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2008 ericsson bucharest stockholm school of economics

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  • If operators donot enter multimedia, they’ll not be differentiated and end up providing only data traffic
  • Focus on THE internet, not a limited mobile version 25% of consumers are willing to watch IPTV, but only 1% are willing to pay for it
  • Assuming every player can provide ideal consumer experience
  • Transcript

    • 1. ERICSSON: Powering Vodafone’s Growth Team ERICSSON Bucharest Annachiara Nicholas Nisarg Vidmantas
    • 2. Challenge for ERICSSON
      • Can operators afford being ‘pipe owners’?
      Huge market potential for multimedia Consumer multimedia revenues US$ billion Who will take a large share of the pie? Operators are under threat as ARPU is almost stagnant ARPU in Western Europe € /user/month $27bn $149bn CAGR 41% Source: IDC Jan ’08, mobile advertising report
    • 3. The Looming Threat
      • Google
      • A combination of WiMax and the ANDROID platform threatens to squeeze mobile operators’ multimedia share
      • Apple
      • iPhone opened up for developing applications
      • Venture Capital fund launched
    • 4. Recommendation Vodafone can stake their position in the future of mobile multimedia by trusting ERICSSON to lead the transformation of their mobile environment to a vibrant open eco-system Harness the most efficient revenue model for mobile providers by developing a structured and dedicated mobile advertising solution Focus of Project ‘Crystal Palace’ currently is developed markets (NA, EU, Japan & Oceania) An Open Garden Mobile Advertising
    • 5. Presentation Structure Future of multimedia Project Crystal Palace Implementation Impact Future of multimedia
    • 6. The future of mobile multimedia is The Ideal User Experience Watch Bollywood Be Future-proof platform Driven by intended action Applications bid for attention
    • 7. Who will capture the future value? Telecom (Data) IT/Internet (Ads) Media (Content) Key Drivers Intensity of competition Web Consumer Insight Prices close to web rates High degree of competition Limited capabilities Still charges for content & services few big players (Google, Yahoo, Microsoft) Key capability Advertisement based  free for consumer Intense competition across various media types Key capability amongst players like Youtube, Facebook etc. Charges for premium content only
    • 8. Presentation Structure Future of multimedia Project Crystal Palace Implementation Impact
    • 9. New business model for Vodafone in mobile multimedia
      • Realize ideal user experience
      • Most effective revenue model
      • Advertising model independent of search companies
      • “ Open garden” model with limitless applications
      • Simple, total, customized web experience on converged media devices
      Project Crystal Palace at Vodafone Business Model Innovation
    • 10. The Open Garden
      • Vodafone’s networks must become mobile ecosystems that mirror the open ethos of the web
      • Transform into a platform for new applications
    • 11. A larger share of multimedia value creation for Vodafone Small share of multimedia value, reduced data profits Vodafone 2011 Vodafone 2008 Developing multimedia strategy Project Crystal Palace will increase Vodafone’s share of mobile multimedia market Large share of multimedia value, reduced data profit Project Crystal Palace
    • 12. Presentation Structure Future of multimedia Project Crystal Palace Implementation Impact
    • 13. Implementing Crystal Palace Vodafone becomes one of the leading mobile multimedia companies Project Crystal Palace Independent advertising model Value Network … … Fast development of applications … Open garden for content and applications Ideal user experience and sustainable revenue model
    • 14. ERICSSON powering Vodafone’s growth
      • ERICSSON value proposition
      • Enable Vodafone independent advertising model
      • Manage transformation to Open Garden
      • Sony Ericsson strengthens Developer World
      • Reputation of industry shaper will attract the value network
      • Vodafone’s growth needs
      • Advertising competences
      • Move to open garden for content
      • Fast development of applications
      • Value network
      Powered by
    • 15. ERICSSON can develop key capabilities to power growth in multimedia Advertising capabilities
        • Deve loping winning products for advertising
        • Partnership with Application Service Providers (ASP’s)
        • Establish focused advertising operation – try lure Yahoo employees
      Open garden content support capabilities
        • Develop and acquire capabilities to manage open garden content
          • - E.g.: Acquire start-up PlayerX
    • 16. Operation Crystal Palace Leadership Jan Wäreby Head of Business Unit Multimedia
      • Strong marketing background
      • Deep understanding of mobile environment
      • Part of the team to be based in Silicon Valley
    • 17. Presentation Structure Future of multimedia Project Crystal Palace Implementation Impact
    • 18. Timeline for Project Crystal Palace Q2 08 Q4 08 Q2 09 Q4 09 2010 Launch of Vodafone “open garden” Get value network partners on board for “open garden” and advertising strategy ERICSSON management discusses strategy internally and with R&D/product teams ERICSSON and Vodafone management discuss strategy, ERICSSON competences showcased Public announcement of strategy Launch of independent Vodafone advertising Launch of ERICSSON services to other operators
    • 19. Financial impact on Ericsson Based on multimedia revenue forecasts for 2011 Forecasts: 60% - expected mobile broadband's share (66% in 2012, according to Ericsson data) Ericsson's revenue - equivalent of 30% of operator's EBITDA Assumptions: Scenarios for mobile multimedia (MM ) Negative Neutral Positive Expected operators' revenue share in MM, %: 10 25 40 Operators' EBITDA margin on MM, % 5 10 15 Discount rate 9.3% * based on EV/Sales=0.7 (Deutsche Bank estimate of fair value, Feb 2008), discounted.
    • 20. Mitigating risks in implementation Risk Likelihood Mitigation strategy Vodafone is resistant to change ++ Reach innovative operators: e.g. Orange, T-Mobile, O2 ERICSSON unable to achieve scale by selling to other operators ++ Adapt model to handset manufacturers, reach smaller operators Google or new iPhone apps come to market before 2009 +++ Project Crystal Palace is defensive measure Consumers do not evolve to “ideal experience” ++ “ Open Garden” and advertising model will ensure web-like experience and prices Risk of inaction would be higher than risk of implementing Crystal Palace
    • 21. The future of Vodafone will be Powered by ERICSSON A Thriving, Profitable Mobile Industry Project Crystal Palace Open Gardens Mobile Advertising
    • 22. Thank You Thank You!!!
    • 23. Back-up
    • 24. How ERICSSON can support Vodafone
      • Turn around image of operators as slow movers
      • Get handset makers to focus on fast applications development
      • Existing services (Multimedia Communication Suite, Mobile TV, Billing solutions)
      • New services (Enablers supporting advertising, Data Mining, ad orchestration)
      • Communicate the need for change
      • Show Ericsson can power Crystal Palace
      • Propose to other telecom operators
      Influence Positioning Services
    • 25. Potential of mobile advertising Example of Japan
    • 26. Operators in advertising
    • 27. Consumers accept mobile ads
    • 28. Mobile subscriptions
    • 29. Advanced generation handsets
    • 30. Mobile advertising – Spam vs. Win-Win
    • 31. A Winner Application
      • Loopt is being offered by Sprint and Verizon
        • “ Social Compass,” friend locating application
        • Received coverage in WSJ, CNET, Gawker
    • 32. Ideal user experience Any content, any application, any device User managed, easy to customize In hardware, software and web experience Action based look and feel
      • Open garden model
      • Customization
      • Simplicity in use
    • 33. Choice of partners – Verizon
        • Customization of mobile web experience
        • 89 web 2.0 applications based on data plan revenue model
        • Strong industry solutions and business applications, fee-based
        • Open Development : consumers can use any device, application or software
      Verizon Wireless has developed relevant capabilities. As has owned by Vodafone, closer cooperation is realistic. Verizon Wireless
    • 34. Choice of partners – NTT DoCoMo
        • NTT DoCoMo establishing strong advertising model
        • JV with Dentsu (Japan's largest advertising agency) for mobile ad on i-mode
        • NTT DoCoMo plan s to control its own inventory for ad placement through i-mode portal
      NTT DoCoMo has developed relevant capabilities in advertising. As Vodafone does not compete in Japan, partnership is realisitc. NTT DoCoMo
    • 35. Open Garden
      • Any content provider can bid to be on Vodafone network
      • Need to protect advertising revenue on open garden model
      • Vodafone needs help implementing the model
      Ericsson can support Vodafone by providing the platform on which content is approved and managed
    • 36. Fast development of applications
      • Open network to developers community
      • Push handset makers to open up to developers community
      • Promote open mobile platform
      Ericsson can support Vodafone through Sony Ericsson by further opening up their platform Vodafone ERICSSON
    • 37. Services and Content revenues Premium content paid Advertising on content Sustainable revenues that fit consumers’ willingness to pay Most content free Services & content revenues
    • 38. Developing advertising competences
      • Vodafone does not know consumers’ buying intentions, unlike Google
      Ericsson can help Vodafone acquire the competences and consumer knowledge needed for independent advertising model
      • Vodafone can build on its capabilities:
      • Knowledge of customer location in real time
      • Knowledge of services and applications used
      • And develop more:
      • Support investment together with Verizon Wireless
      • Partnerships with marketing agencies
    • 39. Mobile Advertising Solution "Mobile ads are twice as profitable or more as non mobile ads because they are more personable“ - Eric Schmidt, CEO Google Build a “database of intentions” from user actions, location Interactive banners with click-to-call and click-through destination sites Annoying, forces opt-outs Targeting and Context Banners SMS & MMS Ads
    • 40. Financial impact on Ericsson Forecasts: 60% - expected mobile broadband's share (66% in 2012, according to Ericsson data) Ericsson's revenue - equivalent of 30% of operator's EBITDA Scenarios for mobile multimedia (MM) Negative Neutral Positive Expected operators' revenue share in MM, %: 10 25 40 Operators' EBITDA margin on MM, % 5 10 15 Operators' EBITDA on MM, $bn 0.7 3.7 8.9 Ericsson's revenue, $bn 0.2235 1.1175 2.682 Ericsson's value, SEKbn 0.9 4.7 11.2 Discounted Ericsson's shareholder value, SEKbn 0.71 3.57 8.56 Exchange rate (29/03/08) SEK/USD 5.9518 Discount rate 9.3% * based on EV/Sales=0.7 (Deutche Bank estimate of fair value, Feb 2008), discounted.
    • 41. Limited value for operators in mobile TV
      • Only 1% of customers willing to pay for mobile TV (Jupiter research)
      • At £3/month mobile TV subscription, Vodafone’s revenues are only £90 m/year
      • Data revenues were £1 billion in y/e Nov 2007
      Back of the envelop calculation on Vodafone: Advertising needed to drive value from mobile TV
    • 42. Thank You Thank You!!!
    • 43. Discussion Discussion

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