Telco2 business models and opportunities briefing may 2013

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From the Telco 2.0 Initiative (www.telco2research.com): Next generation telco business models and strategic growth opportunities. Latest core slide set. Contact@telco2.net

From the Telco 2.0 Initiative (www.telco2research.com): Next generation telco business models and strategic growth opportunities. Latest core slide set. Contact@telco2.net

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  • Interesting perspective on digital services business units. Here's some additional perspective on how companies to the far right hand side of your chart are taking different approaches to what appears to be a common strategy.

    http://www.more-with-mobile.com/2013/04/launch-strategies-for-digital-business.html
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  • Mention data only packages with unlimited voice in Denmark and Germany
  • Currently operators provide core services to individuals within their customer segments (P2P) communications and they collect money from millions of customers in thousands of segments using hundreds of devices. In doing this they have a collection of assets and skills that can be reused to develop new platform services for delivery to upstream customers (like the merchants in amazon model). Operators can be paid for these services by new upstream customer group.Now going to cover what they are and challenges of realising the opportunity…
  • MNOs strengthen their position via a single contact point with upstream players; easier for upstream players to contract – one contract; More high-quality mobile services for consumers. Ours is a 2-sided business opportunityThis is our business model:Anayou is organised and focused on meeting the needs of Business and Commerce. It is a B2B profit-seeking company with a strategic asset in customer profilingAs well as providing a shared commercial and technical platform, anayou passes on aggregation cost benefits to offer MNOs advantageous commercial terms for the core servicesMNOs are organised and focused on meeting the needs of their consumers (and business custtomers-as-consumers)MNOs are anayou shareholders
  • Currently operators provide core services to individuals within their customer segments (P2P) communications and they collect money from millions of customers in thousands of segments using hundreds of devices. In doing this they have a collection of assets and skills that can be reused to develop new platform services for delivery to upstream customers (like the merchants in amazon model). Operators can be paid for these services by new upstream customer group.Now going to cover what they are and challenges of realising the opportunity…

Transcript

  • 1. - 1 -© STL Limited • Proprietary and ConfidentialBusiness Model Innovation for the Digital EconomyThe Telco 2.0 growth opportunityTelco 2.0 business models and how to enable themSimon Torrance, CEO, STL Partners/Telco 2.0 InitiativeSimon.torrance@stlpartners.comwww.telco2research.comNew Telco Business Models & GrowthOpportunitiesSTL Briefing – May 2013www.stlpartners.comwww.telco2research.com
  • 2. - 2 -© STL Limited • Proprietary and ConfidentialSummary• Market getting harder fast• Cost reduction #1; Smart Network #2• Service Innovation takes time• Role of vendors/partners changing
  • 3. - 3 -© STL Limited • Proprietary and ConfidentialVoice, messaging and connectivity revenues are falling fast (EU)010,00020,00030,00040,00050,00060,00070,00080,00090,000100,0002009 2010 2011 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F€MillionsEuro-5 Core services revenuesSpItFrGerUKThe ‘hunger gap’
  • 4. - 4 -© STL Limited • Proprietary and ConfidentialData revenues insufficient to offset voice decline (EU)Source: Ofcom, Company accounts, Barclays Capital, STL Partners analysis05,00010,00015,00020,00025,00030,000Q12009Q12010Q12011Q12012Q12013Q12014Q12015Q12016Q12017Q12018Q12019Q12020€MillionsQuarterly Mobile Core Services Revenues - EU-5 countriesData inc SMSVoice36% fall from 2009-2020
  • 5. - 5 -© STL Limited • Proprietary and ConfidentialNew business models & services must generate very largerevenues to close the 36% gap in 2020 (EU)Rises to €59bn if service revenues are to rise by 2% annually between 2009 and 2020!
  • 6. - 6 -© STL Limited • Proprietary and ConfidentialOperators’ response to datePressure on core businessReduce opex and capexChinese suppliersPrioritisation and shapingWifi offloadNetwork sharingReduced workforceMulticast and CDNsFemto/Pico underlayDevice managementSeek growthVoiceandmessaging–RCSeetc.Retailbroadband&dataAdvertising&marketingBilling,paymentsandcollectionM2MandembeddedmobilityEnterpriseservices
  • 7. - 7 -© STL Limited • Proprietary and ConfidentialOTT threat to future business as well as currentDevices,OS, apps &softwareDataconnectivityVoice &messagingOnlineadvertisingOnline saleof physicalgoodsOnline Saleof contentPaymentsEnterpriseIT$ Traditional $ New profit $ New non-profit$$$$$$ $ $ $ $$$$$$$$$$$$$$$$$$
  • 8. - 8 -© STL Limited • Proprietary and ConfidentialTelco strategies in the big 5 battlegroundsDevices, OS, apps &software1. Divide and rule2. Support Microsoft andNokia (& others)3. Support those that forkAndroidOnline advertising1. Disrupt2. Leverage customerdata3. Protectorate role forconsumer data &privacy?Online Sale of content1. Fragment2. Support Amazon &independent stores3. Leverage data, &paymentsPayments1. Compete viacollaborative approach2. Create completejoined-up solution.Voice & messaging1. Block2. Bundle services3. Improve voice &messaging4. Partner with valuesharers to blockdestroyersbosschallengersbosschallengersCritical need for joined-up telco approach to commerce platforms
  • 9. - 9 -© STL Limited • Proprietary and ConfidentialTelco 2.0: Two-Sided Telecoms Business Model$ $Source: STL Partners Analysis
  • 10. - 10 -© STL Limited • Proprietary and ConfidentialTelecoms industryConsumersSMEsEnterprisesDevicesDownstream CustomersWeb PlayersMediaGovernmentRetailersDevicesHealthcareIndustrialOther TelcosUpstream CustomersSix opportunity areas in the Telco 2.0 platformCore servicesVertical industry solutions (SI)Infrastructure servicesEmbedded communicationsThird-party business enablersOwn-brand OTT servicesCurrent focusAdditionalfocus
  • 11. - 11 -© STL Limited • Proprietary and ConfidentialTelco 2.0 ‘Happy Piper’ vs Telco 2.0 Service Provider?• Reduce capex and opex• Route & offload traffic efficiently• Balance cost vs quality• Right network for service at right time• Service assurance• Network QoS• Congestion mgt• Provisioning• Low costTelco 2.0Happy PiperTelco 2.0ServiceProvider• Invest in services• Deep customer knowledge• ID and authentication provider/agent• Integrate network & services• Flexible chargingAs above plus:• Service development• Customer experience mgt• Customer data• Real-time rating & billingGeneric strategy Key success factors Skills and assets
  • 12. - 12 -© STL Limited • Proprietary and ConfidentialExamplesTelco 2.0 Happy Pipe Telco 2.0 ServicesEuropeAPAC
  • 13. - 13 -© STL Limited • Proprietary and ConfidentialPriorities vary by Telco segmentLargeinternationalplayersRegional playersTier 2/3challengersBusiness &wholesale telcosSmaller nationalleadersExamplesVodafone, Verizon,AT&T, Telefonica,NTT DocomoBT, TeliaSonera,Sprint, SK Telecom,Singtel3, Tele 2, VirginMedia, CricketWirelessC&W, GlobalCrossing, Level 3,InterouteSwisscom,Belgacom, TelecomPortugal, Telecom NZCore servicesVertical industrysolutions (SI)InfrastructureservicesEmbeddedcommunicationsThird-partybusiness enablersOwn brand OTTservicesTop priority Significant but selective approach required Limited or no opportunity
  • 14. - 14 -© STL Limited • Proprietary and ConfidentialHappy Piper can be revolutionary – Free in FranceCost-cutting won’t grow the overall market for operators but it can enable aggressive share gains and/ormargin benefits.0%2%4%6%8%10%12%14%16%0 1 2 3 4 5 6Marketshare%Years after inception4th mobile player into the market: market shareP4 PolandBité LatviaH3G ItalyH3G SwedenH3G DenmarkH3G IrelandYoigo SpainH3G AustriaQ-Telecom GreeceTelevorgu EstoniaMobilkom Czech RepublicFree France
  • 15. - 15 -© STL Limited • Proprietary and ConfidentialDifficult to be a platform player?Telco 2.0 HappyPiperTelco 2.0 ServiceProviderLow cost  Service assurance  Network QoS  Congestion management  Provisioning  Service development Customer experience mgt. Software & design Brand Customer data Ecosystem Development InfrastructurebusinessProduct innovationbusiness
  • 16. - 16 -© STL Limited • Proprietary and ConfidentialDifferent approaches to building new digital services unitsTelco 2.0Strategy UnitTelco 2.0Innovation UnitTelco 2.0Business UnitIdeation   Evaluation   Piloting  Investments/M&A  Product development () Ecosystem/partner development Launch In-service delivery Easiest andleast ambitiousHardest andmost ambitious
  • 17. - 17 -© STL Limited • Proprietary and ConfidentialOperator partnering needed to build scaleNiche platforms and services are unlikely to generate material economic benefit to operators – they have togo big.GoogleMicrosoft OnlineServicesDivision-20-1001020304050600 50 100 150 200OperatingProfit2004-2011($bn)Revenue 2004-2011 ($bn)
  • 18. - 18 -© STL Limited • Proprietary and ConfidentialPartnering for operators – the prisoners’ dilemma
  • 19. - 19 -© STL Limited • Proprietary and ConfidentialPrisoners’ dilemmaWorkingwith third-parties(OTT etc.)CompeteOpen-access– collaboratewith allWorking with other operatorsCompete CollaborateCollaboratewith specificplayersSteal the Crown Defence of the RealmsSelf-appointed King-makerCollaborative King-makerIsolated revolutionary RepublicanismRCSeOwn VoIP serviceOwn paymentssolutionISISOwn APIprogrammeWAC
  • 20. - 20 -© STL Limited • Proprietary and ConfidentialValue-destroying strategies versus value-creating onesWorkingwith third-parties(OTT etc.)CompeteOpen-access– collaboratewith allWorking with other operatorsCompete CollaborateCollaboratewith specificplayersSteal the Crown Defence of the RealmsSelf-appointed King-makerCollaborative King-makerIsolated revolutionary Republicanism
  • 21. - 21 -© STL Limited • Proprietary and ConfidentialIncreasing attempts by operators to work together to build scale oninfrastructure & digital services…but very difficult to pull offMENA US Europe APAC
  • 22. - 22 -© STL Limited • Proprietary and ConfidentialMNOs CustomersUpstreamSales&BusinessDevelopmentCoreteamAdvertisingPlatformContentPlatformPaymentsPlatformCommonPlatforms(e.g.Reporting,Profiling)Content & Apps PlayersMerchantsBrands & Media Co.’sBanksMENA JV: Example of Telco 2.0 in practice
  • 23. - 23 -© STL Limited • Proprietary and ConfidentialInvestedCapital(IC)Sales Sales/ IC EBITDA%EBITDA FreeCashFlowCROIC*%Different operational & financial models: new metrics neededCore servicesVertical industrysolutions (SI)InfrastructureservicesEmbeddedcommunicationsThird-party businessenablersOwn brand OTTservices$1,000 $500 0.5 45% $225 $64 6.4%$500 $350 0.7 30% $105 $26 5.2%$500 $350 0.7 30% $105 $26 5.2%$200 $200 1.0 28% $55 $21 10.3%$100 $200 2.0 15% $30 $12 12.3%$25 $35 1.4 20% $7 $3 10.7%* Cash return on invested capitalCurrentoperatorfocusNewoperatorareas
  • 24. - 24 -© STL Limited • Proprietary and ConfidentialTop 6 ‘Strategic Opportunities’ for Telcos2. Re-define fundamental telco business modeland innovation processes1. Global Trust Network for Personal Dataand Digital Identities5. Case for Infrastructure investment6. Role in Cloud Computing3= Partner better with other industries3= Regulation for cross-border,cross-industry collaboration
  • 25. - 25 -© STL Limited • Proprietary and ConfidentialHow to extract value?“Data is the new oil of theInternet and the newcurrency of the digitalworld.”Meglena Kuneva, European ConsumerCommissioner 2009
  • 26. - 26 -© STL Limited • Proprietary and ConfidentialTelcos have access to uniquely rich and persistent data
  • 27. - 27 -© STL Limited • Proprietary and ConfidentialWorld Economic Forum principles• People are producers, notjust consumers• Give people control, accessand choice• Embed rights in code• Make data practices a pointof competitive differentiation• New ‘rules and tools’weforum.org/personaldata
  • 28. - 28 -© STL Limited • Proprietary and ConfidentialBig Data: Five opportunity areas for TelcosOpportunity grouping DescriptionInternal ServicesUpsell, cross-sell, reduce churn, create & reward advocates, deliverbetter customer experienceRaw Big DataProfessionalServicesReal-time3rd party processenablementPersonal Cloud1.2.3.4.5.
  • 29. - 29 -© STL Limited • Proprietary and ConfidentialBusiness Model Innovation for the Digital EconomyThe Telco 2.0 growth opportunityTelco 2.0 business models and how to enable themSimon Torrance, CEO, STL Partners/Telco 2.0 InitiativeSimon.torrance@stlpartners.comwww.telco2research.comThank you