1. Possibilities in the Future Telecom Market….
John W. Strand
www.strandreports.com
Strand Consult

2. Everybody is talking about innovation….
Consumer driven innovation, innovation as a
differentiator on technological innovation –
the problem is what should we do with all
this innovation and how will we finance it,
if there are no business models that can
transform new functionality and services
into hard cash…
Strand Consult

3. 10 taboos in the mobile industry that are hampering business and preventing a
dynamic development in a sector that needs drive and innovation!
1. Revenue sharing models for mobile services - we need to move forward from CPA / premium SMS
2. Mobile services - how do we get consumers to change habits and purchase more advanced services?
3. Distribution - how should distribution channels be rewarded in the future ?
4. The mobile broadband - business models -Will mobile operators develop towards being mobile ISPs
5. The MVNO market - is it small operators or segmented distribution channels?
6. Outsourcing - what are the operators’ core competencies?
7. Mobile payments - the future is simple, but many are trying to make it complicated.
8. Mobile marketing - is the market that big and will it evolve as many optimists are predicting?
9. Network technologies - we all know GSM and UMTS, but what about all the competing technologies?
10. Mobile market regulation - the regulative authorities and politicians want to regulate the mobile market.
Strand Consult

4. Classic value chain – 5 main layers - 16 sub-layers
Strand Consult

5. Operators OPEX & CAPEX va. Net Sales….
Strand Consult

6. Ericssons Cash flow in 2007 - 188 Billion SEK…..
Total salget voksede 4% totalt PS voksede 16%....
Strand Consult

7. What is their core business…
Strand Consult

8. Case: Zyb…
Strand Consult

9. The big boys are expanding…
Facebook is becoming a dating site
Plaxo has been purchased by Comcast
Microsoft has MSNBC & tried to purchase Yahoo
Vodafone is purchasing Zyb.com
Google is a content aggregator
Nokia is offering free music
Skype – what are they and where are they heading?
Youtube – is this a TV station?
Strand Consult

10. The dream of creating a brand ….
Strand Consult

11. Brand strategy for 2 - 2.5 - 2.8 - 3G…..
2G 2.5G 2.8G 3G
Consumer Consumer Consumer Prime segment
Business Business Business Volume segment
MVNO MVNO MVNO
Subbrands Subbrands
Competitors
Strand Consult

12. The five SP/BR/MVNO mobile phases
Copy Discount Consolidation Segmentation Brand and Retail
The mobile suppliers Discount mobile The Consolidisation Segmented mobile The brand phase is
use same business suppliers means a phase is the suppliers are characterised by new
model as MNO’s shift in paradigm culmination of the launched by MNO’s mobile suppliers that
The mobile suppliers The market is very competition in the and SP’s not have a
are often MVNO’s innovate because discount phase Focus is on lowering backgound in the
The penetration is discount mobile The MNO’s are churn and increase telecommunications
relatively low and suppliers are forced to lower the ARPU market
mobile suppliers are launching new competition Increased number of Not least media
mainly competing for products (internet as MNO’s buy up the independent companies, brand
new mobile distribution, self most successfull segmented mobile owners and retailers
customers with high service, new services mobile suppliers and suppliers Retailers are
subsidies, rather etc.) are thereby getting MNO’s use SP’s and becomming important
than existing mobile Many new mobile more control over the MVNO’s actively as customers for MNO’s
users suppliers are stake market extra sales channels High degree of
More mobile on low prices, and the The positive trends MNO’s launch own fragmentation/
suppliers means market experiences from the discount subbrands segmentation
increasing churn stiff competition and phase continue –
price pressure lower MoU
High penetration Increasing number of
No subsidisation of discount mobile
costumers’ mobile suppliers are using
terminals subsidisation to keep
Increasing churn customers and as A
Increasing MoU countermove to
caused by the falling MNO’s subsidisation
prices strategies
Strand Consult

13. Case: E-Plus – EBITDA vs. SAC….
Strand Consult

14. Cost compared to ARPU per customer…
Casts Procent of ARPU
SAC 999,70 22 %
Subsidies 901,10 20 %
Commission 71,74 2%
Marketing 26,90 1%
Distribution 337,70 7%
Network 509,10 11 %
Interconnection 521,80 11 %
Total cost 2368,40 51 % of ARPU*
ARPU 4619,51
Strand Consult *difference is consequence of VAS

15. Overview of the five mobile broadband phases
Phase I: Access for Phase II: The Phase III: PC’s are
Phase IV: Mass market Phase V: Change
the mobile business young and the used for mobile
– mobile broadband and fragmentation
customer innovative on the communication and
are getting a common of the market
move machine to machine
item
communication
Companies with Mobile internet access For all age groups, The market for mobile The same development
employees in the move are getting used by mobile broadband broadband connections as we have seen on the
are requiting them that are on the access will be as will be saturated. The mobile market will we
employees with mobile move in the city and common in a wi-fi card mobile broadband see on the mobile
internet access who live out in café’s, market will look like broadband market
at friends, at the Laptops will be sold the mobile market – all
Employees can then university with mobile internet people will have a There will emerge
communicate with the access mobile phone and a different terminal
company, customers These young people mobile broadband types, ways to see the
and partners will see it as a natural Machines will use the solution market, and it will be
part of live and will internet through as defragmented as the
perhaps not have a mobile internet The market will shift mobile market
cable based internet solutions in stead of from being focused on
access at home traditional broadband acquire new mobile
solutions or as a internet customers to
supplement preserve them they
have
Strand Consult

16. Mobile broadband – huge prices differences...
Mobile broadband
Denmark Price (DKK) Usage
• Sweden and Finland TDC na
are price leaders Sonofon 499 1GB
• Denmark to see price Telia 299 10GB
3 0,5 199 Unlimited
erosion shortly as 3 1,5 299 Unlimited
resellers enter the 3 3,0 499 Unlimited
market
Finland Price (EUR) Usage
• Austria: EUR 7 (DKK Sonera
52 per) month Elisa 9,9 Unlimited
• Sweden: 35% (and
Norway Price (NOK) Usage
increasing) of mobile Telenor n.a.
broadband clients have Netcom 499 Unlimited
no wireline connection Sweden Price (SEK) Usage
(Tele2) Telia 199 Unlimited
• In Finland, it is 20% Tele2 99 Unlimited
Telenor 199 Unlimited
3 0,4 99 Unlimited
3 up to 7,2 199 Unlimited
16

17. Case: SFR Quatroplay in france…
50Mb to 250Mb, 10€ more pr. month.
251Mb to 500Mb, 20€ more pr. month.
501Mb to 1Gb, 30€ more pr. month.
Each extra 1 Gb costs 0.10 €
These tariffs are offered for a 24 month
subscription.
It costs 5 Euro extra per month if the
customer chooses a 12 month
subscription.
Strand Consult

18. Free IP TV is everywhere……
Strand Consult

19. Free music and almost free TV…..
Broadband subs:
TeliaSonera 2,368k
Telenor 1,574k
Price in Denmark DKK 350 for TV and DKK 259 for Internet
TDC 1,315k
Strand Consult

20. The reality…
Current heroes/winners…. Yesterdays heroes/winners….
Strand Consult

21. Case: Telenor – Good intentions, few services ….
Strand Consult

22. Case: Skype few people, many services….
Strand Consult

23. The big question– IP or not to IP….…
What is the value of a network
IP Centric What is the value of infrastructure
What is the value of a customer
What is the value of traffic
What is the value of a Telco brand
Regional presence
Network Centric Global presence
Strand Consult If the future services are IP based….

24. Open vs. Walled garden..….
Vodafone Live On the move..
SK-Korea
Telenor
3-UK
WALLED OPEN
Strand Consult

25. ”Open garden” value chain – Simultaneous parallel roads…
With an ”open garden” value chain, consumers choose the
Strand Consult providers of mobile services

26. What to invest in…..
Walled Open
Understanding the market Billing platform
Platforms API solution
Services Legal aid
Marketing Partner Programmes
Employees Partners
Product development Market development
Strand Consult

27. Open vs. Walled garden….
Walled Open
High CAPEX Low CAPEX
Long production time Fast production time
High customer knowledge High market knowledge
Focus on products Focus on the Market
Few services Many services
Less dynamic Very dynamic
Strand Consult

28. An arms race for the chosen few….
Strand Consult

29. Vertical vs. Horizontal media products…
Old media New media
Newspapers
Broadband
Magazines
Internet
Radio
TV
Mobile
Distribution
Interaction and payment
Strand Consult

30. Revenues on Premium services 2006 (2005)
•Denmark: € 45 millions (36) – 8,33 € by inhabitant in 2006
•Sweden: € 54 millions (44) – 6,06 € by inhabitant in 2006
•Finland: € 84 millions (70) – 16,47 € by inhabitant in 2006
•Norway: € 125 millions (100) – 27,77 € by inhabitant in 2006
•Baltic: € 31 millions (22) – 3,44 € by inhabitant in 2006
Strand Consult

31. The importance of sales in the future telco market…
Services POS Coustomers
One stop shop
Service
Strand Consult Aggregation

32. From high expences to... …
We believe that the succesfull telco’s of the
future will have few fixed expences and
utilize a combination of focusses strategy,
partnerships, as well as diversified business
models to create traffic in their networks
and on their platforms. In the end it is all
about who have most traffic in their billing
system, not who sends out mosy Press
Releases...
Strand Consult

33. Four main trends from an investor’s point of view…
Innovation is moving from traditional companies to
smaller and more flexible players
A changed value chain opens a number of new
business possibilities
Business models based on revenue sharing make it
easier to build a healthy business
Consolidation continues and continues and continues
Strand Consult

34. What are they purchasing…
Players What are they seeking
Infrastructure players Innovation
Technology providers Cross selling
New players media/banks Market knowledge
Operators Distribution
Venture players Consolidation
Strand Consult

35. 10 Digital winner tips….
1. Mobile broadband – not via the mobile phone but via our PCs
2. CPA broadband on mobile and ordinary broadband
3. Services that can take advantage of the operators billing systems, networks and
service platforms
4. Wide distribution, either via handsets or via existing media channels
5. Those that can reduce the operators costs
6. Those that realise that advertising can not finance much in the mobile world
7. Those that can make everyday life easier for end users – mobility is one of
many subjects in this category
8. People that can think outside the box and that do not pay attention to
technology providers talking about a bright future
9. Those that do not try to create local copies of global concepts, but instead
focus on creating unique companies
10. Those that know the difference between innovation and evolution
Strand Consult

36. Main trends in relation to an exit strategy…
Many companies quickly attain a positive cash flow
Many smaller and medium exits
Few large exits
Few real fiascos if you avoid the ”dreamers”
Innovation becomes valuable
Distribution becomes valuable
Globalisation becomes valuable
Cash flow becomes valuable
The role as consolidator becomes valuable
Strand Consult The classical virtues will win…

37. It’s about 44 things....
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models….
Strand Consult

38. For more information - Strandreports.com
Strand Consult
StrandReports.com