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Business of Value Added Services in New Mobile Era
From Strategy and Business Models to
Services Development for Telecoms ...
About Me
Ali Saghaeian
Chief Analyst & Consultant
Telecommunications, IT, and Media
Emerging Markets & Developed Countries...
• The mobile 3.0 – The trends for Multimedia Services and Value Added
Services
• The 4th revenue curve of mobile communica...
Saghaeian [at] gmail.com
Consumer Demand
 Fast broadband networks, well-designed mobile computing devices, and the
increasing supply of content, a...
Monthly Internet Traffic Forecast: 2015 - 2019
Saghaeian [at] gmail.com
Families of Use Cases:
Matching the Customers’ Demands
Examples to represent variety & variability
Saghaeian [at] gmail.com
Revenue Growth Curve in Mobile
The sigmoid or the S-curve growth: This model can be used to
explain the growth of individu...
 In a majority of the cases, the rise is slow when the subscriber
penetration is below 25% and as the subscriber penetrat...
Mobile Voice Revenue Growth Curves
The first cellular market started in Japan in 1979
Saghaeian [at] gmail.com
Mobile Voice Revenue Growth Curves for some countries
Saghaeian [at] gmail.com
Telco Voice Standards : What is our Roadmap?
VoWiFi
> Significant % of customers have poor in-building coverage in
homes, ...
VoLTE: Very Early Days
• 25 operators have
launched
commercially in
some capacity
across 16
countries
• VoLTE by itself is...
VoLTE Forecast 2015 - 2020
VoLTE Subscriptions (Mio) Revenue ($ Bn)
In 2020:
• VoLTE subscription more than 1.4 Bn
• VoLTE...
VoWi-Fi Market Scenario and Forecast
VoWi-Fi is going to surpass VoLTE by 2018 in terms of minutes of use
VoWi-Fi extends ...
OTT VoIP is cannibalizing Traditional Voice Revenues
Saghaeian [at] gmail.com
Mobile Messaging Revenue Growth Curves
The first SMS was sent in 1991 in Europe
Saghaeian [at] gmail.com
Messaging Trends and Outlook
 In some of the emerging markets, messaging is still the second biggest
revenue generation c...
Messaging in Turkey – Declining Trend
Saghaeian [at] gmail.com
Mobile Messaging Usage Growth Curves in Spain
Saghaeian [at] gmail.com
Mobile Messaging Revenue curve in Taiwan
Saghaeian [at] gmail.com
SMS traffic growth slowing, MMS more volatile
• Global SMS traffic appears to have peaked at just under 8 trillion message...
Variable growth in messaging traffic in top 5 markets
• China and the US are largest markets for SMS and MMS.
• But while ...
China Mobile: steady decline in messaging revenues
• China Mobile has seen its messaging revenues steadily decline in rece...
Vodafone Group: messaging traffic down
• Vodafone Group messaging traffic declined 6.6% in FY2014 to 332.6 billion
message...
OTT Messaging Traffic Worldwide
Saghaeian [at] gmail.com
Messaging will be the most popular application /
platform in Emerging Markets for 2014-2017
Saghaeian [at] gmail.com
Mobile Messaging Revolution
Saghaeian [at] gmail.com
• Operators in developed markets reporting significant declines in
messaging traffic, revenues. . . . . . OTT apps increas...
Mobile Access Revenue Growth Curves
With each cycle, the length of the curve shrinks, so the access
revenue curve will pea...
Data access is compensating for the decline in voice
Saghaeian [at] gmail.com
communications is core business…
being challenged by digital communication
 Communication is (will be) feature of
any web...
 Mobile operators must look at ways to move beyond just providing access
services and position themselves from being serv...
Mobile Services Revenue Growth has been Declining
Saghaeian [at] gmail.com
As We Grow from 2G to 3G to 4G and to 5G
Saghaeian [at] gmail.com
4G-LTE Global Service Status
Saghaeian [at] gmail.com
LTE users – what’s important?
New opportunities, new challenges
Saghaeian [at] gmail.com
Will LTE users pay more for quality?
Saghaeian [at] gmail.com
How can 4G Grow the Revenues
Saghaeian [at] gmail.com
Mobile Data
 WE are living in a data-driven mobile era.
 Many operators started from unlimited to boost demand but soon ...
US Mobile Operators Revenue Microtrends
Saghaeian [at] gmail.com
US Mobile Revenue Growth 1995-2011
Saghaeian [at] gmail.com
Growth in Data revenues in India
• Data revenues were insignificant pre 2010. During 2010-11 there was some traction.
• In...
China Mobile – Mobile data segment trends
Saghaeian [at] gmail.com
Core Revenue Trends – Mobile Data
Telco revenue decline is expected to slow a little going forwards, also due to
increasin...
Industry Growth Drivers 2014 - Mobile Data and OTTs
Also industry executives are highlighting mobile data monetization and...
Mobile in the Past
Evolution of Global Market Drivers
Saghaeian [at] gmail.com
Mobile in the Past
Global Trends Overview
Saghaeian [at] gmail.com
Evolution of Communication Services
Saghaeian [at] gmail.com
 The Mobile Internet 3.0 is defined by the cloud-enabled, software
driven, IP-centric, high-speed 4G+ networks; consumers...
The Game is Changing …
Saghaeian [at] gmail.com
Mobile Internet 3.0 – Leading global mobile operators
Saghaeian [at] gmail.com
Challenges for MNOs: Porter’s Forces
Mobile communication services have been heavily impacted by smartphones
and all IP ne...
Operators need to focus on Data and VAS
Data (Mobile Broadband)
Voice & Messaging
Current Status
(ARPU)
Saghaeian [at] gma...
Why VAS is Important
In mobile telecommunication industry, VAS is defined as services that are:
1. Not part of the basic v...
Reasons for Increasing Importance of VAS
• Decrease in ARPU despite increase in MOU:
– With declining ARPU, the challenge ...
Key Challenges for Service Providers
Complexity of choosing VAS mix
Ability to maximize revenue from major investments
• B...
What is an OTT communications service
Saghaeian [at] gmail.com
The OTT communications services market – segmentation
Saghaeian [at] gmail.com
Threats from OTT Communication Apps
 OTT communication apps are here to stay > Evolves & improves
permanently generating ...
OTT set to corner Revenues of the Future
All Revenue Streams (Messaging in MENA-India & Gaming in Far-East)
are moving tow...
Who are the OTT Users
Saghaeian [at] gmail.com
OTT video revenue will exceed physical by 2018
Global video revenue, OTT vs physical (US$bn), 2013-2018
Source: Ovum, PwC
...
Growth of online video through 2017 in SE Asia
Saghaeian [at] gmail.com
OTT Is Taking Up
› Inline with other markets
around the world, OTT
revenues in China and Korea
are mainly advertisement
dr...
OTT Video Market Share
Direct revenues’ share of video will increase and provide monetization opportunities
Saghaeian [at]...
OTT Business and Monetization Models
1. Free
• Build subscriber base/market reach
• Then sell content/services/advertising...
The 6 Cs are the key market drivers
Commoditization, content, convenience, collaboration, consumers and
consolidation are ...
OTT content is key to revenue growth
Operators should partner to find attractive content bundles for consumers
 Commoditi...
Consumer Cloud services
Telecom operators seen as a vertical by IT – will they sell consumer-cloud?
 Consumer cloud & sec...
Enterprise Messaging: From VAS to M-Commerce
Mobile is the key media & the strategic channel
7.1B mobile connections WW wi...
The 4th Curve
 The 4th curve is not a single entity or a functional block like voice,
messaging or access but is made up ...
Telecom sector revenue trends
Revenue decline can slow down if especially mobile operators implement the
right strategies
...
 Who will capture the profits
 The Need for New operating models
 Implications on the Ecosystem
 Competition and Opera...
Opportunities in the 4th Curve
 AT&T and Telefonica Digital are focused on opportunities beyond
communications into M2M, ...
Opportunities beyond Voice and Data
Saghaeian [at] gmail.com
Globally identification of new revenue opportunities is a key
requirement for Telco players facing slow down
• Further dev...
NTT DoCoMo Revenues from new businesses
Saghaeian [at] gmail.com
Telefonica Digital Revenue Targets
Saghaeian [at] gmail.com
Contextual Communications means New Revenue
Saghaeian [at] gmail.com
AT&T earns new revenue with connected car
Saghaeian [at] gmail.com
China Telecom earns new wholesale revenue with
virtual numbers
Saghaeian [at] gmail.com
Innovation and Collaboration in the 4th Curve
 The opening up of the network for innovation necessitates re-architecting
...
Operators have a number of different commercial and
technical capabilities to offer their partners
Saghaeian [at] gmail.com
Business Segments – The Ecosystem
Saghaeian [at] gmail.com
What is Happening …
Saghaeian [at] gmail.com
Digital convergence is driving overlaps between previously distinct
industries creating a complex new sector, addressable ...
Partnerships can benefit operators and handset
manufacturers, as well as OTTs
Saghaeian [at] gmail.com
OTTs to Complement Telcos
Saghaeian [at] gmail.com
Examples of existing CSP-OTT partnerships
Saghaeian [at] gmail.com
Partnering / Bundling approaches to add Value beyond
Connectivity
Saghaeian [at] gmail.com
Mobile Operator and Device OEM partnerships
Saghaeian [at] gmail.com
Partnerships – E-Plus Germany teams with WhatsApp for
branded SIM
Saghaeian [at] gmail.com
Partnerships - Telefonica teams with Line for Firefox OS
Saghaeian [at] gmail.com
An example: OTT partnerships
Zero rating OTT video messaging
● VoLTE subscriber opts into
1-day free trial of OTT video
me...
Case Study of Zatto and Orange
Zatto, Orange CH’s OTT TV,
bundled with mobile voice &
data plans and focused on
generation...
Partnership Opportunities - Digital Advertising
OTTs & Telecom operators : best possible partnership for targeting user
se...
The 4th curve opportunities
Saghaeian [at] gmail.com
4th Curve Application Areas
Application Areas Competitors
Identity, Risk Management Facebook, Google, Twitter, Microsoft, ...
The four revenue growth curves
Operators who are investing heavily in the 4th curve have a good shot at
seeing the end of ...
 The 4th wave analyzes the four mobile revenue curves in detail and
discusses the strategies needed to increase the net r...
The rise and fall of the 4th Revenue Curves
Saghaeian [at] gmail.com
o Delay the decline
This can be achieved by a number of key initiatives that involve a mix of business
models, consumer lo...
The Impact of 4th Curve on Operator Financials
 The growth in revenue has been fueled by the investments that operators
h...
ICT and Digital Media Revenue Map
Saghaeian [at] gmail.com
ICT and Digital Media Industry - Revenue
 ICT and digital media industry has
grown by 5.6% since 2007, reaching $3.7tn
in...
Business Segments - Revenue, 2007 vs. 2013
 Communications was the worst performer whilst broadband connectivity gained
i...
Shift in value, 2007 vs. 2013
Saghaeian [at] gmail.com
Revenue Growth Barometer
Saghaeian [at] gmail.com
ICT and Digital Media Industry - Profitability
 ICT and digital media industry EBITDA
has grown by 5.1% since 2007, reach...
Profitability of business segments, 2007 vs. 2013
Saghaeian [at] gmail.com
EBITDA Margin Barometer
Saghaeian [at] gmail.com
Perceived value, 2007 vs. 2013
 Connectivity & communications remains the worst performing segment, with
a knock-on effec...
Global Mobile Industry Profit Share
Saghaeian [at] gmail.com
Mobile Operator profit growth in some regions
Saghaeian [at] gmail.com
Safaricom Mobile Data Revenue Segmentation
Saghaeian [at] gmail.com
Based on the strategy and performance of a given operator on the 4th curve, operators
worldwide will typically fall into t...
The Telco Challenge: Data Pipe or Smart Pipe
Saghaeian [at] gmail.com
STRATEGY #1: Connectivity Provider
Using core competences to offer
smart connectivity
•Low competitive advantage
•Low leve...
Key digital services in both Fixed and Mobile world
Large number of digital services segments offers significant revenue p...
(Telco) connectivity will only be a small part of the total
IoT market
Saghaeian [at] gmail.com
STRATEGY #2: Digital Service Provider
Offering digital services directly to customers
•New generation IT services needed
•...
Telco Digital Services Opportunities
Saghaeian [at] gmail.com
How to Build a Successful Digital Services Business
Saghaeian [at] gmail.com
Service Providers Transition
Saghaeian [at] gmail.com
Digital Revenue as a percentage of Total Revenue
Many telcos have set up new divisions to capture opportunities in adjacen...
European telcos are generating 3-4% of total revenues
from “digital” businesses
Saghaeian [at] gmail.com
STRATEGY #3: Digital Service Enabler
Cooperate with OTTs, offer existing capabilities “as a service“
• The experiences fro...
Cooperation in the Ecosystem
Saghaeian [at] gmail.com
The New Digital World represents both Opportunities &
Challenges for the Service Provider
Saghaeian [at] gmail.com
Simplify
supplier
relationships
Cut
operational
costs
Increased
need for
quality and
reliability
The demand side appetite ...
Convergence between the IT and Telco sectors and end-to-end ICT
service is breaking down the divide of the traditional val...
Telco
operator
IT provider
Traditional
ICT services
market
Infrastructure
services
Application
services
Voice
and data
Con...
Opportunity Nature of Service Business
Model
Synergies with existing
capabilities and
products
Key Challenges
Network Serv...
Digital Service Model (1/4)
Saghaeian [at] gmail.com
Digital Service Model (2/4)
Saghaeian [at] gmail.com
Digital Service Model (3/4)
Saghaeian [at] gmail.com
Digital Service Model (4/4)
Saghaeian [at] gmail.com
4-Phase Evolution to Digital Lifestyle Services
Saghaeian [at] gmail.com
Operators have to move up the value chain
Saghaeian [at] gmail.com
 For some of the services, the operator might just focus on enabling the
ecosystem while for others they might actively p...
Future Telecoms Service Business Models
3 types of Revenue Categories in Communications
Saghaeian [at] gmail.com
EXAMPLES OF LEVERAGING A COMMUNICATION PLATFORM FOR EARNING
INDIRECT REVENUE
Examples for Business Models
Saghaeian [at] g...
How can Operators become Digital Lifestyle Solution
Providers (DLSP)?
• Customer vs. User
• Save the customer relationship...
Customer vs. User
 The first step is appreciating that consumers of the 4th curve are not only going to be
the operator’s...
Separate the 4th curve organization from the mothership
 Smart organizations separate 4th curve organization from the mot...
Portfolio management – fail often and cheap. Embrace Beta launch
 The 4th curve business model doesn’t require everything...
Standards vs. Proprietary
 Standards have served our industry well. However, in the apps world,
standards can slow you do...
Essentials of Being a Digital Lifestyle Player
Become a Digital Lifestyle Player!
Saghaeian [at] gmail.com
Thanks for your kind attention 
By ALI Saghaeian
Chief Analyst & Consultant
Telecoms, IT, and Media
Saghaeian [at] gmail....
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Business of Value Added Services in New Mobile Era: From Strategy and Business Models to Services Development for Telecoms Operators

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Please email me "saghaeian [at] gmail.com" for any request on VAS research, consulting and training.

This presentation includes topics such as:
The mobile 3.0 – The trends for Multimedia Services and Value Added Services
The 4th revenue curve of mobile communication – The business of Value Added Services.
Differences in doing business with Multimedia and Value Added Services than voice, messaging and access (data) services.
Mobile Operator Strategy and implications for the ecosystem
The Impact of 4th curve on mobile operator’s financials
Investing in the 4th Curve
How can Operators become Digital Lifestyle Solution Providers (DLSP)?

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Business of Value Added Services in New Mobile Era: From Strategy and Business Models to Services Development for Telecoms Operators

  1. 1. Business of Value Added Services in New Mobile Era From Strategy and Business Models to Services Development for Telecoms Operators By ALI Saghaeian Chief Analyst & Consultant Telecoms, IT, and Media Saghaeian [at] gmail.com
  2. 2. About Me Ali Saghaeian Chief Analyst & Consultant Telecommunications, IT, and Media Emerging Markets & Developed Countries Email: saghaeian @ gmail.com Based in Sydney – New South Wales, Australia Professional Experiences • Founder and Chairman at Kiana Intelligent Communications • Shadow Marketing Director at the Largest Telecoms Operator in the Middle East • Principal Consultant ‐ Strategy & Business at Information Technology Development Center • Head of Value Added Services at Miniatel Communications Development • Chief Analyst & Consultant at Teyf Research & Consulting Group • Chairman and Keynote Speaker in various World Telecoms Events • Project Manager and Consultant to several national VAS Projects
  3. 3. • The mobile 3.0 – The trends for Multimedia Services and Value Added Services • The 4th revenue curve of mobile communication – The business of Value Added Services. • Differences in doing business with Multimedia and Value Added Services than voice, messaging and access (data) services. • Mobile Operator Strategy and implications for the ecosystem • The Impact of 4th curve on mobile operator’s financials • Investing in the 4th Curve • How can Operators become Digital Lifestyle Solution Providers (DLSP)? Presentation Agenda Saghaeian [at] gmail.com
  4. 4. Saghaeian [at] gmail.com
  5. 5. Consumer Demand  Fast broadband networks, well-designed mobile computing devices, and the increasing supply of content, applications, and services have unleashed the consumer demand for more like never before.  The changing face of the industry also impacted the business models, the revenue streams, and the value chain power structure.  The operators rush to meet the growing data demand that is doubling every year in most major markets. We segmented the operator revenues by voice, messaging, and access and correlated them with subscription growth. Saghaeian [at] gmail.com
  6. 6. Monthly Internet Traffic Forecast: 2015 - 2019 Saghaeian [at] gmail.com
  7. 7. Families of Use Cases: Matching the Customers’ Demands Examples to represent variety & variability Saghaeian [at] gmail.com
  8. 8. Revenue Growth Curve in Mobile The sigmoid or the S-curve growth: This model can be used to explain the growth of individual products, companies, markets, and global industries. Saghaeian [at] gmail.com
  9. 9.  In a majority of the cases, the rise is slow when the subscriber penetration is below 25% and as the subscriber penetration approaches 70-90% band in a given segment, the Net-Revenue starts to hit its peak, stagnates for a bit and declines.  The amount of time the revenue curve stays in the stagnation phase depends on the market competitive dynamics and usage profile of the subscribers in a given country.  These are generally dependent on the maturity of the market, the economic and political conditions of the market, the regulatory regimes, the competitive forces that are at play in the market, and the availability of substitute solutions. Analysis of the Growth Curves in Mobile Saghaeian [at] gmail.com
  10. 10. Mobile Voice Revenue Growth Curves The first cellular market started in Japan in 1979 Saghaeian [at] gmail.com
  11. 11. Mobile Voice Revenue Growth Curves for some countries Saghaeian [at] gmail.com
  12. 12. Telco Voice Standards : What is our Roadmap? VoWiFi > Significant % of customers have poor in-building coverage in homes, transports… > VoWiFi can be proactively communicated to customers, e.g. T- Mobile US & EE > Initial launch can be without handover to mobile coverage VoLTE > Clear customer benefits (HD-Voice, faster call set-up, simultaneous voice and data services at 4G speeds) that build on existing base of HD-Voice customers > The experience can not be inferior to that today, e.g. handover required for launch. Therefore, no commercial launch until all major problems have been resolved RCS & Enriched Calling > RCS & Enriched Calling, when combined with VoLTE, will ensure that customers gets the most out of simultaneous voice, messaging and data services; major European operators (Orange, Voda, DT & TEF), see this as the vision for “future of comms” > However, benefits will only be relevant to customers when there is a significant base of enabled devices Saghaeian [at] gmail.com
  13. 13. VoLTE: Very Early Days • 25 operators have launched commercially in some capacity across 16 countries • VoLTE by itself is purely a technology migration • 200+ VoLTE capable devices announced VoLTE is less than 2% of subscribers Saghaeian [at] gmail.com
  14. 14. VoLTE Forecast 2015 - 2020 VoLTE Subscriptions (Mio) Revenue ($ Bn) In 2020: • VoLTE subscription more than 1.4 Bn • VoLTE revenue going beyond $260 Bn Saghaeian [at] gmail.com
  15. 15. VoWi-Fi Market Scenario and Forecast VoWi-Fi is going to surpass VoLTE by 2018 in terms of minutes of use VoWi-Fi extends the coverage of MNOs offering an cost- effective, scalable, high- quality approach whereas cellular coverage might be sketchy But VoWiFi also can help to win the battle against the erosion of revenue from over-the-top providers’ (OTTPs’) VoIP offersSaghaeian [at] gmail.com
  16. 16. OTT VoIP is cannibalizing Traditional Voice Revenues Saghaeian [at] gmail.com
  17. 17. Mobile Messaging Revenue Growth Curves The first SMS was sent in 1991 in Europe Saghaeian [at] gmail.com
  18. 18. Messaging Trends and Outlook  In some of the emerging markets, messaging is still the second biggest revenue generation category after voice.  Messaging continues to be a big revenue generator but its share of the overall data revenues is gradually declining.  For the first time, in 2011, KPN the biggest Dutch operator started to publicly make noise about the impact of players like Whatsapp on their messaging revenue.  Now, over 90% of such subscribers preferred IP messaging. Hence, they were looking for a cheaper alternative to operator messaging. Saghaeian [at] gmail.com
  19. 19. Messaging in Turkey – Declining Trend Saghaeian [at] gmail.com
  20. 20. Mobile Messaging Usage Growth Curves in Spain Saghaeian [at] gmail.com
  21. 21. Mobile Messaging Revenue curve in Taiwan Saghaeian [at] gmail.com
  22. 22. SMS traffic growth slowing, MMS more volatile • Global SMS traffic appears to have peaked at just under 8 trillion messages, with flat growth in 2013. • MMS traffic still appears to be somewhat volatile, peaking at 371.3 billion messages in 2011 before falling substantially in 2012 and then recovering somewhat in 2013. We expect that in those markets where messaging apps are being used to send pictures, the use of MMS will continue to decline. Saghaeian [at] gmail.com
  23. 23. Variable growth in messaging traffic in top 5 markets • China and the US are largest markets for SMS and MMS. • But while SMS seems to be holding steady, and MMS traffic is still growing for Chinese operators, the US operators are seeing a marked decline in both SMS and MMS traffic. Saghaeian [at] gmail.com
  24. 24. China Mobile: steady decline in messaging revenues • China Mobile has seen its messaging revenues steadily decline in recent years. • Tencent‟s WeChat/Weixin incredibly popular – 396 million monthly active users , 14/05/14 Saghaeian [at] gmail.com
  25. 25. Vodafone Group: messaging traffic down • Vodafone Group messaging traffic declined 6.6% in FY2014 to 332.6 billion messages (356 billion in FY13) • By country, Netherlands, Germany, Italy, Spain and Europe saw steepest declines: >25% • Turkey, Romania, South Africa only opcos to see increases in messaging traffic. Saghaeian [at] gmail.com
  26. 26. OTT Messaging Traffic Worldwide Saghaeian [at] gmail.com
  27. 27. Messaging will be the most popular application / platform in Emerging Markets for 2014-2017 Saghaeian [at] gmail.com
  28. 28. Mobile Messaging Revolution Saghaeian [at] gmail.com
  29. 29. • Operators in developed markets reporting significant declines in messaging traffic, revenues. . . . . . OTT apps increasingly favored by subscribers, contributing to cannibalization. • Clear segmentation is emerging among messaging apps . . . Some, like WhatsApp, will continue to focus on communications, others (Line, WeChat, Kakao) have already become potent content and commerce platforms, generating good revenues • Internet companies acquiring, investing or merging with messaging app providers . . . Will Internet companies become the new telcos? • Mobile operators developing multiple responses, depending on technology and local market conditions . . . Partnership becoming very common, especially in emerging markets; emulation has little success so far. • SMS becomes one of a number of communications services mobile subscribers will use • . . . Mobile operators have an opportunity to protect the legacy SMS base i.e. those users who are slow/reluctant to move to IM apps. Conclusions on Messaging Saghaeian [at] gmail.com
  30. 30. Mobile Access Revenue Growth Curves With each cycle, the length of the curve shrinks, so the access revenue curve will peak earlier than the previous two curves Saghaeian [at] gmail.com
  31. 31. Data access is compensating for the decline in voice Saghaeian [at] gmail.com
  32. 32. communications is core business… being challenged by digital communication  Communication is (will be) feature of any web-based service and web- connected “thing”.  Operators’ existing communication services have failed to address costumers’ digital communication needs and will be increasingly challenged new technologies & new players. Saghaeian [at] gmail.com
  33. 33.  Mobile operators must look at ways to move beyond just providing access services and position themselves from being service providers to becoming service innovators. Mobile Access  In addition, the migrations from 2G to 3G to 4G have been step functions to deliver more capacity at a lower cost/bit.  For the access curve, where most operators are still going to be riding the growth for the next several years, strategies will be driven by technologies and business models that help manage the cost per bit to enhance the margins per bit.  The growth of the access curve helped compensate for the declines in voice and messaging revenues. For example, in the US, the voice revenues declined $12B from 2007 to 2011. During the same time, the data revenues increased by $41B, easily compensating for the decline. In Japan, the voice revenues declined by $3B but the data revenues increased by $25B from 2007 to 2011. Saghaeian [at] gmail.com
  34. 34. Mobile Services Revenue Growth has been Declining Saghaeian [at] gmail.com
  35. 35. As We Grow from 2G to 3G to 4G and to 5G Saghaeian [at] gmail.com
  36. 36. 4G-LTE Global Service Status Saghaeian [at] gmail.com
  37. 37. LTE users – what’s important? New opportunities, new challenges Saghaeian [at] gmail.com
  38. 38. Will LTE users pay more for quality? Saghaeian [at] gmail.com
  39. 39. How can 4G Grow the Revenues Saghaeian [at] gmail.com
  40. 40. Mobile Data  WE are living in a data-driven mobile era.  Many operators started from unlimited to boost demand but soon realized the folly of their judgment and moved back to the metering model. While unlimited voice and messaging can be sustained, unlimited data cannot  Smartphone penetration is a proxy for high-data usage. The advent of the iPhone coincided with and to some extent accelerated the deployment of the fast 3G networks. Android started to show the same data consumption characteristics as the iPhone by 2010.  AT&T’s data revenue grew from $689M in 2004 to $22,000M in 2011, a 30x increase. Other operators have seen similar hockey stick curves.  AT&T gave up on the unlimited plans 3 years after the launch. During this time period, the operator sustained the most incredible wave of data growth witnessed in human history. From 1 PB/month traffic in 2007, the data traffic grew 25000% to 35 PB/month by Q1 2012. Saghaeian [at] gmail.com
  41. 41. US Mobile Operators Revenue Microtrends Saghaeian [at] gmail.com
  42. 42. US Mobile Revenue Growth 1995-2011 Saghaeian [at] gmail.com
  43. 43. Growth in Data revenues in India • Data revenues were insignificant pre 2010. During 2010-11 there was some traction. • In 2012 it increased by 50%. In 2013 it doubled form 2012 levels and became significant contributor to non voice revenues • Airtel’s mobile Internet revenues grew around 90 per cent year-on-year • Idea Cellular that reported 92.2 per cent mobile data traffic volume growth. • The company’s average 3G data revenue per user has also increased by Rs 20 in the last one year to Rs 109. Saghaeian [at] gmail.com
  44. 44. China Mobile – Mobile data segment trends Saghaeian [at] gmail.com
  45. 45. Core Revenue Trends – Mobile Data Telco revenue decline is expected to slow a little going forwards, also due to increasing data revenues from higher penetration and traffic from smartphones & connected devices Saghaeian [at] gmail.com
  46. 46. Industry Growth Drivers 2014 - Mobile Data and OTTs Also industry executives are highlighting mobile data monetization and OTTs/content services as key industry growth drivers Saghaeian [at] gmail.com
  47. 47. Mobile in the Past Evolution of Global Market Drivers Saghaeian [at] gmail.com
  48. 48. Mobile in the Past Global Trends Overview Saghaeian [at] gmail.com
  49. 49. Evolution of Communication Services Saghaeian [at] gmail.com
  50. 50.  The Mobile Internet 3.0 is defined by the cloud-enabled, software driven, IP-centric, high-speed 4G+ networks; consumers using multiple connected devices; flattened value chains; and operators relying on mobile data services for majority of their revenues. Mobile Internet 3.0  In fact, mobile apps and VAS commanded the highest share in 2011 from the mobile data revenues.  Additionally, the VASrevenue is also lost as this revenue moves to the over-the-top (OTT) application providers such as Google, Facebook and others.  For China Mobile, Mobile VAS revenue is now greater than both messaging and access revenues. Saghaeian [at] gmail.com
  51. 51. The Game is Changing … Saghaeian [at] gmail.com
  52. 52. Mobile Internet 3.0 – Leading global mobile operators Saghaeian [at] gmail.com
  53. 53. Challenges for MNOs: Porter’s Forces Mobile communication services have been heavily impacted by smartphones and all IP networks A good product roadmap needs to take into account these 4 challenges. Saghaeian [at] gmail.com
  54. 54. Operators need to focus on Data and VAS Data (Mobile Broadband) Voice & Messaging Current Status (ARPU) Saghaeian [at] gmail.com
  55. 55. Why VAS is Important In mobile telecommunication industry, VAS is defined as services that are: 1. Not part of the basic voice offer. 2. Allow the mobile operators to develop another stream of revenue. VAS Category Category Characteristic Example Entertainment designed for mass appeal Games, Caller Ring Back Tone (CRBT), music download. Info characterized by the useful information SMS ,Stock Update, Location Based Service (LBS). M-Commerce services involving monetary transaction using the mobile phone M-banking and m-payment Saghaeian [at] gmail.com
  56. 56. Reasons for Increasing Importance of VAS • Decrease in ARPU despite increase in MOU: – With declining ARPU, the challenge is to develop alternative revenue streams and retain customers by creating a basis for differentiation. • Greater need for differentiation among the service providers –Greater competition –Saturation in Metros and Urban cities –Number Portability expected to come • 3G/4G VAS: – With added utility to mobile phone through 3G/4G, both subscriber base and ARPU are expected to observe phenomenal increase in the coming years Saghaeian [at] gmail.com
  57. 57. Key Challenges for Service Providers Complexity of choosing VAS mix Ability to maximize revenue from major investments • Balance the Portfolio with High price point vs. low cost services • Promotion to Maximize Penetration and Adoption Rates • Time of day promotion Ecosystem complexity • Content: Content Providers, Aggregators, Distributors • Applications: Financial Institutions, Retailers, Government • Foster business models to enable service providers, verticals and VAS • vendors to drive adoption to manage a Win-Win business Model Conflicting goals • Robust internal architecture vs. low CapEx • New 3G/4G investments vs. profitable applications on current 2G networks • Internal transformation (siloed to distributed) vs. time-to-market Saghaeian [at] gmail.com
  58. 58. What is an OTT communications service Saghaeian [at] gmail.com
  59. 59. The OTT communications services market – segmentation Saghaeian [at] gmail.com
  60. 60. Threats from OTT Communication Apps  OTT communication apps are here to stay > Evolves & improves permanently generating enormous user satisfaction (90%+) > Generates enormous usage (WhatsApp has more messages alone than all GSM operators combined)  Communication suites are a threat to telcos > They capture value outside of the traditional communication model > They cause irreparable collateral damage (revenue, margin, image) > Churn is facilitated through cloud-based context  The “App” Model has advantages over native > Available on any smartphone and secondary devices (tablets, PCs, TVs, Watches…) > Evolves and updates more frequently than native or standard-based services > Allows an autonomous strategy : no lengthy and difficult agreements with other players (web, telcos, OEMs, OSes…) > Favors virality via Address Book and usage of the Phone number Saghaeian [at] gmail.com
  61. 61. OTT set to corner Revenues of the Future All Revenue Streams (Messaging in MENA-India & Gaming in Far-East) are moving towards Internet Giants and away from Telcos… Saghaeian [at] gmail.com
  62. 62. Who are the OTT Users Saghaeian [at] gmail.com
  63. 63. OTT video revenue will exceed physical by 2018 Global video revenue, OTT vs physical (US$bn), 2013-2018 Source: Ovum, PwC Saghaeian [at] gmail.com
  64. 64. Growth of online video through 2017 in SE Asia Saghaeian [at] gmail.com
  65. 65. OTT Is Taking Up › Inline with other markets around the world, OTT revenues in China and Korea are mainly advertisement driven › Japan, however, continues to rely more on subscription revenue. Saghaeian [at] gmail.com
  66. 66. OTT Video Market Share Direct revenues’ share of video will increase and provide monetization opportunities Saghaeian [at] gmail.com
  67. 67. OTT Business and Monetization Models 1. Free • Build subscriber base/market reach • Then sell content/services/advertising • Creates data traffic/revenue for mobile operators 2. Subscription • Small monthly fee • Include in mobile operator monthly price plans • Eg BBM, WhatsApp, operators‟ services 3. Advertising and sponsorship • Based on building subscriber base/market reach • Eg Nimbuzz, Fring, OoVoo, TextPlus 4. Virtual content and apps • Stickers, avatars, games • Eg Line, KakaoTalk, Tango 5. Call-out/message-out • Skype, Nimbuzz, Rebtel, T-Mobile Bobsled, Fring 6. Partnerships • Mobile operators – revenue share, market reach • Handset manufacturers – market reach Saghaeian [at] gmail.com
  68. 68. The 6 Cs are the key market drivers Commoditization, content, convenience, collaboration, consumers and consolidation are all shaping the future landscape for OTT services  Commoditization of traditional revenue streams (e.g. voice) means operators must create new profit centers.  Content remains key to the take up of access and demand is almost inexhaustible, but premium content remains a scarce resource.  Convenience is what consumers value in content services – they want it to be readily accessible across multiple devices, easy to pay for and easy to find.  Collaboration is key to the future of operators’ digital strategies. Very few have the skills and resources to compete with best of breed services.  Consolidation is starting to reshape the landscape as operators move up and across the content value chain, and grow scale, though M & A activity.  Consumers are happier to spend on access models than single transactions, and Internet access is taking wallet share from pure content spend. Saghaeian [at] gmail.com
  69. 69. OTT content is key to revenue growth Operators should partner to find attractive content bundles for consumers  Commoditization: As core services become commoditized, service providers will need to offer content bundles to attract and retain consumers.  Content is not just a retention tool; there are significant revenue opportunities as content providers and aggregators explore new ways to package and sell content.  Convenience: Operators can play to their strengths – an active base of paying users, a robust billing and CRM platform, and marketing clout.  Collaboration is not easy, but is the best way to respond to evolving consumer demand, and unlocking multi-billion dollar revenues.  Consolidation: We expect to see larger entities competition for rights and a shift of power within the value chain.  Consumers are demanding more content, on more devices - OTT video services, digital music, video games, and e-books. Saghaeian [at] gmail.com
  70. 70. Consumer Cloud services Telecom operators seen as a vertical by IT – will they sell consumer-cloud?  Consumer cloud & security services are still underpenetrated for most segments of the customer base.  No single brand has managed to become top-of mind / leader in consumer cloud services - while telecom operators feel they have a role to play. Saghaeian [at] gmail.com
  71. 71. Enterprise Messaging: From VAS to M-Commerce Mobile is the key media & the strategic channel 7.1B mobile connections WW with a population of 7.1B people alive* 91% of users have their mobile phone within arm’s reach 24/7** 98% of mobile messages received are read compared to 22% of emails*** Saghaeian [at] gmail.com
  72. 72. The 4th Curve  The 4th curve is not a single entity or a functional block like voice, messaging or access but is made up dozens of new application areas.  The 4th curve has different characteristics than the previous three: o It is not one single curve but a combination of dozens of smaller curves. o The barriers of entry are low on the fourth curve. o The Competitive landscape of each of these curves is different requiring a more agile organization. o Competition from new entrants starts very early. o Business models that extend beyond metering are required.  The previous three curves were quite distinct in their offerings. The investment required, the type of people that needed to get hired, the product roadmap, the vendors, and the value chains etc. were well defined over the course of time. The purpose, the functionality, and expected returns were well understood. Saghaeian [at] gmail.com
  73. 73. Telecom sector revenue trends Revenue decline can slow down if especially mobile operators implement the right strategies Saghaeian [at] gmail.com
  74. 74.  Who will capture the profits  The Need for New operating models  Implications on the Ecosystem  Competition and Operator Consolidation  New Revenue Models  New Joint Venture Models  New Business Models  Regulatory Rethink Implications of the 4th wave Saghaeian [at] gmail.com
  75. 75. Opportunities in the 4th Curve  AT&T and Telefonica Digital are focused on opportunities beyond communications into M2M, Advertising, Financial Services, Cloud, Security, mHealth, and Distribution. With the scale of multi hundred million subscriber base, each can make an impact with solutions and services they introduce into the market.  In many of the markets like advertising and security services, the operator will be a new entrant. But, the operator is also in a unique position where they can provide an end-to-end solution to the customers where they already have a billing and service relationship.  Operators will have to segment the cost of doing business and the revenue streams and optimize for higher margins. Saghaeian [at] gmail.com
  76. 76. Opportunities beyond Voice and Data Saghaeian [at] gmail.com
  77. 77. Globally identification of new revenue opportunities is a key requirement for Telco players facing slow down • Further development of customer base expansion through segmentation • Locking of customers to retain the revenues • Focus on high-end customers • Push on (interactive) VAS to increase revenue and margin • Re-assessment of cost base and organisation models to address increasing margin pressure • Identification of new revenue opportunities in adjacent sectors • Direct competition between fixed and mobile players in voice market • Customer base and consumption still on the rise, but tariff pressure and regulatory changes leading to ARPU decrease • Markets increasingly competitive and segmented • Increase in acquisition and retention costs • Technologies enabling media players to compete in the Telco market and Telco players in the media market (OTT) Global trends in the Telco industry Potential actions from Telco’s Saghaeian [at] gmail.com
  78. 78. NTT DoCoMo Revenues from new businesses Saghaeian [at] gmail.com
  79. 79. Telefonica Digital Revenue Targets Saghaeian [at] gmail.com
  80. 80. Contextual Communications means New Revenue Saghaeian [at] gmail.com
  81. 81. AT&T earns new revenue with connected car Saghaeian [at] gmail.com
  82. 82. China Telecom earns new wholesale revenue with virtual numbers Saghaeian [at] gmail.com
  83. 83. Innovation and Collaboration in the 4th Curve  The opening up of the network for innovation necessitates re-architecting the network elements that can scale with demand and meet the specific requirements of the vertical and the application.  In certain areas, like mobile advertising, financial services, identity management, they should collaborate with their fellow operators to provide a better front-end to the customer and the vertical industry.  For segments that are commoditized and provide no inherent competitive advantage, it is in the interest of operators to collaborate rather than compete so network sharing becomes a much more practical strategy for preserving cash flows.  Operators need to become “service providers” again rather than just the “network operators.” By providing end-to-end solutions they can capture better value from the ecosystem. Saghaeian [at] gmail.com
  84. 84. Operators have a number of different commercial and technical capabilities to offer their partners Saghaeian [at] gmail.com
  85. 85. Business Segments – The Ecosystem Saghaeian [at] gmail.com
  86. 86. What is Happening … Saghaeian [at] gmail.com
  87. 87. Digital convergence is driving overlaps between previously distinct industries creating a complex new sector, addressable by Telcos •Non-Telco players are entering the Telco space challenging traditional business models •New addressable markets being created due to overlap created by digital convergence Telecommunications ICT Consumer Electronics Media Saghaeian [at] gmail.com
  88. 88. Partnerships can benefit operators and handset manufacturers, as well as OTTs Saghaeian [at] gmail.com
  89. 89. OTTs to Complement Telcos Saghaeian [at] gmail.com
  90. 90. Examples of existing CSP-OTT partnerships Saghaeian [at] gmail.com
  91. 91. Partnering / Bundling approaches to add Value beyond Connectivity Saghaeian [at] gmail.com
  92. 92. Mobile Operator and Device OEM partnerships Saghaeian [at] gmail.com
  93. 93. Partnerships – E-Plus Germany teams with WhatsApp for branded SIM Saghaeian [at] gmail.com
  94. 94. Partnerships - Telefonica teams with Line for Firefox OS Saghaeian [at] gmail.com
  95. 95. An example: OTT partnerships Zero rating OTT video messaging ● VoLTE subscriber opts into 1-day free trial of OTT video messaging with HD quality ● Data usage is zero-rated for 24 hours, followed by add-on offer Monetization models ● “Try and buy” offers – upgrades or add-ons ● Sponsored data/revenue share Saghaeian [at] gmail.com
  96. 96. Case Study of Zatto and Orange Zatto, Orange CH’s OTT TV, bundled with mobile voice & data plans and focused on generation Y & Z, aims to boost uptake of mobile data plans 3 play: OTT TV + mobile voice + mobile data Saghaeian [at] gmail.com
  97. 97. Partnership Opportunities - Digital Advertising OTTs & Telecom operators : best possible partnership for targeting user segments – wealth of data at both ends This partnership can double the efficacy of targeted campaigns & hence brand advertisement revenue opportunities Saghaeian [at] gmail.com
  98. 98. The 4th curve opportunities Saghaeian [at] gmail.com
  99. 99. 4th Curve Application Areas Application Areas Competitors Identity, Risk Management Facebook, Google, Twitter, Microsoft, Banks Commerce Amazon, Ebay, Google, Groupon Payments Paypal, Startups, Google, Facebook, Visa User Profile Google, Microsoft, Apple, Twitter, Facebook Advertising Google, Facebook, Startups, Apple Cloud Services Amazon, Cisco, Apple, Microsoft, Salesforce Enterprise SIs, Vertical players Connected Home Cable Companies, HP, Microsoft, Sony, Apple, ADT Health Microsoft, Health Care providers Analytics Google, Microsoft, Facebook, Amazon Saghaeian [at] gmail.com
  100. 100. The four revenue growth curves Operators who are investing heavily in the 4th curve have a good shot at seeing the end of the decade Saghaeian [at] gmail.com
  101. 101.  The 4th wave analyzes the four mobile revenue curves in detail and discusses the strategies needed to increase the net revenue and the investment areas that can lead to new revenue and healthier margins for operators around the world.  It is inevitable that the 4th growth curve for the wireless industry is going to bring in disruption in the industry structure, technologies used, revenue models, and at some point the regulatory framework itself.  Any given operator could play a different role on the various mini-curves that make up the 4th curve. The net performance of any given operator will be measured by how they perform in aggregate on the 4th curve.  Alone, any given mini-curve might not represent as big of an opportunity as the previous three curves individually, however, collectively; the 4th curve has the potential of surpassing the previous ones. Analysis of the 4th Growth Curve Saghaeian [at] gmail.com
  102. 102. The rise and fall of the 4th Revenue Curves Saghaeian [at] gmail.com
  103. 103. o Delay the decline This can be achieved by a number of key initiatives that involve a mix of business models, consumer loyalty, integration of new technologies to reduce churn, and embracing OTT/VAS services. o Extend the peak The reason Sprint is still able to offer unlimited data on iPhone and Android devices is because their margins/bit are better than their competitors. A number of operators like Rogers, Vodafone and Verizon have launched data share plans that allow consumers to bundle multiple device per plan. This will encourage users to become data users across multiple devices. This form of data pricing and bundling will help extend the access curve peak in all markets. o Invest in the 4th curve Given that the 4th curve is not a singular curve but a combination of several mini- curves that have their own profile, growth characteristics, competitive dynamics, and opportunity landscape, operators will have to manage the 4th curve like an investment professional would manage an investment portfolio or fund – diversify to reduce risk and extend growth. Mobile Operator Strategy in the 4th Curve Saghaeian [at] gmail.com
  104. 104. The Impact of 4th Curve on Operator Financials  The growth in revenue has been fueled by the investments that operators have to make to keep up with the network demand. As such, many have had to raise significant amounts of debt.  If the EBITDA for the company doesn’t grow in proportion to the rising debt, the company comes under scrutiny and financial pressure. Typically, the average Debt/EBITDA ratio for global operators stays around 1.4 with Asian operators  Over the past few years, weak economic conditions in various geographies and pressures on the first three curves have increased the Debt to EBITDA ratios for some of the operators. For Deutsche Telekom, the ratio has risen by 22%, for France Telecom 23%, for Sprint 24%, and for Telefonica 50%  Operators’ ability to raise debt and invest in new ideas and growth curves rests on the both the will to invest as well as their current financial condition. When the revenues stop growing but the debt demands stay high, the ratios start to climb, putting significant stress on the financial health of the operator. Saghaeian [at] gmail.com
  105. 105. ICT and Digital Media Revenue Map Saghaeian [at] gmail.com
  106. 106. ICT and Digital Media Industry - Revenue  ICT and digital media industry has grown by 5.6% since 2007, reaching $3.7tn in 2013.  It remains a services-based industry however the proportion of services decreased by 5.1% since 2007 in favor of hardware.  The role of advertising gains on importance. Saghaeian [at] gmail.com
  107. 107. Business Segments - Revenue, 2007 vs. 2013  Communications was the worst performer whilst broadband connectivity gained in importance as service providers tackle competition with multi-play offerings  The role of devices increased as more gadgets were connected  Content was flat as companies look for effective monetization strategies Saghaeian [at] gmail.com
  108. 108. Shift in value, 2007 vs. 2013 Saghaeian [at] gmail.com
  109. 109. Revenue Growth Barometer Saghaeian [at] gmail.com
  110. 110. ICT and Digital Media Industry - Profitability  ICT and digital media industry EBITDA has grown by 5.1% since 2007, reaching $962bn in 2013.  EBITDA margin saw moderate decline from 26.4% to 25.7%, with software being the main culprit.  The biggest improvement in EBITDA margin was achieved by advertising. Saghaeian [at] gmail.com
  111. 111. Profitability of business segments, 2007 vs. 2013 Saghaeian [at] gmail.com
  112. 112. EBITDA Margin Barometer Saghaeian [at] gmail.com
  113. 113. Perceived value, 2007 vs. 2013  Connectivity & communications remains the worst performing segment, with a knock-on effect on network vendors  Investors see potential in content, followed by internet platforms and IT  Device, OS & components seems overpriced Saghaeian [at] gmail.com
  114. 114. Global Mobile Industry Profit Share Saghaeian [at] gmail.com
  115. 115. Mobile Operator profit growth in some regions Saghaeian [at] gmail.com
  116. 116. Safaricom Mobile Data Revenue Segmentation Saghaeian [at] gmail.com
  117. 117. Based on the strategy and performance of a given operator on the 4th curve, operators worldwide will typically fall into three major categories: o Utility players (access only)  Typically the tier 2/3 operators whose revenue profile will very much resemble that of utility players who generate billions of dollars in revenue but their margins are in the range of 8- 12%.  US Electric Utilities revenues have almost tripled over the last 30 years but margins have been cut in half. We can expect similar trends for the utility mobile operators or utility mobile businesses. o Enablers  The next category of operators will invest in technologies that help them become effective enablers of the larger ecosystem.  They provide a robust network, an extensive set of APIs, and the consumer/network data that powers the most popular consumer applications and services. o Digital Lifestyle Solution Providers or Enabler+  Mobile operators who go beyond just providing access and devices to their customers to empower consumers and enterprises with solutions and greater benefits from the 4th curve.  Such operators go beyond just being an enabler of the ecosystem; they actually launch complete end-to-end solutions in given verticals like AT&T’s digital life in home automation. Investing in the 4th Curve Saghaeian [at] gmail.com
  118. 118. The Telco Challenge: Data Pipe or Smart Pipe Saghaeian [at] gmail.com
  119. 119. STRATEGY #1: Connectivity Provider Using core competences to offer smart connectivity •Low competitive advantage •Low level of intimacy with customer •Potentially less profitable •But the “safest” strategy, less risky •No complex IT services needed Negative connotation is not completely justified It may be a good choice for some CSPs, especially the smaller ones Providing advanced connectivity offerings for different types of digital services e.g. Rich media IP communication Cloud M2M (QoS monitoring for different verticals) E-health (SLA, QoS) Saghaeian [at] gmail.com
  120. 120. Key digital services in both Fixed and Mobile world Large number of digital services segments offers significant revenue potential for both fixed and mobile service providers * Priority of services based on a discussion with 20 leading Service Providers in APAC Saghaeian [at] gmail.com
  121. 121. (Telco) connectivity will only be a small part of the total IoT market Saghaeian [at] gmail.com
  122. 122. STRATEGY #2: Digital Service Provider Offering digital services directly to customers •New generation IT services needed •High risk involved •Direct competition with OTTs •Experience in customer engagement is needed •Needs acquisitions on retail market AT&T to acquire Direct TV, Orange acquired Daily Motion, and many others •Potentially high competitive advantage •Very strong intimacy with customer •High profit potential •Can be considered for enterprise customers Product customization, managed services, SLAs, Closer relationship with customer, consultative selling, MCC Saghaeian [at] gmail.com
  123. 123. Telco Digital Services Opportunities Saghaeian [at] gmail.com
  124. 124. How to Build a Successful Digital Services Business Saghaeian [at] gmail.com
  125. 125. Service Providers Transition Saghaeian [at] gmail.com
  126. 126. Digital Revenue as a percentage of Total Revenue Many telcos have set up new divisions to capture opportunities in adjacent markets…with mixed success Saghaeian [at] gmail.com
  127. 127. European telcos are generating 3-4% of total revenues from “digital” businesses Saghaeian [at] gmail.com
  128. 128. STRATEGY #3: Digital Service Enabler Cooperate with OTTs, offer existing capabilities “as a service“ • The experiences from M2M and Cloud areas show that in lean CSP organizations it is possible to profit from value-added services provided on top of connectivity, in cooperation with various partners • Needs separation of access and services layer Saghaeian [at] gmail.com
  129. 129. Cooperation in the Ecosystem Saghaeian [at] gmail.com
  130. 130. The New Digital World represents both Opportunities & Challenges for the Service Provider Saghaeian [at] gmail.com
  131. 131. Simplify supplier relationships Cut operational costs Increased need for quality and reliability The demand side appetite for end-to-end ICT service provision is driven by four main factors • Companies are demanding end-to-end managed ICT services as converged technologies are increasing the complexity of supplier relationships • 47% of European companies cited as key driver in purchasing decision • Increasing demand for BPO in attempts to cut cost for - designing, installing and maintaining corporate networks - non core processes (e.g. billing, administration, HR, …) • 51% of Euro. Enterprises cited cost cutting as a key driver • Increasingly recognised that managed services providers have more experience than in house teams providing improved quality and reliability Note: Source: Survey results cited based on Forrester interviews with 1003 technology managers in North American and European enterprises Forrester ‘The State of Enterprise Managed Telecom Services adoption’ Oct 07, Yankee, EITO Increased ICT complexity • Challenges associated with integrating and managing increasing number of business communication technologies are prompting organisations to outsource ICT management One stop solution for end to end ICT service Saghaeian [at] gmail.com
  132. 132. Convergence between the IT and Telco sectors and end-to-end ICT service is breaking down the divide of the traditional value chain Voice and data Connectivity Network services Infrastructure services Application services Traditional communication services and internet access • Definition and implementation of data transport solutions - Traditional - Innovative (e.g. Virtual Private Network) • Analysis, configuration, monitoring and management of the customers network infrastructure (LAN,WAN) • services: capacity on proprietary servers (hosting) or data centre space for the clients servers (housing) • HW and OS management (traditional and Web based) • IT infrastructure management - Security - Disaster recovery and business continuity - Storage and back up - Desktop Mgmt • Remote management of standard applications • Application maintenance • Software as a Service (SaaS) • System Integration • Consulting Business Process Outsourcing (BPO) • Externalized management of company processes (e.g. Billing, Administration. HR,…) ICT value chain Infrastructure based Services People based Services Telco operators IT operators ICT ServicesCommunication Services Current market pressures Saghaeian [at] gmail.com
  133. 133. Telco operator IT provider Traditional ICT services market Infrastructure services Application services Voice and data Connectivity Network services Business Process Outsourcing (BPO) •IT providers acting as the main contractor -Partner with telco operators (as sub-contractors) to guarantee infrastructure based services (connectivity, network platforms, data centres, …) Evolved ICT services market •Integrated IT and telco offering -Provides the client with end-to-end ICT solutions -Strong focus on converged network offerings e.g. IP telephony, managed networks, mobile connectivity -Primarily achieved through JV or acquisition (e.g. FT acquired Equant rebranded OBS) Telco operator IT provider 1 2 3 4 In this new environment Telco operators are developing end- to-end ICT offering Saghaeian [at] gmail.com
  134. 134. Opportunity Nature of Service Business Model Synergies with existing capabilities and products Key Challenges Network Services • Analysis, configuration, monitoring and management of the customers network infrastructure (e.g. LAN,WAN) • Pay per service • Pay per use • Synergy with current core offering: - Communication services and internet access - Data transport solutions (e.g. content delivery network solutions, ...) • Construct a clear and standardized offering for each segment Infastructure Services • Data Centre services: offer capacity on proprietary servers (hosting) or data centre space for the clients servers (housing) • HW and OS management: maintenance service (traditional and/or web based) • IT infrastructure management: - Security - Disaster recovery and business continuity - Storage and back up - Desktop Mgmt • Pay per service • Pay per use • Leverage infrastructure management competencies present in a Telco • Exploit existing infrastructure in terms of Data Centres, Storage capabilities, … • Construct a clear and standardized offering for the each segment • Further develop IT competencies Application Services • Remote management of standard applications (e.g. mail, antivirus, …) • Application maintenance • Software as a service solutions (e.g. accounting, CRM, …) • Pay per service • Pay per use • Develop IT competencies • Partner with IT solution providers • Build an offering of standard or semi custom SaaS solutions for segment Business Process outsourcing • Externalised management of company processes (e.g. billing, administration, payroll, …) • Unified communication offerings • Pay per service • Develop competencies • Develop a standardized or semi custom offering for the SME market • Design custom offerings for large enterprises 1 2 3 4 Each new opportunity for Telco has specific proposition, business model and related challenges Saghaeian [at] gmail.com
  135. 135. Digital Service Model (1/4) Saghaeian [at] gmail.com
  136. 136. Digital Service Model (2/4) Saghaeian [at] gmail.com
  137. 137. Digital Service Model (3/4) Saghaeian [at] gmail.com
  138. 138. Digital Service Model (4/4) Saghaeian [at] gmail.com
  139. 139. 4-Phase Evolution to Digital Lifestyle Services Saghaeian [at] gmail.com
  140. 140. Operators have to move up the value chain Saghaeian [at] gmail.com
  141. 141.  For some of the services, the operator might just focus on enabling the ecosystem while for others they might actively participate in bringing the service to the market.  For example, AT&T is deeply entrenched in the Health space with several key initiatives in mHealth, TeleHealth, Cloud-based Healthcare, etc. while some of its European counterparts are more focused on enablement of the health ecosystem.  Deutsche Telekom works closely with BMW for auto services while its US counterpart is less involved with companies directly but is more focused on getting the developer ecosystem to take advantage of its network platform.  Operators like Verizon are spending billions of dollars on acquisitions and on beefing up their offerings on the 4th curve. Operators’ Investment in the 4th Curve Saghaeian [at] gmail.com
  142. 142. Future Telecoms Service Business Models 3 types of Revenue Categories in Communications Saghaeian [at] gmail.com
  143. 143. EXAMPLES OF LEVERAGING A COMMUNICATION PLATFORM FOR EARNING INDIRECT REVENUE Examples for Business Models Saghaeian [at] gmail.com
  144. 144. How can Operators become Digital Lifestyle Solution Providers (DLSP)? • Customer vs. User • Save the customer relationship • Use privacy/security as competitive advantage • Separate the 4th curve organization from the mothership • Change the DNA • Portfolio management – fail often and cheap. Embrace Beta launch • Collaboration • Standards vs. Proprietary • Build Advocates To be an effective and a long-term competitor on the 4th curve, operators have to become the OTT players themselves or have close collaboration with them. This requires innovation, financial muscles, and a ruthless mindset to capture its share from the value chain. Saghaeian [at] gmail.com
  145. 145. Customer vs. User  The first step is appreciating that consumers of the 4th curve are not only going to be the operator’s customers today but also users across all operators and in all countries.  Instead of offering a messaging service to an enterprise customer, the operator can offer a cross-carrier service and compete at the OTT scale. Save the customer relationship  It is important for the operator to preserve their customer relationship through VAS and OTT services.  If they can’t or don’t want to develop their OTT solutions, they should partner with the players to offer branded solutions or have joint offerings that makes the customer develop and maintain brand loyalty with the operator. Use privacy/security as competitive advantage  If the mobile industry isn’t proactive in addressing consumer privacy head-on from a technical, business, education and compliance perspective, they will lose great opportunities.  Mobile operators are placed very well in the ecosystem to broker privacy and security between the user and the app ecosystem as a distinct competitive advantage. Steps to becoming a Digital Lifestyle Solution Provider (1/4) Saghaeian [at] gmail.com
  146. 146. Separate the 4th curve organization from the mothership  Smart organizations separate 4th curve organization from the mothership and hire as many Internet employees as possible – the ones that will go work for Google or Facebook.  The group should be held accountable to results perhaps to even a higher standard and providing business metrics focused on service innovation, new customer acquisition and growth. Change the DNA  Some like Telefonica, Deutsche Telekom, Orange, and AT&T are creating new divisions and groups to address the OTT threat and opportunity. But there is significant resistance from the legacy organizations.  They should work with the OEMs to implement and execute on the strategy. Apple with iMessage is already doing it without the user even realizing it Steps to becoming a Digital Lifestyle Solution Provider (2/4) Saghaeian [at] gmail.com
  147. 147. Portfolio management – fail often and cheap. Embrace Beta launch  The 4th curve business model doesn’t require everything to be perfected at launch but rather its functionality and roadmap iterated based on user feedback.  Location, search, consumer cloud services, advertising, and others are classic examples where operators had the expertise and the technology much before the Internet players came to the scene, yet, never paid much attention.  Operators must act like an experienced portfolio manager who can weigh the risks and have the perseverance to see the vision through fruition. Collaboration  There are some good case studies in Portugal where operators are collaborating on an advertising platform or in Czech Republic where operators are working towards a common payments platform; however, operators have largely competed with each other.  Success on the 4th curve requires much tighter collaboration between them than ever before. The reason is simple - scale.  For many of the verticals on the 4th curve, the only way operators can make a meaningful dent would be to go past their legacy competitive concerns. Steps to becoming a Digital Lifestyle Solution Provider (3/4) Saghaeian [at] gmail.com
  148. 148. Standards vs. Proprietary  Standards have served our industry well. However, in the apps world, standards can slow you down. Software solutions by nature are proprietary. There is a reason Skype doesn’t interoperate with Facetime and Google Search and Bing don’t talk to each other.  Bigger operators have the scale to launch proprietary solutions while smaller ones rely on standardized approaches for their customers to benefit from the same advances. Build Advocates  Advocacy drives output that is measured in sales. Advocacy helps decrease acquisition cost and increases life time value of the customer.  Building loyalty is critical to the overall health of future revenues. Operators should understand advocacy dynamics and launch new programs that instill brand loyalty. Steps to becoming a Digital Lifestyle Solution Provider (4/4) Saghaeian [at] gmail.com
  149. 149. Essentials of Being a Digital Lifestyle Player Become a Digital Lifestyle Player! Saghaeian [at] gmail.com
  150. 150. Thanks for your kind attention  By ALI Saghaeian Chief Analyst & Consultant Telecoms, IT, and Media Saghaeian [at] gmail.com Business of Value Added Services in New Mobile Era From Strategy and Business Models to Services Development for Telecoms Operators

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