
% of SIM card
1 GB
Q1 2015
1,5 GB
Q1 2016
54%
34%
Connectivity and equipment in France – Mobile
France, 2014-2016
55h of music streaming or
6h of SD video streaming

12
Broadband subscriptions are growing strongly in France, largely in the
form of multiple play bundles
Source: ARCEP, Arthur D. Little analysis
1Speed >= 30 Mbps
2Fixed broadband and other subscriptions
4,8
3,6
+33%
Q2 2016Q2 2015
Very High Speed1 broadband
subscriptions
(Millions of subscriptions)
Multiplay subscription2
(% fixed broadband subscriptions)
Q2 2016
68% 69%
Q2 2012
62%
Q2 2014
+6%
Connectivity and equipment in France – Fixed broadband
France, 2012-2016

13
2%1%
14%
1%
82%
1%
89%
4%
3%
8%
68%
16%
4%
3%
3%
12%
17%
14%
54%
Network operators are essential to the French digital ecosystem
Source: Diane, annual reports, Arthur D. Little analysis
1Revenues declared in France or released in the press
2Adjusted data to account for estimated revenues of international players in France
3Investments of Nokia’s mobile business unit are reported with Microsoft following the acquisition of this unit by the latter in 2014
5 content
players
5 Internet OTT
players
5 telecom
operators
5 equipment
vendors
5 device
manufacturers
Revenues1,2
€73 B
Direct jobs
128 500
Investments3
€9 B
Taxes
€3 B
Relative size of sub-sectors in the digital ecosystem
France, 2015
3%
R E I T

14
The share of telecom services in French household spending is low and
has decreased over the past few years
Source: Euromonitor, Arthur D. Little analysis
Telecom share in total household spend
France, 2007-2015, % of household expense
17%
Clothing &
furniture
9%
Leisure
15%
Food
4%
Health
27%
Housing
13%
Transport
2%
Telecom
services
13%
10%
4%
24%
14%
16%16%
3%
13%
Others
20152007
R E I T

15
Contrary to other key regulated sectors, telecom services prices have
dropped over the past 5 years
Source: Insee, Arthur D. Little analysis
Consumer price index evolution on selected products
France, 2010-2015, Base 100 in 2010
130
122
79
106
75
80
85
90
95
100
105
110
115
120
125
130
2010 2011 2012 2013 2014 2015
Telecom services
Postal services
Inflation
Rail111
Toll roads & parking
117
Electricity
City gas115
R E I T

16
Prices of telecom services in France are still lower than in other large
Western countries
Source: network operators, Arthur D. Little analysis
1Triple play offers only; unlimited calls to fixed lines at least; unlimited high-speed Internet via xDSL or fibre; TV included, except for additional packages; operators with > 10%
market share; 2 Unlimited calls when available (otherwise >500 minutes), unlimited SMS/MMS, 2 Go Internet at least; offers excluding device, free of engagement when available;
operators with > 10% market share
Offer benchmark – Main operators
Selection of countries, October 2016, € incl. taxes / month
37€
28€
23€22€20€
15€
USSPUKITAL
2015 20 € 42 €30 € 74 €› 25 € 47 € 30 €20 €20 € 47 €45 €26 €
Fixed (Triple Play)1 Mobile2
74€
41€
36€
26€25€
18€
R E I T

17
The strong decline in revenues from network operators has had an
important negative impact on level of employment of 2010
Source: ARCEP, Insee, Arthur D. Little analysis
1Incl. a part of direct employments
2ARCEP figures (retail market)
Direct employments and revenues of network operators in France
France, 2010-2015, Base 100 in 2010
87
94
60
70
80
90
100
110
2010 2011 2012 2013 2014 2015
83
Revenues2
Direct employment (ARCEP)
CAGR 2010-2015
- 1,3 %
- 3,7 %
Employment (DARES)1 - 2,8 %
R E I T

18
Despite the drop in revenues, operators strongly raised their investments
to meet the demand for very high speed broadband
1Investment effort : operators investments (excluding frequency acquisition) / operators revenues
2Temporary ARCEP figures for 2015
Telecom operators investment and revenue evolution
France, 2010-2015, Base 100 in 2010
121
83
147
70
80
90
100
110
120
130
140
150
2010 2011 2012 2013 2014 2015
Investment effort1
Investment effort
(excluding frequency acquisition)2
Revenues2
R E I T

19
Telecom operators’ investments has remained very high – €62 billion
were invested over the period
1Investments excluding frequency acquisition
2Speed >= 30 Mbps
Investments of network operators1
France, 2007-2015, billions of constant euros
3,8 4,3 3,7 4,4 5,0 4,9 4,7 4,7
5,5
2,4
2,2
2,2
2,1
2,3 2,5 2,6 2,4
2,3
20102007
7,47,3
5,9
6,5
2008
6,5
2009 2011
6,1
7,3
20152012 2013
7,8
2014
Mobile
investments
Fixed
investments
7,0
% of
revenue
15% 15% 14% 15% 17% 18% 19% 19% 22%
R E I T
62 billion
(69 billion including frequency acquisition)
BeforeVery
High Speed2
Investment phase incl.
Very High Speed
With ~7m of
fiber
connections,
France benefits
from a coverage
of ~25% of
households in
2016

20
The 7 billion euros invested each year by network operators represent a
very significant weight in the economy
Source: companies, desk research, Arthur D. Little analysis
1Network operators: ARCEP figures (excluding frequency acquisition); Electricity: RTE (2009 to 2014) and ERDF; RFF; Highways: ASFA (Sanef, SAPN, ASF….)
Telecom operators investments1 vs. other sectors
France, 2008-2015, 8-year annual average
7,0
5,0
4,7
1,7
Highways Tr. / distrib.
of electricity
Railways Network
operators
equivalent to the
following
investments, each
year…
or
235 TGV trains
18 A380
17 MillauViaducts
5 nuclear power plants
or
or
or
520 high school
R E I T

21
Telecom has a multiplier effect on the economy, as telecom investments
yield 6 times the amount invested for the French economy
Source: INSEE, IDATE, ARCEP broadband observatory, Arthur D. Little Ericsson Chalmers university of technology « Socioeconomic effects of broadband speeds », French State
finance law project 2013 report on compulsory levy and their evolution, Arthur D. Little analysis
6 €
3 €
1 €
R E I T
Multiplier
effect: x6
46% of compulsory
levy on GDP
Telecom operators’
investment in
broadband networks
(fixed and mobile)
Cumulative creation
of added value
(GDP) in France
Taxes and
levies
Examples of induced effects on
the economy
 Time and productivity gains for
enterprises
 Time savings and customer
experience improvement
 Emergence of new sectors of
activities and new players
Value creation of the telecom
investments
 1 euro invested in broadband
networks creates 6 euros of
GDP which represents 3 euros
of revenue for the State
generate
generate

22
10 years
15 years
16 years
19 years
19 years
24 years
25 years
27 years
49 years
Luxury goods
Food & agriculture
Telecoms
Construction
Oil
Industry
Utilities and environmental services
Health
Consumer goods
As a consequence, the telecom sector is based on heavy investments
which are amortized on a long term basis
Return on investment timeframe1 for various business sectors2
France, average 2012-2015, number of years
Source: company, Thomson Reuters, Bloomberg, Arthur D. Little analysis
1ROALTC : return on average long term capital is calculated as follow : EBIT x (1 – Taxes) / (Total Equity + Total Long Term Debt, Deferred Income Tax and Total Other Liabilities)
2Utilities and environmental services: EDF, Suez, Veolia ; construction: Saint Gobain, Vinci ; telecoms: Orange, SFR, Iliad, Bouygues ; consumer goods: Carrefour ; health: Sanofi ;
industry: Renault, Michelin, Schneider Electric; luxury goods: LVMH, L'Oréal, Kering ; food & agriculture: Danone; oil: Total
R E I T

23
Despite the decline in telecom operators’ revenues, specific taxation
remained stable in France
Source: operators, FFT, Arthur D. Little estimations
1 Perimeter : top 4 companies’ taxes & FFT members specific taxes
2IFER antennas and copper
Telecom operators’ taxation
France, 2012 and 2015, millions of euros and % of total taxes
1 219
2015
1 209
2012
4%
7%
10%
26%
47%
6%
R E I T
2015
1 058
2012
2 018
Income tax
Specific taxes
Fréquencies + FH
IS
TOCE (France TV)
COSIP (CNC)
IFER2
Others

24
Telecom operators suffer from an asymmetric taxation, which is
disadvantageous in comparison with other players of the digital ecosystem
Source: Greenwich Consulting, Conseil National du Numérique, PPL Marini, desk research, Arthur D. Little analysis
1Forecast figures
2Google, Apple, Facebook, Amazon
Fiscal optimization mechanism in Europe of the GAFA
Country of final
consumption
Establishment country
Place of fiscal registration
Ireland
Luxemburg
Examples
VAT Income tax
 €600 million of tax revenue on
electronic services for France
in 20141
 €14 million of income tax for
the « GAFA2 » in France in
2015
Network
operators
Internet
players
x9
Income tax paid in
France in 2015
R E I T

25
Telecom operators’ margins are used to finance strong investments
1Top 4 of French network operators incl. Orange, SFR, Bouygues Telecom and Free
2Estimated operational FCF (EBITDA – CAPEX)
Comparison between KPIs of the telecom sector1 and CAC40
2015, billions of euros
x% % of revenues
Network operators CAC 40 average
Dividends2 3,3
Revenues
1,1
12,8
Taxes
39,1
CAPEX 8,0
EBITDA 33%
20%
3%
Dividends 1,0
0,7Taxes
5,1
2,3
EBITDA
CAPEX
Revenues 39,1
13%
2%
2%
R E I T
8% 2%

26
Despite efforts made by operators to enhance their profitability, this was
more than absorbed by the growth in investment
1Top 4 of French network operators incl. Orange, SFR, Bouygues Telecom and Free
2Estimated operational FCF (EBITDA – CAPEX)
Economic performance of major French network operators1
France, 2013-2015, billions of euros
Revenues EBITDA Operational FCF2
-5%
2015
39,1
2013
41,2
12,0
+7%
2013 2015
12,8
2013
-8%
2015
5,3 4,8
29% 33% 13% 12%
x% % of revenues
+18%
2015
8,0
6,7
2013
16% 20%
Capex
+ € 800m
of EBITDA
+ € 1,3b of
investments
vs

27
Agenda
3 Key takeaways

28
Key takeaways of the 2016 "Economics of Telecoms” Report
Key messages
The digital ecosystem keeps growing in every region of the world, except in
Europe
1
Appetite for digital services is very strong, especially in terms of connectivity and
usage
2
As digital services and technologies rely on connectivity, there is an opportunity
to rebuild a strong digital ecosystem in France
3
Telecom operators are the basis of the current digital ecosystem in France and
are key players to develop the sector
4

Client Logo Area
Remove borders
Arthur D. Little has been at the forefront of innovation since 1886.
We are an acknowledged thought leader in linking strategy,
innovation and transformation in technology-intensive and
converging industries.
We navigate our clients through changing business ecosystems to
uncover new growth opportunities.We enable our clients to build
innovation capabilities and transform their organizations.
Our consultants have strong practical industry experience combined
with excellent knowledge of key trends and dynamics.Arthur D.
Little is present in the most important business centers around the
world.We are proud to serve most of the Fortune 1000 companies,
in addition to other leading firms and public sector organizations.
For further information please visit www.adlittle.com.
Copyright © Arthur D. Little 2016.All rights reserved.
Contact
Ignacio GARCIA ALVES
Managing Partner
garciaalves.ignacio@adlittle.com
Didier LEVY
Director
levy.didier@adlittle.com
Eytan KOREN
Manager
koren.eytan@adlittle.com

2016 "Economics of Telecoms" Report - Update of key economic metrics

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Andere mochten auch

Andere mochten auch (13)

Ähnlich wie 2016 "Economics of Telecoms" Report - Update of key economic metrics

Ähnlich wie 2016 "Economics of Telecoms" Report - Update of key economic metrics (20)

Mehr von Fédération Française des Télécoms

Mehr von Fédération Française des Télécoms (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

2016 "Economics of Telecoms" Report - Update of key economic metrics