Suresh Sidhu COO Celcom opening keynote at TADS 21-22 Nov 2013 Bangkok "Operators Need New Telecom Applications and Services to Survive!"

1. Day 1 Opening Address:
Operators Need New Telecom
Applications and Services to
Survive!
Suresh Sidhu
Chief Corporate & Operations Officer
Celcom Axiata Berhad
Presentation at Telecom Application Developer Summit
21st November 2013

2. Mobility has been Nothing Short of a Revolution For the World
No longer an accessory for a select few but an everyday device…
1989
2000
2013
...leading to increased mobile penetration across developed and developing nations
High end devices significantly multiply traffic
Mobile-cellular subscriptions, 2001- 2011, world and by level of development
Source: Cisco VNI Mobile Forecast 2013
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Source: ITU World Telecommunication /ICT Indicators database.
Company Confidential
Slide 1

3. But A Second Revolution Is In Play:
User Behaviours Shifting From ‘Walk & Talk’ To ‘Sit & Play’
Ubiquitous wireless access, increased smartphone adoption & freemium OTT’s driving behavioural changes
Voice and SMS
Intensive
Mobile phone usage behavior shifts
from ‘walk and talk’ …
Data and
Smartphone
Adoption
…to ‘sit and play’
… via range of smartphones across various
price points
Traditional voice …
… and SMS usage are shifting
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Ubiquitous
Data
Connectivity
Shifting
towards an
“ALWAYS-ON”
culture…
… with a wide variety of freemium OTT type
content and social networking apps
2

4. Increasing Data Consumption Over Small Screen Devices
High mobile penetration and effective phone bundling fuelling the rise of mobile internet adoption
Selected study
Malaysia Mobile Connections Market Profile
Smartphone penetration (forecasted)
Malaysia Mobile connections (in million)
23%
28%
Legend :
Non-smartphone
Smartphone
32%
36%
39%
43%
46%
17.1
21.7
14.9
19.4
12.6
8.0
10.0
26.6
26.1
26.3
26.4
26.3
26.1
25.7
2011
2012
2013F
2014F
2015F
2016F
2017F
Source: Informa IC Intelligence, Celcom Analysis
At 140% mobile penetration but a mere 30% smartphone penetration,
small screen data consumption is yet to be fully exploited
Source: Based on 2012 statistics from Malaysia Communications and Multimedia Commission
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3

5. Increasing OTT Adoption Impacting Traditional Revenue
Streams As We Know It…
Increasing adoption of OTT voice & messaging
apps…
… continues to impact traditional voice & SMS
revenues
With increasing adoption via mobile devices
Voice and SMS Revenue Trend in Malaysia
51
50
RM mil
46
71%
of Facebook’s 1.15b
monthly active users
connect on mobiles
40
30
30
20
6
4
10
1
22
11
8
4,100
4,050
17
16
4,150
28
23
4,195
4,200
37
40%
of Skype’s 300m
unique monthly
users connect
on mobiles
4,000
3,950
3,954
3,900
1
3,850
3,800
Q4 2011
0
% of Global Internet users
40
4,250
1
2
3
4
5
6
7
8
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
9
Years launched
Source: BCG analysis, Sofrecom Analysis
Note: Figures based on number of registered users
Source: Quarterly Reports, Celcom Internal Analysis
4

6. The Challenge Is To Sustain & Increase Mobile Voice &
Messaging Revenues While Embracing An All IP World
Loss of voice and SMS revenues as mode of
communication shifting away…
Hours spent communicating weekly1
40
… increasing time spent on mobile but declining
traditional voice communications as we know it
Minutes spent per day
50
Social networking
44
SMS
Email
30
Video Gaming
40
Mobile voice
Reading
Browsing
Landline voice
30
Audio
20
20
20
12
(27%)
10
10
0
0
1990
1995
2000
2005
2010
7
(33%)
7
(33%)
2011
Messaging
10
(23%)
Voice
2016
1. Based on 15-25 year olds mobile customers in the UK
Source: Ovum, Analysys Mason, BCG analysis
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5

7. Operators Need To Stay Relevant In The Marketplace...
Need to embrace a
culture
of
shorter
product lifecycles and
turn-around times, a
culture of trial and
error with shared risks
with partners
Lean Product
Lifecycle
Management
4
C
1
Challenges
Operators
Face Today
3
Requires new business
models and innovative
pricing mechanisms in
order to cater for new
services & apps
Lack of
innovation
from within
Lack
of
in-house
innovation and rely upon
external elements such
as vendors and partners
for out of the box
solutions
Dated
business models
and pricing
mechanisms
2
Gap in apps
developer
skill-sets
Application & Content
development requires a
different set of skill sets
which operators need to
embrace and nurture
6

8. An Adversarial Situation Today...
Network Service Providers and OTT players at odds
Customer
Network Service Provider
OTT Players
• Multiple Access medium
• Falling Profit Margins
• Large Hardware
CAPEX/OPEX Outlay
• Want to monetize Apps &
Content
• Ride on any access
medium (LTE/3G/WiFi)
• Increasing Global Adoption
• Primarily software driven –
“made once download
many times “
• Available across mobiles,
desktops, tablets
SITUATION
TODAY
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• OTT’s seek unfettered access, net neutrality and
direct customer relationships – Network Operators
are relegated to “dumb pipes”
7

9. ...Needs To Be Turned Into A Win-win
Revolution will peter out without a common economic union
WHAT OPERATORS BRING
WHAT DEVELOPERS/OTTs BRING
Localization
Innovation
Financial Strength
Regulatory
Management
Distribution & Retail
Presence
Faster Time to Market
Global Selection
Billing & Software
Development Kit
Preferred Content
Multi Access
Networks
Lower Risk to
Operators
7
8

10. What Is Needed: A Balanced Tri Party Ecosystem
Telco operators, OTT players and Developers play a role to support an ecosystem beneficial to all including the consumer
TELCO
OPERATOR
OTT BRANDS
• Billing
• CONVENIENCE
• Local Information
• Distribution
• QoS/QoE
• RELEVANCE
• GREATER
SELECTION
• Single System Convenience
• Wide user base of adoption
• Social network integration
DEVELOPERS
• Speed to Market
• Low Risk
• Always Fresh
• Relevant Local Apps
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9

11. The New Reality…
TELCO
OPERATOR
STILL NECESSARY, BUT VIEW POINT NEEDS TO SHIFT
• From charging per minute to share of minute-based model
• From walled garden to partnerships
• Focus shift from utility to experience
DEVELOPERS
• CONVENIENCE
• RELEVANCE
• GREATER SELECTION
NEED TO BE AGILE AND WORK WITH BOTH PARTIES
• Operators are probably best partners for local or unique cultural
needs
• OTT brands are the best fit for global marketplaces
OTT BRANDS
NEED TO FIND WIN-WIN
• Operator partnerships are necessary to ensure customers get
advantage of the latest technology
• The shift to an all data world will not happen without large amounts of
CAPEX spent by operators
• Solid distribution partnerships will also ensure sustainable future and
better monetization
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10

12. The Celcom Approach…
Initiatives moving to create a Tri-Party Ecosystem
Adopt and build own brand
services - Eg. Escape, Buzzaar
Build Alternatives with Partners
Eg. Kolony
Groom and provide
opportunities for App
Developers
NEXT
STEPS
Build OTT-like elements into
core elements
(In discussions)
Embrace OTT via charging and
partnerships
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TIGHTER GO-TO-MARKET WITH
CONTENT AND APP DEVELOPERS
11

13. THANK YOU