Telecom Markets Trends Raul Lucido vice president strategic marketing & Governmental & regulatory...
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Transcript of Telecom Markets Trends Raul Lucido vice president strategic marketing & Governmental & regulatory...
Telecom Markets TrendsTelecom Markets Trends
Raul Lucidovice presidentstrategic marketing &Governmental & regulatory affairs
Raul Lucidovice presidentstrategic marketing &Governmental & regulatory affairs
1995-2000: Unprecedented growth
• Internet access boom equals fixed line bonanza• Corporate data needs skyrocket• New revenue streams (US data)
– Hosting goes from zero to $2.5 billion– eCommerce services reach $20 billion
• Mobile services create a boom– Europe goes from 6% penetration to 54%– Japan goes from 7% to 50%– Hundreds of millions of handsets sold annually
0
200
400
600
800
1000
1200
1400
1600
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
US
D b
illio
n
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
As
% o
f G
DP
There is an irreversible long-term trend in demand for telecoms …
Source: Analysys
World telecoms revenue
As % GDPHistorical Forecast
… driven, in part, by technology …
Cooper’s Law states that the number of conversations (voice and data) conducted over a given area, in all of the useful radio spectrum, has doubled every two and a half years for the
last 105 years, ever since Marconi discovered radio in 1895Source: ArrayComm, Martin Copper
1
100
10 000
1 000 000
100 000 000
10 000 000 000
1 000 000 000 000
100 000 000 000 000
1895
1905
1915
1925
1935
1945
1955
1965
1975
1985
1995
2005
… and leading to a revolution in the structure of the economyStructural demand for communications and
IT
Cost of basic technologies
Cost to users Short-term demand
Telecoms revenue is an accurate indicator of wealth
Global telecoms revenue (USD million) per km2 in 1998
Source: Analysys
In a world where trade flows look like the Internet …
Prices are expected to continue to decline to less than EUR0.05/min
Source: Analysys Cutting the Cost
Average cost per call minute for an average residential user (1990 EUR): 1991–2001
CAGR reductions on call tariffs of 3–13% in
the last ten years
Average cost per call minute for a six-line business (1990 EUR): 1991–2001
CAGR reductions on call tariffs of 5–15% in
the last ten years
We know that demand grows steadily in the long run …
Source: ITU/Analysys
0
200
400
600
800
1000
1200
1400
1600
1800
2000
199
8 U
SD
bill
ion
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
1985 1990 1995 2000
World telecoms revenue As % GDP
… so why have stock markets reacted like this?
Source: BigCharts.com
Deutsche Telekom
NASDAQ
OTE
Capacity is being reduced …
0
50 000
100 000
150 000
200 000
250 000
300 000
Telecomsmanufacturers
Telecomsoperators
Telecoms job cuts
Source: Telecoms job cuts, Financial Times, September 2001
… and the change in business climate could last one year or more
Over-investment
3–4 years
Collapse in values
Slow revenues
6 months?
Consolidation
Today
Demand and supply match
Revenues increase
About 1 year
Investment begins
A year or so
2001: Operators feel the bust in debt . . .
0
10,000
20,000
30,000
40,000
50,000
60,000
Q1 2000 Q1 2001
BT
Deutsche Telekom
Enitel
KPN
Sonera
Debt levels of 5 European telcos (millions of Euros)
Source: Company reports
. . . and in share prices
0
50
100
150
200
250
31 March, 2000 31 March, 2001
BT
Deutsche Telekom
Enitel
KPN
Sonera
Share prices of 5 European telcos (US dollars)
Source: Dow Jones, from ADRs listed on NYSE
Nasdaq Telecommunications Index
0
200
400
600
800
1000
1200
1400
71-0
2-0
5
73-0
2-0
5
75-0
2-0
5
77-0
2-0
5
79-0
2-0
5
81-0
2-0
5
83-0
2-0
5
85-0
2-0
5
87-0
2-0
5
89-0
2-0
5
91-0
2-0
5
93-0
2-0
5
95-0
2-0
5
97-0
2-0
5
99-0
2-0
5
01-0
2-0
5
1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
“Hype decisions”
Main factors creating the hyper-growth and crisis
Market Investments
The hyper- growth of the late
1990’s & 2000
“Technology” Investments
• Failure in new business models delaying new services
• Financing constraints (debts, cash,…)
• Network spending exceeds demand in several areas
• Increased competition & lower margins
• Hyper-growth gone/Macroeconomic instability
• Signs of subscriber growth maturity
NowSpectrum
Geographical expansion
New competitors Internet
LH Optics
Digital Mobile
Good GDP development (US driver)
Next likely Steps
• Many more Operators/SP will go “bankruptcy”, Suppliers?
• From Growth focused to Return focused to Profitable Growth focused
• Define the core business and divest/close non-core assets
• Retain and explore installed customer base
• Fast consolidations to create necessary Returns
• The “incumbent” telcos will dominate & drive consolidations
Consolidation has started. We will see 3 (4) operators per market. The top 20 globally will have more than 80% of revenues.
Restructuring Suppliers
Main driving forces for the Future Telecom Market
Regulation Customer Demands
Technology/Products
• Consolidation & Convergence• Economy Development• New Technologies/Services• End-to-end Interoperability/Open standards• Business Models
TodaySingle-service networks
FutureMulti-services network
(carrier class)
Da
ta/I
P N
etw
ork
sD
ata
/IP
Ne
two
rks
Wir
ele
ss N
etw
ork
sW
ire
less
Ne
two
rks
Wir
elin
e N
etw
ork
sW
ire
line
Ne
two
rks
Ca
ble
TV
Ne
two
rks
Ca
ble
TV
Ne
two
rks
ConnectivityConnectivity
Communication controlCommunication control
Service Networks &Application enablersService Networks &Application enablers
A new communications architecture
Connectivity/Connectivity/Backbone NetworkBackbone Network
Access NetworksMGWMGWMGWMGW
MGWMGW MGWMGW
Content Applications
Ne
w &
Mig
r at i
ng
en
d- t
o-e
nd
Pro
toc
ol s
Seamless Interoperable Services - Key to Mass Services
End-to-End
• E-2-E Connectivity• E-2-E Call completion• E-2-E Applications
1 BMobile
1 B (400 M+ Internet)
Fixed
Business Model Mobile Services - Retail logic
SubscriberOperator/Service Provider
ContentProvider,Ads
Commission (for billing, customer care,…),Revenue sharing
charges* charges
*Entrance fee + Monthly fee + Volume based usage fee
Best Practice; i-mode,…)
Easy to use, Simple pricing, Relevant Services
SMS Growth, January 2000 to December 2002E
0
5
10
15
20
25
30
Jan-00 Mar-00 Jun-00 Sept-00 Dec-00 Mar-01 Jun-01 Sept-01 Dec-01 Mar-02E Jun-02E Sept-02E Dec-02E
Source; GSM Association
SMS was standardized in 1991/1992
Billions/Month
Aug 2002Dec 2001LaunchNov 2000
May 2001 Sept 2001
Subs
crip
tion
s (m
illi
on)
~47%of allsubs
Sources: Ovum and Reuters
Development Sha-mail service, J-Phone
Broadband Access has now taken off
• Stronger Operator Business Cases
• Competitive Technologies
1999 2000 2001 2002E 2003E
xDSL 0.7 6.0 17.0 ~33.0 ~52.0
CATV 2.4 9.0 14.0 ~23.0 ~33.0
Ethernet ~1.0 2.0 ~4.0 ~7.0
Source; Dell Oro, etc.
Subscribers (Million)
0
2
4
6
8
10
12
2002 2003 2004 2005 2006 2007 2008 2009 2010
USD bill.
Ethernet metro access
Fiber Ethernet
DSL–Ethernet up–link
DSL–ATM up–link
Sources: EU commission, Jefferies & Company, Inc and ECTA, Pioneer Consulting 2001
Growth of Wireline Broadband Access
(Year -end)
Su
bs
cri
pti
on
s (
mil
lio
n)
Fixed Broadband(Cable, xDSL, LMDS, Fibre)
Fixed (POTS/ISDN)
Mobile
0
300
600
900
1200
1500
1800
2000 2001 2002 2003 2004 2005 2006 2007
… Mobile Subscriptions Doubling to 1.8 Billion by 2007
World-wide Operator Services Revenues - “demand”
70’s 80’s 90’s 2000
• GDP development• Digitalization & SPC
• GDP development• Deregulation
• GDP development• Mobile• Internet
• GDP development/Asia• Broadband, Multi-Media, Mobile & Fixed• “Convergence”
?
Growth Opportunities
• Subscriber Growth
• Traffic/Usage Growth
• New Communication Services (Voice, Messaging, Imaging/Video,…)
• New Content & Applications
Our Product Visions;We believe in a main Product Strategy that is based on the following;
• Next Generation Networks that is based on an “end-to-end” carrier class “all IP solution” both mobile (3G) and fixed (Broadband)
• Seamless migration between today’s networks and subscribers to Next Generation, driven primarily by the large operators
• Next Generation “all IP” is based on a single network and multi-purpose terminals (or networks) for multiple services (Multi-Services)
• Open defined standards and APIs, end-to-end
Local AreaNetwork (~50m)
Personal AreaNetwork (~20m)
Wide AreaNetwork (~10km)
Wireless Evolution
4GCombined
devices
Digital
DECT, PHS
Infra Red
Wideband
WLAN
Bluetooth
Analog
CT1
“wire”
3GWCDMA,
EDGECDMA2000
2GGSM, PDC
TDMA,CDMA
1GAMPS, NMT,
TACS etc
Fibre Access
Ericsson Next Generation carrier class Broadband Multi-services Network
Ethernet DSL Access(+ POTS/ISDN)
Fiber Ethernet Access LMDS (+W-LAN & 3G)
Copper Access Fixed Radio Access
Backbone NetworkIP/MPLS/ATM/SDH/WDM
IP Multimedia
(TSP)
Softswitch Control & ApplicationsTelephony &
IN
(ENGINE/AXE)
MGW MGWMGW
Apartment 1e/o
e/o
RJ45
RJ45
Apartment 1+n
Entrance e/o
RJ45
Name tableInformation
board
Surveillance camera
HubHub
ELN220
DRG22
Regional Node
Ethernet DSL Access
Switched Ethernet
Ethernet access
IP network
ATM
Service EngineService Engine
Backoffice systems
DSLAMDSLAM
Public Broadband access
AAAService
Selection
xDSL Access
Broadband access server
Copper
Fiber
Product portfolio strategy – Invest in Next Generation
SDH opto/WDM/DXX,MINI-LINK, Juniper
Messaging, Browsing, Download, Streaming,
Positioning, VPN
Softswitch(TeS/MSC, IP-MM), HSS
EDGE NODE/BRAS ENGINE Integral (ATM/IP)/MGW
Ethernet Access/DSLLMDS/MINI-LINK BAS
Packet core, Circuit core, WCDMA RAN/OSS, EDGE/GSM RAN, CDMA2000, MGW
Backbone/Transport
3-party applications Partners.
Ericsson Mobility World
Applications
Application enablers
Control
BroadbandAccess 2.5/3G
Network/roll-out/Integration, System Integration,
Customer Management,Managed Services
Services
Convergence & Substitutions - Content migration
Substitutionsfrom othervalue chains
Time
BUSD
1000
2000
Messaging
Gaming/Gambling
Media & Music
Mobile office
Positioning
m-commerce
Public Services
Advertisement
Telecom services- GDP development- Business Productivity- Competition- New Services
“The ability to learn faster than yourcompetitors may be the only sustainable
competitive advantage”
Arie de Geus
The New Market logic