1. The document discusses how telecom companies can transition from a traditional one-sided business model to a two-sided platform model to drive future growth. 2. It provides examples of how companies like Google, Mastercard, and Betfair have successfully implemented two-sided models to connect two interdependent groups. 3. The document outlines potential new two-sided business models for telecom companies, including retail platforms, supply chain platforms, and B2B value-added service platforms that could generate over $375 billion in revenues.

1. Business Model Innovation in the Digital Economy The Two-Sided Telecoms Business Model Martin Geddes, Chief Analyst, STL Partners [email_address] www.telco2.net

2. Core messages Future growth: Reliant on extending business model New ‘ platform ’ business model grows from existing core consumer business Moves from one-sided to two-sided market model Execution requires partnership and collaboration

3. Many successful two-sided market players

4. Why you should pay attention $375bn telco opportunity c.15% of global telecoms revenues in 2017 High-margin, high-growth business

5. Introducing two-sided markets

6. Betfair: Beats one-sided rivals Joins two groups who want to interact vs. Bookies Punters Punters

7. Google: Two-sided master FREE! Need to attract users that upstream party values Advertisers Audience

8. Chicken and egg problem: need an audience Build audience Introduce revenue model

9. Mastercard: Balancing two sides Mirror of termination fee debate in telecoms “ Acquiring” (Merchant) Banks “ Issuing” (Customer) Banks

10. A New Telco Proposition?

11. New Telco Value Propositions Now: Bundled voice, messaging, video and internet access Supply Chain Platform Personalised Logistics Services for Data Retail Relationship Platform Media & Content Services Provider ECONOMIES OF SCOPE ECONOMIES OF SCALE

12. 1. New Retail Platform

13. Telco: traditional one-sided retail model INVENTORY RETAILER VALUE PROP “ Connected lifestyle” “ Affordable fashion”

14. Two-sided retail models Rent shelf space Provide business intelligence & payment services Rent portal space Provide payment and customer care services No inventory risk No inventory risk

15. Telco media services supply chain platforms What needs to change: Emulation of leading retailers (e.g. Amazon, Tesco) “ Reviews, recommendations & rewards” Investment in analytics, CRM Permission marketing approach “ Trade and persuade” model for customer data and access ODI Innovation World Web21C Litmus Live! + Betavine Content Provider Access

16. 2. Supply Chain Platform

17. Supply Chain Logistics: Physical World Distribution Collection Multi-Modal Transport Delivery 1. Distribution Collection Multi-Modal Transport Delivery B2B VAS Tax & Duty Management Documentation Management Denied Party Screening Scheduling & Supply Chain Management Systems Integration Tracking & Monitoring

18. Telco 2.0: New Wholesale + VAS Wholesale Distribution Capture/Origination Multi-Modal Transport Display/Termination B2B2C VAS Identity, Authentication, Security Advertising, Marketing Services Ecommerce Order Fulfilment Billing & Payments Customer Services Telco (2.0)

19. New Wholesale Distribution Platform

20. Current Approach: One-sided Bulk Wholesale $ Upstream Customers Revenue Side 1 Downstream Customers Revenue Side 2 Customer relationship is with someone else Other Telcos (e.g. MVNO) Consumers Enterprises SMEs Multi-Nationals Your Telco

21. Future Approach: Fine-grained Wholesale Partners can re-package minutes and messages to achieve higher margins Wholesale Aggregator £15/month £ 20/ month Consumers Your Telco

22. New Wholesale – Video & Data Connectivity included with the application Tomorrow : Multi-modal delivery Machine-to-machine Wholesale VPN products Packaged apps “comes with data”

23. New B2B2C Value Added Services Platform

24. Help customers interact more easily Barriers Identifying Other Party, Authorisation & Security Promoting Offer Conducting transaction Fulfilling Order Billing & Payment Service & Support Customers – Revenue Side 1 Customers – Revenue Side 2 Millions of Customers Thousands of Segments Developers Retailers Government Brand Advertisers Content Owners Telco – Retail

25. Telcos assets well suited Barriers Identifying Other Party, Authorisation & Security Promoting Offer Conducting transaction Fulfilling Order Billing & Payment Service & Support Customers – Revenue Side 1 Customers – Revenue Side 2 Telco Capabilities & Assets       Millions of Customers Thousands of Segments Developers Retailers Government Brand Advertisers Content Owners Telco – Retail

26. Telcos have many valuable but latent data assets MY PERSONAL DATA MY STUFF MY IDENTIFIERS MY INTERACTIONS MY RELATIONSHIPS MY CONTEXT MY DEVICES MY CREDIT Name Address Gender Profile Preferences SIM SoftSIM Serial Number Device details Location Presence On/Off Roaming Pictures Videos Calendar Address Book Bank School Friends Workplace Browsing History .mobi domains QR Codes Bad debt Demographics Average balance Number SIP address IP Address Email

27. Current Approach: Media & Advertising… $ $ Upstream Customers Revenue Side 1 Downstream Customers Revenue Side 2 Telco Platform Ecosystem Brand Advertisers Consumers Enterprises SMEs Multi-Nationals

28. Revenue from both sides: advertiser and users Advertising & Marketing Example: Blyk Source: STL Partners’ estimates and calculations; core assumptions not articulated here

29. … but market is too small! Revenue, $ Billions 2006 2010 $2,000bn $2,490bn $425bn $533bn $30bn $62bn Fixed and Mobile Telecoms Global advertising On-line and mobile advertising

30. Upstream customers want more than just ads Authentication is crucial to Betfair’s business Betfair pays around $22 to verify the identity of each new customer Slow and expensive process “ There’s a tendency when building a platform business to do too much yourself - I come back to payments, I come back to authentication. People in this room [at the Telco 2.0 Executive Brainstorm in March] can do this for me. Operators have the skills and the relationships and I am willing to pay them for this service.” Ed Wray, Chairman and Founder, Betfair

31. Open up more markets for telco platform $ Millions of Customers Thousands of Segments $ B2B2C VAS Distribution Upstream Customers Downstream Customers Developers Retailers Government Brand Advertisers Content Owners Telco – Retail Content Owners Telco Platform Ecosystem

32. Example: Customer Service

33. Customer Service Example: The Problem User Call centre Se habla español… Your name… Credit card security code… I’m sorry but David is unable to take your call right now… Freephone 1.0 Voicemail 1.0 INBOUND CALLS OUTBOUND CALLS

34. Customer Service Example: The Solution “ Live voicemail” Form fill Payment services Identity & authentication User Call centre Enter your PIN to release your name and address to Acme Corp, and authorise payment for £188. Your delivery is scheduled for 7 July. To change your order, press one. Freephone 2.0 Voicemail 2.0 INBOUND CALLS OUTBOUND CALLS

35. Example: Identity

36. Identity & Authentication Example: Banking Transaction Request Authentication Request Authentication Request Digital Signature Signature Validation Transaction Result Operator

37. Example: Billing & Payments

38. Billing and Payments Example: Paypal =  Safe payment solution: customer and merchant data never leaves Paypal Compound Annual Growth Rate: 39% Merchant Consumer $$

39. Billing and Payments Example: Mobile =  Greedy operators killing the goose? Source: www.gamemobile.co.uk

40. Value of the opportunity

41. $375bn from New Wholesale & VAS Platforms?

42. B2B VAS revenue c. $125bn* * Total W Europe & US Market, 2017: $125 Billion * See new report, Sizing the two-sided market opportunity for a full analysis. http://www.stlpartners.com/telco2_2-sided-market/index.php Identity, Authen-tication & Security Advertising Marketing Services & Business Intelligence E-Commerce Sales Order Fulfilment - Offline Order Fulfilment – Online (Electronic content) Billing & Payments Customer Support

43. Opportunity into perspective

44. Summary

45. Three different parts to the future Telco Operator $$ Downstream End Users Consumers Retailer SMEs Enterprises Public Sector 1. Developers E-tailers Government Brand Owners Content Owners Telco (Retail) $$ Wholesale Platform Upstream Customers 2. VAS Platform $$ $$ 3.

46. Next Steps for Operators Now Develop a pilot/proof of concept with a major name upstream customer: Build credibility in marketplace and internally Road test demand for one or more service capabilities Capture platform functional requirements Validate business models and pricing Create basis for volume estimates Next 18 months Develop a ‘joined-up’ strategy and business case for the new wholesale and VAS businesses Engender Board-level support for the 3 businesses and the 2-sided business model Create a separate dedicated organisation for VAS business Develop expertise in two-sided business models and pricing strategies Build downstream capabilities: CRM, data mining & data protection/privacy to support all 3 business models Build upstream capabilities: Aggregation, distribution and integration partners for new wholesale and VAS businesses Establish a process for operator collaboration

47. THANK YOU More info on this topic at www.telco2.net/blog www.stlpartners.com/telco2_research-analysis.php www.telco2.net/event/ Business Model Innovation in the Digital Economy