1. Rethinking the Telcos business
models in the age of 5G _
Digiworld. Montpellier 20/11/2014
Carlos López Blanco
Public Affairs & Regulation
Telefónica, S.A.

2. Every wave of innovation gives opportunities to rebalance
leadership between companies, industries and geographies
1G 2G 3G 4G 5G
The need for speed
DISCOVER, DISRUPT, DELIVER
Who is going to lead next
generation in digital industry?
‣ Designed for voice
‣ Improved coverage
and capacity
‣ Digital standards
(GSM, CDMA)
‣ Data for mobile:
SMS, MMS
2
‣ Basic voice service
‣ Analog based
protocols
‣ Designed for voice
with some data
consideration
(Multimedia, Next
Internet)
‣ First Mobile
broadband
‣ Designed primerily
for high data
transmission
‣ IP based protocols
(LTE)
‣ High mobile
broadband
1979 1991 2001
1981
‣ High data transmission
+
‣ Lower battery
consumption
‣ Higher versatility and
scalability (more
connected devices,
with different needs)
‣ Converged fiber-wireless
network…
2,4 kbps 64 kbps 2.000 kbps 100.000kbps
2011
2021?

3. 5G happens in a whole new world. We are living a digital
revolution !
A growing data-centric business
Source: Ericsson mobility report Nov.2013
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Internet
“things”
Smart
Cities
Connected
Smart TV
Home
Growth
3
Rise of emerging markets (North vs. South)
Connected things as a growth opportunity
PCs Mobility/
BYOD
200 M
of
10.000 M
Internet of
“everything
”
50.000 M
Smart
Wearables
Connected
cars
Drones
1995 2000 2013 2020
Source: CISCO
Traffic per customer
2013 2019E
600
MB
2,2
GB
Source: CISCO & GSMA Intelligence
More mobile
€4.3trn
Total ICT in 2012
Market size
+€0,9trn
12-16
Internet Access

4. How could the world of Telecom be like in the era of 5G?
All mobile experience for customers & devices and
Evolution to IP & cloud based network architectures
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4
Device
virtualization
& hosting
Smaller
cells
FTTx
Cloud
IP services
networks
 World seamless mobile
(e.g. mobile and Wifi),
multidevice and
multichannel
(app/web/”real world”),
even if there is a need of
underlying fixed
infrastructure to provide
digital services.
 Cloud: SaaS Software as a
service and Network
functions virtualization,
and Software Defined
Networking.
 Internet of Things (IoT):
Higher versatility and
scalability (more
connected devices, with
different needs)
Internet of
Things (IoT)

5. Telecom is not a closed ecosystem anymore. It is part of a
broader digital ecosystem competing with OTT
Services that were traditionally offered
separately…
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… are now part of one single universe where
Operators compete with Internet players
Telecom network & services:
‣ Fixed/mobile/core/intal networks
‣ Fixed/Mobile Voice/VoIP to number
‣ SMS
‣ Internet Access (Data)
‣ TV
Internet services
‣ Web based contents
‣ E-commerce
‣ Hosting services
‣ Search engines
‣ VoIP PC to PC
‣ E-mail
‣ Instant messaging / Social
Communication and Online Services:
‣ Fixed/mobile/core/intal networks
‣ Fixed/Mobile Voice/VoIP
‣ SMS/Instant messaging
‣ TV/Video/Web based contents
‣ Internet Access (Data)
‣ Hosting services
‣ E-mail
‣ E-commerce
‣ Search engines
Apps
OS
Contents
Devices
Telco players:
Connectivity
and
Solutions
5

6. Operators are at a crossroad in Europe: declining revenues,
unleveled playing field, increased investments needs
-2,4% p.a
OTT ecosystem dominated by a few players
creating new monopolies
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6
Negative outlook on EU telecom revenues:
Europe is the only region decreasing revenues
Source: IDC Worlwide
Blackbook 2014.
Communication
Content
Commerce
Devices & OS
TELCO sector and Europe
are falling behind digital industry
‣ Value distribution of 64 Internet
companies with market capitalization
over 1.5 billions $ (end 2012)
83%
9%
4% 2%
2%
Big investments needed
to achieve digital Agenda
Source: McKinsey. Regulation Needed for a New Investment Wave.
February 21, 2013.

7. How will operators handle the challenge ?
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Living a new digital revolution
 Leveraging the central role
of connectivity in digital
customer experience
 Coping with risks from
cross market competition
 Regulation needs to
evolve with market &
industry
Opportunities
Cross-Market
Competition
Regulation
 Reinforce position investing
in best access networks,
customer care & becoming
partner of choice.
 Growth through stimulating
adoption, limiting the
unlimited and bundling.
 Risk of commoditizing Telco
companies and losing customer
relationship
 Risk of losing connectivity of
IoT services
 Risk of losing management of
network and services
 Innovation & Investment
friendly area
 Efficient market
structure
 Level Playing field
7

8. Opportunities come from reinforcing position investing in
connectivity, partnership, customer and environment
REINFORCE
POSITION
INVESTING IN
Connectivity is
at the center
of customer
experience and
the link
between
devices and
services in the
cloud.
CONNECTIVITY
DEVICES
APPS AND CONTENT
DISTRIBUTION
CUSTOMER
EXPERIENCE
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CONNECTIVITY
CUSTOMER
OPPORTUNITIES
OF GROWTH BY
 Stimulating adoption
of mobile data
 Promoting usage
through tiered
pricing
 Enriching customer
experience by
bundling with digital
services, and
convergent 4P
bundles.
Best access networks & operational
efficiency…
… with a best-in-class approach to
customers and customer care…
PARTNERSHIP
… becoming the partner of choice
for the best digital products /
apps…
ENVIRONMENT
… fostering new policies and skills
so to open the possibilities of
technology.

9. Excellence in basic assets as a lever to become the partner
of choice for others
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• Best multichannel UX
+ Agility to create / sell
service bundles
+ Fast service
integration in our
channels
CONTENT
OWNERS
APP
DEVELOPERS
Efficient operations
DEVICE
VENDORS
Premium
digital
customer
experience
BEST IN CLASS
NETWORK AND
CUSTOMER CARE
Our
Main motivators for 3rd parties to join us
segmentation
and targeting
capabilities
Our
distribution
reach
Billing
capabilities
Subsidy their
apps and/or
connectivity
9
CONNECTIVITY-CENTRIC ECOSYSTEM
Network capabilities
• Coverage + Best UX
+ Network intelligence
+ Selective network
capabilities open to
third parties
Customer care
• Best cost
+ Fastest execution
+ Fast / efficient service
integration with
internal operations
Partnership Platform

10. Operators face challenges from cross-market competition
While up to now threats to the Telco industry were related to surrounding
E-SIM
businesses, current threats target business basics
(e.g. Apple)
DISCOVER, DISRUPT, DELIVER
Spectrum & Low Power
Wide Area (LPWA)
(e.g. SIGFOX)
10
Risk of commoditizing Telco
companies and losing customer
relationship
Risk of losing connectivity of IoT
services
Proxy
(e.g. Google)
Risk of losing management of
network and services
Excellence in basic assets (network capabilities, customer care, operations) and
partnerships skills will enable operators face the challenges ahead

11. Operators have to face challenges, but it is not enough ! A
regulatory framework adapted to the new world is needed
DISCOVER, DISRUPT, DELIVER
11
Innovation &
Investment
friendly area
Efficient
market
structure
Level Playing
+ + field
Consolidation & competition
framework revisited.
Speed to scale: Allow
efficiencies when competing
with global champions, in new
digital industry.
More market led, less
regulatory driven.
Allow market innovation
and favour investment, by
removing excessive ex-ante
regulatory pressure
Same services-same rules
to all elements
of value chain
(&with other regions)
Not to miss the boat of global digital industry in Europe,
a real change in policy is needed to go from diagnosis to delivery !

12. Telefonica’s proposal for a better Digital Ecosystem
10 policy recommendations to create an open and safe Internet experience
for all and unleash the full potential of the Digital Economy
1. 2. Create a Portable 3. 4. 5.
Digital Life for
consumers by allowing
them to use their data,
information and
applications regardless
of their devices or
platforms
Build Digital
Confidence through a
safer Internet
experience and by
empowering citizens to
be in control of their
personal data.
Open up mobile
Operating Systems,
App Stores and other
digital platforms to
increase users’
freedom, choice and
competition
Promote
interoperable
Internet
applications,
communication and
messaging services
to improve
consumer
experience and
foster competition
6. 7. 10.
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http://www.digitalmanifesto.telefonica.com
Improve transparency
about the conditions of
use for Internet
services and the
distinction between
information and
advertisement in online
search results
Evolve the policy
models of Global
Internet Governance
by building on its
existing foundations
and through
involvement of all
stakeholders in an open
manner and on equal
footing
Make Internet available
to everyone by
establishing adequate
conditions for private
investment in
broadband
infrastructure
Create fairer policy
frameworks by
establishing the same
rules for the same digital
services and smarter
regulation by relying more
on outcome-based policy
making and case-by-case
supervision
Promote Open
Innovation and
Open Standards
principles and
prevent that undue
Intellectual Property
protection restricts
innovation in the
Digital Economy
Transform education,
learning and teaching
by widely adopting
digital technologies
and services based on
Open Resources and
Standards.
8. 9.
12

13. DISCOVER, DISRUPT, DELIVER