Business Model Innovation for the Digital Economy

Mobile VideoUnderstanding the threat (and opportunity) of growth for

operators

Chris Barracloughchris.barraclough@stlpartners.com

www.Telco2.com

- 2 -© STL Limited • Proprietary and Confidential

Mobile video growth is placing the current business model under considerable strain

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2008 2009 2010 2011 2012 2013 2014 2015

Ind

exed

to

200

8 =

100 Revenues

Users

Traffic

Video traffic growth will far outstrip revenue

growth...

£

Costs

Revenue

Time

...resulting in margin squeeze and potential losses for

mobile operators

Key question facing mobile operator management:

• How fast will this occur: when will the current broadband business model reach ‘end-of-life’?

- 3 -© STL Limited • Proprietary and Confidential

STL Partners’ study will answer the key operator question about the sustainability of the current mobile broadband business model

Key Question:

• How long will it take for

video-related costs to

outstrip broadband

access revenues:

• When will the current

mobile broadband

business model reach

‘end-of-life’?

Answer provided for different market scenarios based on changes in:

1. Demand-side variables:

• End-user consumption profile

2. Supply-side variables:

• Network and device technology

• Video delivery method

3. Market and business model variables:

• End user broadband pricing

• Operator network capacity profile (RAN, backhaul, core)

• Operator network cost profile (fixed, semi-variable, variable)

Clients will be able to select specific operators within (mature) markets and assess when video

growth is likely to be a ‘business-critical’ issue under 3-4 market scenarios.

- 4 -© STL Limited • Proprietary and Confidential

Methodology summary: developing a detailed mobile video economic model

• 3-4 scenarios developed for video traffic growth:

• 3-4 different macro-trends

• Scenarios impact country trends (volume and

pricing)

• Scenarios also affect network costs and

ultimately individual operator P&L

1. Demand

• Consumer use cases

• Video consumption by

delivery method

2. Supply

• Developments in

• Devices

• Networks

• Delivery methods

3. Video Traffic

• By delivery method,

device , network

• By region and major

country

4. Market

Dynamics

• Market structure &

competition

• Market shares

Macro Forecast

5. Pricing

• Mobile broadband

access

6. Video Traffic

and Broadband

Revenue

• By country

Country Forecast Company Forecast

7. Network costs

& capacities

• RAN, backhaul, core

• Fixed, semi-variable,

variable

8. Operator P&L

• Revenue forecasts

• Opex and Capex

forecasts

- 5 -© STL Limited • Proprietary and Confidential

The economic model will provide a number of valuable outputs

1. Demand

2. Supply

3. Video Traffic

4. Market Dynamics

Macro Forecast

5. Pricing

6. Video Traffic and

Broadband Revenue

Country Forecast Company Forecast

7. Network costs &

capacities

8. Operator Video

P&L

Per MB mobile

broadband access

price forecasts by

country

Video volume and

revenue forecasts by

country

Revenue and cost forecasts for individual

operators’ broadband businesses in key markets

£

Costs Revenue

Time

Scenario 1; Operator X, UK

Consensus on supply-

side (technology)

developments

Consensus on specific

consumer use cases

for mobile video

- 6 -© STL Limited • Proprietary and Confidential

Why a syndicated approach?

1. Garner input from multiple specialists:

• Chipset vendor

• Device manufacturer

• NEP

• IT vendor

• Content industry

• Operator

2. Reach consensus across the value chain on the business model issues associated with video

delivery

3. Spread cost of this significant project

- 7 -© STL Limited • Proprietary and Confidential

Next steps

• Please contact :

Chris Barraclough, MD STL Partners

chris.barraclough@stlpartners.com