Presentation at Light Reading's 2020 Vision Executive Summit in 2016 about digital transformation in the telecom industry.

1. P R E S E N T E D B Y :
Digital Transformation
James Crawshaw
Senior Analyst
Heavy Reading
Nov 2017

2. A Transformational Journey – Marmota Monax
Packet switching
Virtualization Intelligent network
Digitalization

3. Digital Transformation - across multiple industries
Company Industry 3Q17 results transcript quote
Barrick Gold Mining
As our mines continue to evolve and our ore types change and license to operate costs increase, our focus on
innovation and digital transformation is critical to maintaining this long-term and sustainable vision.
Electronic Arts Leisure
This quarter demonstrates how [our sports titles] can also drive the digital transformation within our
business, both with regards to downloads and to highly enjoyable event-driven live services.
Hugo Boss Apparel
Enhancing our digital presence is a key priority. Beyond the optimization of hugoboss.com, digital
transformation also includes a further rollout of omnichannel services, which is in full swing as well as
utilizing digital capabilities for key operational processes.
ING Group Financial services
The benefit from the digital transformation programs will be back end loaded and we stay committed though
to our ambition to have the cost/income ratio to be between 50% to 52% by 2020.
Kraft-Heinz Food manufacturing
[The President of our Global Online and Digital Growth Initiatives] is responsible for leading all Kraft Heinz e-
commerce platforms, accelerating digital transformation, and driving new online business.
Revlon Beauty
Even though we're at the beginning of the digital transformation we're already starting to see the growth rate
accelerate in the business.
Sun Life Financial Life insurance
Savings will be reinvested into new jobs and capabilities that support the client experience, including new
service models, process automation and our ongoing digital transformation
Tele2 Telecom
Thinking about digital transformation … our customers are increasingly demanding for us to be present in all
channels and for digital to be simple and easy channel to interact with, but for all the channels to be able to
talk to each other. So, first and foremost, we are focusing on the customer experience and then obviously our
Challenger program and all of the work we’ve done on backend operational efficiency embracing new digital
tools to improve operational efficiency.
Turkcell Telecom
This quarter, we marked another milestone in our digital transformation by launching the Lifecell brand and
accompanying plans in Turkey. With Lifecell plans, all communications, including calls, will be conveyed over
mobile data and through our digital services.
Source: Seeking Alpha
Online sales
Omnichannel
Cost saving
Online sales
Omnichannel
Operational efficiency
Mobile app
Online sales

4. Audience question poll
Do you think the telecom industry is ahead or
behind most other industries in its digitalization?
•Ahead
•In-line
•Behind

5. CSPs actually ahead in Digital Transformation
Source: Keeping Score - Why Digital Transformation Matters, Coleman Parkes

6. What is driving the need for digital transformation?
• Gluttony – the insatiable demand for bandwidth
• Pride - the commoditization of telephony and Internet access
• Sloth - the stagnation (or decline) of telecom operator revenue
Which leads to:
• Anger – with regulators for hamstringing telcos
• Greed – cost cutting to bolster near term profits at the expense of
long term
• Envy - the remarkable success of FB, GOOGL and AMZN
• Lust – value destroying acquisitions of media/content businesses

7. The Impact of OTT on Telecom ARPU
WhatsApp, Viber, and Apple’s
iMessage represent >80% of all
messaging traffic
Skype accounts for >33% of all
international voice traffic
minutes

8. Audience question poll
At what rate (CAGR) do you think global telecom
industry (wireline and wireless) revenue grew from
2010 to 2015?
• -3.0%
• -1.5%
• +0.0%
• +1.5%
• +3.0%

9. -
200
400
600
800
1,000
1,200
1,400
1,600
Semiconductors Network Equipment Wireline & Wireless
Operators
Content Distribution
(cable & satellite)
Content Creators /
Aggregators
Device Manufacturers
Revenue($bn)
2010
2015
CSPs take lion’s share of industry revenue
Source: World Economic Forum/Accenture analysis based on data from S&P Capital IQ
2015 2017E
GOOGL $75bn $111bn
FB $18bn $41bn
NFLX $7bn $12bn
Sum $100bn $164bn

10. But telco margins have declined
Source: World Economic Forum/Accenture analysis based on data from S&P Capital IQ
0%
5%
10%
15%
20%
25%
30%
35%
40%
Semiconductors Network Equipment Wireline & Wireless
Operators
Content Distribution
(cable & satellite)
Content Creators /
Aggregators
Device Manufacturers
EBITDAmargin
2010
2015

11. Margin decline may reflect traffic growth
China Unicom’s public
Internet traffic growth
accelerated in 2015 and
2016.
Mobile Internet traffic
in China grew 140% in
1H17
Source: China Unicom

12. Traffic growth but no ARPU uplift
Source: 3Austria
4G

13. EBITDA share of the industry has fallen
Source: World Economic Forum/Accenture analysis based on data from S&P Capital IQ
0%
10%
20%
30%
40%
50%
60%
Semiconductors Network Equipment Wireline & Wireless
Operators
Content Distribution
(cable & satellite)
Content Creators /
Aggregators
Device Manufacturers
EBITDAshare
2010
2015

14. However, CSPs still take majority of industry EBITDA
Source: World Economic Forum/Accenture analysis based on data from S&P Capital IQ
-
50
100
150
200
250
300
350
400
450
500
Semiconductors Network Equipment Wireline & Wireless
Operators
Content Distribution
(cable & satellite)
Content Creators /
Aggregators
Device Manufacturers
EBITDA($bn)
2010
2015

15. Key aspects of telco transformation
1. Improved customer experience
2. Agility of operations
3. Enabling internal innovation
4. The platform play - turning operators into service aggregators

16. 1. Improved customer experience
Customer
experience is
management of
all touch-points
along end-to-end
customer
journey across all
environments to
ensure positive
brand
association.
Source: TMForum

17. Consumer digital experiences across industries
Australia India Indonesia Japan Malaysia
New
Zealand Philippines Singapore
South
Korea Thailand
Average
High tech 1 1 1
Automotive 1 1 2 1
Banking 3 2 1 5 2 1 1 3 4 2 2
Retail (grocery) 2 3 3
Media &
Entertainment 1 5 3 3
Insurance 4 3 2 3
Retail (consumer) 5 4 3 3 1 6 2 1 5 3 3
Utilities 7 5 2 7 3 4 4 2 3 1 4
Telco 6 7 4 4 4 7 5 4 7 4 5
Government 6 6 8 6 7
Source: SAP APAC Digital Experiences report, 2016
Digital Experience Index

18. What can telcos do to improve their digital X?
•Omnichannel
•Self-care apps
•Chat bots
•Analytics
App name
Utility
rank
Productivity
rank
Ratings
Star
rating
My Verizon 5 1,199,107 4.5
myAT&T 6 312,721 4.0
T-Mobile 12 54,326 4.5
AT&T Mobile Transfer 15 3,737 4.5
My Sprint Mobile 16 2,835 2.0
Verizon Content Transfer 17 2,592 5.0
Verizon Cloud 25 8,079 4.5
AT&T Call Protect 33 46,499 4.5
My TWC 43 4,285 3.5
XFINITY xFi (Comcast) 43 468 3.0
XFINITY WiFi 54 4,048 3.5
My Fios (Verizon) 74 118,784 4.5
T-Mobile Content Transfer 80 11 3.5
myCricket 84 617 2.5
MyDISH 77 125 3.0
XFINITY Connect 87 56,511 3.0
XFINITY Mobile 100 60 3.0
Source: AppAnnie - US telecom apps on Apple app store (11/2017)

19. Digital CX – French Telecom Case Study part 1

20. Digital CX – French Telecom Case Study part 2

21. Digital CX – French Telecom Case Study part 3

22. Digital CX – French Telecom Case Study part 4

23. 2. Agility of operations
• System segmentation to enable multi-speed IT
• Systems of engagement (customer facing)
• Systems of record (transactions)
• Systems of insight (analytics)
• Moving applications to the cloud for scalability

24. 3. Enabling internal innovation
• Embrace the agile approach
to IT development
• Adopt DevOps
• Open apps with APIs
• Make IT systems modular and
composable
• Adopt a fail fast mentality
• Invest in employee training
Source: Swisscom

25. 4. Platform play
• The platform business model has become the strategic goal of
modern business
• “The platform’s overarching purpose is to consummate matches
among users and facilitate the exchange of goods, services or social
currency, thereby enabling value creation for all participants.”
Platform Revolution, Geoffrey Parker et al
• Telecom operators’ attempts to build a platform business have met
with mixed success.
• Some operators have expanded into adjacent markets such as pay TV
or financial services.

26. The IoT Platform Opportunity
Source: Heavy Reading graphic, Ericsson estimates

27. Digitalization case study – Vodafone
• Digital customer management – addressable cost base = EUR5bn
• Data analytics to provide predictive, proactive and personalised offers optimising the efficiency of marketing spend,
enhancing ARPU and improving direct channel mix. Just 15% of customer value maximisation campaigns today based
on data analytics. Digital just 10% of channel mix today, target >40%.
• MyVodafone app (58% penetration in Europe) and digital marketing channels will over time become main customer
acquisition and management platform.
• Meet customer requests through automated, digital support – for example, by using chatbots and digital agents that
utilise artificial intelligence.
• Digital technology management – efficiency gains
• New ‘middleware’ on top of legacy IT systems, ‘Digital eXperience Layer’ accelerates the deployment of new digital
capabilities, de-coupling them from the longer and financially costly upgrade cycles of legacy billing
• Real-time data analytics enables smarter network planning and deployment, as well as more precise ROI-based
investment decisions.
• With ongoing effort to migrate 65% of IT apps to cloud, Vodafone aims for significant capex & opex savings.
• Digital operations – addressable cost base = EUR3bn
• Simplification and automation of standard processes, in both operational and support areas.
• Includes IT and network operations, customer management back office functions and all other admin.

28. Digitalization case study – Telefonica Spain
• Transformation began in 2012 to create a leaner and more competitive company
• Commercial benefits
• Share of online sales has increased from 2% to 24%
• Physical points of sale has reduced by 63%
• Commercial costs down 67%, presumably due to elimination of handset subsidies
• Network & operations
• Access faults reduced 41%
• 82% of incidents now resolved remotely
• Calls to call center for access issues reduced by 50%
• IT & systems
• Number of systems reduced by 19%, servers reduced 47%, data centers reduced 57%,
platforms reduced 28%
• Systems opex+capex has reduced by 37%
• Organization – workforce “simplification” has led to a 9% increase in productivity
to EUR128k per annum OpCF/employee

29. Question poll
Which is the most important factor constraining digital
transformation in the telecom industry?
1. Strict regulatory framework
2. Multitude of technology stacks (2G/3G, ATM/IP) and
IT systems built up after years of consolidation
across the sector
3. Resistance to change (not telco specific)

30. Digital transformation summary
Aspect Legacy Digital Outcome
Strategy
Network technology focused
(ADSL, VDSL, 3G, 4G)
Customer focused (seamless
connectivity, personalized
offers)
Increased NPS
Marketing
Lock the customer in to 2 year
contracts with deceptively low
introductory offers
Retain the customer by being
easy to deal with, responsive to
requests and proactive with
suggestions
Lower subscriber
acquisition costs
Services
Walled garden – own the
customer
Open, API-based ecosystem –
own the platform
Increased customer
stickiness
People “Us versus them” mentality DevOps Better solutions, quicker
Processes Waterfall development Agile, iterative development
Lower cost of
development and
operations
Quality Five-9s reliability Beta test and fail fast
Increased pace of service
innovation

31. Q&A
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