1. PROGRAMMABLE TELECOMS –
WHAT IS IN IT FOR TELCOS?
TADSUMMIT ASIA | MAY 2020
SEBASTIAN SCHUMANN, DEUTSCHE TELEKOM AG

2. ABOUT ME
§ 10y core network design, dev & innovation @ Slovak Telekom
§ 2.5y VP Engineering @ immmr
§ ~2y wholesale network infrastructure @ Deutsche Telekom
§ TAD* since 2014
§ twitter.com/s_schumann
§ linkedin.com/in/sschumann
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3. CLOSING THE GAP ON TWILIO
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§ Twilio revenue grew in 2018 to 650,1 mn USD
§ 1,4k employees, 451,5k USD/employee
§ 64k active customer accounts
§ 754 mn USD revenue as of Q3/2019
§ 2,7k employees as of Q3/2019
§ 172k customers as of Q3/2019
https://investors.twilio.com/all-news/press-release-details/2019/Twilio-Announces-Fourth-Quarter-and-Full-Year-
2018-Results/default.aspx

4. CLOSING THE GAP ON TWILIO
WHAT GAP?
§ DT revenue grew in 2018 to 75,7 bn EUR
§ Net profit 2018: +2,2 bn EUR
§ 216k employees, 349,7k EUR/employee
§ Investments of 12,2 bn EUR worldwide
§ 59,2 bn EUR revenue as of Q3/2019
§ 212k employees as of Q3/2019
§ 18 mn customers as of Q3/2019*
https://www.telekom.com/en/media/media-information/archive/annual-figures-2018-563880
§ Twilio revenue grew in 2018 to 650,1 mn USD
§ Net loss 2018: -122 mn EUR
§ 1,4k employees, 451,5k USD/employee
§ 64k active customer accounts
§ 754 mn USD revenue as of Q3/2019
§ 2,7k employees as of Q3/2019
§ 172k customers as of Q3/2019
https://investors.twilio.com/all-news/press-release-details/2019/Twilio-Announces-Fourth-Quarter-and-Full-Year-
2018-Results/default.aspx
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5. CLOSING THE GAP ON TWILIO
WHAT GAP?
§ DT revenue grew in 2018 to 75.700 mn EUR
§ Net profit 2018: +2.200 mn EUR
§ 216k employees, 349,7k EUR/employee
§ Investments of 12,2 bn EUR worldwide
§ 59.200 mn EUR revenue as of Q3/2019
§ 212k employees as of Q3/2019
§ 18 mn customers as of Q3/2019*
https://www.telekom.com/en/media/media-information/archive/annual-figures-2018-563880
§ Twilio revenue grew in 2018 to 650,1 mn USD
§ Net loss 2018: -122 mn EUR
§ 1,4k employees, 451,5k USD/employee
§ 64k active customer accounts
§ 754 mn USD revenue as of Q3/2019
§ 2,7k employees as of Q3/2019
§ 172k customers as of Q3/2019
https://investors.twilio.com/all-news/press-release-details/2019/Twilio-Announces-Fourth-Quarter-and-Full-Year-
2018-Results/default.aspx
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* Fixed line in Germany as of Q3/2019, total 178.4 mn mobile, 27.9 mn fixed, 20.2 mn broadband)

6. CLOSING THE GAP ON TWILIO
FROM A TELECOMS PERSPECTIVE?
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7. MY TELECOMS PERSPECTIVE.
§ The ”Twilio gap” from an operator perspective is more than just numbers
§ Operators do more than just communications, and there are no really any numbers for a heads-on comparison
§ The biggest difference in the assets from a Telco and Twilio: You can touch them.
§ The potential of intercarrier wholesale - see the 2018 Annual Report:
7 https://bericht.telekom.com/geschaeftsbericht-2018/serviceseiten/downloads/files/financial_statements_dtag_gb18.pdf
It may not be fully comparable, but helps
to set the context J

8. WHAT IS RELEVANT IN THIS DISCUSSION
FROM A TELCO VIEW?
§ Legacy Telco communication service production
§ Is (still) a classic NT business supported by IT systems (OSS/BSS)
§ Is mostly a local business supported by intercarrier production & relations
§ Is closed community, long-term regulated, needs IC agreements
§ Is a highly dependent multi-player ecosystem mainly driven by standards
§ Is physical, with some core network components being virtualized
§ Modern alternative CSP communication service production
§ Developed as an app economy play by modern software companies
§ Is global for only a handful of relevant market players
§ Is walled garden, operating in grey zones
§ Low external dependencies due to End-to-End service, sometimes leveraging commercial breakout
§ Is entirely virtual, enabled by software, connectivity & the cloud
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9. WHERE DOES CPAAS FIT?
§ CPaaS is an API enabler on top of Telco assets augmented with various features to enable programmable telecoms
§ Most providers aggregate these assets from various Telco’s
§ Some already integrate alternative communications provider’s assets
§ CPaaS technology follows paradigms driven by software companies
§ Virtualized/Cloud based global production with focus on local markets
§ Fast, automated provisioning and billing
§ Modern consumers with usually a variety of different choices
§ Standards are not relevant to get started; we see reverse standardization (i.e. best practice will win)
§ Telco’s as well as CPaaS players both need to comply with local regulations (at least reg. Telco assets)
§ CPaaS’ value creation is in the API abstraction and value of use cases, less volume alone
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10. CPAAS VALUE VS VOLUME PRICING – WHERE’S THE MARGIN
Sample Pricing1
§ SMS to Germany
§ Send: 7,5ct (+36%3)
§ Receive: 0,57ct
§ Number Verify: 10ct (+33%)
§ Phone number: 25 EUR per month w/o connectivity
§ Number insights: 0,5 – 3ct (+100%)
§ Telephony to Germany
§ Make call: 5,7ct (+295%3)
§ Receive call: 0,45ct
Sample Pricing2
§ SMS to Germany
§ Send: 8,5ct (+55%3)
§ Receive: 0,75ct
§ Verify: SMS cost add. 5ct (+59%)
§ Phone number: 5 USD per month w/o connectivity
§ Telephony to Germany
§ Make call: 5,5ct (+282%3)
§ Receive call: 1ct
§ VoIP P2P: 0,4ct (+100%)
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1 Prices in EUR, only mobile SMS/calls, prices per minute/message
2 Prices in USD, only mobile SMS/calls, prices per minute/message, volume discounts or pre-commit discounts may apply
3 Reference prices

11. CPAAS – A CURSE OR A BLESSING FOR TELCOS?
§ Forecast for worldwide voice & messaging CPaaS market to grow from 2bn USD in 2017 to 10.9 bn USD in 20221
§ Big demands in ongoing “digital transformation projects” from previously plain access to communication assets to
more business and process supporting functions based on communications features
§ Carriers are slowly getting started with CPaaS (see next slides), while established providers already move to offering
vertical specific functions and advanced service features beyond API access
§ Market capitalization increases by major CPaaS providers (e.g. mid 2017 to mid 2019 Twilio 3bn à 18.6bn USD)
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1 IDC study: “Worldwide Voice and Text Messaging Communications Platform-as-a-Service Forecast, 2018–2022”
2
Gartner studies

12. CPAAS – A CURSE OR A BLESSING FOR TELCOS?
§ Getting started with CPaaS fits most Telco strategies
§ Lower cost and faster time-to-market support consumer product innovation for core communication services
§ Industry-standard evolution towards APIs and automation contribute to technology strategy
§ Pursue new business and cooperation models in a dynamically growing CPaaS market, such as API marketplaces and off-footprint partnerships
§ Twilio and other CPaaS providers are a new kind of competition that captures values on top of Telco’s
§ Double-sided sword: The providers bring traffic, but also abstract and capture both value and the customer
§ CPaaS is evolving as the “Telecommunications Support System (TSS)” of many applications & services, while
making the role of Telco’s themselves less relevant
§ Wait, what?
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13. CPAAS – THE TELECOMMUNICATIONS SUPPORT SYSTEM
§ Formerly produced end-to-end NT services Telephony and SMS supported by an operations stack and
business applications that are consumed only in devices or applications dedicated for this purpose are still
there and relevant
§ Connect people and have a basic communications system as part of it
§ This stack will remain and will be minimized/optimized
§ The future value lies in the gateway function
§ Create improved service experiences for the end customers
§ Easily expose enablers to have providers focus on their core business
§ Business-process supporting communications enablers that are produced with a modern IT infrastructure
and paradigms that can be integrated almost anywhere (apps, flows & processes, devices) will evolve
§ Exposing classic NT services (telephony, SMS) & endpoints, but also providing Internet communications enablers (e.g. messaging, WebRTC
voice & video, E-mail) and capabilities (e.g. transcoding)
§ Fully API driven – enablers as well as provisioning, lifecycle, billing, integration
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NT centric
supported
by OSS/BSS
IT centric
supported
by TSS

14. HOW CAN THE TSS PARADIGM HELP?
§ For any type of services Telecoms can act as enabler (eq. “support system”)
§ Shift focus away from network-centric service production model and customer view towards IT-toolchain-driven
service exposure differentiating on the experience level
§ CPaaS enables both product and technology and therefore mitigates investment risks and enables joint budget
allocation between (former) NT & IT distinction – IT is no longer just “a cost factor”
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Network
Technology
IT
Network
Technology
IT
NT
Experience
IT

15. PROGRAMMABLE TELECOMS – WHAT IS IN IT FOR TELCOS?
§ A lot of relative margin on top of voice & SMS, churn prevention and acquisition of new businesses
§ The potential to assume a new role as communications infrastructure enabler
§ A chance to re-think NT/IT split and discover new ways to optimize organization and generate customer value
§ The ability to address new competitors in both global market as well as individual local markets
§ The Telco way towards CPaaS
§ Make or buy? Build or partner? Acquire? Aggregate?
§ The “enabler”/API story applies to many areas of Telecoms
§ Connectivity
§ Asset/inventory management
§ Business process integration and optimization
§ Automation, provisioning…
§ Telco’s have the best network in the market – monetizing it is a no-regret move
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NT
Experience
IT

16. GENERAL CONCLUSIONS
§ What makes this discussion special?
§ The special role of Telecoms and the carrier ecosystem.
§ Once we treat Telecoms like “yet another IT application”, it all depends on how good the abstraction is, how
integrated the experience, and how good the ecosystem
§ And of course there’s scalability, regulation, automation, etc. but that should not be new to Telco’s
§ Find your way in what to focus on when exposing your assets and remaining a relevant service (not just connectivity)
provider – CPaaS should just be one part of your technology enabler strategy
§ Take fixed/mobile merger as blueprint for NT/IT mergers and merge/leverage capabilities similarly
§ Many new market players (e.g. CPaaS providers, aggregators) evolved that modern IT-supported Telco’s can take
head-on
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17. WHAT DOES THIS MEAN FOR ASIA?
¡ IdeaMart (Sri Lanka) is the most successful Telco CPaaS globally
¡ Revenue contribution greater than any other VAS, close to double digit % revenue contribution to the business
¡ Performance of late is relatively flat, as it struggled to move beyond messaging
¡ Bottom-line: Asian Telcos can be successful in CPaaS, this is not a western phenomenon
¡ Keys to IdeaMart's success:
¡ Treated messaging like “yet another IT application”, abstractions to simple web forms any small business owner could use, developed a vibrant ecosystem
throughout Sri Lanka solving local problems that mattered to Sri Lanka
¡ Largest TADHack Global location for many years
¡ Customers in Sri Lanka would choose their telco based on whether they supported IdeaMart
¡ In the Analysis Alan will present on the CXTech Landscape, Asia is under-represented in CPaaS. Twilio, Vonage, Sinch, Telnyx, 8X8, Plivo,
Amazon, Voxbone, MessageBird, Voyant, etc. are all Western companies. Where are the Asian Champions?
¡ There's a multi-billion dollar revenue gap for CPaaS in Asia
¡ Asian Telcos can close this gap - the keys are: treat telecoms like “yet another IT application”, it all depends on how good the abstraction is,
how integrated the experience, and how good the ecosystem

18. THANK YOU.
§ Do you want to discuss CPaaS and the role of Telecoms? Get in touch!
§ s.schumann@telekom.de
§ Text +421903419345
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