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Welcome to Day 1launch meeting 2009

RegulationDaniel Kirk, Spectrum Value Partners

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The information is strictly l inked to the oral comments which were made at its presentation, and may only be used

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Implications for Regulation in a Changing World

World Telecoms Strategy Council

Ascot: 12 May 2009

Daniel Kirk: Value Partners

4

Does the current regulatory model address the right problems?

• Liberalise monopolies

• Ensure any-any connectivity

• Replicate impacts of competition

by regulating access to

‘bottlenecks’

• Set fair rates of return

• Encourage market development

Spectrum Network Services ITRetail &

Distribution

Consumer

propositionDevices

Wholesale

Intercon’ct

An increasingly disaggregated value chain

Current Areas of Competitive

Positioning

• Slowing subscriber growth, financial

pressures on operators & investment

• Convergence between networks and

across platforms

• Competition moving to the open internet,

brand & service

• New breed of providers are global & un-

regulated

• Networks no longer the ‘gate keeper’

power is moving to other players

Traditional Focus of Telecoms

Regulation

Challenge

5

How will telecoms fare in current climate?

Market di mension

Telecoms, Media and Entertainment sectorsDrop of consumer goods

(from peak to minimum)

Number of quarters of market reduction

Recession in 1991, UK

Source: ONS, PWC, VP analysis

5 10 15 20 250%

-5%

-10%

-15%

-20%

-25%

-30%

-35%

Housing and public utility services

Fuel and lubricants

Sports and recr eati onal ser vices

Jewelry and watches

Big Appliances

Vehicle sales

Flights

Beer

Furniture Toys , games and hobby

Restaurant & coffee shops

Alcohol

Wine

Communication

Food

Education

Books

Alcoholic drinks

Leisure acti vities’ toolkits

Fabric Shoes

Hotel

Audi o-vi deo

Personal hygiene

Garments

Cultural Ser vices

Newspapers

Salute Non flight travels

Gardening

6

Telcos are embarking on a cost transformation exercise

• Divestment of unproductive

operations• Lower operating costs from

- Focus on efficiency

- Increased outsourcing- Improved purchasing

- SAC/SRC reductions

Cost transformation

Continued Investment

• Focused Capex in growth areas

• Continued reduction in Opex

• Revenue growth in new services• Organic EBITDA growth

• Fibre roll-out

• Switch to growth areas (e.g. Wireless)

• ICT services provision

Results

7

Inevitably there will be further consolidation and infrastructure sharing

Market Trends

• Mobile markets appear to settle at 3 / 4 players

maximum

• Global players benefit

from scale driving case for further regional

consolidation

• Fixed networks for voice

& broadband likely toremain monopolies –

even with NGN migrations

• LLU, and other wholesale,

requires national scale

Mobile / Site sharing

Fixed/ Network separation

Indonesia

IndiaUS

Incre

as

ing

matu

rity

Deployment Penetration Consolidation Innovation

UK

Australia

Nigeria

KenyaEgypt

South

Africa

Qatar

UAE

Indonesia

IndiaUS

Incre

as

ing

matu

rity

Deployment Penetration Consolidation Innovation

UK

Australia

Nigeria

KenyaEgypt

South

Africa

Qatar

UAE

BoD

Management reporti ngCompliance / monitoring

CEO

Independent

Oversight GroupRegulator

WHOLESALE

UNIT

RETAIL

UNIT

ACCESS

UNIT

Physical separation of the unit Chinese walls between all the units

• Qtel / Vodafone

site sharing

• Zain/ Essa

site sharing • 02 / Vodafone

site sharing

8

National broadband policy is high on the agenda of many governments

Recovery plans: infrastructure spend as the best route out of the crisis

Acceleration of broadband penetration through fixed and mobile to maximize reach

Public-Private partnerships

Multiplier effect of the telecoms industry on the economy

…Key constraint remains availability of financingSource:: Press Rel eases

Malaysia 2009 economic stimulus program assigned $0.81BN for BB infrastructure

EU Commission proposes to target €1BN to extend and upgrade high-speed internet

UK has allocated £750m fundingto achieve BB coverage with 2Mbps network by 2012

American Recovery and Reinvestment Act includes $7.2BN for a broadband rollout

Singapore authorities have granted in 2008 up to $0.525BN to a consortium to deploy a broadband fiber network

Australia’s government has announced plans to build a $31b national fiber network to be implemented in 7-8 years

9

Source: Informa Telecoms and Media, press releases

Mobile broadband: the next driver of growth for the industry... CASE STUDY

GB / month (000s)

WCDMA

launch

50% tariff reduction

HSDPA launch

• Limited wired infrastructure in Africa triggers wireless broadband

with greater coverage at lower cost

MTN SA data usage evolution

• Tipping point for mobile broadband reached in ‘08 with a 5x increase in data traffic

• UK: mobile broadband subscriptions increased

from 175k in Jan to ~1m in Aug

• Over 75% of traffic on UK operators networks

is data

Europe / US / Australia

• iPhone launches: Etisalat, Vodafone, Orange

• High take-up of WiMAX in the region (~10% market share in Jordan and Bahrain)

• In Saudi Arabia, Mobily had 300,000 mobile broadband subscriptions within 18 months

Middle East

10

3G “Convergence”band?

2G

Cost

Broadcast FWA

Digital Dividend

Refarming

x1x1.5

x 3

x 4

x 5

…given appropriate spectrum is freed for mobile broadband

5GHz 26GHz 40GHz200MHz 450MHz 1.9GHz 3.5GHz900MHz 10GHz2.5GHz

Spectrum allocation

Network costs

• Crucial consideration

for mass market reach

and USO

700MHz 900MHz2.1GHz

2.5GHz

3.5GHz

2.1GHz

11

Convergence is finally arriving – but changes the players in the Game

PVRVCR

IP TV STBs

Portable Media Players

On the move

3G phones

Smart Phones

Portable DVD

Games consoles

IP Phones

At home

HD TV

Home

Pay TV

Broadband

Consumer Electronics

Internet

PC

Mobile

Content

Home controlSet-upSet-up

Smart meters

Back up

Insurance

Record showsSecurity

View content

Home Organiser

Who do I buy my services from...

12

New players are increasingly dis-intermediating traditional media and telcos

1 BillioniPhone

appsdownload

2006 2008 2010fPhysicalDigital

% of music content acquisition

75% of digital music content

download coming from iTune

iPhoneiPod

Search

Consumer

Applications

Advertisin g

(double click)

VoIp/

Communication Business Application s

Android

(Mobile)

Infrastructu re (Spectru m)

t

Integration upwards and dowards telco value chain

Players from adjacent business making the

highest impact on telcos and media

Communities

13

Are new services and providers creating new barriers and monopolies?

M-payment • Operators require banking licences in several markets• Issues over credit management and capital requirements

New platforms – new regulatory challenges

Device as Gatekeeper

• Premium devices such as i-phone have major market impact

• Exclusive deals seen as anti-competitive in some markets• Applications stores a key area of growth – but who approves

Net Neutrality • BBC iPlayer, Hulu , You Tube • Major impact on traffic & costs• Is it acceptable to block access to sites, or reduce speeds

Software / Search • Well documented previous anti-trust actions against MS• Recent indications of interest from US DoJ in Google’s market

power

14

Targeted online advertising – invasion of privacy or innovation

• What information is

personal ‘IP address, web history, location data?

• What safeguards are required: egg informed

consent, opt-in vs opt out

• How to ensure

transparency, but not inhibit a valuable service?

• Whose responsibility ISP, advertisers?

• What regulatory rules apply globally?

Key Questions

• Places monitoring equipment within an ISPs network

• Gives each user an individual ID – keep them anonymous

• Records key words from pages visited and builds a profile

• Does NOT store details of web pages visited• Allows advertisers to build profiles based on key

words• Offers web publishers opportunity to take higher

value adds – targeted at user interests• Generates significantly higher CPMs than other

services

• Opposed by Internet Privacy Groups• Currently facing challenge from EU Commission

• Amazon have said they will block information on their sites

Case Study

15

Regulatory policy: EU as best practice?

Mobile penetration

Entry barriers in the wireline segment

Fixed network expansion strategy

• Mobile in early stages

• Expensive mobile rates

• Mobile only narrowband

• Main barrier is getting access to end users (last mile)

• Limited alternatives to DSL except in “cable countries”

• Fixed lines in every household

• Limited new unprofitable lines in rural areas, but compensated by

USO

• Roll-out DSLAMs in central offices

• 30- 100% mobile penetration

• Broadband wireless available

• Fixed line fully substitutable by

mobile –

16

How should role of Regulator evolve?

What is the most appropriate model of regulation in a world

of NGN investment, convergence & recession?

Points for Discussion

17

Contact information

valueteam.comvaluepartners.com

[email protected]

SydneyKing Street W harf, Suite 302

45 Lime StreetSydney NSW 2000

Austral ia

Tel. +61 2 9279 0072Fax +61 2 9279 0551

Singapore7 Temasek Boulevard

Suntec Tower One #26-04038987

Singapore

Tel. +65 6820 3388Fax +65 6820 3389

Hong Kong1806 Vicwood P laza

199 Des Voeux Road Central Sheung W an

Hong Kong

Tel. + 852 2103 1000Fax + 852 2805 1310

BeijingTower A, Suite 1702,

Vantone Centre Jia 6 Chaoyangmenwai Avenue

Chaoyang distric t 100020Beijing

People’s Republic of China

Tel. +86 10 5907 0616Fax +86 10 5907 0383

ShanghaiFortune Gate office bui lding,

Unit 02, 25/F1701 Beij ing Rd (W)

200040 Shanghai People’s Republic of China

Tel. +86 21 6132 4230

Fax +86 21 6132 4238

Mumbai8t h floor, C block

Devchand House, Shiv Sagar EstateDr. Annie Besant Road

Wor li, Mumbai - 400 018 India

Tel. +91 22 6611 9700

Fax +91 22 6611 9988

Rio de JaneiroRua da Candelária 6010º andar

Centro

Rio de Janeiro - RJCEP 20091 - 020

Brazi l

Tel. +55 21 2213 9191Fax +55 21 2213 9190

HelsinkiVilhonkatu 6 A

00100 Helsink iFinland

Tel. +358 9 4780 1300 Fax +358 9 4780 1301

RomeVia Della Grande Muraglia 28400144 Rome

Italy

Tel. +39 06 526 131

Fax +39 06 526 133 14

São Paulo Avenida Brigadeiro Far ia Lima,

201 (12 Andar)05426-100 São Paulo - SP

Brazi l

Tel. +55 11 3817 2200

Fax +55 11 3817 2210

Buenos AiresAlicia Moreau de Justo 550 4 Piso

C1107AAL -Buenos Aires

Argentina

Tel. +54 11 4314 4222Fax +54 11 4314 6111


Centro

Rio de Janeiro - RJCEP 20091-020

Brazi l

Tel. +55 21 2213 9191Fax +55 21 2213 9190

São Paulo Rua Padre João Manuel 7551°e 2° andares - cjs . 11, 12 e 21

Cerqueria Cesar

São PauloBrazil

CEP 01411-001

Tel. +55 11 306 809 99Fax +55 11 308 141 38

IstanbulSunplazaDereboyu Sk. No:24 Maslak

34398 Istanbul Turkey

Tel. +90 212 276 98 86

Fax +90 212 276 98 82

DubaiPO Box 503025 - DMC 9

Business Central Towers-Suite 1304 ADubai Media City

Sheikh Zayed Road

Dubai – United Arab Emirates

Tel. +971 50 788 0187

IstanbulSunplaza

Dereboyu Sk. No:24 Maslak34398 Istanbul

Turkey

Tel. +90 212 276 98 86

Fax +90 212 276 98 82

MunichMaximilianstrasse 35a

80539 MunichGermany

Tel. +49 (0) 89 24218 445Fax +49 (0) 89 24218 200

MilanVia Vespri Siciliani, 9

20146 MilanViale Cassala 14 A

20143 MilanItaly

Tel. +39 02 489 851Fax +39 02 489 4898 5999

LondonGreencoat HouseFrancis Street

London SW1P 1DH

United Kingdom

Tel. +44 (0) 20 7630 1400Fax +44 (0) 20 7630 7011

RomeVia di Porta Pinc iana 100187 Rome

Italy

Tel. +39 06 697 6481

Fax +39 06 697 648 51

MilanVia Vespri Sicilian i, 920146 Milan

Italy

Tel. +39 02 485 481

Fax +39 02 485 48 720 / 725

valueteam.comvaluepartners.com

[email protected]

SydneyKing Street W harf, Suite 302

45 Lime StreetSydney NSW 2000

Austral ia

Tel. +61 2 9279 0072Fax +61 2 9279 0551

Singapore7 Temasek Boulevard

Suntec Tower One #26-04038987

Singapore

Tel. +65 6820 3388Fax +65 6820 3389

Hong Kong1806 Vicwood P laza

199 Des Voeux Road Central Sheung W an

Hong Kong

Tel. + 852 2103 1000Fax + 852 2805 1310

BeijingTower A, Suite 1702,

Vantone Centre Jia 6 Chaoyangmenwai Avenue

Chaoyang distric t 100020Beijing

People’s Republic of China

Tel. +86 10 5907 0616Fax +86 10 5907 0383

ShanghaiFortune Gate office bui lding,

Unit 02, 25/F1701 Beij ing Rd (W)

200040 Shanghai People’s Republic of China

Tel. +86 21 6132 4230

Fax +86 21 6132 4238

Mumbai8t h floor, C block

Devchand House, Shiv Sagar EstateDr. Annie Besant Road

Wor li, Mumbai - 400 018 India

Tel. +91 22 6611 9700

Fax +91 22 6611 9988


Centro

Rio de Janeiro - RJCEP 20091 - 020

Brazi l

Tel. +55 21 2213 9191Fax +55 21 2213 9190

HelsinkiVilhonkatu 6 A

00100 Helsink iFinland

Tel. +358 9 4780 1300 Fax +358 9 4780 1301

RomeVia Della Grande Muraglia 28400144 Rome

Italy

Tel. +39 06 526 131

Fax +39 06 526 133 14

São Paulo Avenida Brigadeiro Far ia Lima,

201 (12 Andar)05426-100 São Paulo - SP

Brazi l

Tel. +55 11 3817 2200

Fax +55 11 3817 2210

Buenos AiresAlicia Moreau de Justo 550 4 Piso

C1107AAL -Buenos Aires

Argentina

Tel. +54 11 4314 4222Fax +54 11 4314 6111


Centro

Rio de Janeiro - RJCEP 20091-020

Brazi l

Tel. +55 21 2213 9191Fax +55 21 2213 9190

São Paulo Rua Padre João Manuel 7551°e 2° andares - cjs . 11, 12 e 21

Cerqueria Cesar

São PauloBrazil

CEP 01411-001

Tel. +55 11 306 809 99Fax +55 11 308 141 38

IstanbulSunplazaDereboyu Sk. No:24 Maslak

34398 Istanbul Turkey

Tel. +90 212 276 98 86

Fax +90 212 276 98 82

DubaiPO Box 503025 - DMC 9

Business Central Towers-Suite 1304 ADubai Media City

Sheikh Zayed Road

Dubai – United Arab Emirates

Tel. +971 50 788 0187

IstanbulSunplaza

Dereboyu Sk. No:24 Maslak34398 Istanbul

Turkey

Tel. +90 212 276 98 86

Fax +90 212 276 98 82

MunichMaximilianstrasse 35a

80539 MunichGermany

Tel. +49 (0) 89 24218 445Fax +49 (0) 89 24218 200

MilanVia Vespri Siciliani, 9

20146 MilanViale Cassala 14 A

20143 MilanItaly

Tel. +39 02 489 851Fax +39 02 489 4898 5999

LondonGreencoat HouseFrancis Street

London SW1P 1DH

United Kingdom

Tel. +44 (0) 20 7630 1400Fax +44 (0) 20 7630 7011

RomeVia di Porta Pinc iana 100187 Rome

Italy

Tel. +39 06 697 6481

Fax +39 06 697 648 51

MilanVia Vespri Sicilian i, 920146 Milan

Italy

Tel. +39 02 485 481

Fax +39 02 485 48 720 / 725

Finance & Business ModelsMargrit Sessions, Tariff Consultancy

Jean-Michel Chapon, IDATE

World Telecoms Counci l, 12/13th May 2009

PRICING FOR CUSTOMER SEGMENTS

FINANCE & BUSINESS MODELS

Session LeaderMargrit Sessions

TARIFF CONSULTANCY LTD

WORLD TELECOMS COUNCIL

12 & 13th May 2009Organised by Total Telecom


A vision of telecoms in 2015


Applications pre-dominantly in

Internet

Applications pre-dominantly in

Internet

Broadband Everywhere

5 Billion people

connected

Multitude of business models

Is telecoms

as we know

it no longer

a growth

sector and

where will

future

growth come

from?

It has grown

for 100 years

and will

certainly

grow for the

next 15!

– “As we

know it” may

be the

questionNokia’s vision



• Handsets turn into computers – Shift from vertically integrated to being sliced into distinct, horizontal technology layers, such as networks,

devices, operating systems and applications.

The vertical “sausage” that was the industry is becoming a layered

“hamburger”, says Carl-Henric Svanberg, CEO Ericsson.

• By the end of 2008 Apple sold more than 17m of its iPhones, over 500m

downloads from “App Store” since its launch last July.

T-Mobile Germany: claim iPhone data usage of up to 30x other contract users (100MB v. 3.4MB). Doubled again with 3G iPhone.

Based on external research, e-mail, SMS, web then wi-fi browsing are

the most popular uses.

• Mobile broadband overtaking fixed broadband

“We have no choice but to innovate,” says Olaf Swantee, head of mobile

operations at Orange, a big European operator. That is a tall order. But the alternative is to become low-margin utilities.

Trends


•ARPU in Euros 12/07 03/08 06/08 09/08 12/08

T-Mobile - GERM 17 16 16 16 15

Vodafone - GERM 17.9 16.9 17 16.8 16.2

T-Mobile US 35 34 32 33 37

AT&T Wireless 38.9 38.8 39.1 39.3 39.3

Telecom Italia 20.3 19.2 20.1 20.5 20.8

Vodafone Italia 21.6 20.8 21.3 21.7 21.5

Orange France 33.2 33.2 33.2 33.3 33.2

SFR France 35.7 40.8

O2 UK 33.9 31.1 30.2 30.6 28.1

Orange UK 32.3 31.7 30.8 29.8 28.5

CHURN in % 12/07 03/08 06/08 09/08 12/08

T-Mobile Germany 8.4 7.2 7.2 14.4 13.2

Vodafone - GER 20.1 22.6 21 18.9 28.8

T-Mobile US 33.6 31.2 32.4 36 39.6

AT&T Wireless 20.4 20.4 19.2 20.4 19.2

Telecom Italia 16.4 17.6

Vodafone Italia 24.1 27.5 27.1 30.3 27.2

Orange France 19.8 19.7 20.4 20.7 21.7

O2 UK 34.8 32.4

Orange UK 28.2 27.5 27.6 28 28.2

Churn is far

more

variable

than ARPU

ARPU / CHURN


PRICE DECLINE

Voice:

•In the Netherlands, KPN saw its ARPU decrease by 40% over one year following a price war

•In Finland, TeliaSonera had to cut prices by 15% to fight the rising penetration of no-frills resellers.

•In Germany, Deutsche Telekom’s low cost brand Congstar launched with a 19 cent per minute rate in 2009, the price is now at 9 cent per minute.


PRICE DECLINE

Data:

Average Mobile

Broadband Pricing Country

2007 (Euro) 2008 (Euro)

Price reduction (Euro)

2007 to 2008

Percentage reduction

(per cent)

Latvia 13.6 6.4 7.2 53 per cent

Austria 20.8 11.7 9.1 43 per cent

UK 37.3 24.2 13.1 35 per cent

Poland 36.3 26.8 9.5 26 per cent

Slovenia 20.2 15.4 4.8 24 per cent

Denmark 30.0 25.9 4.1 17 per cent

Lithuania 23.3 19.4 3.9 17 per cent

Portugal 33.8 28.5 5.3 15 per cent

France 39.7 38.2 1.5 4 per cent

Netherlands 36.0 35.2 0.8 2 per cent

Germany 20.2 20.0 0.2 1 per cent

Spain 34.8 34.7 0.1 1 per cent

Source Tariff Consultancy Ltd.


PRICE DECLINE

Data:


Relax XL Tariff

End 2007 price per month (euro)

End 2008 price per month (euro)

Reduction (%) Notes

XL 50 24 9.95 59%

XL 100 39 NADiscontinu

edXL 200 49 29.95 39%

XL 400 69 NADiscontinu

edXL 1000 79 59.95 24%

T-Mobile Germany

both reduced

pricing &

reduced the number

of price

points during

2008 for both call &

data

packages

Web n Walk

End 2007 price Per month

(euro)

End 2008 price Per month

(euro)

Reduction (%)

Notes

Basic (200MB) 20 NA Discontinued

Medium (400MB) 35 24.95 29% 300MB

Large (5GB) 50 39.95 20% Unlimited

PRICE DECLINE


PRICE INCREASE

- Increase of minimum call charge (UK)

- Outside the bundle prices increase

- Less favourable increment billing

- Lowest priced product available on less favourable contract term

- Inclusive allowance only to be used for certain communication instead of all

- Mobile TV no longer as part all packages


Non-

Headline

Prices

Increase


OPERATOR STRATEGY

In 2008 TIM has re-priced services for the contract customer which has

allowed it to boost its contract base (but lose some Pre-Pay subscribers). It

has benefitted from growth in Mobile Broadband and mobile internet usage

which has offset voice ARPU decline.

It has started to promote its TIM + Tutto (Mobile & Fixed) offers allowed by

AGCOM in December 2008, and has launched a new youth sub-brand, Mobile

MTV in July 2008, as an MVNO in association with Viacom which is co-

branded “powered by TIM”.


OPERATOR STRATEGY

Telefonica saw a reduction in ARPU, but claimed positive Data growth due to

the impact of the iPhone and a series of summer promotions, including reduced

data calls & SMS rate reductions.

The proposition is to provide low “on-net” calls to Movistar subscribers in

return for a 5 Euro per month fee.

The benefit is in churn reduction. During 2008 Movistar claim a net loss (of

numbers ported away) of only 61k overall & continues to increase contract

market share.


WRAP UP

More bundling: Bundling though becoming more complex –

comparison with other operators made difficult

Loyalty scheme for high value users, customer care for high

users

Advertising models increasingly to emerge

Improved offerings, more inclusive allowance, non-headline

prices will increase

Data prices to further decline, increased offers including day,

week, month, prepaid etc.


TCL is a new international

consultancy formed in 2006 focussing

on pricing analysis,

research and consultancy for

mobile, fixed,

networking & Data Centre services on

a global basis.

More information

can be found at www.telecomsprici

ng.com

Recent TCL headlines & breaking news

- FTTH is already competitive with

conventional Triple Play and is undercutting

traditional ADSL services...

- Mobile penetration is set to rise from 46% in 2008 to 95% by 2013 according to a new

survey of operators in 34 Emerging Market

countries...

-Dual & Triple Play providers in Europe focus

on price competition with promotional pricing now the norm...

About Tariff Consultancy Ltd


THANK YOU!

Margrit SessionsTariff Consultancy Ltd

[email protected]

welcome to day 1 - total tele may 2009 day 1... · 2009. 6. 9. · welcome to day 1 launch meeting...

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