Grabovsky a.t.kearney telco-form_08.06.11

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Grabovsky a.t.kearney telco-form_08.06.11

  1. 1. Future transformation and integration of Telecom and Media Dr. Sören Grabowski Moscow, June 8th, 2011
  2. 2. Agenda Evolution of the consumption patterns and Internet value chain Selected trends 2020: Net Neutrality, Social Communications and Media Redistribution of the revenue streams and new partnership models Russian realities and a word of caution A.T. Kearney 05.20110 2
  3. 3. Industry trends and uncertainties point towards three likelyscenarios of how the communication industry could evolveIndustry Scenario Approach Major industry trends Global communications industry scenarios Device and New neighbors, Stagnant core Data explosion service new threats integration Integration New business Size matters LTE All cloud: Commodity pipe finally happens models Major industry uncertainties Share and role of Customer Regulatory Delivery service user generated preferred Mobile Play: Status quo role paradigm content relationship Full service world: Pipe DreamSource: A.T. Kearney analysis A.T. Kearney 05.20110 3
  4. 4. Industry scenarios range from a high value-added role forMNOs to a fully commoditized, web-payer-dominated worldIndustry scenarios Global communications market scenarios All cloud: Mobile play: Full service world: Commodity pipe Status quo Pipe Dream • Mobile industry evolves along • Mobility as all encompassing • Operators integrate the value same path as fixed – operators service chain, driving convergence provide access with no value • Industry definitions stay stable across content, delivery and add – dumb pipe device • Limited additional convergence; • Operator split between evolution is incremental • Acquire online players and wholesales and fixed media firms • Each player leverages its assets • OTT players capture service for revenue sharing • Disintermeditate OEMs by going revenues direct to ODMs – use subsidies • Handsets commoditize like PCs to control device (OEMs that transform into all- out web-players win, e.g., Apple)Source: A.T. Kearney analysis A.T. Kearney 05.20110 4
  5. 5. Each scenario results in a different value chainconfiguration with a specific set of winners and losersEnd state value chain configuration by scenario Device Service Distribution Service Platform Applications & Network OEM Media provider software online services operator (MVNOs) Online services Fixed operator Mobile operator Devices All cloud Online services Online services Fixed operator Mobile operator Mobile Devices operatorMobile play Online services Online services Fixed operator Fixed operator DevicesFull service Mobile operator world Mobile operatorAll cloud Mobile play Full service world• Software and online services players • No major changes in value chain • Operators consolidate and converge. They succeed in the online services battle thus • More activity for media players starting to control distribution and contact points along capturing major part of profit pools provide online services the value chain• OEMs and operators driven out of new • OEMs still have a significant role, specially • Operators provide online services and income sources integrated OEMs like Apple become a dominant playersSource: A.T. Kearney analysis A.T. Kearney 05.20110 5
  6. 6. Agenda Evolution of the consumption patterns and Internet value chain Selected trends 2020: Net Neutrality, Social Communications and Media Redistribution of the revenue streams and new partnership models Russian realities and a word of caution A.T. Kearney 05.20110 6
  7. 7. Ten trends will shape the telecommunications industry till2020 creating a rich, but horizontal segmented environmentTelco trends 20201 6 Fragmented Infrastructure – Personal Advertising – Network of Networks Internet ads take over the ad world2 7 End of Net Neutrality – Augmented Reality – Natural evolution of QoS in networks Sensor, machines and data ease life3 8 Social Communications – Cloud commodity – Disaggregating largest community IaaS is commodity, SaaS grows4 9 N-Screen Environment – Lean operations – Content anywhere on all devices Simple and reduced to the bone5 10 New TV – Consolidation in distance – The end of any schedule limited synergy effectsSource: A.T. Kearney analysis A.T. Kearney 05.20110 7
  8. 8. 2 Due to massive traffic increase, net neutrality will end – one way or the other as the invest is not sustainableEnd of net neutrality Europe1) Massive Data Increase Massive Add‘l Investments Options for Change Additional Capex Required Fixed Fixed Capex Trendline - PB/month - 14611 - €bn/year - YoY Modification of +35% €9.8 bn retail price schemes 2,7 3,0 add‘l 0,3 1,5 2,4 8409 CAPEX + 5,2 5,2 5,2 5,2 5,2 5,2 €116bn Traffic-dependent 3236 4,4 for FTTx charges for all traffic (50% HH) YoY Enhanced quality services Mobile Mobile - PB/month - +107% 1217 - €bn/year - 5 €21 bn over the public internet 6 6 5 add‘l 764 CAPEX 399 13 11 12 12 13 13 14 Enhanced quality services 185 (LTE not based on bilateral 1 3 11 32 77 incl.) agreements 06A 07A 08A 09A 10 11 12 13 14 08A 09A 10 11 12 13 14 If congestion hits the Internet, QoS-based services (via CDNs) are in demand by OTT providers1) Data included for Western, Central and Eastern Europe, for Consumer and Business usersSource: A.T. Kearney Whitepaper “A Viable Future for the Internet” A.T. Kearney 05.20110 8
  9. 9. 3 Social networks like Facebook internalize inter-personal communications, crowding out telcosSocial communicationsFacebook: Google:• 250 mn mobile users using • 1.5 mn Google Voice users 7 200 service providers in 60 months after launch countries • 150 mn mobile users for Google Chat Ads Coupons Status Maps aloneApps/Gaming SharingVoIP Calls Messages Places Wall Posts While telcos have always focused on providing connectivity to their subscribers, social networks are serving the communication needs of their communitiesSource: Facebook; Google; A.T. Kearney A.T. Kearney 05.20110 9
  10. 10. 4 Media, personal content & services are accessible any- where from any device – stored distributed in a cloudN-screen environment Home Cloud Enterprise Video Conf. Smart TV NAS Server & Server & Server & Storage Storage Storage Audio Set-top Box Consumer Cloud Enterprise Cloud Desktop Internet Laptop Router Router Servers On-the-Move Tablet Smartphone Electronic Paper Car Laptop Smartphone TabletSource: A.T. Kearney A.T. Kearney 05.20110 10
  11. 11. Agenda Evolution of the consumption patterns and Internet value chain Selected trends 2020: Net Neutrality, Social Communications and Media Redistribution of the revenue streams and new partnership models Russian realities and a word of caution A.T. Kearney 05.20110 11
  12. 12. Giving the unsustainable economics for carriers, newcommercial models need to evolve to handle the trafficNet Neutrality – Alternative Commercial Models Option 1: Increase average retail prices Option 2: Standard termination charges for all traffic Traffic flow Additional payment flow Retail Connectivity Provider End Users Traffic flow Additional payment flow Retail Connectivity Provider End Users Last mile Online Connec- Internet Aggregation Last mile Service tivity Core / Backhaul Online Connec- Provider Provider Internet Aggregation Service tivity RAN Core / Backhaul Provider Provider RAN € € € € Payment is passed down to the ‘last mile’ providers via termination charges factored into wholesale prices at each Access charge: Increase in level/handover point retail prices supported by differentiated pricing Option 3: Enhanced QoS over Public Internet Option 4: Enhanced QoS based on bilateral agreements Traffic flow Additional payment flow Traffic flow Services Retail Connectivity Provider End Users Additional payment flow Retail Connectivity Provider End Users Public Internet Last mile Last mile Online Connec- Internet Aggregation/ Online Connec- Internet Service tivity Aggregation Core Backhaul Service tivity Core Provider Provider / Backhaul Provider Provider RAN RAN € € € Private network Commercial agreements to Technology Enabler e.g. Akamai Differentiated pricing for guaranteed QoS distribute additional revenues for end-to-end services Content Delivery Services Managed Services Delivery € Probably a combination of models is necessarySource: A.T. Kearney A.T. Kearney 05.20110 12
  13. 13. New Value Capture: In a changed ecosystem new MNObusiness models will need to evolveEvolution of MNO revenue models Illustrative(Mature Markets) 2006 2010 2014 Access Services Access Services Access Services (voice & data) (voice & data) (voice & data) High F usage F F T F segment F U U F P A P + + + ULow usage U segment U U 0% 100% 0% 100% 0% 100% 0% 100% 0% 100% 0% 100%• Revenue for mobile voice and data and • A higher share of subscribers – primarily • For some subscribers, third party- services are primarily transaction-based, high-volume users – pays flat-rate access advertising pays for (part of) the access – i.e., subscribers pay by units consumed, tariffs, especially for data plans mostly in the low usage segment either for every single unit or for bundles • VAS still primarily transaction-driven • MNOs create revenue-share models with with a specified number of units (e.g., service providers minute, SMS, MB) – only few high-volume • MNOs widely adopt tiered pricing models users have flat fees for data access to better monetize high volume users MNO business models need to evolve to capture new revenue sources through new pricing structures and partnershipsF = Revenues from flat-rate tariffs; P= Revenue share from partnerships; A = Revenue from advertising revenue sharing;T = Tiered-pricing based revenues; U = Usage / transaction based revenuesSource: A.T. Kearney A.T. Kearney 05.20110 13
  14. 14. Agenda Evolution of the consumption patterns and Internet value chain Selected trends 2020: Net Neutrality, Social Communications and Media Redistribution of the revenue streams and new partnership models Russian realities and a word of caution A.T. Kearney 05.20110 14
  15. 15. Russia’s current data consumption trend is already on asurging slope with data ARPU doubling over a period ofjust two years Data ARPU evolution in Russia Data contribution as % of ARPU, (EUR, Q1 2009-Q4 2010) (June 2010, %, global examples) Data ARPU ARPU 35% 31% 28% 27% 26% 25% 24% 23% 23% 19% 1,3 1,4 1,2 1,1 0,9 0,7 0,7 0,7 Norway Germany Spain Sweden Switzerland Portugal Russia Austria Netherlands Belgium Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2009 2009 2009 2010 2010 2010 2010 Customers are increasing their non-voice consumption irrespective of operators’ access technology and capacitySource: Global Wireless Matrix, A.T. Kearney analysis, Client data A.T. Kearney 05.20110 15
  16. 16. And there is no fundamental difference in Russia neither indevice preferences nor in the user behavior Smartphone Sales statistics Top 10 Countries for Social Networking (mln. units) (August 2010, Total Worldwide Audience1)) Russia Worldwide 296,6 Average time spent by visitor, hours per month Russia 9,8 Israel 9,2 Turkey 7,6 172,4 United Kingdom 7,3 139,3 Philipinnes 6,2 122,3 7,0 Canada 5,8 80,0 Indonesia 5,3 4,4 3,4 Finland 5,0 37,4 2,7 1,2 Spain 5,0 0,7 Puerto Rico 4,9 2005 2006 2007 2008 2009 2010E Russian players are likely to join worldwide value chain trends1) Age 15+ - Home and Work Locations, excludes traffic from public computers or access from mobile phones or PDAsSource: Gartner, MForum Analytics (2011), comScore Media Metrix (2011), A.T. Kearney analysis A.T. Kearney 05.20110 16
  17. 17. Media and Telecom integrationCritical factors for Russia 1 • Russia offers a attractive field for operators to extend activities and to Individual model the market according to their own needs operators and providers • However, new value chain will rather lead to the redistribution of the revenue streams among the players and to less extent to the increase of customer spending • Efficient execution, access to state-of-the-art know how, lean operational models and sound partnership strategies are key for the defending profitability • Existing regulation in Telecommunications lags behind technology trends, 2 the entrance of the new players (e.g. internet service providers) leaves Regulators even less options for traditional technology-based regulation • With further evolution of the value chain the role of cross-industry (telecom, media, finance, antimonopoly) regulatory cooperation will increase • Thus, a broader understanding and consensus should be reached for the success, the right balance has to be found to ensure healthy competition and sustainable industry developmentSource: A.T. Kearney A.T. Kearney 05.20110 17
  18. 18. Dr. Sören Grabowski Principal Head of Communications, Media & High Tech-Practice – Moscow & Kiev Soeren.Grabowski@atkearney.comA.T. Kearney AMERICAS Atlanta l Cambridge l Chicago l Dallas l Detroit l Mexico City New York l Sao Paulo l Silicon Valley l Southfield I Toronto l52/5 Kosmodamianskaya Washington D.C.Riverside Towers EUROPE Amsterdam l Berlin l Brussels l Bucharest l Copenhagen115054 Moscow Düsseldorf l Frankfurt l Helsinki l Istanbul l Kiev l Lisboa l London Ljubljana l Madrid l Milano l Moscow l Munich l Oslo l ParisPhone : +7 (495) 212 01 00 Prague l Rome l Stockholm l Stuttgart l Vienna l Warsaw l ZurichFax : +7 (495) 212 01 99 ASIA Bangkok l Beijing I Hong Kong l Jakarta l Kuala Lumpur l Melbourne I Mumbai l New Delhi l Seoul l Shanghaiwww.atkearney.com Singapore l Sydney l Tokyowww.atkearney.ru AFRICA & Abu Dhabi I Dubai l Johannesburg I Manama I Riyadh MIDDLE EASTCopyright ⓒ 2011 by A.T. KearneyThis document is exclusively intended for your personal use. Distribution, quotations and duplications – even in the form of extracts – for third parties is only permitted upon prior writtenconsent of A.T. Kearney. A.T. Kearney used the text and graphs compiled in this report in a presentation; they do not represent a complete documentation of the presentation. A.T. Kearney 05.20110 18

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