Our final team report on the Imperial MSc Management Consulting project June 2012

1. Mathias Borglin
Orakarn Chantaramungkorn
Chris Corbishley
Patrick O’Neil
Zhaoyu Qian
Reena Sharma
Sopika Tanthmanatham
BearingPoint Consulting Project
IMPROVING MONETISATION
IN THE UK MOBILE SECTOR

3. EXECUTIVE SUMMARY
Mobile operators (MOs) are currently facing a
major challenge as well as a huge opportunity
to boost profits and build more attractive
business models for the future. They must
increase their profits in order to (1) achieve
targets set by investors and (2) invest in next
generation networks. Yet operators find
themselves in a position where discretionary
cash is becoming scarce and their organisations
necessarily more lean, making it essential
for them to explore new ways of leveraging
existing assets, technologies and competencies
as well as investigate new growth areas through
strategic partnerships and savvy investments.
In this report we break down the issue of
‘improving monetisation’ amongst UK
operators in terms of increasing profits by
reducing costs, making more cost-efficient
investments in network infrastructure, and
improving revenues, specifically new revenue
streams in the consumer and enterprise
markets. Through a combination of primary
and secondary research, we have set out our
recommendations based on converging and
diverging stakeholder viewpoints on how
different UK operators can monetise new
data services and manage the transition to a
new mobile economy based on ‘bits’ and not
‘minutes’.
3

5. TABLE OF CONTENTS
Introduction
Problem Definition: Regulation, Rivalry, Recession
The Value Chain
Our Approach
Criteria for recommendations
7
7
8
10
11
Cost Optimasation and Infrastructure
Capex spending in the mobile telecoms sector
Recommendations
12
12
15
Revenue Opportunities in Consumer Markets
Bundling
Mobile Advertising
mCommerce
Recommendations
17
17
18
18
19
Revenue Opportunities in Enterprise
Unified Communications
Recommendations
20
20
25
Conclusion
26
GLOSSARY
27
References
30
Appendixes
Appendix I: Interviewees
Appendix II: Interview transcripts
Appendix III: O2 Wallet Overview
34
34
36
45

7. INTRODUCTION
Problem Definition:
Regulation, Rivalry, Recession
The mobile telecoms industry is at present
being negatively impacted by three key factors:
regulation, rivalry and recession.
Operators such as Orange, Vodafone,
T-Mobile and O2 are operating in a highly
mature industry which makes the UK one of
the most competitive markets in the world.
The flattening out of registered lines is a
clear sign that their market base is stagnating
(Figure 1), whilst key performance indicators
such as average revenue per user (ARPU)
and EBITDA are declining as a result of
the regulator putting pressure on traditional
revenue streams from voice and messaging
Figure 1: UK Registered Mobile Lines Penetration Rates
Source: Ofcom
1

8. services. Meanwhile data revenues are not
sufficient to make up the delta (Figure 2).
However, overall growth in the communications
market1 suggests operators are missing out
on some important opportunities as a result
of their precarious position in the industry
value chain. Recession is compounding these
problems by making it increasingly difficult
for cash-starved operators to innovate and
compete with new entrants, as well as invest in
next generation networks in order to meet the
growing demand for mobile data.
The Value Chain
Intense rivalry is not only present amongst
the mobile operators. Indeed a significant
threat is now posed by powerful new entrants
on both sides of the value chain, including
mobile handset manufacturers like Apple
providing their own over-the-top (OTT)
Figure 2: UK Service Mobile Service Revenue
Source: Ofcom
1.
2
Ofcom, “International Communications Market Report 2012”, http://stakeholders.ofcom.org.uk/binaries/research/cmr/cmr12/CMR_UK_2012.pdf
(accessed 5 Jul 2012).

9. services, MVNOs and internet giants such
as Google. This fundamental shift has led to
fears of operators becoming the ‘dumb pipe’,
providing a commodity service from which
everyone else benefits but them.
The following figures (3 and 4) give an
indication of how the value chain has been
disrupted as a result of new entrants being
able to establish a direct relationship with end
users.
Figure 3: Mobile sector value chain before the introduction of smartphones
Source: Own analysis
Figure 4: Mobile sector value chain after the introduction of smartphones
Source: Own analysis
3

10. Our Approach
Our research was carried out using a
combination of secondary sources, (industry
reports, Ofcom data, trade press) and
conducting a series of primary interviews with
high-level industry participants whose feedback
formed the basis of our recommendations.
We broke down the issue of ‘improving
monetisation’ in terms of increasing profits,
which can be separated into cost and revenues.
Firstly, how operators can make more costefficient investments in network infrastructure
and secondly which new revenue streams have Interviewee selection was designed to capture
the highest growth potential in both consumer the converging and diverging perspectives
of different industry stakeholders. Amongst
(B2C) and enterprise (B2B) markets.
those interviewed were:
Figure 5: Our approach
Source: Own analysis
4

11. •
•
•
Mobile Operators: Head of Consumer Criteria for recommendations
Product Marketing at O2 Telefonica
As a general industry report our
Enterprise Product Manager at
recommendations do not represent a ‘one
Vodafone
size fits all’ solution for all UK operators.
Equipment Vendor: Chief Technical
Instead they are a set of options to be
Officer of Huawei UK
considered based on the ethos of individual
operators.
Systems Integrator: mCommerce
Specialist from IBM Citi Group
•
Institutional Investor: Director of
First Capital
•
Regulator: Senior Associate at Ofcom
For more information on the persons
interviewed see Appendix I.
The three criteria used in making our
recommendations were:
1. Does it leverage the operator’s core
assets and capabilities?
2. Is it an attractive market with high and
sustainable growth potential?
3. Does it help improve the operator’s
position in the industry value chain?
5

12. COST OPTIMASATION AND
INFRASTRUCTURE
Capex spending in the mobile
telecoms sector
infrastructure and upgrading technology, but
without necessarily optimising the returns.
Indeed, if we look at global capex levels
Previous years of strong growth in the telecom in the telecoms industry, the amount has
industry have allowed operators to build been growing almost constantly since 2003
up a large cost base with focus on building (Figure 6).
Figure 6: Global capex levels in the telecoms industry 2003 -2011
Source: Adapted from: We need to talk about Capex by PwC
6

13. As confirmed in our interviews, most operators
agree that their capex planning is driven by
technology advancements and not by business
objectives or market demand, resulting in over
20% of capex being spent on projects that
fail to achieve a positive ROI, whilst the rest
barely cover the cost of capital.2 Roll-out of
4G/LTE in the UK will require increasingly
large capex, with reports suggesting total
investments of nearly £5.5 billion by 2015,3
thus operators must identify ways of reducing
spend to achieve a positive ROI.
The global average long-term ROI has been
below cost of capital for the last 10 years
(Figure 7). With the recent economic downturn
and the boom in data traffic, pressure is now
on operators to spend wisely in order to
regain the trust of institutional investors.4
An interview with John Yeomans, Director
of First Capital confirmed a new emphasis
on telecoms identifying more cost-efficient
Figure 7: Average ROI in the telecoms industry 2001-2010
Source: Adapted from: We need to talk about Capex by PwC
2.
PwC, “We need to talk about CAPEX - Benchmarking best practice in telecom capital allocation”, www.pwc.com/communications/capex (accessed 13th
Jul 2012).
3.
Capital Economics, “Mobile Broadband and the UK Economy”, http://www.4gbritain.org/wp-content/uploads/2012/04/Mobile-Broadband-and-the-UKEconomy-30-April-2012.pdf (accessed 13th Jul 2012)
4.
Ernst Young, “Top 10 risks in telecommunications 2012”, http://www.ey.com/Publication/vwLUAssets/Top_10_risks_in_telecommunications_2012/$
FILE/2012_TelecomsBusinessReport_13Feb2012_low%20res.pdf (accessed 13th Jul 2012).
7

14. alternatives for universal IP infrastructure as
well as the convergence of fixed and mobile
networks.
Managing opex spending in the
mobile sector
to maintain healthy margins they must manage
these costs effectively, the three major cost
areas being (1) Network (maintenance), (2)
Customer acquisition and retention (sales
and marketing) and (3) Interconnect with the
networks of other operators (Figure 8).
Over the past five years, most European
operators have seen rising operating costs
compared to revenues. In order for operators
The promise of LTE is that network running
costs will be lower than the existing patchwork
of legacy 3G technologies. Yet in order to
Figure 8: Opex breakdown for a European Mobile Operator
Source: Adapted from Quest for Margins by Capgemini
8

15. get there, struggling UK operators have had
to consolidate their networks under sharing
agreements, whilst continuing delays in the
licensing of spectrum by Ofcom has prompted
operators to identify alternative solutions
for dealing with increased data traffic. This
is in stark contrast to a heavily incentivised
US market which has seen five new MNO
entrants as well as incumbents investing nearly
$4 billion a piece in LTE infrastructure.5
to make expensive wireless infrastructure
investments.7
A recent example is Vodafone in Germany
and Italy who estimates cost savings of up to
€60 million in Germany alone from building
their own backhaul network. Their £1 billion
acquisition of Cable Wireless puts them in
an advantageous position against their UK
competitors who lack the scale to make the
same huge investments in fixed-line.
Recommendations
Network sharing
Based on our cost breakdown, there are a An option for reducing required investments
number of areas where measures can be taken and improving monetisation of existing
to improve margins, especially within network assets is in the sharing and outsourcing of
network capacity. Recent examples of this are
opex.
Everything Everywhere formed by T-Mobile
and Orange and the newly formed joint
Wired Backhaul Network
venture between Telefonica UK (O2) and
One way that operators have reduced opex
Vodafone UK. This will help them increase
is by investing in their own wired backhaul
quality of service for their customers while
networks. Most operators use their own
reducing the required number of masts saving
microwave backhaul and then lease backhaul
them “hundreds of millions of pounds”.8 In
capabilities, which despite carrying only 35%
terms of EBITDA and margin improvements,
of traffic, makes up 65% of the costs.6 By
operators with nationwide coverage could
investing in backhaul, telecoms may reduce
improve their margins by 1.4%. It will also
their dependency on third-party providers and
help them build-out more rapidly their 4G/
increase EBITDA margins by up to 1.85%, as
LTE capacity, reducing the expected roll-out
well as keep up with increasing data demand
time by up to two years.9
from customers. This also reduces the need
5.
6.
7.
8.
9.
See Appendix for interview with Bruno Basalisco, Senior Associate, Ofcom
Capgemini, “Capgemini Quest for Margins: Operationsal Cost Strategies for Mobile Operators in Europe”, Telecom Media Insights, Issue 42 http://www.
capgemini.com/m/en/tl/tl_Operational_Cost_Strategies_for_Mobile_Operators_in_Europe.pdf (accessed 14th Jul 2012).
Carol Wilson, “LTE Will Reshape Entire ATT Network”, Light Reading Mobile, http://www.lightreading.com/document.asp?doc_id=193566 (accessed 14th
Jul 2012).
Gideon Spanier, “Vodafone and O2 to save ‘hundreds of millions of pounds’ by sharing networks”, The Independent, http://www.independent.co.uk/
news/business/news/vodafone-and-o2-to-save-hundreds-of-millions-of-pounds-by-sharing-networks-7827959.html (accessed 14th Jul 2012).
Ernst Young, “Top 10 risks in telecommunications 2012”, http://www.ey.com/Publication/vwLUAssets/Top_10_risks_in_telecommunications_2012/$
FILE/2012_TelecomsBusinessReport_13Feb2012_low%20res.pdf (accessed 13th Jul 2012).
9

16. Wi-Fi Investment
Another option for telecoms to reduce
required investments in expensive mobile
infrastructure is to redirect some of its
investment into establishing ubiquitous WiFi networks. By using Wi-Fi technology in
densely populated areas and large corporations,
capacity pressure on mobile infrastructure can
be reduced. A recent example of this is the
acquisition of Spectrum Interactive by Arqiva,
a communications infrastructure company10.
Indeed most consumers are used to connecting
through Wi-Fi. In 2011 4.9 million people in
the UK used Wi-Fi hotspots11, an increase of
600% since 2007. Most consumers also view
Wi-Fi as the most accepted measure to reduce
strain on the mobile network (Figure 9), a
view shared by operators such as O2, whose
head of consumer marketing, Richard Porter
explained that O2 WiFi has been an effective
way of balancing data traffic (see Appendix
II).
Figure 9: Customer attitude towards changes in data services
Source: Managing your megabytes by PwC
10.
Nicky Atkins, “Arqiva agrees offer to acquire spectrum interactive limited”, Spectrum Interactive Limited, http://spectruminteractive.co.uk/m/News/a/
Arqiva-offer/ (accessed 14th Jul 2012).
11.
PwC, “Managing your megabytes - How fear of data charges is driving mobile users to WiFi” PwC Communications, http://www.pwc.com/sg/en/tice/
assets/ticenews201204/consumer-mobile-feb-2012.pdf (accessed 16th Jul 2012).
10

17. REVENUE OPPORTUNITIES IN
CONSUMER MARKETS
“There is a lot of value in the relationship we have with our
customers; an overall wrap that starts with connectivity, be it broadband,
mobile or Wi-Fi, but also goes beyond that into an experiential piece we
can bring to them, like Priority Moments, Priority Sports, plus a whole
load of content experiences currently in the pipeline”.
Richard Porter, O2 Telefonica UK
Bundling
Bundling as a typical consumer lock-in
strategy, has been adopted by most operators
to retain and attract customers. The most
widely used forms are “experiential bundling”
and ‘Quadruplay’. Experiential bundles offer
standard mobile network services (on a
monthly contract) with differentiated customer
experiences, such as O2 Moments or Orange
Wednesdays. Quadruplay is a 4-service package
which bundles fixed line, broadband, pay TV
and mobile services together. Operators and
MVNOs (such as Sky and Virgin) with a larger
and stronger position across all these assets are
offering ‘quadruplay’ or ‘triple-play’ bundles to
lock-in their customers, giving them a unique
competitive edge.
12.
As data revenues begin to show potential
for top line revenue growth, operators can
compete by bringing out new types of data
bundling, such as ‘shared data plans’ across
multiple devices and users, responding to the
huge expansion of mobile data traffic and
connected devices, including smartphones,
tablets, e-book readers and gaming devices.
By offering data plans, operators can increase
ARPU, boost data revenue by absorbing
subscriptions across multiple devices whilst
driving adoption of more expensive, higherquota data plans. It has so far been launched in
the US, where it is estimated that multi-device
plans could drive US data revenue from $81.4
billion in 2011 to $151.9 billion in 2016.12
Gartner, “Gartner Says Communications Service Providers Must Adopt Multidevice Data Plans to Take Advantage of Expanding Cellular Connectivity”,
http://www.gartner.com/it/page.jsp?id=2004215 (accessed: 19 Jul 2012).
11

18. “We are looking to monetise our customer relationship in
a third party way through our O2 Media Business. This can be
done by advertisers, such as local businesses, paying to share that
relationship as well as location-specific information used to target
them with specific offers.”
Richard Porter, O2 Telefonica UK
Mobile Advertising
Global expenditure on mobile advertising
(search, display and messaging) in 2011
was $5.3 billion, and is expected to double
every year to $20.6 billion in 2015.13 With
the increasing penetration of smartphones,
advertising is a growing market from which
operators can capture value by ‘monetising the
customer relationship’.
In the UK, O2 is already launching advertising
products via its O2 Media business such as
O2 priority moments for local advertisers.
Statistics show that geo-location based
advertising including mapping and search
tools deliver the highest revenue amongst all
types of mobile advertising, which fits with
operators’ core competencies and strengthens
their position in the value chain.14 However,
a move such as this invariably raises privacy
concerns. A Senior Associate at Ofcom stated
that although mobile network operators are
13.
14.
15.
16.
12
allowed to use customer’s phone number and
location data for marketing purposes once they
have consent, data protection law laws coming
into place over the next two years will start
to make things difficult for the major players
including Google, Facebook and even MNOs.
mCommerce
mCommerce, defined as the buying and selling
of goods and services via wireless devices over
mobile internet, is expected to increase 65%
annually to reach $24 billion in 2015.15 This
follows trends around increasing smartphone
penetration and ubiquitous mobile broadband
increasing users perceived need for mobility.
Mobile network operators play a key role in
the mCommerce value chain by providing
mobile communication networks that are
irreplaceable and difficult to imitate.16 They
are the intermediary between upstream value
MobiThinking, “Global mobile statistics 2012”, Part C: Mobile marketing, advertising and messaging, http://mobithinking.com/mobile-marketing-tools/
latest-mobile-stats/c (accessed: 20 Jul 2012).
Ibid
Coda Research, “Why mCommerce?”, The essential of mCommerce or Mobile Commerce, http://www.cart2mobile.com/why-mcomm/Index.aspx
(accessed 9 Jul 2012).
Ying-Feng Kuo and Ching-Wen Yu, “3G telecommunication operators’ challenges and roles: A perspective of mobile commerce value chain”, Elsevier B.V.,
http://www.sciencedirect.com/science/article/pii/S0166497205001124 (accessed 18th Jul 2012).

19. chain members and the end user. Hence they
can offer diversified value-added services
to the industry such as financial and retail
services. Financial services, such as mPayment
(which includes mBanking giving customeraccess to their bank accounts to transfer
money) and mWallet (customers using their
mobiles to purchase goods and services) are
areas currently being explored. Yet it is not
in these areas where operators can capture
the most value. For instance, mPayment is
based on physical payment at point of sale
over a fixed-line network whereby the handset
manufacturer provides the enabler via an NFC
chip.
On the other hand retail services, or mRetail,
has the potential to leverage operators’
capabilities in billing, transaction security
and delivery of content. Key partnerships or
investments in e-commerce platforms such as
O2 Wallet (see overview in Appendix) could
allow operators to compete with Google by
offering a secure service to shoppers, including
options to browse for product information,
compare prices in-store, store locators and
purchase products securely over the mobile
network. Mobile retail has shown 300% YearOn-Year growth for Q1/2012 in the UK17, a
market expected to reach £4.5 billion in 2012
- more than any other European nation.18
Recommendations
Mobile Operators should pursue opportunities
where they can add the most value and
improve their position in the value chain.
We recommend adopting multi-device data
bundling as it will help MOs retain and extract
more value from their customers, while having
a competitive advantage over MVNOs such a
Sky and Virgin.
Additionally, operators must develop an
e-commerce and billing platform which is
adapted for on-demand payments made via
mobile internet. That way they can monetise
over-the-top services such as mRetail or
mobile app stores more effectively. This
general recommendation came out of an
interview with the CTO of mobile equipment
vendor, Huawei who explained that their RD
dollars are currently being spent on developing
more sophisticated operations support system
(OSS) for mobile operators to separate the
billing of mobile minutes (or bits of data)
and on-demand mobile purchases to allow
operators to offer secure payment services to
their mCommerce customers.
17.
IMRG, “As e-retail market rebounds, mobile sales record extraordinary growth”, http://www.imrg.org/ImrgWebsite/User/Pages/Press%20Releases-IMRG.
aspx?pageID=86parentPageID=85isHomePage=falseisDetailData=trueitemID=7327specificPageType=5pageTemplate=7 (accessed 21st Jul
2012).
18.
Kelkoo and the Centre for Retail Research, “Mobile retail set for phenomenal growth”, http://www.fashionunited.com/executive/report/mobile-retail-setfor-phenomenal-growth-20120302488470 (accessed 18th Jul 2012).
13

20. REVENUE OPPORTUNITIES IN
ENTERPRISE
“We are looking to change the way Britain works by becoming a
total communications provider for our enterprise customers. We are
currently the leaders in mobile enterprise, we want to become leaders
in fixed as well (following the acquisition of Cable Wireless)”
Simone Vaccari, Enterprise Product Manager, Vodafone UK
Unified Communications
network services to enterprise customers, with
75% smartphone penetration in the workplace,
Vodafone are the leaders in mobile enterprise, more companies are utilizing tablets and
and have stated their mission is to become smartphones to boost productivity at work.
a total communications provider through Opportunities within this space include new
managing corporate networks for their services such as One Net which provides a
enterprise customers in both fixed and mobile. single mobile calling plan for SMEs and allows
These are highly lucrative contracts, which are the answering of landline calls on your mobile,
perhaps only accessible to operators designed as well as a growing new trend called ‘bring
to deliver enterprise services, especially one your own device’ (BYOD) which allows the
such as Vodafone who recently acquired one secure integration of personal mobile devices
of the largest fixed line enterprise networks in into corporate networks.
the UK.
Unified communications offers a single
platform for managing fixed and mobile
communications, thus Vodafone would be the
only UK operator able to provide it. Yet there
are still plenty of new revenue opportunities
for operators looking to offer managed mobile
Mobile Cloud Computing
Mobile Cloud Computing (mCC) is one of the
fastest growing segments in cloud computing.19
According to Juniper Research, the mCC
market is expected to grow 88% between 2009
and 2014 to reach $9.5 billion,20 with the largest
19.
Kevin Tea, “Mobile Cloud Is The Next Game Changer”, Business Computing World, http://www.businesscomputingworld.co.uk/mobile-cloud-is-the-nextgame-changer/ (accessed: 18 Jul 2012).
20.
Andrew R Hickey, Mobile Cloud Demand skyrocketing: Report, http://www.crn.com/news/cloud/231902081/mobile-cloud-demand-skyrocketing-report.
htm;jsessionid=jFIgrAlNy2bhGXSMHmnqZA**.ecappj01 (accessed: 19 July 2012).
14

21. revenue contributions coming from enterprise
mobile cloud applications.21 Although market
forecasts anticipate exponential growth, many
operators show lack of clear strategies for fully
utilising the prospective 4G networks with
mobile cloud services. Therefore, operators will
have to design business models to differentiate
themselves from competition and improve
profitability.22 The challenge facing operators
is how to manage their networks to deliver
services to their customers efficiently whilst
overcoming regulation concerns over the free
flow of data traffic (as yet undetermined) and
possible network congestion.23
Machine-to-Machine (M2M)
Machine-to-Machine (M2M) which is
connecting computers, devices and equipment
to receive and transmit data remotely over a
network, represents a significant new revenue
opportunity for MNOs as increasing number
of devices, such as cars, video surveillance
cameras, home appliances and health monitors,
are embedded with mobile broadband
technology. The number of cellular M2M
connections is expected to reach 359.3 million
in 2016, with Compound Annual Growth Rate
(CAGR) of 27%24 (Figure 10).
Figure 10: Cellular M2M network Connections
Source: Berg Insight
21.
Bill Lesieur, “Maravedis: Are operators prepared to leverage the mobile cloud?”, Fierce Broadband Wireless, http://www.fiercebroadbandwireless.com/story/
maravedis-are-operators-prepared-leverage-mobile-cloud/2012-02-01 (accessed: 18 Jul 2012).
22.
Ibid
23.
Marguerite Reardon, “Telcos see future in the cloud”, Mobile World Congress - CNET Reviews, http://reviews.cnet.com/8301-13970_7-57386622-78/telcossee-future-in-the-cloud/ (accessed: 19 Jul 2012).
24.
Tobias Ryberg, “The Global Wireless M2M Market”, Berg Insight, http://www.berginsight.com/ReportPDF/ProductSheet/bi-globalm2m4-ps.pdf (accessed
17th Jul 2012).
15

22. M2M benefits multiple business sectors such
as automotive, utilities, logistics, security, and
healthcare. The automotive sector accounts
for the majority of M2M devices today, but
other sectors such as fleet management
(logistics), healthcare and security are expected
to overtake it by 2020.25
Automotive
M2M in automotive business is growing as a
strong demand for services such as car stolen
recovery, mechanical problem diagnosis and
entertainment. Moreover, manufacturers want
to differentiate their offerings and build new
revenue streams. It is expected that 90% of
new cars in 2020 will have some form of in-
vehicle connectivity.26 For example, BMW
uses Vodafone M2M SIMs in their latest 2012
model to provide the BMW ‘online service’,
a 24/7 personal concierge service for drivers
and emergency call functions.27 Although in its
early stages, there is vast potential for M2M
to generate new revenue streams and improve
user experience.
Fleet management
Within logistics, fleet management is one of
fastest growing sectors in M2M as the number
of fleet management systems is expected
to grow from 2 million units in 2010 to 5
million in 2015 in Europe, with a 21% annual
growth rate.28 The M2M fleet management
“M2M is thought to be one of the fastest
growing segments for the next few years
and companies are going to rely on this
sort of machine to machine communication
of data”
Simone Vaccari, Enterprise Product Manager, Vodafone UK
25.
26.
27.
28.
16
John Horn, “Fastest M2M Growth: fleet, security, asset management”, Telecom Engine, http://www.telecomengine.com/article/fastest-m2m-growth-fleetsecurity-asset-management (accessed 17th Jul 2012).
Machina Research, “Connectivity Drives Market”, Consumer Lifestyle News, http://cln-online.org/index.php?option=com_contentview=articleid=243
7:connectivity-drives-marketcatid=39:top-stories (accessed 15th Jul 2012).
Vodafone Group Plc, “Annual report”, http://www.vodafone.com/content/dam/vodafone/investors/annual_reports/Vodafone_Annual_Report_12.pdf
(accessed 10th Jul 2012).
John Horn, “Fastest M2M Growth: fleet, security, asset management”, Telecom Engine, http://www.telecomengine.com/article/fastest-m2m-growth-fleetsecurity-asset-management (accessed 17th Jul 2012).

23. solutions enable a real-time monitoring of
the status of vehicles such as its location,
maintenance schedule and technical status.
Such applications demonstrate a positive
impact to both businesses and customers as it
brings greater efficiency, cost saving and can
reduce carbon emissions.
Mobile Health
Mobile health (mHealth) is the utilization of
mobile communication technologies to deliver
high quality healthcare services. The global
mHealth market is expected to reach $23
billion by 2017 with Asia Pacific and Europe
each capturing approximately 30% of market
share.29 (Figure 11)
The mHealth field is complex and offers
opportunities for stakeholders across several
industries to advance their organizational
objectives. Figure 12 shows the various
stakeholder relationships involved in the
mHealth value network.
Figure 11: mHealth Revenue Forecast (2013-2017)
Source: PwC
29.
PwC, “Touching lives through mobile health Assessment of the global market opportunity”, http://www.pwc.com/in/en/assets/pdfs/telecom/gsma-pwc_
mhealth_report.pdf, (accessed 19th Jul 2012).
17

24. MNOs are uniquely positioned to influence
how the ecosystem develops, as they possess
the necessary assets required to improve
access, reach and quality of mobile healthcare
services.30 As such, they stand to become
key beneficiaries from the expected growth
in the mHealth market, predicted to gain
approximately 50% of the market share ($11.5
billion) by 2017.31
Despite these innate capabilities, mobile
operators currently expanding their mHealth
service portfolio are partnering with healthcare
Figure 12: mHealth ecosystem
Source: McKinsey32
30.
KPMG International, “Issues Monitor: Sharing knowledge on topical issues in the Media Telecommunications Industries”, http://www.kpmg.com/
Global/en/IssuesAndInsights/ArticlesPublications/Documents/issues-monitor-media-telecommunications.pdf (accessed 20th Jul 2012).
31.
PwC, “Touching lives through mobile health Assessment of the global market opportunity”, http://www.pwc.com/in/en/assets/pdfs/telecom/gsma-pwc_
mhealth_report.pdf, (accessed 16th Jul 2012).
32.
Mckinsey.com (2010) mHealth: A New Vision for Healthcare. [online] Available at: http://www.mckinsey.com/client_service/initiatives/mhealth [Accessed:
19 Jul 2012].
18

25. organizations and medical hardware and
software companies to enhance their network
capabilities.33 These competences will
strengthen their position in the value chain
and serve as a strong barrier to entry for
prospective entrants, enabling operators to
realize long-term economic gains.
Security
M2M devices for security applications is
expected to grow to nearly 22 million by 2014,
from 2.3 million in 2009.34 This is accelerated
by the number of alarm systems, vehicle
tracking systems and wearable integrated
tracking devices, that can be used for protecting
individuals.35 The security sector is perhaps the
most significant in M2M, as automotive, fleet
management and healthcare all rely on the
security applications developed by operators
in the M2M market.
Recommendations
Network Congestion
It is expected that “there will be 25 billion
connected IP devices by 2015, with M2M
traffic expected to grow by 258%”.36 With the
significant growth in M2M solutions, traffic
optimization and management will be required
to ensure that network resources are utilised in
the most efficient and beneficial way.
Highly Fragmented Industry
The M2M industry is complex and highly
fragmented as it requires the integration of
different products to effectively implement a
M2M solution. To reduce this fragmentation,
operators need to expand their opportunities
through alliances and affiliations. For
instance, major operators from Asia Pacific
(NTT Docomo, SingTel, Telstra), Europe
(Telefonica, Vimpelcom and KPN) and
Rogers from Canada have all collaborated to
set the standards and utilize core technologies
to accelerate market growth.
While Unified Communications and mobile
Cloud Computing should continue to be
part of the operators’ core offerings, M2M
represents a significant growth opportunity
for MNOs looking to achieve sustainable
differentiation by attracting new customers
and generating revenues. However, there are
two issues that should be considered:
33.
KPMG International, “Issues Monitor: Sharing knowledge on topical issues in the Media Telecommunications Industries”, http://www.kpmg.com/
Global/en/IssuesAndInsights/ArticlesPublications/Documents/issues-monitor-media-telecommunications.pdf (accessed 20th Jul 2012).
34.
Berg Insight, “Security Applications and Wireless M2M”, http://www.berginsight.com/ReportPDF/ProductSheet/bi-sec3-ps.pdf [accessed 20th July 2012]
35.
Ibid
36.
Steve Wexler, “Cisco Jumps Into The M2M Market”, UBM TechWeb, http://www.networkcomputing.com/wireless/231600077 (accessed 18th Jul 2012).
19

26. CONCLUSION
“I have not yet found a telco, fixed or mobile, that has reliably
cracked doing anything as a business above basic bit transport. If I
were advising any telco or mobile operator, I would say stick to your
knitting, stick to bit transport”
John Yeomans, Director, First Capital
Our industry interviews uncovered diverging
viewpoints amongst stakeholders concerning
the exact sources of profitability for mobile
operators in future. On the one hand, MNOs
such as O2 and Vodafone are exploring new
revenue opportunities in over-the-top services,
mCommerce, mobile advertising and M2M.
On the other, institutional investors seem
certain that telcos are being commoditized
and must focus their efforts on meeting data
demand and achieving operational excellence.
It is not clear how the industry will evolve as
a result of 4G mobile broadband, nor which
segment of the value chain will benefit the
most. However, mobile operators have a
chance that may come once in a generation,
to improve their position and move into new
areas other than basic conveyance services.
Provided MNOs get the product right by
developing outside the main organisation
(such as Telefonica Digital are doing with
37.
20
their wayra academy),37 there is a chance they
can develop innovative new services to help
them monetise their network investments and
compete with new entrants.
Recommendations
To summarise, our recommendations on how
operators can improve monetisation in the
UK mobile sector are:
1) Invest in new operations support systems to
deal with non-minute based billing i.e. billing
and payment systems which are better suited
to the era of ‘bits’ and on-demand payments
carried out over mobile internet, instead of
text and premium rate calls for instance. A
new billing or mCommerce platform would
enable operators to monetise new data services
associated with mRetail, advertising and M2M.
Wayra Academy, http://www.wayra.org/en (accessed 28th Jul 2012)

27. 2) Consider alternative data networks to run
alongside 4G network infrastructure, such as
public Wi-Fi and whitespace spectrum, which
could reduce congestion on core networks
and help meet the growing demand for mobile
data.
3) Explore M2M applications in other growth
industries, other than logistics, mHealth and
security, such as manufacturing, retail and
inventory management.
Included is a link to a short video where it is
possible to hear views from industry experts:
http://youtu.be/TAK8RSHTIqk
21

28. GLOSSARY
4G/LTE (4G Long Term Evolution)
A 4G wireless communications standard
that will provide up to 10x the speeds of 3G
networks for mobile devices. It is one of
several competing 4G standards along with
Ultra Mobile Broadband (UMB) and WiMax
(IEEE 802.16)
ARPU (Average Revenue Per User)
A measure of the revenue generated per
subscriber. A key performance indicator for
the telecoms industry.
CAGR (Compound Annual Growth Rate)
A steady year-over-year growth rate of an
investment over a specified period of time
CAPEX (Capital Expenditure)
Telecoms is one of the most capital intensive
industries that have high capital expenditure.
Capital expenditure is funds used by a company
to acquire or upgrade assets such as property
or equipment.
Cost of Capital
The required return necessary to make a
Backhaul Network
capital budgeting project, such as investing
Backhaul Network switches calls between in new infrastructures, worthwhile. Cost of
pairs (or more) of Customer Access Network capital includes the cost of debt and the cost
(CAN) infrastructures to create end-to-end of equity.
continuity so that people and/or computers
can communicate. The Customer Access Cloud computing
Network is a non-switched structure that A model for delivering information technology
directly connects the Backhaul Network to the services in which resources are retrieved from
the internet through web-based tools and
Customer Premises Equipment.
applications, rather than a direct connection to
Bundling
Grouping
various
telecommunications a server.
services, wireline and/or wireless, as a package
to increase the appeal to potential customers
and reduce advertising, marketing and other
expenses associated with delivering multiple
services
BYOD (Bring Your Own Device)
Employees taking their own personal device
to work, whether laptop, smartphone or tablet,
in order to interface to the corporate network
EBITDA
A measurement of a company’s operating
profitability. It equals to revenue less expenses
before interest, tax, depreciation and
amortisation.
Fixed-line
A telephone line that traveled through metal
wire or optical fiber as part of a nationwide
telephone network.

29. Interconnection
Interconnection involves a linking up of
one telecom operator to the infrastructure
facilities of another. Interconnection is crucial
for communicating across networks, and
makes it possible for the subscribers of two
different operators to communicate with each
other. It is essential for extending the scope
and efficiency of the telecom network, and
is especially important for new operators
entering the market who normally use the
existing facilities of another operator for
providing their services.
IP infrastructure
A knowledge-based structure supporting and
interconnecting all national and regional IP
systems
Legacy Voice and text services
M2M (Machine-to-Machine) M2M networks
are defined as communication without or with
limited human end user intervention. Note
that the human end user is not typically the
initiator of the input but only occasionally and
optionally the recipient for the output.
MNO (Mobile Network Operator)
A Mobile Network Operator is a telecommunications service provider organization
that owns the complete telecom infrastructure
for hosting and managing mobile
communications. MNOs are also known
as carrier service providers, mobile phone
operators and mobile network carriers.
MVNO (Mobile Virtual Network Operator)
A Mobile Virtual Network Operator is a
mobile operator that does not own spectrum
or have its own network infrastructure. It has
business arrangements with traditional mobile
operators to buy network time.
NFC (Near Field Communication)
A technology standard for very-short-range
wireless connectivity that enables quick,
secure, two-way interactions among electronic
devices. NFC technology typically takes the
form of a small chip embedded in a phone or
a plastic card.
OPEX (Operating Expenses)
Expenditure that a business incurs as a result
of performing its normal business operations.
OSS (Operation Support System) platform
Operation support system for telecom
operators to carry out their customer billing.
It allows them to calculate network usage and
charge customer the right amount based on
‘minutes’ or number of ‘bits of data’ going
over their network.
Over-the-Top (OTT) services
Over the Top (OTT) refers to video, television
and other services provided over the internet
rather than via a service provider’s own
dedicated, managed IPTV network. Therefore,
OTT service providers do not need carriage
negotiations or any infrastructure investment
on the part of the provider.

30. Quadruplay
4-service package which bundles fixed line,
broadband, pay TV and mobile services
together
ROI (Return on Investment)
A performance measure used to evaluate the
efficiency of an investment or to compare
the efficiency of a number of different
investments. To calculate ROI, the benefit
(return) of an investment is divided by the
cost of the investment.
Top line revenue
Gross sales or revenues of a company which is
normally shown on the “top” of a company’s
income statement.
Unified Communications
According to the International Engineering
Consortium, unified communications is an
industry term used to describe all forms of
call and multimedia/cross-media messagemanagement functions controlled by an
individual user for both business and social
purposes.
Whitespace
Unused broadcasting frequencies

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35. APPENDIXES
Appendix I: Interviewees
John Yeomans
Director at First Capital
Specialises in digital media and communications. He is a Director
of FirstCapital, a European investment bank specialising in MA
and raising capital for growth technology businesses; of SharedBand
Ltd, which manages access to telecom networks over multiple IP
connections; of Violin Ltd, which facilitates targeted TV advertising;
and of Worksnug, a global social network to improve the experience
of mobile workers.
Richard Porter,
Head of Product Marketing at Telefonica O2 UK
Responsible for product marketing in the consumer mobile division.
Targeted on revenue and customer satisfaction for a broad range
of products across voice, messaging, mobile internet and portals.
Also responsible for revenue and deals associated with third-party
content.
Irving Wladawsky-Berger
Strategic Advisor, Innovation Strategy CitiGroup
Retired from IBM in 2007 after 37 years with the company. Since
then, he has collaborated with colleagues at IBM on a number of
initiatives including Cloud Computing and Smarter Planet. In 2008
he joined Citigroup as Strategic Advisor, working on innovation
and technology initiatives including the transition to mobile digital
money and payments. He is also a regular contributor to the Wall
Street Journal’s CIO Journal.

36. Carl Pimblett
Technical Sales Director (UK Ireland), Huawei Technologies
Technical Director responsible for pre-sales activities into Service
Provider and Distribution Channel markets for Huawei Technologies
in UK and Ireland. Staff responsibilities include Product Management,
Pre-Sales Engineers, Bid Management and Commercial Contracts
Management teams.
Simone Vaccari
Enterprise Product Manager at Vodafone UK
Product Manager for smartphone mobile internet (data connectivity),
with PL responsibility of £80m. Key responsibilities include:
developing innovative and customer centric propositions from market
insights, sharing best practice with other Vodafone markets, and
managing product portfolio life-cycle collaborating with marketing
and sales. KPIs include: smartphone penetration and ARPU (average
revenue per user).
Bruno Basalisco
Senior Associate at OFCOM
Through his professional experience within Ofcom and economic
consultancy he has strong expertise in both quantitative and qualitative
economic techniques and a deep knowledge of the communications
industries.

37. Appendix II: Interview transcripts
John Yeomans, Director at First Capital
Are mobile operators playing their part in providing payment services to consumers? What about Google? And
credit card companies?
-There are lots of different ways to implement mobile payments
-Any method that relies on a data communication using the mobile terminal is a bit
problematic because of the problems in building in coverage and those kind of things
-The way I see this technology going is mobile phone that contain a security chip like an
RFID device, and the actual communication is in the retailers terminals and FPOS system and
mirrors the present systems that are card based and transaction based and fixed line based
-Unless you can reliably communicate 99.999 % of time using this terminal, you are not
going to have Tesco guys saying “oh sorry we have just drifted out of coverage” we cant do that.
Can you pay by cash?
-I would question what part the mobile operators have in this. If it’s a question of putting
chips in phones, that’s the job of mobile handset makers
-What is mobile operators part in this other than sell handsets with chips in them?
-I don’t think there is much in it for the mobile operator
-Should they be focusing more on mRetail and shopping based opportunities?
-Have not yet found a telco fixed line or mobile that is as reliably correct at doing anything
as a business above basic bit transport
-If I were advising any telco or mobile operator I would say stick to your knitting and do
bit transport
-Thus what else should they do?
-Music portals, defaulting data connection to operator portals – this was amateur frankly.
-T-Mobile provides mobile communications to 25% of people in this country
-Google is trading in all countries in the world and isn’t constrained to which mobile
operator they work in.
-Mobile advertising – O2 Telefonica has done it the best
-Operators see that a major phenomenon has happened.
-Mobile billing system with O2 is being successfully used with premium rate but we are
typically talking about something that is geared towards collective amounts of up to 5 or 10
pounds. It’s not like a credit card. It is not set up to accept payments of 300 pounds

38. -Funny to authorize payments by mobile network when existing payment systems are all
in place
In the UK shareholders and investors have lost a lot of money, if we look at CWW or BT, share prices have
plummeted in the last 5-6 years. How does the City perceive mobile operators?
-Sadly UK has screwed up its fixed line businesses for a long time
-The 5 mobile operators in the UK are owned by deutsche telecoms, Telefonica,
Vodafone, France telecom, and 3
-The city when it evaluates mobile operators in the UK sees that there are 3 European
telephone operators primarily fixed line with mobile extra, then there is UK mobile telephone
operator with a fair few fixed line interests outside the UK.
-The city largely looks at these as Telco’s not as fixed or mobile operators
-It’s true that the more valuable parts of these businesses are the mobile parts of these
businesses
-City has got a bit confused
-In the 90’s it was an investment business, about 3 years ago it was a profitable but
dividend business – getting a bit more competitive
-Confused now because the dynamic between smartphone and data growth which is
forcing massive investment
-Verizon outstripped voice for the first time 18 months ago
-O2 did the same in the UK
-10 years time – data will be 10 times or more than voice
-Inevitable consequence is that mobile operators have got to invest
-The city looking backward is saying they want a dividend from investment and looking
forward it is going to take more investment. They are going to have to cut their dividends and
how is that going to happen.
-We set up in this country with 4 mobile operators – we have collapsed that to 3 with the
Everything Everywhere joint venture
-O2 and Vodafone have agreed now that they are sharing infrastructures
-Mobile coms is just like fixed coms
-They are trying to compete at a higher level at things like customer service and if they
can, yes they want to do these apps but I don’t think it will happen
What do you think of the possibility of there being just one mobile operator in future?
-It will be defined by the market. You’ve got the market and regulation. You have two

39. contradictory things
-Regulatory law and competition law- if you get more than 25% of the market, you are
potentially a monopoly
-ATT, Verizon and Sprint Nextel
-T-Mobile trying to merge with ATT - regulators did not allow it to go through
-Everything Everywhere was allowed to happen
-A lot of pressure to consolidate and the regulator is trying to keep competition but
natural outcome is 2 or 1 - its all a matter of time
-Could regulators relax to the point of allowing BT an LTE license to move into the
space?
-BT is too small to do it now – BT didn’t need to demerge
-BT dug itself into debt in the early 2000’s
M2M
-Neul – the cloud, whitespace
-When they freed up television broadcast spectrum, which is prime spectrum in the
range of 400-800Mhz, there is now a lot of more or less unused spectrum.
-1960s they left spare bit f spectrum to avoid interference because the transmitters were
not perfectly stable
-We have got a lot better but there is still a risk
-Problem is it is a dirty spectrum – can pick up interference
-In a modern day world, that can be managed by frequency hopping like the military do
-Neul sees it’s market as completely machine to machine
-People have been saying M2M will take off for the past 20 years
-I am skeptical because any large organization gets set in its ways
-M2M – Whole thing run by a sim – so far very inflexible – rather than lower amount
of users and higher fees, there should be volume in users and cheaper fees – that is what M2M
needs.
Looking at M2M but specifically mHealth and mobile apps and payments (enterprise side). Have operators set
up any differently in this area in respect to meeting the needs in that market?
-Standards take 2 years
-Takes another year of jockeying and another year of commercial support
-Deutsche telecom or Vodafone have commercial support

40. You think there is an incentive from their part in that they’ll basically be pushing people onto the network –
basically more traffic on their networks that won’t compete with their 9-5 consumer type market?
-If it’s done right – of course that’s the prospect
-Principal is great –things like environmental monitoring etc. it is great although I think
it will take longer than a lot of people think
You set companies like Workslug that are built on being able to work on the move by taping into public spaces
and availability. What is your perspective on whether or not LTE is the best option especially in built up areas
and what public Wi-Fi companies might be?
-I think it’s fascinating
-I think this is the most important issue in mobile and Wi-Fi at the moment which is
bridging the gap between mobile and Wi-Fi
-I have little doubt that LTE will role out – Verizon has 70% population coverage of
it’s customers, most of the rest of the world has less than 10%, the UK has none because we
haven’t allocated the frequencies yet
-This is where the pinch point in mobile com’s is – 90%+ of most peoples data is in
building
-For me personally – 80% of data on my smartphone is through Wi-Fi because I’m
usually in my office, flat, my home or at other offices
-The operators sell you phones, the operators are planning the role out of LTE, which is
an out-of-building solution to solve all your problems but actually the solution is most obviously
there – in-building with Wi-Fi
-Most operators have woken up to the fact that they need more Wi-Fi including public
Wi-Fi including shopping malls, cafés etc.
-What you do outside of Wi-Fi areas is trivial compared to within Wi-Fi areas.
-Out-of-building solutions are expensive and would not necessarily penetrate in-building
areas, which is where you need it.
-So they are now all rushing to set up Wi-Fi
-We couldn’t set up space stations fast enough for O2
-What operators should be doing is getting coverage for as much as possible and then tie
everything up seamlessly
Do you know of any operators that are currently looking to do that?
-If you look at O2 here, it uses a solution from Kineto wireless, if you look at orange it
uses a more old fashion solution based on UMA technology, if you look at 02, it’s just rolling
stuff out as much as they can and getting access to people.

41. -This is something where the likes of BT could do pretty well.
-If you look at FON – it supplies routers cheaply and the deal is there is a small part of
the band-with that is free for people passing outside
-The problems with Wi-Fi are clear – it is unlicensed spectrum and problems like not
knowing where to log on
-Seems to be that the Wi-Fi mobile thing is the absolute core underlying issue within
where the rest fits
-Mobile operators cannot do anything except tell their customers to turn on their Wi-Fi
Interesting because we saw Vodafone buy out Cable and Wireless so they are obviously moving into fixed line.
-Our mobile operators - 3 are run by Europe’s largest fixed line operators
-Vodafone is buying a billion of assets in the UK
-The game is fixed line and mobile coming together and that will be more and more true

42. Richard Porter, Head of Product Marketing at Telefonica O2 UK
Where are the greatest growth opportunities for consumer mobile?
-There are a number of companies like O2 that have grown up from a core mobile
business but now have a much broader portfolio of offering such as consumer Wi-Fi, consumer
home broadband and home phone.
-Consumers would still think of us as predominantly a mobile business, the broad
portfolio is much wider than that.
-“In terms of growth areas there is a lot we can do for consumers in terms of Machine
to machine business. There is a lot of growth in that market and that will directly benefit
consumers.”
-LTE is another area of growth and will provide us with the ability to deliver great new
experiences for our customers
What is the danger that mobile operators are becoming a commodity service provider?
-“The twenty million dollar question”
-Creation of Telefonica digital is a global business playing in a completely space leveraging
all of the network assets we have and customer relationships we have across the world and then
overlaying the digital product set that puts O2 and Telefonica right in the space of being a
leading provider of digital experiences to customers. There is a lot of value in that experience
piece for customers, the relationship that we have, the support we give for the overall wrap that
starts with connectivity in many forms whether it’s broadband, Wi-Fi or mobile and runs right
through the handset experience, the sales and service wrap which is the retail store, the voice
support channels but beyond that in the experiential piece. We have priority ticketing, the O2,
recently launched priority sport with Nike
-Yes this a great asset and we have to continue to leverage it but there is a lot of value to
be extracted from customers in that much broader relationship
What role can mobile operators play in mCommerce, mobile advertising applications and M2M?
-We sit in the value stream
-We sit between the person with the tablet and the suppliers that want to connect it those
consumers
-We will let advertisers pay to have relationships with consumers on our base by targeting
very specific things for them
-We are looking at how we can explore and grow that across the Telefonica footprint
-In content and applications, particularly mobile payments – for many years we have
been part of that value chain particularly through premium SMS.

43. -More and more transactions are being done on the mobile phone
-“We recently launched O2 Wallet which puts us right in the middle of that payments
value stream and we see that as an absolutely key area going forward”
What are the current dynamics between mobile operators and handset manufacturers?
-To deliver an outstanding experience to the customer, we need great technology
underneath, the network, and the service wrap and we need the presentational piece – the
device, to be great as well.
-We work closely with the manufacturers and what we want is to make sure that the
experience is great, that the devices work with all of services and products but that there is a
choice for the customer
-They need us, we need them and the consumers need it all to work together.
-We are looking at how to create a phone in an html5 browser and that brings a new
way of using devices and adding traditional phone functionality on them – particularly useful
in Latin America
What is O2’s biggest differentiator?
-That experiential relationship
-As an O2 customer you get priority on tickets 48 hours before anybody else
-That sort of experiential wrap brings a massive o2 differentiator for us and the leap we
have just taken with Nike is to extend that similar breadth into the sport space
What has prompted the large-scale consolidation of network infrastructure? What consequences will it have?
-O2 and Vodafone have had a sharing agreement whether that is cell space and power
-We are taking that up a gear and taking the economies of scale o places where its
increasingly hard to differentiate and taking the economies of scale there and sharing with
Vodafone and investing the money that we save in a much better customer experience in the
broader business so we can use that investment to differentiate in a different way rather than on
a core network which is increasingly less of a differentiation piece
-You do not necessarily need 6 or 7 networks in a country
Are investments in public Wi-Fi networks a good alternative to building LTE infrastructure?
-We have O2 Wi-Fi
-You can use it if you have a sim from another operator in the UK
-Increasingly consumers will use the different ways of connecting in a more balance way
-Could choose broadband at home with high bandwidth, Maybe choose LTE when out
and about but when in Starbucks I might hook up to Wi-Fi

44. Simone Viccari, Enterprise Product Manager at Vodafone UK
What are the most successful enterprise products from Vodafone? Corporate network, unified communications,
M2M, smartphone, can you bring your own device – Can you tell us a bit about each and which ones are most
valued?
-Vodafone’s aspirations for the business enterprise unit is to ‘change the way Britain
works’ – how we will do that is through a series of different products – unified communications,
one net (which gives customers a geo phone number).
-We have a lot of different products, which enable us to comply with that, the only issue
is that they are very hard to sell.
-I look after smartphone data for enterprise products within the core team
-MDM – different section of enterprise that looks at more innovative products which
gives us sustainable differentiation in the market and would enable us to comply with the change
the way Britain works but most of the customers now are asking for core products – fewer
customers are asking us for the other products so if you look at our old revenue line – 85% on
core products and 15% on M2M/MDM products
-It’s because customers are going through the transition and they don’t know where the
added value is yet.
-We are trying to sell them to customers by creating case studies
-When a company gets the product we try to make a case and see what the company is
getting out of it.
-Structured between core, innovative products (growing slowly but there is growth)
-Long journey – not easy to change the perception of customers
-M2M is growing a lot. The biggest account is with Centrica and M2M is thought to be
one of the fastest growing segments for the next few years and companies are going to rely on
this sort of machine to machine communication of data
-The aspiration of enterprise within Vodafone – we are the leaders in mobile
communications in enterprise and we want to be in fixed line
-Once we have the backing of Cable and Wireless we will have a big source of revenues
Logistics, automotive and mHealth. Do you think there are other industries where you think M2M could be
developed?
-Ring-fencing would be an innovative way to use M2M
-Ring-fencing could be deployed in a variety of ways but am not that involved in it

45. What would the roll out of LTE bring enterprise products at Vodafone? What kind of products could you offer
your customers as a result?
-Orange is releasing LTE is September/October and is renegotiating spectrum with the
government
-There are a lot of hopes around LTE in how we can use it to the full potential
-Investing a lot of capex in past two years and making all of our bay stations LTE ready
so as soon as we have the spectrum we can just switch it on and have the whole country covered
up
-How would we use this for enterprise?
-Many companies today are mobilizing the workforce and are challenged due to
downloading a lot of data
-We have a penetration of smartphones of 75% - some companies are not taking internet
as its not filling in all of their needs – this is where LTE could fill that gap
-I’m not sure the deployment strategy of LTE
What role does smartphones have in enterprise? With total communications could you imagine a world where all
work phones are smart phones?
-As more applications are deployed on the enterprise side, more companies are depending
on smartphones and tablets as the main tool to work
-As an adequate ecosystem develops, ore enterprise companies who originally wanted no
involvement will be.

46. Appendix III: O2 Wallet Overview