Startup Disruption in Telco

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A look at the disruption in the Telecommunications industry by multiple startups. Covering the conditions that created the opportunity for new entrants, their common traits, and the take aways for entrepreneurs.

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Startup Disruption in Telco

  1. 1. STARTUP DISRUPTION IN TELCO JAMES PARTON, DIRECTOR OF TWILIO EUROPE @JAMESPARTON !
  2. 2. WHAT SPRINGS TO MIND WHEN YOU THINK OF YOUR MOBILE PROVIDER? IBEGYOURPARTON.COM @JAMESPARTON
  3. 3. A LITTLE ABOUT ME
  4. 4. INTERSECTION OF TELCO AND STARTUP ! IBEGYOURPARTON.COM @JAMESPARTON
  5. 5. SO WHAT’S THE PROBLEM?
  6. 6. TELCO REVENUE DECLINING FOR FIRST TIME UK 4G spectrum auction generated £2.3bn! 2000 UK 3G action made £22.5bn IBEGYOURPARTON.COM @JAMESPARTON Source: ETNO
  7. 7. THE TELCO BUSINESS MODEL IS BROKEN “ Voice is God’s gift to humanity. It’s what differentiates us from the animals. And we position voice at zero — you don’t have to pay for voice. Voice is dead. ” Hakam Kanafani! Group CEO of Turk Telekom! Mobile World Congress 2013 IBEGYOURPARTON.COM @JAMESPARTON
  8. 8. ..BUT TELCO’S REMAIN CASH GENERATION MACHINES 2012 Revenue (USD Billions) $130 $98 $65 126.4 84.1 81.8 76.4 $33 $0 60.9 AT&T China Mobile Telefonica Deutsche Telekom 59.3 Vodafone FT Source: Company websites IBEGYOURPARTON.COM @JAMESPARTON
  9. 9. CROSS INDUSTRY COMPARISON $180 2012 Revenue (USD Billions) $135 $90 173.9 156.6 126.4 107 $45 79.1 67.4 58.3 48 24.1 $0 Samsung Apple AT&T IBM Sony Unilever Luxembourg Coca Cola Nike 11.6 Heinz Source: Company websites, Wikipedia, Business Week, BBC IBEGYOURPARTON.COM @JAMESPARTON
  10. 10. OIL, FOOD, TRANSPORT, COMMUNICATION 2012 Revenue (USD Billions) $500 $375 $250 482 443.9 $125 226 126.4 $0 Exxon Mobil Wallmart Toyota AT&T Source: Company websites, Wikipedia, Business Week, BBC IBEGYOURPARTON.COM @JAMESPARTON
  11. 11. SO WHAT ABOUT THE DISRUPTORS...? 2012 Revenue (USD Billions) $130 $98 $65 126.4 84.1 81.8 76.4 $33 $0 60.9 AT&T China Mobile Telefonica Deutsche Telekom 59.3 Vodafone FT Source: Company websites IBEGYOURPARTON.COM @JAMESPARTON
  12. 12. SO WHAT ABOUT THE DISRUPTORS.... 2012 Revenue (USD Billions) $140 $105 $70 126.4 84.1 81.8 $35 $0 76.4 60.9 59.3 50.1 5 AT&T Telefonica Vodafone Google 0.7 0.3 Skype Source: Company websites, insideris.com IBEGYOURPARTON.COM @JAMESPARTON
  13. 13. SO WHAT ABOUT THE DISRUPTORS.... 2012 Revenue (USD Billions) $130 OTT 2016 $98 OTT 2013 $65 126.4 106 84.1 $33 $0 81.8 76.4 71 60.9 AT&T OTT 2016 China Mobile Telefonica Deutsche Telekom OTT 2013 59.3 Vodafone FT Source: Ovum, Company websites, insideris.com IBEGYOURPARTON.COM @JAMESPARTON
  14. 14. THE DECLINE IS PREDICTED TO CONTINUE Source: Telco 2.0 IBEGYOURPARTON.COM @JAMESPARTON
  15. 15. NEW KIDS ON THE BLOCK
  16. 16. THE RISE OF MESSAGING APPS 2005 280m active 2010 465m active 2011 236m active Over 50 social messaging apps on Google Play have more than 1 million downloads Source: Crunchbase, Wikipedia, mobilesquared , Ben Evans IBEGYOURPARTON.COM @JAMESPARTON
  17. 17. NEW KIDS ON TH
  18. 18. CASE STUDY: mobile picture messaging user experience done right... Source: ReadWriteWeb IBEGYOURPARTON.COM @JAMESPARTON
  19. 19. CASE STUDY: PHOTO MESSAGING Source: OnDevice IBEGYOURPARTON.COM @JAMESPARTON
  20. 20. CASE STUDY: RISE OF Source: TeleGeography IBEGYOURPARTON.COM @JAMESPARTON
  21. 21. SPEED AND AGILITY
  22. 22. RADICAL INNOVATION IN COMMUNICATIONS ~4,800 years ~3,000 BC IBEGYOURPARTON.COM @JAMESPARTON 38 years 1838 108 years 1876 1984
  23. 23. SOFTWARE TIMESCALES 3G Launch 3 years 2003 2006 IBEGYOURPARTON.COM @JAMESPARTON 1 year 2007 1 year 1 year 2008 2009
  24. 24. DNA
  25. 25. SOFTWARE IS EATING TELCO • Marc Andreessen was right about software eating the world, especially when it comes to Telecommunications... - The innovation void is being filled by software people, not Telco’s - Software people think web first. This style of thinking is inherently open - Software people think collaboratively APIs, collaborative working, open source - Software people think about building communities & ecosystems Why software is eating the world: http://parton.ly/17u5g5z Andreessen photo: http://www.flickr.com/photos/36521958135@N01/2443764501 IBEGYOURPARTON.COM @JAMESPARTON
  26. 26. Innovation WWW INTERNET Switching Copper
  27. 27. TELECOM Switching Copper
  28. 28. CONTROL = #FAIL
  29. 29. YE OLDE MOBILE INTERNET IBEGYOURPARTON.COM @JAMESPARTON
  30. 30. CASE STUDY: INTERNATIONAL CALLING Avg. cost of a 3 minute transatlantic call: ! 1927: $75 (today’s equivalent $1,000) 1964: $12 (today’s equivalent $90) 2010: $0.21 ! Volume of transatlantic call minutes: ! 1964: 20 million 2010: 114 billion ! ! Source: TeleGeography IBEGYOURPARTON.COM @JAMESPARTON
  31. 31. CHANGING USER BEHAVIOUR ! Weekly mobile activity by 12-15s in UK with a smartphone, 2013! 400 300 311 200 192 100 0 27 Phone Calls SMS App Messages Per Week Source: Ofcom IBEGYOURPARTON.COM @JAMESPARTON
  32. 32. NO BUSINESS HAS A DIVINE RIGHT TO SURVIVE “The fact is time is racing on: the economy is declining, technology is moving ahead and so are other parts of the world. The telecoms sector hasn’t had its ‘Lehman’ moment yet. But with declining revenues, rising debt and dated business models, I worry about that happening,” IBEGYOURPARTON.COM @JAMESPARTON European Commission Vice President ! Neelie Kroes
  33. 33. SO WHAT CAN WE LEARN?
  34. 34. TAKE AWAYS • Search for complacent industries with high margins and poor user experiences! • Don’t just talk to your customers, implement what they tell you! • Watch trends in your direct and indirect markets! • Ensure your business model is multi faceted! • Think about your DNA - create and integrate into ecosystems, become de facto.! • Have a Plan B, anticipate change IBEGYOURPARTON.COM @JAMESPARTON
  35. 35. PAYOFF IS HUGE 2005 & 2011 2008 $2.6bn & $8.5bn $105m eBay & Microsoft BT 2009 2012 $207m $1.1bn O2 Facebook 2014 2014 $900m $19bn Rakuten Facebook IBEGYOURPARTON.COM @JAMESPARTON
  36. 36. CASE STUDY: M&A • Think about what we have covered today! • Despite being the clear number 1, Zuckerberg is not making the same mistakes! • Facebook is under performing in Youth segments, Emerging Markets, and Mobile! • Decision making at software speed, whilst resisting the temptation to build in house! • He wants the next Facebook to be Facebook IBEGYOURPARTON.COM @JAMESPARTON
  37. 37. FURTHER READING Alan Quayle! http://www.alanquayle.com/blog ! Tomi Ahonen! http://communities-dominate.blogs.com/brands/ ! Disruptive Wireless! http://disruptivewireless.blogspot.co.uk/ ! Martin Geddes! http://www.martingeddes.com/ ! Benedict Evans! http://ben-evans.com ! Telco 2.0! http://www.telco2.net/blog/ IBEGYOURPARTON.COM @JAMESPARTON
  38. 38. THANK YOU. @JAMESPARTON IBEGYOURPARTON.COM SCOOP.IT/T/SOFTWAREANDTELCO This work is licensed under the Creative Commons Attribution-ShareAlike 3.0 Unported License.

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