The Telco 2.0TM Two-Sided Telecoms Market Opportunity Report“Sizing the $125Bn Platform Services Opportunity”Analysis Methodology, Sample Results and Validation Example

In this Report we size each of the VAS platform’s service capabilities in detailSIZING THE SEVEN SERVICE CAPABILITIESThe Seven Service CapabilitiesIdentity, Authen-tication & SecurityAdvertising, Marketing Services & Business IntelligenceE-Commerce SalesOrder Fulfilment - OfflineOrder Fulfilment – Online (Electronic content)Billing & PaymentsCustomer SupportCovered for Each Service CapabilityOverall service capability sizing by vertical industryBackground information from public informationKey STL Partners assumptions‘Sanity checks’ for estimatesThese are covered for each service capability over the next 40 pages of the Report.

Overall service capability sizing by vertical industry

Background information from public information

Key STL Partners assumptions

‘Sanity checks’ for estimates

Using government economic data, we have calculated the size of each of the 7 service capabilities across each vertical industry in the UK, Europe & the USSIZING THE PLATFORM OPPORTUNITY: SUMMARYVertical Industry RevenuesHorizontal Service Capability Market for each Vertical IndustryPotential opportunity for Telco PlatformChecks & BalancesOffice of National Statistics – UK National AccountsUKUK economic output split by industry (classified according to the EU NACE standards) which allows detailed analysis and permitting minimisation of double counting as one industries outputs are used as an input to another. Estimates of % of vertical industry revenue spent on each service capabilityEstimates of % of service capability market available to Telco platformValidate sizing against industry data and/or sensible cross-checksEuroStat – European Business Facts & FiguresEuropeEconomic output by industry across all 27 country members. It also uses the NACE classification to allow a comparison and reconciliation to the UK figures. For example:Percentage of Financial intermediation (except insurance and pension funding) revenues spent on Identity, Authentication & Security services estimated at 1% = £880mFor example:Percentage of Financial intermediation (except insurance and pension funding) revenues spent on TELCO Identity, Authentication & Security services platform estimated at 0.1% = £88mFor example:£880m spent on Identity, Authentication & Security for Financial Intermediation = £22 per adult per year in the UK across retail and business banking, mortgage lending, credit cards etc. £88m for Telco platform = £2.20 per adult per yearUS Bureau of Economic Statistics – GDP by Industry StatsUSIn other words:Telco platform could potentially capture 10% of all Identity, Authentication & Security services in Financial IntermediationUS data split by industry and in the detailed input/output format similar to the UK data. There are small differences in the classification of industries with the US NAICS. Note: See Appendix for detailed industry classifications and groupings used in our analysis.

We calculate that three service capabilities could generate 73% ($90 billion) of the total platform revenue in 2017SIZING THE PLATFORM OPPORTUNITY: SUMMARYAdvertising, Marketing Services and Business Intelligence (the one area that many operators are currently focused on) is the largest single service capability……but represents less than 30% of the total opportunityBilling and Payments and Customer Care are both substantial opportunities for operators:$26 billion eachSome service capabilities are smaller but enable others:Identity, Authentication & Security are required to deliver advertising, E-Commerce sales, Billing & Payments etc.E-Commerce Sales drives On-line order fulfilment and billing & payments

SIZING THE SEVEN SERVICE CAPABILITIES – IDENTITY, AUTHENTICATION AND SECURITY, SANITY CHECKSWe tested our calculations for Identity, Authentication & Security in two vertical industries and believe we have been conservative in our assumptionsFinancial Intermediation, except Insurance and Pension FundingIn the UK in 2004, the total industry generated revenues of £88 billion ($176 billion) which we expect to grow to £127 billion ($254 billion) by 2017 (assuming a 2.2% compound annual growth rate going forward)We estimate that the amount spent on Identity, Authentication and Security by the Financial Services industry amounts to 1% of this total revenue:1% x $176 billion = $1.76 billion in 20041% x $254 billion = $2.54 billion in 2017The adult population in the UK is around 40 million which means that Financial Services institutions spent around $44 per adult per year on identity, authentication and security systems in 2004 and around $64 in 2017 to cover all retail and business banking products (current accounts, savings accounts, mortgages, personal loans, credit cards etc.)Much of this expenditure is on proprietary internal systems and processes and so we calculate that a Telco platform could only capture 10% of the available revenues spent on Identity, Authentication and Security:10% x $1.76 billion = $176 million in 200410% x $2.54 billion = $254 million in 2017Thus, we calculate that the Financial Services community could thus spend only $4.40 per adult per year in 2004 and $6.35 in 2017 on a Telco platform offering identity, authentication and security servicesPublic Administration: UK PassportsThe issue of passports is essentially an exercise in identity, authentication and security by governmentsThis, and identity card schemes, are areas where we forecast operators could have a role to playIn the UK, in 2006 the government charged £72 per new or replaced passport and £46 per amended passport and generated total fees of £346 million ($792 million)Complexity (and cost) is increasing with the introduction of biometric passportsLaunched the Passport Validation Service (PVS) with public and private sector customers, including the introduction of a call centre facilityWe assume the total Identity, Authentication and Security opportunity for operators in Public Administration and Defence is 0.05% of the total value of the industry: a tiny fractionExample of one detailedSector Vs Application Validation Analysis