Telco 2.0 - New Business Models for Operators

Slide 1: Growing the Topline through New Business Models Simon Torrance CEO, STL Partners Founder, Telco 2.0TM Initiative simon.torrance@stlpartners.com +44 7979 657 682

Slide 2: Introduction • Telco 2.0TM is a global initiative run by boutique analyst and consulting company STL Partners to catalyse change across the telco value chain. • What follows is an updated introduction to the ‘Telco 2.0’ concept • It describes in simple terms the opportunity Telcos have to create sustainable growth • It is based on considerable research and analysis, recently validated by a worldwide survey of 600+ industry experts in September 2007 • Our next phase of work is to define a roadmap for delivering this vision • More details on all of the concepts described here can be found on our blog and in our research reports – www.telco2.net – or by personal email to simon.torrance@stlpartners.com © STL Limited • Proprietary and Confidential -2-

Slide 3: Summary: What is ‘Telco 2.0’? • Telco 2.0 is about sustainable growth strategies for network operators facing new forms of competition. It means… • Operators focus on their core competence … as ‘distributors of valuable bits and bytes’. • They fully utilise their distinctive assets (which today are under-exploited) and recognise end users as resources (not just profit centres) • Operators are not dumb pipes, wannabe media companies, nor end-user service innovators • Rather, they are 'logistics solutions providers' for data (voice, messaging, video, web, personal information) • They make sure data is delivered to the right place at the right time in the right way, and enable different parties to get paid in appropriate ways • To do this they make use of multiple distribution systems (eg. internet, mobile, broadcast, network caching, physical media) some of which they own, some of which they don’t. • Crucially, they operate a 2-sided business model, getting paid by upstream partners as well as downstream end-users © STL Partners www.stlpartners.com

Slide 4: “Everyone’s interaction “Logistics solutions with it creates more provider for valuable bits value for everyone else” and bytes”

Slide 5: Let’s re-define core ‘Telco’ Systems Integrator Packaging Partner Products Telco Protected Products Packets & Platters Utility (pipes and cell towers) Plumbing © STL Limited • Proprietary and Confidential -5-

Slide 6: What does ‘Core Telco’ sell? Partner e.g. Content, software and Services only consumer electronics hardware Products Services integrated with Protected eg. PSTN Voice, SMS, iTV Distribution systems Products Distribution systems only e.g. Packet data, content Packets & Platters delivery, media broadcast © STL Limited • Proprietary and Confidential -6-

Slide 7: Some companies have re-structured around this model Systems Integrator Packaging Partner Products Telco Protected Products Packets & Platters Utility (pipes and cell towers) Plumbing © STL Limited • Proprietary and Confidential -7-

Slide 8: The ‘Core Telco’ business model today is ‘One-Sided’ Telco Suppliers = Costs Users = Revenue Eg. Blackberry, Nokia Content, Apps, Partner Products Music Store Devices Eg. Fixed Voicemail, Network Elements, Protected SMS Voting Termination Products Interconnect, Eg. ISP Access, hosting Packets & Platters Storage Hardware © STL Limited • Proprietary and Confidential -8-

Slide 9: This leads to some significant challenges • Growth in core business • Rapid technology unsustainable development • Broadband ISP • Consumer demand for unsustainable new service types • Inbuilt reluctance to • Regulatory pressure change • More and different • Senior management competitors uncertainty re. Strategy • Capital Markets unexcited • Legacy business model NB: Emerging Markets: timing of these issues varies © STL Limited • Proprietary and Confidential -9-

Slide 10: The big question, then, is… Where should we focus our strategic effort to ensure growth? © STL Limited • Proprietary and Confidential - 10 -

Slide 11: Answer: Focus on ‘core telco’ competences… o, ide s 10100010111001001001011000110 , v ge 10000101111101010010010101010 ce sa oi es 00101010111101010101010001010 V 10001010111011110100010101010 ,m 01011100100010001011011001010 eb 11100111010000001011001010100 w “Logistics solutions providers for valuable bits and bytes” © STL Limited • Proprietary and Confidential - 11 -

Slide 12: …and exploit key assets (‘User Data’ is the most important) MY RELATIONSHIPS MY PERSONAL DATA Knowledge of Core customer data personal and Name, Address, business interactions Gender, National ID, Profile & Preferences My bank, school, workplace, friends MY INTERACTIONS MY DEVICES User ID linked to Naming and tracking physical device or non-human resources token; configuration .mobi domains, web browsing history, SIM, USIM, SoftSIM, serial QR codes read number, profile & settings MY STUFF MY IDENTIFIERS Digital Lifestyle MY CONTEXT Identity and persona Aggregators & PIM creation for user User real-time activity Pictures, Videos, Bookmarks, Number, address or ID and environment History, Files ; Calendar, provisioning; porting; avatars Address Book, To Do, Notes Location, Motion, Temperature, On/Off, Roaming, In-call © STL Limited • Proprietary and Confidential - 12 -

Slide 13: Really understand new growth opportunities Decline Growth Many other distribution models © STL Limited • Proprietary and Confidential - 13 -

Slide 14: Create ‘2-Sided Business Models’ Developers Retailers Millions of Government $$ Customers $$ Telco Thousands Google of Segments ASPs Telco (Retail) © STL Limited • Proprietary and Confidential - 14 -

Slide 15: Build a Commercial Platform to Support them… Developers OTT Products Protected Retailers Products Millions of Government $$ Packets Customers $$ Thousands Google of Segments ASPs PLATFORM Telco (Retail) © STL Limited • Proprietary and Confidential - 15 -

Slide 16: …a low cost, light, flexible commercial platform Developers OTT Products Protected Retailers Products Millions of Government $$ Packets Customers $$ Thousands Google PLATFORM: of Segments E-Commerce ASPs IT & SDP Wholesale Access Telco (Retail) © STL Limited • Proprietary and Confidential - 16 -

Slide 17: This will generate new income from upstream partners… Developers OTT Products New Revenues: Protected Retailers Products eg. Millions of Government Credit Checks Packets Customers VoiceMail APIs Thousands Google Content+Connectivity PLATFORM: of Segments E-Commerce ASPs IT & SDP Wholesale Access Telco (Retail) © STL Limited • Proprietary and Confidential - 17 -

Slide 18: …which can be extended by leveraging User Data New Revenues: Developers OTT Products Credit Checks Protected Retailers APIs VoiceMail Products UserMillions of Data: Content+Connectivity Government Packets Activity Data Customers Relationship Data Ad Personalisation Thousands Google Object Data Advanced Call Filtering PLATFORM: of Segments Social Media Support E-Commerce ASPs IT & SDP Wholesale Access Telco (Retail) © STL Limited • Proprietary and Confidential - 18 -

Slide 19: Richer wholesale markets will be a critical enabler Developers OTT Products Richer Wholesale Aggregation Protected Retailers Products Millions of Government Packets Customers Thousands Google PLATFORM: of Segments E-Commerce ASPs IT & SDP Wholesale Access Telco (Retail) © STL Limited • Proprietary and Confidential - 19 -

Slide 20: To find out more, read our new research reports… Future Broadband Telcos in Advertising Voice & Messaging 2.0 Business Models www.telco2.net © STL Limited • Proprietary and Confidential - 20 -

Slide 21: ...come to a Telco 2.0 Executive Brainstorm, or read the blog www.telco2.net/event www.telco2.net/blog © STL Limited • Proprietary and Confidential - 21 -

Slide 22: Final thought “The end-user is an asset, not just a customer, and any new business model has to regard them as a resource, not just as a profit centre” (Source: Respondent to Telco 2.0 Future Broadband Business Models Survey, Sept 07) © STL Limited • Proprietary and Confidential - 22 -

Slide 23: Consulting Research Brainstorms www.telco2.net contact@telco2.net