SVP Advisors - Company Presentation July 2010 V4

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SVP Advisors - Company Presentation July 2010 V4

  1. 1. SVP ADVISORSCompany Presentation<br />July 2010<br />RETHINKING│COMMUNICATIONS<br />
  2. 2. Contents<br />1. About SVP Advisors<br />2. Our experience – selected case studies<br />3. Contact details<br />2<br />
  3. 3. SVP Advisors is an international management consulting firm for the communications industries specializing in business strategy and regulation<br />Established by seasoned professionals in 2006, we have earned over time a solid reputation within the broad communications sector thanks to our quantitative and practical approach in consulting assignments<br />Our work combines various disciplines such as economics, econometrics, finance, accounting, marketing, engineering, and computer science<br />3<br />Company Profile<br />
  4. 4. 4<br />Areas of Expertise<br />
  5. 5. International Experience<br />SVP Advisors assignments (12 Countries)<br />Previous Team experience (24 Countries)<br />5<br />
  6. 6. 6<br />We work with some of the world’s largest and well-respected institutions and operators, and we are often invited to present at international conferences and workshops addressing the latest st topics in the communications sector<br />Our client base includes:<br /><ul><li>Regulators (AGCOM, CMT, CITC, COFETEL, EETT, NITA, OCECPR, TRA UAE)
  7. 7. Telecom Operators (Telecom Italia, Telefónica, Turkcell)
  8. 8. Financial Institutions (Banco Santander, Citibank, Inter-American Development Bank)
  9. 9. Int’l Organizations (EU Commission)</li></ul>Clients<br />Client Distribution<br />24%<br />47%<br />Regulators<br />Telecom Operators<br />Financial Institutions<br />Int’l Organizations<br />6<br />
  10. 10. People<br />Julio Villalobos<br />Partner<br />Technology & Regulatory Expert<br />Marco Gatti<br />Director<br />Regulatory Expert<br />Francisco Velázquez<br />Partner<br />New Ventures & Financing Expert<br />Dimitri Kallinis<br />Partner<br />Business Strategy Expert<br />Over 10 yearsexperience in strategy advice and operations in the communications sector<br />Lead several TMT strategy consulting assignments for int’l clients. Former Head of Residential Unit at On Telecoms, a leading Greek 3Play Operator, responsible of Products, Sales Strategy, Content, MarkComms &Pricing<br />Areas of expertise: broadband, MVNO, IPTV, business planning, commercial strategy, market analysis<br />Over 10 yearsexperience in strategy advice and operations in the communications sector<br />Extensive track-record of costing, regulatory and strategy consulting projects for fixed and mobile operators in several EU and Middle East Countries. Former Team Leader of Technology Strategy at Telefónica Spain<br />Areas of expertise: ADSL, fixed & mobile networks, techno-economic modelling, regulatory strategy, regulatory accounting<br />Over10 yearsexperience in strategy advice and financing in the communications sector<br />Telecoms financing expert, participated in >10 large M&A transactions and in >20 syndicated loan transactions over the last few years. Has actively participated in innovative ventures through an investment fund<br />Areas of expertise: new technology & media ventures, start-ups, innovation, financial transactions<br />Over 10 years experience in regulation and policy in network industries<br />Extensive in the field experience in telecoms regulation. Regular speaker at TMT conferences and media events. Former Senior Economist at OFCOM (Swiss NRA) and Chairman in the IRG Regulatory Accounting Group<br />Areas of expertise: regulatory policy, regulatory accounting and costing, competition analysis<br />7<br />
  11. 11. Contents<br />1. About SVP Advisors<br />2. Our experience – selected case studies<br />3. Contact details<br />8<br />
  12. 12. Margin Squeeze test for bundled products<br />25%<br />20<br />%<br />15<br />%<br />10<br />%<br />5<br />%<br />0<br />%<br />-<br />5<br />%<br />OLO Small <br />OLO Medium <br />OLO Large <br />Incumbent <br />size<br />size<br />size<br />size<br />Using Bitstream<br />Using LLU<br />EETT (Greece), 2008<br /><ul><li>On behalf of the EETT, the Greek NRA, we carried out a competition analysis of bundled offers including access, narrowband and broadband services, on the basis of:</li></ul>An imputation test, to verify whether the incumbent’s tariffs constitute ‘predatory pricing’<br />A price squeeze test, to establish whether the combination of wholesale and retail tariffs in a market produce an anticompetitive situation, such as ‘margin squeeze’, preventing efficient alternative operators from competing profitably<br /><ul><li>To support our analysis, we developed an integrated model which provided the necessary data inputs and parameters required to evaluate possible combinations of multi-play offers
  13. 13. The price squeeze model produces results based on a number of wholesale services, such as bitstream, colocation, shared and full LLU, and interconnection</li></ul>Margins of a typical double-play offer considering economies of scale and technology choice<br />Note: chart has been altered for confidentiality reasons<br />9<br />
  14. 14. Accounting Separation System for a Mobile Operator<br />Mobile operator (CEE), 2009 <br /><ul><li>For a large mobile operator we developed an Accounting Separation System aimed at fulfilling its regulatory and operational needs
  15. 15. The accounting separation system supports the mobile operator in:</li></ul>Carrying out profitability analysis, wholesale costing and commercial pricing strategy<br />Proving full compliance with regulatory obligations<br />Being proactive in its regulatory and competitive environment<br />Countering complaints of anticompetitive behavior on the basis of enhanced information availability<br /><ul><li>As market matures, this tool will also support the mobile operator to focus on cost efficiencies, enhanced targeting and product innovation, while considering MTRs impact, network upgrades, wholesale strategy and regular reporting to management</li></ul>General overview of the Mobile Accounting Separation System<br />10<br />
  16. 16. Audit of the Regulatory Accounts of a Mobile Operator<br />AGCOM (Italy), 2010<br /><ul><li>On behalf of AGCOM, the Italian NRA, we audited the regulatory accounts of mobile operator H3G Italia, prepared under both the FDC HCA and FDC CCA methodologies
  17. 17. We followed a phased approach that comprised of the following activities:</li></ul>Review of the methodology followed in the preparation of regulatory accounts<br />Reconciliation of financial and other relevant data (e.g. traffic volumes)<br />Review of the re-valuation of assets at current costs<br />Review of the allocation of costs to activities, cost centres and services<br /><ul><li>The main outcome of our work has been the identification of necessary and/or suggested amendments to the operator’s costing systems, and the quantification of the impact of such changes on the cost of regulated services (i.e. wholesale termination)
  18. 18. AGCOM has used the results of his audit in the price cap mechanism applying to H3G’s wholesale mobile termination rates</li></ul>Schematic overview of H3G’s Regulatory Cost Accounting System <br />11<br />
  19. 19. Audit of the Regulatory Accounts of a Fixed Incumbent Operator<br />CMT (Spain), 2007-2010<br /><ul><li>On behalf of the CMT, the Spanish NRA, we reviewed the cost accounts of the fixed-line incumbent Telefónica
  20. 20. Our work comprised the following activities:</li></ul>Reconciliation of costs and revenues with the financial accounts<br />Review of the allocation of costs to services<br />Review of the re-valuation of assets at current costs<br /><ul><li>Additionally, we evaluated the adequacy of modifications introduced in the system due to the evolution of the company’s operations and the ameliorate proposals made by the NRA
  21. 21. The results of the audit were used by the NRA in setting regulated tariffs and monitoring relevant markets to ensure fair competition
  22. 22. We have carried out this project for the CMT during 4 subsequent years, from 2007 to 2010</li></ul>Evolution of current costs by regulated activity segment<br />12<br />
  23. 23. Telecommunications Policy in a LATAM Country<br />Cofetel(Mexico), 2007<br /><ul><li>On behalf of Cofetel, the Mexican Regulator, we carried out a study of the telecoms sector and identified areas where public intervention would be required
  24. 24. After establishing the market boundaries for the services considered, we assessed:</li></ul>the benefits and costs of several alternative technological options<br />the role of public communications in low income & rural areas<br /><ul><li>The study provided recommendations based on the market situation and international best practice and covering:</li></ul>The role of competition in the market<br />Fixed to mobile substitution<br />The social role of the Internet<br />The benefits and costs of several alternative technological options<br /><ul><li>Our recommendations covered several policy areas, including regulation, social telephony & internet access programs, spectrum management and education</li></ul>Market efficiency gaps with different technologies ‏<br />Note: chart has been altered for confidentiality reasons<br />13<br />
  25. 25. Review of Universal Service Policies in the EU<br />Telecom Italia (Italy), 2008<br /><ul><li>We assisted Telecom Italia in examining potential implications of the EC’s review of Universal Service Obligations (USO) and defining the incumbent’s position in the process. Our investigation focused on:</li></ul>the potential inclusion of broadband and mobile services within the scope of USO<br />how the USO should be funded<br />the relevance of the formal separation of access and service layers<br /><ul><li>Based on extensive research, we examined the implications of technological and market developments in the universal service framework, including the expansion of mobile telephony, the move towards Next Generation Networks, increasing competition levels, and the potentially diminishing importance of public telephony
  26. 26. Disparities among EU countries were also investigated to understand the limitations that such disparities impose on the search for a unified USO regulatory framework at European level</li></ul>Conditions justifying public intervention for provision of telecoms services<br />14<br />
  27. 27. Retail-Minus methodology based on a DCF model<br />EETT (Greece), 2007<br /><ul><li>We assisted the EETT, the Greek NRA, in the establishment of wholesale broadband access tariffs on retail-minus basis
  28. 28. We first examined which framework best corresponds to the market and operator conditions in the relevant country, considering previous international experiences and country-specific market data. A methodology was devised for the calculation of the retail-minus factor, as well as rules for the assessment of retail offers and the review of wholesale tariffs
  29. 29. We then supported our client in carrying out a public consultation to ensure an adequate reflection of the different operator views and market realities.
  30. 30. A Discount Cash Flow model was developed in order to replicate the revenues and costs of a generic alternative operator. The results of the model were used to establish new wholesale tariffs.</li></ul>Retail-Minus calculation model <br />15<br />
  31. 31. Due Diligence Process for a Mobile Operator <br />Inter-American Development Bank (Colombia), 2007<br /><ul><li>On behalf of the Inter-American Development Bank, a major US lending bank, we reviewed the business plan of a leading mobile operator in Latin America
  32. 32. The transaction was a refinancing syndicated facility of US$600 million co-financed by several commercial banks from LATAM, US and Europe
  33. 33. We provided a market and technical due diligence report, including revenue, capex and opex analyses, as well as payback analysis and sensitivity analysis
  34. 34. Our work included on-site visits to perform management interviews, on the ground market analysis as well as network and operational facilities’ monitoring.
  35. 35. Based on the main findings from our review we build a revised case with a different set of hypotheses and parameters</li></ul>Illustrativeexample of theanalysiscarriedoutduringtheDueDiligenceprocess<br />16<br />
  36. 36. Assessment of MVNO Business Models<br /><ul><li>We supported a European mobile operator in the development of its MVNO strategy
  37. 37. As part of our work, we developed a Tool for determining the economics of different MVNO business models to be potentially hosted in its mobile network
  38. 38. The modelling tasks were preceded by the definition of the business models, in terms of:</li></ul>MVNO type (e.g. light)<br />Business proposition (e.g. discount)<br />Target market segment (e.g. youth)<br /><ul><li>For each business model, the Tool provided financial accounts (P&L, CF statement) and KPIs (subscribers, ARPU, MoU, etc…) over a 5-year period
  39. 39. The Tool was instrumental in assessing the viability of MVNO models in the current market situation, under different scenarios of market penetration and cost structure (including the wholesale cost for airtime)</li></ul>Mobile operator (EEC) 2010 <br />Schematic Overview of the MVNO Tool<br />17<br />
  40. 40. Business Case for an Interactive Content Provider<br />Content Provider (Western Europe), 2009<br /><ul><li>We assisted an international betting company developing the Business Case for a “real” live interactive football betting application
  41. 41. We first assessed and provided inputs on the business model selected for the new application including:</li></ul>service provision and access means <br />potential clients/partners<br />price and revenue sharing mechanisms<br /><ul><li>We then identified and analysed the national markets showing the greater potential for the application based on the degree of penetration of broadband services, the average spend in sports betting, and the features of multiservice platforms
  42. 42. Finally, we developed a Business Case based on the business model and target markets previously defined. The Business Case produced a full range of economics based on different scenarios of addressable market, service penetration, events covered, average usage and spent, as well as net revenue (fees) for the betting company</li></ul>Overview of the key economics of the Business Case – Base Scenario<br />Note: figures have been altered for confidentiality reasons<br />18<br />
  43. 43. Bottom-Up model for determining the cost of postal services <br />OCECPR (Cyprus), 2010<br /><ul><li>On behalf of the OCECPR, the Cypriot NRA, we developed a Bottom Up Costing (BUC) model for determining the cost of Postal Services provided by Cyprus Post (CP)
  44. 44. The model covered all services and activities carried out by CP in the postal value chain: collection, sorting (inward and outward), transport and delivery
  45. 45. The model takes into account cost efficiencies achieved in certain processes, variations in costs due to different service parameters (e.g. items’ weight) and geographical specifics
  46. 46. The model provides the following outputs:</li></ul>Unitary cost by service (e.g. bulk mail)<br />Cost by activity (e.g. delivery)<br />Cost by category (e.g. personnel)<br />Cost by resource employed<br /><ul><li>The results of the model were instrumental in the assessment of the pricing policy of CP, including the compliance with regulatory obligations and competition principles</li></ul>Calculation flow of the BUC model<br />19<br />
  47. 47. Contents<br />1. About SVP Advisors<br />2. Our experience – selected case studies<br />3. Contact details<br />20<br />
  48. 48. Contact details<br />Contact Persons<br />Mr. Julio Villalobos – Partner<br />Julio.Villalobos@svpadvisors.com<br />Mr. Dimitri Kallinis – Partner<br />Dimitri.Kallinis@svpadvisors.com<br />C/ Almagro 15, 5th floor<br />28010, Madrid<br />Spain<br />Telephone number: <br />+34 91 310 2895<br />Fax number: <br />+34 91 141 28 11<br />Company Details<br />
  49. 49. THANK YOU<br />

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