Telecom companies are facing declining revenues due to competition from online players and must adapt to retain a share of data revenues. Key strategies for survival include improving broadband services, empowering users, leveraging advertising potential, and adopting innovative content models. To avoid becoming ‘dumb pipes,’ telcos need to recognize evolving customer needs and organize for a competitive future.

1. Protecting Data Revenues: Positioning Telcos for growthTelecom revenues are declining. Data revenues have been critical for Telcos which have successfully followed a “walled garden” approach. But with Google and Apple, their revenues are fast declining. How should Telcos counter this threat from online players and retain a share of data revenues. Prepared By Charan Puneet Singh

2. Executive SummaryTelecom companies in mature markets are increasingly under pressure, to protect data revenues given the competition from different players in market, the transformation under way in the industry and increased capital and operational spends. In its current avatar, the scope for today’s Telcos in the emerging telemedia value chain is limited to that of a “dumb pipe” , pushing content to the consumer. In order to stay relevant in the market, the telecoms today have four imperatives:1. Defend and grow telecom’s share of the broadband market through network improvements and high-value integrated and interactive multimedia services.2. Focus on enabling the 4A vision (content accessible by anyone at anytime through any device) and empowering users, be they individuals, communities or companies.3. Exploit the advertising potential of the subscriber base - especially mobile.4. Adopt innovative content development and delivery models, and focus on the consumer experience.Also, Telecoms today will have to transform themselves in terms of cost structure, organizational structure and business processes to allow them to take on the emerging competition in the form of internet and media companies.

3. ROADMAP FOR PRESENTATIONUnderstanding the factors at playKey Recommendations

4. Challenging times for Telcos GloballyTelcos must prepare to face potential threats from within & outside the industry. Declining TariffsDisruptive Innovations Declining RevenuesHigh Customer ChurnEvolving Customer Needs Evolving Technology Trends Breakdown of “Walled Gardens”Declining ProfitsMacro economic ChallengesInvestments in Capex Investments in OpexIncreased CostsRegulatory Costs /FeesInterconnect CostsInvestments in Next Generation Technology *Limited scope of root cause

5. What is keeping Telco CEOs awake?Data revenues now constitute 50% of revenues for some leading Telcos; implying how leading Telcos are adapting to changing market trends. 1Global data traffic now exceeds global voice traffic; implying an underlying change in the way customers use telecom services.2Disruptive innovations in Consumer Electronic Devices (Netbooks/ Iphones/Ipads /IPTV / Satellite Navigation) are affecting a transformation of the telecom industry.3Global Mobile revenue growth has stabilized, with ARPUs declining and subscriber penetration reaching saturation in most industrialized markets. 4KPIs like ARPU are becoming redundant; the focus now is on margin (AMPU)5The pricing models are being adapted for a multi-platform & metered consumption 6Telcos are losing relevance with consumers, replaced with next-gen. internet brands.7Globally, the telecom industry is set for M&A; only the big and bold will survive.8

6. The Emerging Telecom EcosystemThe emerging telemedia value chain spawns new business models, undercutting the dominance of telecom service providers who are being forced to innovate to avoid being labeled a “dumb pipe” Sales /AdvertisingContent Packages / ServicesLicense RightsSearch /AdvertisingContent ProductionAggregation and PackagingDistributionPortals and SearchTransport and DeliveryCustomer Device ManagementAdvertising CampaignOnline TrafficBroadband SubscriptionsTraffic AcquisitionAdvertising AggregatorCustomer Data Targeted DealsContent DistributionCustomer Devices SalesCustomer Content ManagementPOTENTIAL REVENUE OPPORTUNITY FOR TELCOS

7. Factors Affecting Growth in Data Factors behind a global rise in data revenues: Development of VAS Eco-system: Telecom Operators have developed an eco-system for consumption of Value-Added Services like Video-On-Demand etc.

8. Growth of Local Content and Search Companies: In most of APAC, VAS demand is dominated by local internet companies and content providers.

9. Growth of Smart Phones: Smartphone prices have crashed and intense competition between major players has resulted in the best deals for consumers.

10. Growth of Netbooks: Demand for mobility and proliferation of cheap computing power has pushed data consumption

11. Growth in mobile-based applications: I-phone segment represents the most profitable of this lot, but analogies can be found globally.

12. Growth in Mobile-based transactions: Specially in economies where banking network is undeveloped or is sparse or inaccessible for other reasons.

13. Products offering Convergence / Triple Play: Operators have products selling packaged Broadband, Voice and IPTV services in the UK market.

14. Innovations in Pricing: Developments in Billing Systems has allowed telecoms to charge consumers on a more granular level to ensure retention.

15. Innovative Business Models: Data based services like TiVo, Netflix and new devices like iTouch, Ipad , Kindle and Dash have pushed data consumption.VAS Eco- SystemsNew DevicesMobile ApplicationsInnovation / Convergence

16. The Demand for Data: Bursting PipesThe size of data opportunity is huge, will be led by proliferation of smart phones and data cards but will require heavy capital investments in 4G by Telcos.Smart phones have increased data consumption by manifolds: Average data usage went up by 50-100 times with devices like Apple Iphones / Android G1.

17. It is Data Cards, USB Dongles and Data Cards that make up the bulk of Data consumption today.

18. Mobile data ttraffic growth will be lead by smart phones and flat price data plans by Telcos and data card traffic.

19. Investments in 4G technologies like LTE / Wimax will influence success.Source Chetan Sharma Consulting

20. ROADMAP FOR PRESENTATIONKey RecommendationsUnderstanding the factors at play

21. The Emerging Opportunity For ChangeTo avoid becoming a “dumb pipe”, the emerging telemedia value chain also opens up a lot of opportunities for Telecoms. The opportunities for telecom operators thus translate into four broad imperatives:Defend and grow telecom’s share of the broadband market through network improvements and high-value integrated and interactive multimedia services.Focus on enabling the 4A vision and empowering users, be they individuals, communities or companies.Exploit the advertising potential of the subscriber base - especially mobile.Adopt innovative content development and delivery models, and focus on the consumer experience.

22. Walled Gardens Cant Alone Save The Telcos The complexities of ever evolving online consumer and technological trends, together with constraints on capital investment make “Walled Garden” a doubtful choice.Where and Why it workedWhere and Why it failedThe Mighty Fall of American Online: AOL refused to understand that consumers want to exercise choice and not be tied down. Failure of Microsoft’s MSN Strategy: MS could not see evolving trends: Desktop was the final destination, till Google changed the game. Success of YouTube: Google's’ free content sharing site succeeded despite Viacom’s attempt to protect its content.Closure of Yahoo’s Search Business: Yahoo could not afford continued investment, given Google’s complete dominance of the search business.Failure of Netflix- Streaming: The product was positioned to control TV viewing experience.Success of I-phone: Apple created a new platform to push data based services, (via numerousapplications sold on iTunes) helping Telcos generate profits . However, Apple allows content developers to build and sell applications for Iphones and thus it is a modified “Walled Garden” strategy.

23. Success of Facebook: Facebook has rich security features, a platform for application developers to generate content. With the new ”like” feature, where users can share content from external sites on Facebook, it has extended the virtual walls to new boundaries. Don’t run with the Mob While some Telecom s throw money on replicating competitors and building new “walled gardens”, few leading companies are creating their own paths to success based on understanding of customer needs . Note: As per a Gartner Study in 2009, 9 out of 10 corporate social media initiatives have failed.

24. Though Iphones is a success for AT&T in the US market, it could not stop the market-leader, Verizon from adding more customers and increasing its ARPU, including data revenues by focusing on business design. When Verizon launches I-phone in 2010, AT&T will have a lot to watch out for. Source Oliver Wyman Consulting

25. Meet Evolving Customer Data NeedsGo back to basics to identify what customers really want, customize service plans and product offerings, rather than force fitting solutions to product offerings.Identify data needs of different customer sets; there is no magic bullet for all.Use customer data to identify customer niches and serve them with right handset capabilities, services and price plans.Identify priority segments and focus to serve them better.Offer customizable data plans to users and ensure long term retention. Ensure that business priority is communicated in outbound communication clearly.