Value Creation in the Future Multimedia Convergence Ericsson Tokyo Stefano Di Genua Julia Goessler Shirley Liu Leo Tumwattana

Recommendations “ Gate Keeper to Digital Life” Superior Content Enable Personalized Marketing Julia Goessler

“ Gate Keeper to Digital Life”

Superior Content

Enable Personalized Marketing

Agenda Customer of Tomorrow & Value Creation in the Future Structure of Vodafone Business Model Action Plan & Financials Competition How Ericsson Will Support Vodafone Shirley Liu

Customer of Tomorrow & Value Creation in the Future

Structure of Vodafone Business Model

Action Plan & Financials

Competition

How Ericsson Will Support Vodafone

Customers of the future Shirley Liu $ Content Ugly truth: Customers are no longer willing to pay for content

Shirley Liu

Customers of the future Shirley Liu Premium Content e.g. Reuters, Bloomberg, Live TV Food, Clothes, Cars, etc. $ Customers would only like to pay for premium services, necessities and digital life $ $

Shirley Liu

Customers of the future Shirley Liu Premium Content e.g. Reuters, Bloomberg, Live TV Food, Cloths, Cars, etc. Attract The value is created by subscription premium services and digital advertisement $ $ $ $

Shirley Liu

Recommendations “ Gate Keeper to Digital Life” Superior Content Enable Personalized Marketing Shirley Liu

“ Gate Keeper to Digital Life”

Superior Content

Enable Personalized Marketing

Agenda Customer of Tomorrow & Value Creation in the Future Structure of Future Vodafone Business Model Action Plan & Financials Competition How Ericsson Will Support Vodafone Julia Goessler

Customer of Tomorrow & Value Creation in the Future

Structure of Future Vodafone Business Model

Action Plan & Financials

Competition

How Ericsson Will Support Vodafone

1. “Gatekeeper to Digital Life” Julia Goessler Voice Location Music TV Customers Internet Vodafone All-in-one service provider – “Gate Keeper to Digital Life”

Julia Goessler

2. Superior Content Julia Goessler IPTV Music GPS Applications Premium Content Strong partnerships with leading content providers

Julia Goessler

3. Personalized Marketing Julia Goessler Personal Data Access to Potentially 212 Million Subscribers Advertisers meet Customers TV Location Music Reuters … Vodafone Platform Partners Digital Persona Vodafone enables advertisers to target specific consumers

Julia Goessler

MOBILE ADVERTISEMENTS Leo Tumwattana

Leo Tumwattana

Mobile Advertising Very personal thing Do it right: great opportunity e.g. Google Do it wrong: ignored e.g. spam Leo Tumwattana Requires attention to interface design: Unobtrusive Relevant Easy to use

Very personal thing

Do it right: great opportunity

e.g. Google

Do it wrong: ignored

e.g. spam

Leo Tumwattana

Requires attention to interface design:

Unobtrusive

Relevant

Easy to use

WHAT DO WE PROPOSE? Leo Tumwattana

EXAMPLE 1 Location and profile based coupon delivery application Leo Tumwattana

Location and profile based coupon delivery application

Example 1: Coupon Delivery Leo Tumwattana

Leo Tumwattana

Example 1: Coupon Delivery Leo Tumwattana 2:00 PM Contacts Phone

Leo Tumwattana

Example 1: Coupon Delivery Leo Tumwattana 2:00 PM Contacts Phone

Leo Tumwattana

Example 1: Coupon Delivery Leo Tumwattana 2:00 PM Contacts Phone

Leo Tumwattana

Example 1: Coupon Delivery Leo Tumwattana 2:00 PM Contacts Phone Banana Republic Coupon: 20% off dress pants   Get Coupon Code

Leo Tumwattana

Example 1: Coupon Delivery Leo Tumwattana 2:00 PM Contacts Phone Banana Republic Coupon: Buy one t-shirt get one free   Get Coupon Code

Leo Tumwattana

Example 1: Coupon Delivery Leo Tumwattana 2:00 PM Contacts Phone Banana Republic Coupon: Buy one t-shirt get one free Coupon Code: xxxxxxxx Done

Leo Tumwattana

Example 1: Coupon Delivery Leo Tumwattana 2:00 PM Contacts Phone Would you like to be notified of future promotions from this store? No Yes

Leo Tumwattana

… REPEAT… Leo Tumwattana

Example 1: Unobtrusive Ads Leo Tumwattana 2:00 PM Contacts Phone

Leo Tumwattana

Example 1: Unobtrusive Ads Leo Tumwattana 2:00 PM Contacts Phone Ralph Lauren Coupon: 50% off T-Shirts   Store Location

Leo Tumwattana

Example 1: Unobtrusive Ads Leo Tumwattana Ralph Lauren Ralph Lauren Get directions 2:00 PM Contacts Phone Power of advertising with Vodafone

Leo Tumwattana

Example 1: Coupon Delivery Advantage of that scenario: Get user data (profile) Promotional service for our customers Create personalized link between brand and customer Get permission from customer for further advertisement from this and similar companies Leo Tumwattana

Advantage of that scenario:

Get user data (profile)

Promotional service for our customers

Create personalized link between brand and customer

Get permission from customer for further advertisement from this and similar companies

EXAMPLE 2 Mobile IPTV Application with Ads Leo Tumwattana

Mobile IPTV Application with Ads

Example 2: Unobtrusive Mobile IPTV Ads Leo Tumwattana

Example 2: Unobtrusive Mobile IPTV Ads Leo Tumwattana x

Example 2: Unobtrusive Mobile IPTV Ads Leo Tumwattana

Example 2: Unobtrusive Mobile IPTV Ads Leo Tumwattana Regular ads during natural commercial breaks

Advantages of this scenario: Ticker Ads Unobtrusive Users can turn them off Break-time ads can be targeted to subscriber Service “quality” differentiation By target customer vs. mass broadcast Example 2: Unobtrusive Mobile IPTV Ads Leo Tumwattana

Advantages of this scenario:

Ticker Ads

Unobtrusive

Users can turn them off

Break-time ads can be targeted to subscriber

Service “quality” differentiation

By target customer vs. mass broadcast

Brief summary Interface design cannot be an afterthought Form a department focused on design mobile applications: Tailored to specific devices Easy to use Or else it will never work! Leo Tumwattana

Interface design cannot be an afterthought

Form a department focused on design mobile applications:

Tailored to specific devices

Easy to use

Or else it will never work!

Agenda Customer of Tomorrow & Value Creation in the Future Structure of Vodafone Business Model Action Plan & Financials Competition How Ericsson Will Support Vodafone Stefano Di Genua

Customer of Tomorrow & Value Creation in the Future

Structure of Vodafone Business Model

Action Plan & Financials

Competition

How Ericsson Will Support Vodafone

Value Creation Stefano Di Genua Phase 1 Deployment of the new platform in the key markets Phase 2 Revenues increase with geographic expansions Phase 3 Value acceleration with all European territory coverage

Stefano Di Genua

Key Assumptions Stefano Di Genua Assumptions Today Our assumptions Revenues USD 2.6 billion USD 5.3+ billion Subscriptions 4 times year on year 2% Clicks-through average of 4/person 2 Price 3G priced at USD 60 USD 58 Market growth 12% 5% Costs New Infrastructure 13% Partnering program 7% Other expenses Kept equal to now Increased the enterprise value of almost $3.5 billion US

Facts Stefano Di Genua Break-even after 3 years

Agenda Customer of Tomorrow & Value Creation in the Future Structure of Vodafone Business Model Action Plan & Financials Competition How Ericsson Will Support Vodafone Julia Goessler

Customer of Tomorrow & Value Creation in the Future

Structure of Vodafone Business Model

Action Plan & Financials

Competition

How Ericsson Will Support Vodafone

Competitive Advantage Strong Alliances O2 T-Mobile Virgin E-Plus Orange Pannon MTN Julia Goessler Strong Partnerships create an inimitable competitive advantage

Agenda Customer of Tomorrow & Value Creation in the Future Structure of Vodafone Business Model Action Plan & Financials Competition How Ericsson Will Support Vodafone Julia Goessler

Customer of Tomorrow & Value Creation in the Future

Structure of Vodafone Business Model

Action Plan & Financials

Competition

How Ericsson Will Support Vodafone

Ericsson’s Role Julia Goessler New applications require an upgrade of infrastructure & handsets over the next 2-3 year Ericsson will be main provider of infrastructure & handsets

Julia Goessler

New applications require an upgrade of infrastructure & handsets over the next 2-3 year

Ericsson’s Benefits Julia Goessler Stronger Partnership with Vodafone Increased business of upgrading networks “ Ericsson is a winner if our customers are winners” Carl-Henric Svanberg, CEO of Ericsson

Julia Goessler

Stronger Partnership with Vodafone

Increased business of upgrading networks

Recommendations “ Gate Keeper to Digital Life” Superior Content Enable Personalized Marketing

“ Gate Keeper to Digital Life”

Superior Content

Enable Personalized Marketing

BACKUP SLIDES

Win-Win Situation Julia Goessler Player Revenue Additional Value Content Providers Subscription by Vodafone Access to Vodafone Customer base Google Advertising Access to Vodafone Customer base Advertisers Consumer buying Targeted Advertising Customers -- Low priced content & personalized unobtrusive advertising Vodafone Subscription fees & Advertising Creation of a powerful value network Vodafone platform creates value for all players

Julia Goessler

How subscription transfer work

Advantages of transferable subscription 1 IPTV subscriptions per family 1 subscription per person Hence much higher potential subscription Track individual subscribers viewing behaviours

1 IPTV subscriptions per family

1 subscription per person

Hence much higher potential subscription

Track individual subscribers viewing behaviours

The Overview Of Multimedia Market Internet Media Telecom Difficult to set up structures related to customers need Searching & Sharing Little or no experience with customers but want to own their own content The future multimedia market is the convergence of Telecom, Internet and Media

The Overview of Multimedia Market ---Customers Side Consumers spending on digital media increases rapidly Source: U.S. Census Bureau (Statistical Abstract of the United States: 2007) Customers are more interested on digital media based on internet

Consumers spending on digital media increases rapidly

Source: U.S. Census Bureau (Statistical Abstract of the United States: 2007)

The Overview of Multimedia Market ---Suppliers side Global advertising revenues will grow at a CAGR of 84%, from $1 billion in 2006 to $23 billion by 2011; Advertising revenues currently make up 4% of the total global consumer multimedia market, and will increase to 13% by 2011 Digital advertisement will become the main revenues of multimedia providers

Global advertising revenues will grow at a CAGR of 84%, from $1 billion in 2006 to $23 billion by 2011;

Advertising revenues currently make up 4% of the total global consumer multimedia market, and will increase to 13% by 2011

The revenue of future Digital Advertisement Advertiser Direct and strong tie with customers Customers Tailors to their interests Operators Additional resources of revenue The first mover to digital advertisement stands to gain most

Digital Advertisement

Advertiser

Direct and strong tie with customers

Customers

Tailors to their interests

Operators

Additional resources of revenue

VALUE CREATION Stefano Di Genua Superior Content Deployment of the new platform Revenues start to increase Value acceleration Phase 1 Phase 2 Phase 3 Phase 4

Stefano Di Genua

PRICING STRATEGY Stefano Di Genua In offering more for less , Vodafone can tap an unexploited market

Stefano Di Genua

SENSITIVITY ANALISYS Stefano Di Genua Even in the worst case scenario for all the parameters, the project still offers good prospects Sensitivity Analysis Parameter Worst Base Best Subscriptions (‘000s) 220,000.00 440,000.00 880,000.00 Price 20.00 29.00 39.00 Value per click 1.00 1.00 1.00 Number of clicks-through per customer 1.00 2.00 4.00 Cost of capital 9.50% 8.42% 5.64% NPV (‘000s) 40,338.16 1,441,918.58 9,428,655.19 IRR 12% 37% 54%

Stefano Di Genua

SOUNDED ASSUMPTIONS Growth is sustainable because: Only 20% of the data network is used; Nevertheless, we believe that customers’ needs will change and additional infrastructure will be needed after the first 2/3 years; Revenues will start to grow considerably after the 3 rd year when the new infrastructure will help Vodafone to tap the new market through LTE; Metcalfe’s law concludes that the new network will have a higher value; The solution proposed will need a decrease in cells’ size in order to sustain the speed of the data stream (consistent with the bandwidth law); Moore’s law should be applied in predicting the capacity of the new network and its needs for further expansions. Stefano Di Genua The project will generate an NPV of almost $1.5 billion USD and and IRR of 37% with a cash multiple of almost 10x

Growth is sustainable because:

Only 20% of the data network is used;

Nevertheless, we believe that customers’ needs will change and additional infrastructure will be needed after the first 2/3 years;

Revenues will start to grow considerably after the 3 rd year when the new infrastructure will help Vodafone to tap the new market through LTE;

Metcalfe’s law concludes that the new network will have a higher value;

The solution proposed will need a decrease in cells’ size in order to sustain the speed of the data stream (consistent with the bandwidth law);

Moore’s law should be applied in predicting the capacity of the new network and its needs for further expansions.

Stefano Di Genua

OPERATING EXPENSES STRUCTURE Stefano Di Genua Other initial costs concern the deployment of the infrastructure and platform

Stefano Di Genua