Chris Barraclough: Shareholder Value for Telcos - Telco 2.0 7th Executive Brainstorm

Rebuilding value & control via a 2-sided business model
Chris Barraclough, MD, STL Partners/Telco 2.0

Agenda
What is a business model?
Problems with Telco 1.0 business model
New opportunity: Telco 2.0

A business model is the COMMERCIAL architecture of a business: how it makes (or loses) money
A 5-domain model
The marketplace
Service Offering
Value Network
Technology
Finance
Source: Faber et al; Designing business models for mobile ICT services, 2001; adapted and developed by STL Partners
Note: Each domain breaks down into several inter-related components that make up the overall business model.

The success of a company’s (or collection of companies’) business model is ultimately a function of two factors
Value
Control
+

Control Drivers
Value Drivers
Control & Value Drivers
Value Network
Technology
Service Offering
Finance
The Marketplace
Low/no growth in end user revenues
More companies sharing revenues and generating costs
More substitute products
Unable to match free
Telco 1.0 business model is now under pressure in several domains
More modular technology
Decentralised network intelligence
More punitive regulation
Less vertical integration
Weaker customer relationships
Source: Ballon 2007; STL Partners analysis

Sexy new services paid for by end user will NOT yield continued revenue and profit growth
Short term revenue growth only +
Medium term capacity & cost issues =
Falling margins, lower profits… 

Pre-2005
Retailer of books and games
Now
Retailer + platform (Amazon Marketplace)
Amazon – retailer-cum-platform provider

Pre-2005
52,000 SKUs
Now
100,000s of SKUs

Pre-2005
52,000 SKUs
Revenue from end user sales
Now
100,000s of SKUs
New revenuefrom enabling services to traders

Pre-2005
52,000 SKUs
Profitable but margin squeeze
Now
100,000s of SKUs
New revenue from enabling services to traders
Profit underpinned by platform

Pre-2005
52,000 SKUs
Profitable
Best-in-class logistics
Now
100,000s of SKUs
Improved, lower cost logistics (more scale)

Pre-2005
52,000 SKUs
Profitable
Best-in-class logistics
Big consumer base,strong relationships:
E.g. peer reviews
Now
100,000s of SKUs
Improved, lower cost logistics (more scale)
More customers, stronger relationships:
E.g. Premium logistics – Amazon Prime

A new telecoms business model
$
$
Source: STL Partners Analysis

A successful Telco 2.0 business model restores elements of value and control to the Telco industry
Control Drivers
Value Drivers
Control & Value Drivers
Value Network
Technology
Service Offering
Finance
The Marketplace
Single platform for multiple industries
Operator remains gateway to end users
New revenue source from upstream customers
Services more complementary
End-users add value to platform
More customer intimacy
Centralised intelligence – resides in platform
Unclear – potentially a move into less regulated markets
?
Source: Ballon 2007; STL Partners analysis

Three things required to bring Telco 2.0 to fruition
Bad debt
Demographics
Leadership
MY CREDIT
MY PERSONAL DATA
MY RELATIONSHIPS
Address
Gender
Average balance
Skills
Name
Profile
MY INTERACTIONS
MY DEVICES
Preferences
Location
Presence
SIM
SoftSIM
Number
SIP Number
Pictures
Videos
Bank
School
Browsing History
Collaboration
MY CONTENT
MY IDENTIFIERS
MY CONTEXT
QR Codes
IP Address
Serial Number
Device details
Calendar
Friends
On/Off
Source: STL Partners analysis
.mobi domains
Address Book
Workplace
Roaming

$375 billion opportunity (not guaranteed!)
EU-27 and North American Telecoms
$1,230bn
$689bn
Source: STL Partners, Telecoms Two-Sided Business Model Opportunity and Future Broadband Business Models, both published in 2008

Thank You
More at www.telco2.net

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Chris Barraclough: Shareholder Value for Telcos - Telco 2.0 7th Executive Brainstorm

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