Shareholder Value for Telcos


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Telco 2.0 MD Chris Barraclough's presentation at the 7th Telco 2.0 Executive Brainstorm

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  • The ability of the 5 domains of a business model to influence two factors will ultimately drive the success or failure of that business model:Value = value within the value network. Value network = collection of actors in an industry. E.g. Mobile telecoms industry = operators + partners/vendorsControl = amount of control an individual company or collection of companies that do same role can exert on value network. E.g. Mobile telecoms operators have very strong control over mobile telephony market
  • Currently operators providecore 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…
  • Lots needs to be done but 3 key things are important:Leadership. Concept has to be embraced at the top of the organisation. New way of making money from new customers using new skills = major shift. Without board level leadership then 2SBM will fail. Encouraging signs = Telco 2.0 exec brainstorm attended by senior commercial players – marketers and strategists from operatorsAction group potential Colao painted very similar vision of future in recent presentationSkills. Mentioned that platform knowledge and information exchange is key to future success. Google = 2-sided master because it can capture and manage data so well. Starting to invade telco space – maps, triangulation, chrome, accounts etc. and most recently opt-in to traffic monitoring service using mobile phone location being offered direct to end user. Operators have lots of assets but others will work around. Value depreciating and operators have to find a way to become very skillful and managing upstream and downstream customer data well (and within privacy laws). 2 options – do anonymously or only use data on transactions that take place within telco (Google model)Collaboration. As mentioned – scale is king. Problem for operators is that none are big enough to dominate on their own as they have network boundaries (defined by regulation and economics). Upstream customers want to reach ALL telco customers not just those on a single network in a single retion. Therefore if they are to develop a large-scale platform for upstream providers, operators are going to have to work together and with partners to overcome this fragmentation. Aggregation services will be key. This could happen via a 3rd-party aggregator like Mblox and Ericsson IPX in premium SMS or it could be via operators collaborating directly as with Zoompass (a JV in Canada between Rogers, Bell Canada and Telus) to provide digital wallet.
  • Shareholder Value for Telcos

    1. 1. Rebuilding value & control via a 2-sided business model<br />Chris Barraclough, MD, STL Partners/Telco 2.0<br />
    2. 2. Agenda<br />What is a business model?<br />Problems with Telco 1.0 business model<br />New opportunity: Telco 2.0<br />
    3. 3. A business model is the COMMERCIAL architecture of a business: how it makes (or loses) money<br />A 5-domain model<br />The marketplace<br />Service Offering<br />Value Network<br />Technology<br />Finance<br />Source: Faber et al; Designing business models for mobile ICT services, 2001; adapted and developed by STL Partners<br />Note: Each domain breaks down into several inter-related components that make up the overall business model. <br />
    4. 4. The success of a company’s (or collection of companies’) business model is ultimately a function of two factors<br />Value<br />Control<br />+<br />
    5. 5. Control Drivers<br />Value Drivers<br />Control & Value Drivers<br />Value Network<br />Technology<br />Service Offering<br />Finance<br />The Marketplace<br /><ul><li>Low/no growth in end user revenues
    6. 6. More companies sharing revenues and generating costs
    7. 7. More substitute products
    8. 8. Unable to match free</li></ul>Telco 1.0 business model is now under pressure in several domains<br /><ul><li>More modular technology
    9. 9. Decentralised network intelligence
    10. 10. More punitive regulation
    11. 11. Less vertical integration
    12. 12. Weaker customer relationships</li></ul>Source: Ballon 2007; STL Partners analysis<br />
    13. 13. Sexy new services paid for by end user will NOT yield continued revenue and profit growth<br />Short term revenue growth only +<br />Medium term capacity & cost issues =<br />Falling margins, lower profits… <br />
    14. 14. Pre-2005<br /><ul><li>Retailer of books and games</li></ul>Now<br /><ul><li>Retailer + platform (Amazon Marketplace)</li></ul>Amazon – retailer-cum-platform provider<br />
    15. 15. Pre-2005<br /><ul><li>Retailer of books and games
    16. 16. 52,000 SKUs</li></ul>Now<br /><ul><li>Retailer + platform (Amazon Marketplace)
    17. 17. 100,000s of SKUs</li></ul>Amazon – retailer-cum-platform provider<br />
    18. 18. Pre-2005<br /><ul><li>Retailer of books and games
    19. 19. 52,000 SKUs
    20. 20. Revenue from end user sales</li></ul>Now<br /><ul><li>Retailer + platform (Amazon Marketplace)
    21. 21. 100,000s of SKUs
    22. 22. New revenuefrom enabling services to traders</li></ul>Amazon – retailer-cum-platform provider<br />
    23. 23. Pre-2005<br /><ul><li>Retailer of books and games
    24. 24. 52,000 SKUs
    25. 25. Revenue from end user sales
    26. 26. Profitable but margin squeeze</li></ul>Now<br /><ul><li>Retailer + platform (Amazon Marketplace)
    27. 27. 100,000s of SKUs
    28. 28. New revenue from enabling services to traders
    29. 29. Profit underpinned by platform</li></ul>Amazon – retailer-cum-platform provider<br />
    30. 30. Pre-2005<br /><ul><li>Retailer of books and games
    31. 31. 52,000 SKUs
    32. 32. Revenue from end user sales
    33. 33. Profitable
    34. 34. Best-in-class logistics</li></ul>Now<br /><ul><li>Retailer + platform (Amazon Marketplace)
    35. 35. 100,000s of SKUs
    36. 36. New revenue from enabling services to traders
    37. 37. Profit underpinned by platform
    38. 38. Improved, lower cost logistics (more scale)</li></ul>Amazon – retailer-cum-platform provider<br />
    39. 39. Pre-2005<br /><ul><li>Retailer of books and games
    40. 40. 52,000 SKUs
    41. 41. Revenue from end user sales
    42. 42. Profitable
    43. 43. Best-in-class logistics
    44. 44. Big consumer base,strong relationships:
    45. 45. E.g. peer reviews</li></ul>Now<br /><ul><li>Retailer + platform (Amazon Marketplace)
    46. 46. 100,000s of SKUs
    47. 47. New revenue from enabling services to traders
    48. 48. Profit underpinned by platform
    49. 49. Improved, lower cost logistics (more scale)
    50. 50. More customers, stronger relationships:
    51. 51. E.g. Premium logistics – Amazon Prime </li></ul>Amazon – retailer-cum-platform provider<br />
    52. 52. A new telecoms business model<br />$<br />$<br />Source: STL Partners Analysis<br />
    53. 53. A successful Telco 2.0 business model restores elements of value and control to the Telco industry<br />Control Drivers<br />Value Drivers<br />Control & Value Drivers<br />Value Network<br />Technology<br />Service Offering<br />Finance<br />The Marketplace<br />Single platform for multiple industries<br />Operator remains gateway to end users<br /><ul><li>New revenue source from upstream customers
    54. 54. Services more complementary
    55. 55. End-users add value to platform
    56. 56. More customer intimacy
    57. 57. Centralised intelligence – resides in platform
    58. 58. Unclear – potentially a move into less regulated markets</li></ul>?<br />Source: Ballon 2007; STL Partners analysis<br />
    59. 59. Three things required to bring Telco 2.0 to fruition<br />Bad debt<br />Demographics<br />Leadership<br />MY CREDIT<br />MY PERSONAL DATA<br />MY RELATIONSHIPS<br />Address<br />Gender<br />Average balance<br />Skills<br />Name<br />Profile<br />MY INTERACTIONS<br />MY DEVICES<br />Preferences<br />Location<br />Presence<br />SIM<br />SoftSIM<br />Number<br />SIP Number<br />Pictures<br />Videos<br />Bank<br />School<br />Browsing History<br />Collaboration<br />MY CONTENT<br />MY IDENTIFIERS<br />MY CONTEXT<br />QR Codes<br />IP Address<br />Serial Number<br />Device details<br />Calendar<br />Friends<br />On/Off<br />Source: STL Partners analysis<br />.mobi domains<br />Address Book<br />Workplace<br />Roaming<br />
    60. 60. $375 billion opportunity (not guaranteed!)<br />EU-27 and North American Telecoms<br />$1,230bn<br />$689bn<br />Source: STL Partners, Telecoms Two-Sided Business Model Opportunity and Future Broadband Business Models, both published in 2008<br />
    61. 61. Thank You<br />More at<br />