2016 global communications gaap summit …...2016 global communications gaap summit tuesday, 21 june...

Transition: getting it right in a changing environment

2016 Global Communications GAAP Summit

Tuesday, 21 June

08:00 – 10:30 Workshop 2: Implementation of IFRS15 - breakout rooms

10:30 – 11:00 Coffee break

11:00 – 12:30 Revenue recognition - plenary

12:30 – 13:30 Lunch

13:30 – 14:30 Hot topics and what’s new in accounting - plenary

14:30 – 15:30 An industry perspective - plenary

15:30 – 16:00 Closing remarks

Global Communications GAAP Summit

PwC

Agenda

June 2016

2


PwC

June 2016

3

Revenue recognition - plenary

Revenue recognition workshops debrief

James Barker BT

Marta Soto Telefónica

Heiko Ehrcke Deutsche Telekom

Mark Allsop PwC

Christoph Gruss PwC


PwC

June 2016

5

IFRS 15 – what we discussed

Principalversusagent

View from your peers

Fixed enterprise contracts

SSP and allocating discounts

CostsDisclosures


PwC

June 2016

6


• Facts and circumstances - judgement• Not that simple• Impact on KPIs and external engagement• Will it change?

Principal versus agent

• Single performance obligation – one stop shop• Declining price clauses

Fixed enterprise contracts


PwC

June 2016

8


• Easier for the systems not to take the practical expedient

• Automated solutions vs manual • Internal commissions – incremental?

Costs to acquire and fulfil contracts

• Value of information you can get from implementing IFRS 15?

• Selecting an IT solution• Competing resources• Governance and sponsor• Central vs local ownership

A view from your peers


PwC

June 2016

8


• Cost plus margin approach for equipment with market cross check

• Cost plus margin on services is not feasible for the sector

Determining SSP and allocating discounts

• Future value of the PO in comparison to order backlog

• Should a reconciliation from IFRS 15 revenue to cash be presented?

Disclosures and reporting


PwC

June 2016

8


PwC

June 2016

9

Questions?


PwC

June 2016

10

Lunch

Lunch will be served in Restaurant Borromäus

Please be back in this room at 13:30

Global Communications GAAP Summit June 2016

11

Peter HogarthKatie WoodsHot topics and what’s new in accounting?

PwC

Agenda

- What’s new in 2016 and hot topics

- Alternative performance measures

- Regulator focus


PwCJune 2016

34

What’s new in 2016?

Not much … again!


PwCJune 2016

35

Amendments effective this year

Standard Nature of amendment Effective Endorsed

IAS 19 Employee contributions Jul 14 Feb 15

Annual improvements Various Jul 14 / Jan 16 Feb 15 / Jan 16

IFRSs 10, 11 and IAS 28 Acquisition of interests Jan 16 Jan 16

IASs 16 and 38 Methods of depreciation Jan 16 Jan 16

IAS 1 ‘Disclosure initiative’ Jan 16 Jan 16

IFRS 10 and IAS 28 Investment entities Jan 16 o/s (Q3 16)

IAS 27 Equity method in separate financial statements

Jan 16 Jan 16


PwCJune 2016

36

More change to come

Standard Nature of amendment Effective

IAS 12 Deferred tax assets on unrealised losses Jan 17

IAS 7 Debt reconciliation Jan 17

IFRS 9 Financial instruments Jan 18

IFRS 15 Revenue from contracts with customers Jan 18

IFRS 16 Leases Jan 19


PwCJune 2016

37

Amendment to IAS 7: Not a net debt reconciliation

20x1 Cash flows Non-cash changes 20x2

Acquisitions Foreign exchange

Fair value changes

Long-term borrowings 22,000 (1,000) - - - 21,000

Short-term borrowings 10,000 (500) - 200 - 9,700

Lease liabilities 4,000 (800) 300 - - 3,500

Hedges of long-term borrowings

(675) 150 - - (25) (550)

Total liabilities from financing activities

35,325 (2,150) 300 200 (25) 33,650


PwCJune 2016

38

But you could do this

20x1 Cash flows Non-cash changes 20x2

Acquisitions Foreign exchange

Fair value changes

Long-term borrowings 22,000 (1,000) - - - 21,000

Short-term borrowings 10,000 (500) - 200 - 9,700

Lease liabilities 4,000 (800) 300 - - 3,500

Hedges of long-term borrowings

(675) 150 - - (25) (550)

Total liabilities from financing activities

35,325 (2,150) 300 200 (25) 33,650

Cash & cash equivalents (1,250) (225) 75 (25) (1,425)

Net debt 34,075 (2,375) 375 175 (25) 32,225


PwCJune 2016

39

IFRSs 9, 15 & 16 – a timeline for adoption

Today!

January 2017Opening B/SIFRSs 9, 15

January 2018Adopt IFRSs 9, 15

Opening B/S IFRS 16January 2019Adopt IFRS 16

January 2016Opening B/S

IFRSs 9, 15 if 2 yrs comparatives

Endorsement?IFRSs 9, 15

Endorsement?IFRS 16


PwCJune 2016

40

How do the standards interact?

IFRS 15

IFRS 9IFRS 16

• Contract assets vs receivables

• Provision for doubtful debts (impairment)

• Cannot adopt 16 before 15

• Service vs lease

• Sale vs lease

• Sale & leaseback

• Provision for doubtful debts (impairment)

• ‘Failed’ sale & leaseback

• Lease/buy & hedging often part of single treasury strategy


PwC

June 2016

41

Sales vs lease – telco supply of equipment and service

Is outright control of the equipment transferred to the customer? *

No

Yes Apply IFRS 15 in identifying performance obligations

Is control of the right to use the equipment transferred for a period of time? *

No

Yes

Apply IFRS 15 to services and IFRS 16 to equipment

* - If yes to either of these questions, equipment/lease is considered distinct


But what’s going on with IFRS 9?

Not prudent enough!

Distorts results for insurers!

Get a move on!

June 2016

21


PwC

The European angle

• 2013 Maystadt report: “IFRS has, unquestionably, had a positive effects in terms of the quality and comparability of financial reporting”

• 2016 Report by Committee on Economic & Monetary Affairs:

− Not enough focus on prudence & capital maintenance

− No conceptual basis for IFRS 9’s loss provisioning model

− Off-balance sheet accounting has not yet been properly and effectively addressed

− IFRS is too complex

− Improvements needed to IASB governance and standards development processes

• Could impact endorsement of any of IFRSs 9, 15 and 16.

June 2016

22


PwC

The IFRIC are busy too

• Two draft interpretations

- Uncertain tax positions

- Foreign currency transactions and advance considerations

• But there will not be any guidance on purchases of assets on variable payment terms:

“The Interpretations Committee observed that, during the Board’s deliberations on its project on leases, the Board did not conclude on whether variable payments linked to future performance or use of the underlying asset meet the definition of a liability at commencement of a lease or, instead, meet that definition only at the time that the related performance or use occurs. In addition, the Interpretations Committee noted that there are questions about the accounting for variable payments subsequent to the purchase of the asset. Accordingly, the Interpretations Committee concluded that the Board should address the accounting for variable payments comprehensively. The Interpretations Committee determined that this issue is too broad for it to address within the confines of existing IFRS Standards. Consequently, the Interpretations Committee decided not to add this issue to its agenda.”

IFRIC update March 16June 2016

23


PwC

Question

What does this mean for dealer commissions?

• FiTel pays €200 commission on connection of the customer. • FiTel also pays a commission based on 5% of the customer’s billable revenue

each month for the duration of the customer life.


24

1. Yes 3. It depends

Should the variable commission payments (5% of revenue) be included in the calculating the cost to acquire a customer?

2. No

PwC

What does this mean for dealer commissions?

It depends

June 2016

25

1) Dealer has fully performed so represents an IAS 32 ‘contingent settlement provision’:

− Include the variable amount in calculating the financial liability, hence corresponding asset, or….

2) IFRIC deliberations that the payment could be linked with the revenue contingency

− Record the cost in line with the revenue profile

A clarification is not expected and this policy choice is expected to remain


PwC

A useful publication


PwCJune 2016

47

What has the IASB got left to do?

Principles of disclosure

Equity method

Common control

transactions

Pollutant pricing

mechanismsDebt - equity

Performance reporting


PwCJune 2016

48

What has the IASB got left to do?


28

InsuranceMacro-hedging

Conceptual framework

Goodwill & impairment

Definition of a

business

PwC

Alternative performance measures


PwC

June 2016

29

Most common APMs in the industry

June 2016

30

ARPU

Revenue generating units new

subscribers

Underlying operating

profit

Adjusted EBITDA

Normalised free cash

flow


PwC

Investor views on APMs

Source: PwC survey, reporting adjusted performance measures


PwCJune 2016

52




PwCJune 2016

53




54PwC

APMs are newsworthy

Paying the price in the stock market for pro-forma

earnings tricks

Public companies in the US are doing more to burnish

the results they present to investors than ever before.

It isn’t working.

Citi Research

Exceptionals are rarely exceptional

We have come across numerous examples where

“exceptional items” recur over many years. We are

particularly doubtful about the classification of

restructuring costs as non-recurring; in many

industries we believe these are ongoing.

Beware the ‘GAAP gap’

“The earnings they are putting out today, I think they

are very suspect … It has become common for

managers to tell their owners to ignore certain

expense items that are all too real”

S&P 500 earnings: Far worse than advertised

There’s a big difference between companies’

advertised performance in 2015 and how they

actually did. The gap between reported and pro

forma earnings last year reached its widest level

since the financial crisis.

Accounting Today

Yahoo Finance

Wall Street Journal


PwCJune 2016

55

Standardisation of APMs

ESMA guidelines on Alternative Performance Measures

1

• Enforceable

• Scope

• Similar to existing best practice:

− Define & clearly label− Explain why relevant & reliable − Reconcile to GAAP− Present consistently, with comparatives− No greater prominence

• Prohibits ‘pro-forma’ sub-totals

• Requires clear labels

• No greater prominence

Amendment to IAS 1 2


PwCJune 2016

56

What of the future: Redefining successI think [the definition of business success] will change but I don’t think it will be better. The environment should not be the concern of individual companies as that is a challenge for governments. Companies must focus on maximising profit, and the legal frameworks put in place by government should guide their behaviours on these issues.

I expect to see a greater demand for measurement of the benefits to society and the ability of companies to provide useful resources to individuals.

USA equity analyst

”

”

“ “

To what extent do you agree that business success in the 21st century will be redefined by more than financial profit?Q

Investor professional

CEO’s

54%

Agree strongly Agree Neither agree nor

disagreeDisagree Disagree

stronglyDon’t know

28%

37%35%

39%

14%11%

15%

11%8%

3% 2% 0%

German fixed income analyst

Source: PwC survey, redefining success in a changing world April 2016


PwCJune 2016

57

Regulator focus


PwC

June 2016

37

38

Areas of focus

Reflecting current market conditions:

- Judgements, estimates and assumptions, including sensitivity disclosure

- Impairments & provisions

Adjusted performance measures

Revenue

Cash flow statements

Segments


PwC

June 2016

Fair value measurement

Business combinations

Clear & concise disclosure


PwCJune 2016

39

Thomas Tandetzki An industry perspective

The dramatic changes in the industry

The digitised and converging world

EU digital agenda


40

Agenda

PwC

The dramatic changes in the industry


PwC

June 2016

41

My message today – The telecommunications industry will change fundamentally – Only a “Digital Telco” will survive


PwC

June 2016

42

• Long period of steady growth for telco operators with subsequent incremental cost reduction behind us

• Legacy structures and telco’s culture withstand an adaptation of what the market demands …

Telcos challenged by OTTs: lower cost structure and better customer experience

Regulators put pressure on retail prices

Value of the digital world hardly arrives in telco industry

… hence: “business as usual” not sustainable for many telcos

• Few operators embark on a more radical path towards cost restructuring by simplification, digitisation and human centered design resulting in a radically lower cost structure

• In parallel, the global telecom sector continues to consolidate – in-country & cross-country with an FMC endgame in every country

Source: PwC’s Strategy&

Each new computing cycle typically generates 10x the installed base of previous cycle – Telcos are part of the game

June 2016

43

Morgan Stanley Mobile Internet Report (12/09)


PwC

Internet users 1995 -> 2014<1% to 39% population penetration globally


PwC

June 2016

44

Mobile Phone Users: 1995 -> 20141% to 73% population penetration globally


PwC

June 2016

45

But: Growth is Slowing

June 2016

46

Global Internet Users2008 – 2015

Growth rate slowing to 9%

Smartphone Unit Shipments2007 – 2015

Growth rate dropped to 10%


PwC

Platforms are King - Google & Facebook

June 2016

47

Google + Facebook = 76% (& Rising) Share of Internet Advertising Growth, USA


PwC

Messaging Continues to Grow Rapidly... Leaders = WhatsApp / Facebook Messenger / WeChat

June 2016

48


PwC

“Software is eating the World” - Marc Andreessen

June 2016

49

Virtual Reality models of oil field

Sources: Wired, DGI.com, PwC, StratFor

Wearable health sensors AI-driven wealth management advisors

The Digital Factory - Industry 4.0

Drone-based delivery and logistics

Personalised, digital shopping experiences


PwC

When market growth stagnated, European market witnessed pressure on EBITDA and revenues – Other regions are more healthy

June 2016

50

EBITDA and revenues evolution 2011-2013, main mobile operators

Δ Service

Revenue (%)

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

-6 -4-10-14 62 84 16-2-8-12

EBITDAmargin (p.p.)

Rest

Incumbent

Player 1

Player 2

Europe

3 ITVoda GE

Mobikom AT

T-Mobile GB

Ora FR

Voda IT

T-Mobile AT KPN NL

Elisa FI

DNA FI

Sonera FIMobistar BE Proximus BE Wind IT

Telenor DK

TDC DK

T-Mobile GEBASE BE

Optimus PT

Voda NL

Voda PT

Telia DK

T-Mobile NL

TMN PT

TIM IT

Ora ES

Voda ES

3 GB

O2 GB

Voda GB

Bouygues FRSFR FR

O2 GE

E-Plus GE

Source: BofA ML Wireless Matrix Q1 2014


PwC

Europe is the exception – Emerging markets are still growing

June 2016

51

Regional telecom revenue growth

(CAGR 2011–2015) (%)

6.7%

3.5% 3.5%

1.1%

-0.8%

EuropeLatin

America

Asia

Pacific

Middle East

& Africa

North

America

Blended –

Western Europe

at -1-2% p.a.



PwC

Charge for Usage: But usage growth has failed to materialise as an ARPU driver

June 2016

52

Source: CTIA, MoffettNathanson estimates and analysis

Wireless Data Traffic per Sub per Month and Adjusted Wireless ARPU, 2009 to 2015

ARPU

CAGR: -1.3%

Data Traffic

CAGR: 78.4%

+32.5x

-7.4%


PwC

In the meantime, non-traditional Telco players developed superior customer experience capabilities – See e. g. digital commerce

June 2016

53

Digital commerce customer experience

Telco

Telco

Telco

Telco

Explore

Shop, Buy, Receive & UseInteract & Get support

Design

Showroom Account

Management

Marketing

Channels &

Shop Links

Advertising

Order Process

Order ManagementUser EngagementCustomer Service

User Interface

& Navigation

Segmentation

& Targetting

Multi-Channel

SEO



PwC

http://www.google.co.uk/url?sa=i&rct=j&q=xero+logo&source=images&cd=&cad=rja&docid=rEjTphSjOHRSOM&tbnid=ne4nl3mLzhQM5M:&ved=0CAUQjRw&url=http://help.affinitylive.com/setup/integrations/&ei=00zUUdaDO4_ltQamj4GoBQ&bvm=bv.48705608,d.Yms&psig=AFQjCNHKN_ReyLNVNUH2hWo7lkVI0cvztA&ust=1372954155254889

http://www.google.co.uk/url?sa=i&rct=j&q=xero+logo&source=images&cd=&cad=rja&docid=rEjTphSjOHRSOM&tbnid=ne4nl3mLzhQM5M:&ved=0CAUQjRw&url=http://help.affinitylive.com/setup/integrations/&ei=00zUUdaDO4_ltQamj4GoBQ&bvm=bv.48705608,d.Yms&psig=AFQjCNHKN_ReyLNVNUH2hWo7lkVI0cvztA&ust=1372954155254889

http://www.google.co.uk/url?sa=i&rct=j&q=otto+logo&source=images&cd=&cad=rja&docid=lJo_JyiDLqmslM&tbnid=MNBOsaUoDvzUtM:&ved=0CAUQjRw&url=http://www.ottogroup.com/de/medien/material.php&ei=Gk3UUeThK8rMtAbP64HABA&bvm=bv.48705608,d.Yms&psig=AFQjCNEL_u31qMyWcAzW_z4waCnzx4tTRA&ust=1372954262697178

http://www.google.co.uk/url?sa=i&rct=j&q=otto+logo&source=images&cd=&cad=rja&docid=lJo_JyiDLqmslM&tbnid=MNBOsaUoDvzUtM:&ved=0CAUQjRw&url=http://www.ottogroup.com/de/medien/material.php&ei=Gk3UUeThK8rMtAbP64HABA&bvm=bv.48705608,d.Yms&psig=AFQjCNEL_u31qMyWcAzW_z4waCnzx4tTRA&ust=1372954262697178

http://www.google.co.uk/url?sa=i&rct=j&q=amazon+logo&source=images&cd=&cad=rja&docid=r_u50ade2CpoXM&tbnid=OEE_zZeQ24hKlM:&ved=0CAUQjRw&url=http://languagepie.wordpress.com/2012/10/07/dont-be-fooled-speaking-english-is-not-enough/&ei=tU3UUc3aE4bfsgarlIH4Dg&bvm=bv.48705608,d.Yms&psig=AFQjCNH4QauTWJUmRncTPTNcpmZlmRlt5A&ust=1372954400349241






http://www.google.co.uk/url?sa=i&rct=j&q=cdw+logo&source=images&cd=&cad=rja&docid=-MaJF79u3FYT6M&tbnid=P4R9khvRrpD2VM:&ved=0CAUQjRw&url=http://globalgoodgroup.com/blog/2012/10/25/cdw-data-storage-management-and-virtualization-solutions/cdw-logo-global-good-networks-sponsored-content/&ei=P07UUcODDMLcswbg6IH4CA&bvm=bv.48705608,d.Yms&psig=AFQjCNGwS3dMM2TCrn3nmbrcgA9l_BuIWw&ust=1372954539871187

http://www.google.co.uk/url?sa=i&rct=j&q=cdw+logo&source=images&cd=&cad=rja&docid=-MaJF79u3FYT6M&tbnid=P4R9khvRrpD2VM:&ved=0CAUQjRw&url=http://globalgoodgroup.com/blog/2012/10/25/cdw-data-storage-management-and-virtualization-solutions/cdw-logo-global-good-networks-sponsored-content/&ei=P07UUcODDMLcswbg6IH4CA&bvm=bv.48705608,d.Yms&psig=AFQjCNGwS3dMM2TCrn3nmbrcgA9l_BuIWw&ust=1372954539871187

http://www.google.co.uk/url?sa=i&rct=j&q=walmart+logo&source=images&cd=&cad=rja&docid=pJjm24jG4pspHM&tbnid=sDpZe-JeVKZeuM:&ved=0CAUQjRw&url=http://www.brandprofiles.com/walmart-1-logo&ei=qErUUaejB9HLtAao4YH4Bg&bvm=bv.48705608,d.Yms&psig=AFQjCNEPfci4gCsJmqf34rEwC6cw7vIl8w&ust=1372953390488474

http://www.google.co.uk/url?sa=i&rct=j&q=walmart+logo&source=images&cd=&cad=rja&docid=pJjm24jG4pspHM&tbnid=sDpZe-JeVKZeuM:&ved=0CAUQjRw&url=http://www.brandprofiles.com/walmart-1-logo&ei=qErUUaejB9HLtAao4YH4Bg&bvm=bv.48705608,d.Yms&psig=AFQjCNEPfci4gCsJmqf34rEwC6cw7vIl8w&ust=1372953390488474



http://www.google.co.uk/url?sa=i&rct=j&q=network+solutions+logo&source=images&cd=&cad=rja&docid=afnKiMiqTBMmyM&tbnid=FSS_I2Pro7hrVM:&ved=0CAUQjRw&url=http://www.paulsonmanagementgroup.com/blog/2011/08/16/mobile-network-solutions/&ei=dU7UUe7SHoeQtAbzo4HICA&bvm=bv.48705608,d.Yms&psig=AFQjCNFMlDVmSMA0_0kxhGVLYBxRXjOwIg&ust=1372954603415529

http://www.google.co.uk/url?sa=i&rct=j&q=network+solutions+logo&source=images&cd=&cad=rja&docid=afnKiMiqTBMmyM&tbnid=FSS_I2Pro7hrVM:&ved=0CAUQjRw&url=http://www.paulsonmanagementgroup.com/blog/2011/08/16/mobile-network-solutions/&ei=dU7UUe7SHoeQtAbzo4HICA&bvm=bv.48705608,d.Yms&psig=AFQjCNFMlDVmSMA0_0kxhGVLYBxRXjOwIg&ust=1372954603415529









As a consequence – Telcos build networks, OTTs generate value

June 2016

54

Worldwide network infrastructure cost vs. Internet players’ revenues and value

in bn USD, 2014

354

Google

360

Facebook

220

104

Apple (iTunes)

100

729

NetflixWhatsapp

Skype

Viber

Network CapEx Revenues of major internet players

Market cap. of majorInternet players

Revenue Multiple OTTS: appr. 7

Revenue Multiple Telcos: < 2

Source: OECD, Forbes, Infonetics, PwC’s Strategy& analysis


PwC

The paradox is obvious – Telcos fuel the digital world, but don’t get value from it …

June 2016

55

Time

Revenues

Traffic

De-coupling/

GapCosts

Reduce Network Costs

… via improved Network capacity

efficiency

Develop New Revenue Sources

… via expansion in adjacencies

Optimise Existing Revenues

… via new pricing models

Reduce cost per Mb

… via investments in cost-effective

technologies



PwC

Hence, disruptive “all digital” models with up to 45% lower costs are emerging

June 2016

56

Leveraging digital for cost reductionIllustrative disruptive cost structure

Apply same

to other cost

Eliminate

Admin &

overhead

Driver self

care

through low

cost offers

Optimize

Bad Debt

Predictive

Analytics

(Big Data)

7.4%

Remaining

Costs

4.5%

Drastically

simplify IT

1%

Eliminate

Marketing

Through

Simplification

Eliminate

Own Shops

10%

7.5%

Eliminate

Handset

Subsidies

3.6%

5.6%

Total Costs

15%

6%

7%

14%

36%

2%

5%

10%

100%

5%

~45%

Bad Debt

Admin

Other

IT

Customer service

Handset subsidies

Network

Marketing

Sales & Distribution

4%

Source: PwC’s Strategy& analysis


PwC

One consequence, consolidation in-/cross-country is continuing with a final FMC market structure when fixed infrastructure exists

June 2016

57

Major M&A (Europe) deals from 2011 – 2015, € bn

Current trends (globally)

• FMC convergence in all markets

with fixed infrastructure

• Local mobile convergence: 3

players per market on average

• Further international expansion

from US players and far East

Asian players

• Further pure infrastructure

consolidation

FMC Local mobile consolidation International expansion Announced/In progress

0.9

17.0

3.4

7.7

8.6

1.3

2.61.3

2.3

7.2

7.4 7

13.8


16.7

The digitised and converging world

June 2016

58


PwC

The world is digitising fast! – Creating new growth

June 2016

59

Faster and higher

capacity networks

The transmission speed of a LTE network is

5.000 times the speed of a 2G network

Exorbitant growth of terminals

In 2015, there was

3,5x internet connected devices

for every human on the planet – 22 billion

High digital adoption

In the US and Europe, 60% of children

under 2 years play with mobile devices …

… before being able to use the

potty or speak a full sentence

Gigantic data volumes

Volume of data generated in 2014 was

greater than all the data in the entire

history of humanity until 2013


Levers

of Growth


PwC

…ultimately resulting in a transformed digital Telco

June 2016

60

Digital telco transformation framework

• Re-imagine the customer experience

• Rethink new products & services

offering with digital

• Define digital business models

• Build customer facing operations

• Simplify products & services

• Set up all IP infrastructure

• Re-imagine lean digital processes

• Change the culture/DNA

• Acquire digital capabilities

Digital Business Models

Fro

m S

trate

gy

“T

he W

hat”

…

…T

o E

xecu

tio

n

“T

he H

ow

”

Customer Journey

Products & Services Offering

B2C B2B

1

Digital culture3

Digital Delivery Model

Customer

facing

operations

Product

management

Process

2

Technology



PwC

Operators usually have a rather technology driven view

June 2016

61

Technological layer Description

Services & Products(connectivity, media …)

• Develop and provide services requiring fixed and mobile access, generating a clear benefit for the user

• Provide an access independent service experience

Devices

(phone, pad, router …)

• Seamless usage of all services on all devices (TV, PC, Tablet, mobile, Car, 3rd party devices)

• No service interruption

• Integrated services (e. g. TV/Tablet advertising)

User Interface(web portal, App store …)

• Common GUI on all devices/access points

• Same user experience

BSS

(billing, CRM, authent …)• One ID, one bill, one customer service contact etc.

OSS

(network mg, element mg …)

• Provisioning of services on all devices, access channels

• Common Service Platform

• One NMC

Access

(mobile & fixed)

• Automated best access network selection; seamless without service interruption

• No differentiation between access networks


PwC

Customer Expectations should be in the focus!

June 2016

62

Branding/Marketing

Physical Channels (Outlets,

Retail Stores etc.)

Digital Channels (Web Portal,

Social Media, Mobile App)

Call Centre

Field Operations

CPE/Service

A

B

C

D

E

F

&

Customer experience touch points

1

24

5

6

3

I want all

applications and data

on all devices at all

times

I want to

administer

myself intuitively

Customer Lifecycle

I want to move

across channels

as I wish

I don´t want to

care about

networks,

volumes etc.


PwC

From a customer perspective, FMC has significant impact on Telcos’ offering

June 2016

63

Customer experience view – Questions for a telco

1

24

5

6

3

Do we offer our services with the same

purchasing experience across all channels?

Do we have the right

channel transfer options?

Are services activated

automatically on all channels and

devices?

Is there one single point of contact

across all products and services?

Is the service experience across the

service channels the same?

Do we include all services

in one bill?

Do we have the right services?

Does the customer need to care about

connectivity, speed or volume?

Are all services/applications and data always

and everywhere available?

Is it convenient?

How can we leverage FMC

experience as main loyalty and

retention driver?


PwC

Recommendations for any Telco operator for the next three years

June 2016

64

The PwC Telco CEO agenda

1. Define your way to play on the basis of three strategic archetypes: network play, customer play, innovation play

2. Re-define your operating model with the objective to simplify and to radically reduce your cost structure – Assess carefully your management capabilities to identify the best transformation path

3. Understand what digital means for your specific play – in any case, fundamentally new capabilities will be required in all dimensions: HR, IT, processes

4. Develop customer centricity as a key capability for any play beyond the network

5. Participate in consolidation with three objectives: (i) gain national market share, (ii) acquire fixed assets in FMC markets, (iii) grow customer base to scale digital innovations

In summary …

S i m p l i f y – D i g i t i s e – C o n s o l i d a t eSource: PwC’s Strategy&


PwC

Digitising other verticals offers enormous market potential – a must move for Telcos

June 2016

65

Estimated size of selected growth markets globally (Verticals)$ bn, 2020

1,390

63

17

123150

60 6759

5

Smart Home Service

Assurance

TransportationeHealth Smart Cities Public SafetyConnected Car Industry 4.0Utilities

Sources: IDC, Ovum, Technavio, MarketsAndMarkets, GSMA, Grand View Research, Navigant Research, Mind Commerce, PwC’s Strategy& analysis


PwC

EU digital agenda

June 2016

66


PwC

The Digital Agenda is a key element of the Europe 2020 Strategy

June 2016

67

The seven pillars of the Digital Agenda

Pillar Description

Digital Single Market• Strengthen EU Single Market rules for the digital area

• Promote the free flow of online services across boarders in the EU

Interoperability & Standards

• Improve framework and processes to ensure the seamless interaction of devices and applications

Trust & Security • Intensify measures against cyber-attacks and cybercrime

Fast and ultra-fastInternet access

• Foster broadband investment to reach download rates of at least 30 Mbit/s for every European household by 2020

Research and innovation• Increase ICT research and innovation by better coordination and investment-

friendly rules

Digital literacy • Reduce the digital divide by improving education and digital skills

Benefits for EU society• Promoting digital benefits for our everyday lives (e.g. energy efficiency, health

services)

Priority of the

European

Commission

1

2

3

4

5

6

7


PwC

“Digital Agenda” decisions on roaming and net neutrality will have a direct influence on Telcos’ business models

June 2016

68

Roaming

• Roaming charges for retail customers will end by 15 June 2017

• Rules for wholesale charges to be decided in 2016

• Risk/Chance of arbitrage by foreign operator (“permanent roaming”)

• Details of Fair Use Policy to possibly limit volumes to be negotiated in 2016

Net Neutrality

• Specialised services of higher quality will be allowed, if network capacity is sufficient

• Best effort services must not be limited, but reasonable traffic management is allowed

• “Zero rating” will be permitted

• Critics say, definition of specialised services too vague to assure real net neutrality

• Compliance with net neutrality rules will be monitored by national regulatory authorities


PwC

Comprehensive review of the telecommunications framework is still ongoing in 2016

June 2016

69

Level playing field

• Response to the convergence of traditional Telcos

and over the top companies (Skype, Netflix, …)

• How to create a regulatory level playing field for all

firms that provide comparable services?

Access Regulation

• Promote investments in future-proof infrastructure

• Do Telcos need higher incentives for long term

broadband investment, e.g. by less regulation?

Spectrum Management

• Promote investments in high speed wireless

networks

• How can the management of radio spectrum be

harmonised within the EU?

Universal Service

• Assure consistency with technological

development

• To what extend is broadband an universal

service and how could it be financed?

Review of

Telecoms

Rules


PwC

June 2016

70

Fi DolanClosing remarks


PwC

YesterdayMonday, 20 June

15:00 – 15:15 Introduction and welcome

15:15 – 16:00 Leasing: the new standard

16:00 – 17:45 Workshop 1: Leases - breakout rooms

June 2016

71

Agenda


PwC

TodayTuesday, 21 June

08:00 – 10:30 Workshop 2: Implementation of IFRS15 - breakout rooms

10:30 – 11:00 Coffee break

11:00 – 12:30 Revenue recognition - plenary

12:30 – 13:30 Lunch

13:30 – 14:30 Hot topics and what’s new in accounting - plenary

14:30 – 15:30 An industry perspective - plenary

15:30 – 16:00 Closing remarks

June 2016

72

Agenda


PwC

Question

Leasing: the new standard

How relevant was this session?

1. Very relevant

2. Relevant

3. Somewhat relevant

4. Not at all relevant

June 2016

73


PwC

Question

Workshop 1: Leases


1. Very relevant

2. Relevant



June 2016

74


PwC

Question

Workshop 2: Implementation of IFRS 15


1. Very relevant

2. Relevant



June 2016

75


PwC

Question

Revenue recognition - plenary


1. Very relevant

2. Relevant



June 2016

76


PwC

Question

Hot topics and what’s new in accounting?


1. Very relevant

2. Relevant



June 2016

77


PwC

Question

An industry view


1. Very relevant

2. Relevant



June 2016

78


PwC

Question

Overall, how do you rate the 2016 Global Communications GAAP Summit?

1. Very useful

2. Useful

3. Okay

4. Poor

June 2016

79


PwC

Question

If we hold a similar event next year are you or someone from your company likely to attend?

1. Yes

2. No

June 2016

80


PwC

Question

Where would you like the next Global Communications GAAP Summit to be held?

June 2016

81

1. Amsterdam2. Barcelona3. London4. Munich5. Paris

6. Prague7. Stockholm8. Toronto9. Warsaw


PwC

Thank you and safe travels

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained

in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information

contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability,

responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision

based on it.

© 2016 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP which is a member firm of PricewaterhouseCoopers

International Limited, each member firm of which is a separate legal entity.

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