Dtv And Ip Television Trends And Markets

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MUMMIV^ Edizione

DTV and IP Television trends and markets

Roma, April 20th 2006Francesco Lezzi

2Copyright © 2007 Accenture All Rights Reserved.

Strictly confidential. Internal use only

Agenda

• Accenture overview

• Telecom Italia figures

• Digital TV European scenario

• DTV and IPTV Market analysis• Digital TV arising services

• Italian Market landscapes

• Telecom Italia content offering



What is Accenture?Accenture is a global management consulting, technology services and outsourcing company, with net revenues of US$16.65 billion for the fiscal year ended Aug. 31, 2006 and approximately 146,000 people in 49 countries

Accenture "high performance business" strategy builds on its expertise in consulting, technology and outsourcing to help clients perform at the highest levels so they can create sustainable value for their customers and shareholders

Using its industry knowledge, service-offering expertise and technology capabilities, Accenture identify new business and technology trends and develop solutions to help clients around the world

Enter new markets Increase revenues in existing markets Improve operational performance Deliver their products and services more effectively and efficiently



Consulting - Technology - Outsourcing

CONSULTING Accenture collaborates with its clients to help them achieve high performance. With deep industry and

business process expertise, broad global resources and a proven track record, Accenture can mobilize the right people, skills and technologies to help clients improve their performance

TECHNOLOGY Accenture is a global leader in technology and systems integration with the full range of services—from

technology R&D to IT diagnostics, enterprise solutions, systems integration, technical architectures, business intelligence and infrastructure consulting among others

OUTSOURCING Accenture has the broadest outsourcing services offering in the market, unmatched in scope, scale and

depth. Accenture provide outsourcing services to 600 clients in 45 countries, serving nearly every industry sector



Agenda









Telecom Italia main figures

21 million fixed lines in Italy as of September ‘06 32.4 million mobile lines in Italy as of December ’06 8.6 million broadband accesses, of which 6.8 in Italy

(December ’06) Italy’s leading portal Virgilio and Italy’s number one

search engine 2006 Revenues: over €31.3 bn €; EBITDA 12.9 bn Industrial investments as of end ‘06: 5.1 bn € Employees as of June ‘06: about 85K

Leader in fixed and mobile markets in Italy



TI current financial results

- TI Group: 3Q ‘06 financial results and positioning -

3Q ‘06reported

YoYreported* Delivering across businesses, borders and efficiency targets

Revenues 23,104 +5.2%Wireline• Strengthened share on voice traffic (~72.8%) & in domestic BB (6.4 mln

lines, +0.7 mln vs. 2005 ye)• EU BB drives growth thanks to increasing coverage, quality of service and

product innovation (1.7 mln BB lines, +0.4 mln vs. 2005 ye)Mobile• Gained mkt share in Italy (40.3%, +0.6 pp vs. 3Q’05 with 12.4% UMTS lines

on total)• Solid growth in Brazil combining volume & value (24.1 mln lines with a 24.1%

mkt share reaching 21.6% EBITDA mg)Media• Increasing audience and mkt share with ~15x outperformance of Italian TV

Ad market

Ebitda 9,786 +0.8%

Ebitda margin 42.4% -1.8pp

€ mln

* Compared to 3Q 2005 results

Telecom Italia continuously reinforcing its business and positioning in key markets



22%

16%22%

22%18%

35,9 36,8 36,7 36,8 37,1

9,2 10 10,4 11,1 11,9

2005 2006 2007 2008 2009

Revenues sources substitution

- Retail * Total TLC Market in Italy: Innovative vs. Traditional -

Source: Telecom Italia Investor Relations – Mar 2006 (*) Includes equipment and handsets, excludes incoming traffic fixed and mobile

CAGR ’05-’09

46,8

6,6%

0,8%

Voice 45,1

Services / Content

BB access

Data

Innovative services % 21% 24%20%

- VoIP- DUAL MODE- Videocom.

Traditional Services

Services on innovative platforms

Services on innovative platforms2009 Mix: 2,1%

• The market will be transformed by the introduction of innovative technologies, platforms and services• Telecom Italia addressable domestic mkt will continue to grow:

•Stable TLC core segment•Introduction of new high growing business areas (ICT, Pay TV) enabled by innovative technologies and

platforms

- ADSL, ADSL2+ VDSL2- HSDPA, WiMax/Bro;

LTETerminals

and handsets

- Personal Communication Services (Messaging, mail, etc.)

- Content Services (BB Portals, IPTV, HDTV, Mobile TV, DVBH)

€ Bn

- BB Data and ICT services

47,1 47,9 49,0

22% 23%



Agenda









TV Market in Europe

• In 2005 DTV households were more than 45 mln

• Today UK represents the top country for DTV penetration (65%), followed by Finland, Norway, Italy and France (penetration between 35-45%)

• France and UK markets are dominated by satellite (66% and 50% of total DTV, respectively)

• DTT is well positioned in UK, Germany, Italy and Finland

• Some operators have also launched Mobile TV offers during 2006 based on DVB-H technology

Analogic TV today represents 75% of total TV market in Europe, while Digital TV market is split between several platforms

Source: AITech-Assinform/NetConsulting, 2006

Analog; 75%

IPTV; 2%

Cable; 5%

DTT; 6%

Sat; 12%

Analog Sat DTT Cable IPTV

- DTV platforms penetration in EU (2005) -



10,5 13,8 17,6 21,9

25 27 2931,5

20,926,3

32,137,1

2,6

4,5

6,5

8,5

0

20

40

60

80

100

120

2006 2007 2008 2009

Cable DTH DTT IPTV

DTV market forecast

Source: Yankee Group, Sept 2005

- Western Europe Digital TV Subscriber Forecast (mln) -

59

71,685,2

99

The European digital TV marketplace is becoming increasingly crowded, with several distribution platforms

• In the next 4 years European families accessing to DTV will be 65% of total

• DTV subscribers will grow in Western Europe with a 19% of CAGR 06-09

• DTT and IPTV will be best performer in term of subscriber acquisition (CAGR 21% and 48% respectively)

• Digital cable growth will be sustained partially by technological upgrading



IPTV MarketIPTV market will grow rapidly in the next years (71% of CAGR 2006-10) following but also driving the gradual upgrade of broadband networks to higher bandwidth capacity

• The market for IPTV services in Western Europe was worth $62 million in 2004, with less than 1% of households subscribing to IPTV services

• The market will boom over the next years, growing to $4.3 billion in 2010 and 11% of Western European households will subscribe to IPTV services

• By the end of 2010, France, Italy, and Germany will be the largest IPTV markets in Europe, accounting for 55% of the total market

- IPTV Western European market forecast -

Source: IDC 2006

5041.065

1.874

2.942

4.329

1%

3%

5%

8%

11%

-500

1.0001.5002.0002.5003.0003.5004.0004.5005.000

2006 2007 2008 2009 2010-1%

1%

3%

5%

7%

9%

11%

13%

15%

IPTV Spending (mln$) IPTV Household penetration (%)



IPTV: who is launching

Source: Accenture analysis on IDC data in ‘Western European IPTV Forecast 2005–2009’

• First countries in which full-scale IPTV initiative are launched

• Low presence of Pay TV or high competition between DSL and Optical fiber for network access

• Large scale initiatives launched starting from 4Q05/1Q06

• Local scale initiatives launched in 2004• Countries in which Cable or satellite are

consolidated or there is a lack of competition for broadband network access

• Only local initiatives or no initiatives at all• Low degree of broadband penetration (in

comparison to the rest of Europe)

1° Tier

2° Tier

3° Tier

- IPTV Maturity level in Europe -

IPTV initiatives in Western Europe have been traditionally launched by main telco challengers (e.g. Fastweb in Italy, Free in France) forcing incumbents to follow



Telcos re-positioningTelco's are moving to Digital TV market, positioning as competitor of traditional PayTV operators…

- Telco’s re-positioning respect to TV operators -

• Telcos, mainly incumbents, are registering a progressive decrease of revenues on traditional telephone service (voice, dial-up) and reduction of margin on broadband services

• Leveraging on new content distribution platform, many operators are integrating a triple-play model with video content offer in order to re-equilibrate revenues

• Video contents, traditionally offered by TV operators, are assuming a central position on Telco strategy, entering in PayTV market

- Telco’s context -Linear

programmingNo linear

programming

Basic contents

Premium contents

Advanced

services

Channels available also

on other platforms (both FTA and Pay)

Thematic channels (pay tv);Live sport events

(ppv)

‘Time shifted TV’ (FTA);

VOD library of not exclusive

programs

VOD library of exclusive contents

HDTV (High Definition TV)

PVR (Personal Video Recorder)

- Traditional TV operators positioning -

Weak Strong



IPTV evolutionAlso on IPTV side, Telco operators are forced to differentiate their offer from the video services offered by Broadcaster in order to gain Share-of-wallet

From Basic IPTV services.. .. across Enhanced services .. ..to Advanced interactivity

• Broadcast TV (free and premium channels)

• Video on Demand (Streaming, Download & Play, Push VoD)

• interactive Electronic Program Guide (iEPG)

• Parental Control• Internet on TV (T-

browsing, T-mail, …)

• High Definition TV• Digital Video Recorder• Time Shifted TV• Search functions by

channel, program, timing, characters, …

• Multi-room (more STBs in the same house access to IPTV services simultaneously)

• Community, videochat and real time messaging services content related

• New TV formats leveraging on interaction with/among customers

• Triple Play integration (Voice, IM, Video-communication, … via TV)

• Service access by remote devices (e.g. PC, PDA, Mobile phone)

• Multiplayer Gaming on TV

Distinctive content remains the key. Interactivity and Triple Play (integration with IM, Video-communication, …) could be a further opportunity for Telcos to differentiate

TODAY TOMORROW NEAR FUTURE



Agenda









High-Definition TV

HDTV promises to have a disruptive effect on TV experience; broadcasted since 2003 in US

(Directv was the pioneer) and immediately after in Japan; first deployments in Europe started in late

2005

DTV trends: arising services

Some emerging trends are influencing the TV offering in terms of content and services..

Personal Video Recording – Time-shifted TV

according to IMS Research Forecast, DVR penetration on European HH will increase from

current 2% to 28% in 2010. Over the next years, the demand for watching any program or event

any time will increase. In the Italian Pay TV market, Sky is already providing the local

PVR/TSTV service

Hybrid solution

STB vendors are providing IPTV/DTT hybrid solutions enabling Telcos to offer more rich and completed

services



1. Sony, June 2006

The new TV wave: High Definition TV

-ATV Development in Europe: QTY Sell out (x1000) 1 –

• Advanced compression codecs (H264 and VC1) are allowing significant bandwidth reduction to deliver HD content; E.g. with a 1080i format, necessary bitrate is:

• MPEG2: 18Mbps (vs. 4-6 Mbit/s for SDTV)• WM9 o H264 (MPEG4 part 10): 8-13 Mbps (VoD

vs. broadcast)

SD


Strictly confidential. Internal use only More of Half of Italian Households will have

access to Digital TV within the end of 2007

Accenture Analysis, Federcomin 2006

Digital Tv Penetration in ItalyHouseholds (Users for Mobile TV), Thousands

1000

3500

6500

9800

800

2400

4550

6370

4900 5200 5400

250 4001050

1800

830

1800

3200

4600

5550

7800

10500

13000

2004 2005 2006 2007

DTT DTT Only SAT IP-TV Mobile TV Digital TV

63% of HH

50% of HH

37% of HH

26% of HH

DTT will progressively substitute the traditional FTA television, while a portion of DTT households will start to occasionally access to pay-per-view premium content.

Families that are willing to pay regularly for premium content will continue to prefer Satellite and will start to explore IP-TV capabilities.



Italian Digital TV scenario: Platforms and

OperatorsItalian TV HouseHolds 21.1 mn

(EoY 2005 – Databank)

Pay

TVFT

A T

V

1. Set-top-boxes at EoY2005 – Federcomin Jun 20062. Also Wind and Tiscali announced future roll-out of IPTV services within 2007 (not confirmed)

MobileTV & DVB-H

~350K~190K

IPTV 2

3.8 mn

1.4 mn

FTA National channels plus Minor Local

Broadcasters

Sat TV

3.5 mn 1

DTT

http://www.telecomitalia.it/cgi-bin/tiportale/TIPortale/ep/start.do?tabId=0&LANG=IT



DTV offers benchmark

Operator/ Services

HD

PVR

Other services (Communication, Interactive, Games)

Basic contents offering(quality/quantity)Calcio content availability

Movies, Fiction

Minimum monthly price (*) 56,47€ (20Mega) 65€

56,52€ (Alice Flat)73,52€ (Alice 20Mega)

34,52€ (Alice Flat)51,52 (Alice 20Mega)+ decoder DTT

+12€+16€

+28€ +17€

Multivision

Local PVR announced by end of 2006

Announced by 2007 Trial

+16€

Easiness installation

(*) The price includes: phone line fee, flat ADSL, basic TV subscription Plus Minus

Announced by 2007

Announced by 2007

Local PVR announced by 2007

- TV offers bundled with voice and fast internet services -

+ 7€

+15€

Packages discounted

+7€



Agenda









TI “Content Related” Offer overview

Telecom Italia is the leading operator in Italy that provides innovative contents and services through Broadcast and Broadband assets with enriched TV experience

Alice Home TV

Innovative IPTV service in Italy LIVE TV and VOD contents (film library, broadcast channels,

live Serie A football matches), Internet Browsing and Mail Launched on December ‘05

Rosso Alice

First broadband portal in Italy LIVE TV and VOD contents (film library, broadcast

channels, live Serie A football matches), music, ringtones and games

~ 3 mln registered users and >5,000 transactions/day Launched on 2003

TIM TV

Mobile TV (DVB-H technology) 8 Live Channel, Live Serie A football matches Launched on May 06

Development of standard and premium offers (sports, movies, entertainment, news, music…)

Vehicle for partnership with media groups / content producers

Deliver Interactive and Seamless Multiplatform Experience



Alice Home TV: Evolution framework

2006 2007December 2005

Launch of “Alice Home TV”

TV Re-Broadcasting (La7, MTV Italia, Class News, Class CNBC)

VoD service (movies, sport, news, finance, lifestyle)

Live Events (Soccer, Sport, Music)

TV Browsing

Expanded TV Re-Broadcasting (e.g + SKY movie package)

Expanded VoD service (e.g movies, vertical channels)

New live Content (Big Brother live, live concerts)

New sitcoms

TV Platform: evolution of Alcatel and introduction of Microsoft.

DTT integrated Set Top Box High Definition, PVR (personal video

recorder), Multiroom… Over 100 rebroadcasting TV channels

Basic: 60-65 channels (30 generalist, 30-35 thematic)

Premium: 38 Sky premium channels (movie, sports)

VoD: 1,800 basic and 1,600 premium library, 20,000 events (sports, news, lifestyle, music, etc



THE END

Grazie per l’attenzione e

Buon proseguimento

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