This document discusses opportunities for telecom operators in the digital content ecosystem and strategies they can employ. It notes that while over-the-top players pose some risks like disintermediation, they also increase data usage and ARPU. The document recommends telecom operators position themselves as content enablers rather than competitors by strengthening their core business through increased ARPU and reduced churn from digital content. Specific opportunities in the Middle East market include leveraging billing relationships and providing better access to local content.

1. OTT: A Threat to Telecom Operators?Presentation to SAMENA, April 2010

2. 2How much of a threat are global OTT players to telecom operators?

3. Why should telecom operators get into the digital content game?

4. Which roles should operators play in the digital content ecosystem?

5. What are the specific opportunities inherent to the Middle East market?

6. Which model is best for digital content, in-house or outsourced?3Consumers in the region are well-served by international and regional web-based video providersRegional playersInternational playersSource: thenextweb.com

7. 4Consumer behavior in mobile is changing with the proliferation of smartphones and applications usageAverage time spent on various mobile functionsGlobal unit shipments of desktop PCs, notebook PCs, vs. Smartphones & tablets (2005-2013E)NEW ACTIVITYMail appAll OtherMaps

8. Game

9. Social Networking

10. Utilities

11. OtherTelephonyPhone

12. Skype

13. MessagesWeb / Web appsSource: Morgan Stanley research Source: AppsFire

14. 5Key Regional Internet facts13% of MENA search queries are from mobile devices

15. 50% of all mobile traffic is from Symbian devicesMobile InternetVideoArabic users love Videos:“KSA is in the top 3 mobile playbacks worldwide” (YouTube) LanguageQueries in Arabic represent:

16. 54% of MENA queries

17. 70%of Egypt queries

18. 80%of Saudi queriesSource: Google

19. 6The advent of these global OTT players is not necessarily bad news for telecom operatorsIncrease in data trafficHigher ARPUiPhone userUS1.63ARPU of the average customerWestern Europe2.45Source: Booz & Company

20. 7However, dis-intermediation does present risksRisksDis-intermediation of telcosUser Interface controlNo control of the user interface: telcos do not capture the full value from the new businessDigital content value chainContent1Billing, Care & AnalyticsNetwork(content distribution)User Inter-face Content Mkg& Sales Service Design &DeliveryChurnTelcosTelecom operator’s / pay TV provider’s core expertise areasUp to 25% of Smartphone users are at risk of churn if they could not access specific content & apps via their operator(AnalysysMason, Jan’11)Content playersTraditional media owners Digital media solution providersCannibalizationNew services tend to cannibalize telcos’ core business: e.g. voice revenues (Skype & Nimbuzz apps)Telecom operators and pay-TV players lose the relationship with end-users and become “dumb pipes” in the digital content value chain, at the benefit of other providers(1) Creation, production, adaptation, acquisition, management

21. 8Telcos should get into digital content, but this is not where the money is for themMobile revenues in selected regions & countries, by type (2009)Projected market size$7bnApps sales (2013E)$40B$75B$82B$21B$162B$37B$18BContent1%2%4%5%5%6%10%12%8%13%9%10% P2P messaging18%9%$1.6tr10%Telecom industry revenues (2013E)8%11%7%Other Data40%37%23%VoiceA drop in the bucket0.4%Apps sales represent only of overall projected telecom revenues in 2013Middle EastIndiaUSAKoreaChinaJapanAfricaSource: Informa Global Content Forecasts 2008-2013, and Mobile Operator Revenues Update 2010 Q2. Source: Booz & Company

22. 9The real economic value of digital media for telcos is to strengthen their core business through…Increasing ARPUReducing churnAcquiring new customers

23. 10In the Middle East, global competition is weakenedby specific factors…The regional opportunity is very small compared to other regionsGlobal players do not have access to local / Arabic contentEntertainment & media market by region (US$ billion)They might be restricted from operating in the region (licensing & regulatory constraints)Source: PWC

24. 11Better access to local content… and telcos have an opportunity to leverage unique differentiating leversBilling relationshipTelecom operators’ differentiating leversParticularly relevant in the Middle East

25. Positioning in the digital content value chain—Operators have a choice to make12Network-focusedContent enablersContent playersCompete on price, coverage, flexibility

26. Wholesale capacity provider to MVNOs & SMART players

27. Drive traffic

28. Network open to all content providers

29. No direct investment in developing content

30. Management of device & content experience

31. Heavy investments required

32. Strong brand required

33. Compete on being trusted partner for 3rd party content partners

34. Open network to 3rd parties

35. Leverage assets to enhance 3rd party content & services

36. End-to-end customer experience ownership

37. Branded devices, content, services

38. Mixed revenue models, including advertising

39. Retain control over customer experience only related to core offerings, not for all content

40. Focus on own content only in 1-2 areas13Intigral brings value to each stakeholder in the digital content ecosystemIntigral value proposition to its content ecosystem partnersTelecom operatorsContent owners, application developers, content creatorsEnd-usersMobile storefrontsIPTV/ OTT TV EPGsAdvertisersWeb portalsWide end-user reach End-to end content solutions: aggregation, development, delivery One-stop shop for all digital content – across 3 screensTargeted advertising capabilities Multi-screen reachLocally relevant contentIntigral’s Value PropositionCustomer analytics dataFlexible solutions e.g. Managed ServicesMulti-screen ad deliveryRich & enhanced featuresMonetization opportunities – e.g. advert, billing relationshipMulti-format ad deliveryMulti-screen capabilitiesBroad choice of content

41. 14Intigral’s tight relationship with 250+ content providers is a clear differentiator in the marketContent ProviderNeeds

42. Customer analytics

43. Marketing & Promotion support

44. Access to multiple operators

45. Multi-platform

46. Offer

47. Customized & local contentIntigralOffer

48. Customer analytics

49. Billing

50. Customer Care

51. Marketing & Promotion

52. Needs

53. Targeted and local contentExamples of partnershipsStrong portfolio of Content Provider partnersSupplier account management programHealth content provider DMC developed their own iPhone application

54. 15Nadeek – STC’s Sports portal

55. 16Online, telcos can combine the self-care features of their portal with locally sourced content Local multi-player online game…… Integrated into m3com, STC’s multimedia portalTraffic (1m unique visitors /month)

56. Billing relationship for paid gamesBenefits to Jawaker

57. 17Bringing Cinema at Home to STC’s invision subscribersObjectives: stimulate VOD usage (existing customers), build invision brand awareness and support invision acquisitionRun dates: 17 March 2011 - 11 April 2011Activated free channels: Invision website + M3com website

58. Invision YouTube channel

59. MMS

60. Email shot

61. TV guide

62. On STBActivated Pay media: Print media

63. Radio spots18Newspaper, Radio and MMS Shot

64. 19Digital and video creative produced by Intigral run across STB and web platforms…On box promoInvision.com.saYouTube

65. Thank you© 2010