8/8/2019 Informa - Telecom Croatia_Aug2010_Final
1/42
11/08/10www.informatm.com Confidential 1
Make better business decisions
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
2/42
/ /11 09 2009
Click to edit Master titlestyle
Click to edit Master subtitle style
/ /08 11 2010
How are European MNOsadapting to meet thechallenges posed by todays evolving industry landscape?
Telecom CroatiaZagreb, Aug 2010
Thomas Wehmeier
Principal Analyst | Industry Research
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
3/42
11/08/10www.informatm.com Confidential 3
oday s operating:nvironment the age of
austerity
transformation
pragmatism
convergence
efficiency
transition
cost -cutting
capacity crunch
churn
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
4/42
11/08/10www.informatm.com Confidential 4
Europes mobile sector: a mature industry indecline?
Revenues in reverse
Margins under severe pressure Focus on cash-flow Consolidation Traditional players attacked from all sides
Operators under attackfrom all angles
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
5/42
11/08/10www.informatm.com Confidential 5
Revenue declines make great headlines, butregulation and economy hiding the real data story
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
6/42
11/08/10www.informatm.com Confidential 6
The world has changed.
I think what is fair tosay is
the value chain andwho plays what rolein that value chain is
very much to bedetermined.
Matthew Key, CEO,Telefonica Europe
factories
openness
access plus
Partnering
coopetition
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
7/42
11/08/10www.informatm.com Confidential 7
European operator landscape has converged
Status of incumbent players inWestern Europe, 2005 Status of incumbent players inWestern Europe, 2010
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
8/42
11/08/10www.informatm.com Confidential 8
Convergence is very much a reality in theEuropean arena
Networks (everything but the last mile)
Devices (femtocells, WiFi-basedsmartphones, MiFi, WiFi-on-a-SIM)
Services (triple-play, quad-play)
Retail (single retail footprints)
Customer interactions (single CRM teams)
Brand (movistar, Vodafone, aon)
Marketing (single marketing campaigns)
Service providers (integrated players)
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
9/42
9
The impetus to respond to changes in the sector are forcing telcos to develop new partnerships
throughout their businesses
N e t w o r k
S e r
v i c e
sD
e v i c e s
Newrelationships
R e t a
i l
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
10/42
11/08/10www.informatm.com Confidential 10
Operators must choose multiple paths to meetthe innovation challenge
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
11/42
11/08/10www.informatm.com Confidential 11
Operators are finally rediscovering their love for their core businesses
The provision of pure access is
an attractive business
TeliaSonera, 2010
We are a telecoms group. In the end
you have to know what your business is.
Stephane Richard, France Telecom,July 2010
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
12/42
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
13/42
11/08/10www.informatm.com Confidential 13
Efficiency: operators are going lean, mean andagile
The drive for efficiency is not just acost benefit, but doing thingsbetter and more efficiently shownto drive greater overall servicelevels
Most operators seeking to reinvestOPEX gains into commercialactivities and revenue growth,e.g. into SAC, new technologies(NGA), store modernisation,brand campaigns
real estate
simplifiedproductportfolio
ITsimplification
BSSrationalisation
marketing
spend
acquisitioncosts
energy
network O&M
outsourcing
network-sharing
call centrecosts
unprofitablecustomer segments
groupprocurement
data centreconsolidation
headcount
self-provisioning
processoptimisation
SingleRAN
unified, all-IPnetworks
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
14/42
11/08/10www.informatm.com Confidential 14
Cost-cutting aside, four near-universal prioritieshave emerged for European telcos
Ubiquitous, high-speed broadbandfactories
Exceptional customer service & experience
Protect legacy voice
and SMS revenues
Seed and nurturenew revenue streams(data)
1.
4.
3.
2.
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
15/42
11/08/10www.informatm.com Confidential 15
Sweden shows the rest of Europe the light at theend of the tunnel
TeliaSonera Sweden rebased mobilerevenue growth, 1Q08-1Q10
TeliaSonera Sweden absolutemobile revenue, 1Q08-1Q10
TeliaSonera seeing healthy revenue uplift (8%yoy in 2009) thanks to benign voice market andstrong data pull through in a market defyingmacro-European trends
Mobile data revenues at 180% of its rebasedlevel in just two years with growth acrossconsumer and business
Majority of revenue uplift from migration of customers to mobile data access plans withsmartphones
Positive trends mirrored in TeliaSonerasbusiness in Norway, Denmark and Finland
Source: TeliaSonera
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
16/42
11/08/10www.informatm.com Confidential 16
All this despite revenue per gigabyte trends inSweden falling down the face of Everest
Source: PTS; Informa Telecoms & Media
2004-2009:Traffic = 2,700xRevenue = 17x
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
17/42
Its really not hard to see why operators just lovesmartphones (despite opening the doors to
service-based competition from open internet)
Getting the right device in usershands has become the single
biggest revenue driver for todays mobile operators. Where
once getting users to migratefrom 2G to 3G was seen as the
important shift, today it is allabout migrating users to
smartphones
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
18/42
But whilst its tempting to think smartphone only, theaddressable data opportunity is so much bigger Smartphone users typically represent only one-
eighth of an operators active data user basetoday, but data usage is much more broadlyspread
Operators most address both the smartphoneopportunity, whilst remembering the substantialmajority of its users that are on dumber
phones
Expand base of devices that can consume dataand improve the data experience on non-smartphone devices
Develop data pricing for the mass market in
prepaid
Optimisation can provide significant user gainsthrough reduced data consumption, time-saving in downloading content and theenhancement of the quality, consistency &immediacy of user experience
Smartphone penetration of total base
Active data user penetration of total base
Vodafone Europe 11% 34%
Swisscom 15% 36%
Europeanaverage
10-15% 30-35%
Source: Vodafone; Swisscom; Informa Telecoms & Media
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
19/42
11/08/10www.informatm.com Confidential 19
From iPhone to Bic phone: device strategiesevolving with the times
Polarisation of the handset market reflects changing consumer behaviour in post-recession Europe and need to target acrossall tiers
Subsidies heavily concentrated on the customer lifetime valueopportunity and the drive to generate non-smartphone tosmartphone uplift
Low-cost smartphone-lites to minimise subsidy cost to servethose customers with lower spending profiles in prepaid
Direct retail takes on greater importance to drive the right devicefor the right person and control consumer buying experience.Missold devices not only reduce uplift potential, but also riskgreater post-sale costs, higher return rates and an overallhigher lifetime cost to operator
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
20/42
11/08/10www.informatm.com Confidential 20
A view from Tele2 on smartphones
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
21/42
As users migrate to best-in-class smartphonedevices, video becomes the major traffic driver
Average data consumption by devicetype by application (Western Europe,2010)
Smartphones see around 20-foldtraffic multiple vs non-smartphones
A small, but growing sub-set of devices push trafficconsumption to new boundaries
Video overtakes browsing as thelargest driver of traffic with other bandwidth-intensiveapplications such as audiostreaming and mapping growingin weight
Signalling inefficiency of certainapplications placing hugeburden on radio networkcontrollers
2.1x
19x
Source: Informa Telecoms & Media
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
22/42
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
23/42
11/08/10www.informatm.com Confidential 23
As smartphones penetrate the market, networkquality has never been more transparent to end
users
I seem to spend more time waitingfor the stupid apps to load than I doactually using them. I really wish Id
chosen another network
The voice of a lonesmartphone useror theecho of a growing chorus
of dissatisfaction?
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
24/42
11/08/10www.informatm.com Confidential 24
Are we seeing the start of the great smartphoneand mobile broadband swindle?
Users feeling robbed by performance of their devices
Operators beginning to pull back from
marketing mobile broadband Reverse migration as users seeksanctuary on the fixed network
Emergency investments into networks
Source: Informa Telecoms & Media
I have an iPhone on XXXUK OperatorXXX and recently I have had problems withvoice calls. I have tried dialling numbersover and over again but the call wouldntgo through. Thats happened frequently
over the past 2 weeksiPhone user, London, Jun 2010
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
25/42
The network is, always has been, and willbecome an even more important differentiator for mobile operators
Global mobile network traffic growth, 2008-2014
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
26/42
11/08/10www.informatm.com Confidential 26
An always most profitablyconnected model is inextricablylinked to the long-term strategicrelevance of the fixed network
Cost and speed advantages of fixed will maintainits relevance
Applications of intensive bandwidth consumptionwill stay on the fixed network where experience is
better and cost is lower resulting in segmenation of application usage by access technology anddevice
Fixed internet to capture the home whenconnected TVs, PCs, laptops, consoles and morebecome more commonplace
Mobile broadband prime role will be to complementthe fixed network for nomadic & mobile usagescenarios
Fixed backhaul and backbone imperative for profitable and high-quality mobile broadband
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
27/42
11/08/10www.informatm.com Confidential 27
Operators must adopt holistic and pragmaticstrategies to address network quality issues
On reflection, operators werent adequatelyprepared for the data deluge despite
spending years praying for its arrival, butoperators throughout Europe are activelyengaged in the implementation of some or all of these traffic management tools
A one one-size-fits-all approach will notemerge, but operators must adopt holisticstrategies encompassing a mixture of demand and supply-side measures
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
28/42
Operators need to think about optimising user experience outside areas of high-speed data coverage
Source: Operator website
GSM
3G
Greater London
Coverage by technology in Greater London of Tier 1 MNO (June 2010)
European 3Gcoverage stillsurprisingly patchy
Fallback to older technologies critical for service continuity
How to achieve
optimal user experienceirrespective of accesstechnology?
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
29/42
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
30/42
A brief history of mobile data pricing
Pay-per-MBPay-per-event
Buckets & bolt-onsUnlimited flat-rate
Where next?
10s of millions
Usageperuser
2003:3G
launch
Feb 2006:HSPA
launches
Nov 2006:3s X-Series
Oct 2005:T-Mobileswebnwalk
May 2010:AT&T/O2
kill flat-ratedata
Jun 2007:iPhone
launches
2000:GPRSlaunch
Active data users 100s of millionsAfewMB
100sofMB
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
31/42
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
32/42
11/08/10www.informatm.com Confidential 32
Its coming early operator moves will heraldthe arrival of more advanced pricing
customisation
tated, segment-orientated tariffs, and whether that will result in higher or lower prices, well, it
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
33/42
Customisation and personalisation will be key to drive upperceived value of mobile broadband services
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
34/42
11/08/10www.informatm.com Confidential 34
Case study: Vodafone Spains QoS-baseddifferential mobile data pricing the first of many?
Tariff is branded as Calidad Oro, meaningGold Quality
User guaranteed a prioritised serviceduring periods of high network load, butno guarantee of a minimum speed. Ineffect, they are offered a guaranteed ahigher QoS relative to lower-valuecustomers.
Where network resources allow, users arepermitted maximum speeds even whenexceeding their usage cap.
Ericsson/Huawei-supplied solutionunderpins the tariff
Seeking to leverage MBB market churn to
attract higher-value, less price sensitiveusers Key challenge has been to market the
service transparently and educateusers about the benefits of the valueproposition
Tariff Price per month Inclusive data Price per additional MB
Internet Express 32 Unlimited (throttledspeed of 128kbpsafter 1Gb)
0.00
Navega Plus 39 Unlimited (speedsmay decrease after 4GB consumed)
0.00
Calidad Oro 49 Unlimited (speedsmay decrease after 10GB)
0.00
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
35/42
Case study: Skylink Russia build data tariffsbased on application and time of day
Early mover in seeking to differentiate in acompetitive data market
Tariffs built around unlimited access topopular online services
Differentiating different protocols by offering
unlimited http/https, but additionalcharges for other P2P protocols Warnings highlighting hidden costs (e.g. of
apps running in the background) Using Flash Networks technology to drive
its policy engine Early results indicate more satifsied
customers, effective acquisition tool andoptimized network utlilisation this hasled to an expanded contract beingawarded to Flash Networks
Russia CDMA operator Approx. 1 million subs Data offered via EV-DO
Content-based tariffs include: Unlimited Classmates (popular SNS) Unlimited LiveJournal (popular SNS) Unlimited Web (unlimited http/https traffic)
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
36/42
11/08/10www.informatm.com Confidential 36
Transparency and user education will be the major hurdle to the spread of differentiated pricing
Gamestation inserted a clause intotheir terms & conditions to say itlegally owned the soul of each
customer 9 out of 10 purchasing from site
agreed to the conditions Transparency and customer
education needs to extend far beyond the T&Cs
Regulatory pressure to increasetransparency is likely
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
37/42
How to balance transparency, loyalty andmaximising profits?
Consumption metering apps
SMS notifications Notification when automaticupdates occurring
Roaming alerts
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
38/42
11/08/10www.informatm.com Confidential 38
Croatia: key market drivers
macro environment
structural impacts
market drivers
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
39/42
11/08/10www.informatm.com Confidential 39
Croatia: a chip off the EU-27 block?
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
40/42
11/08/10www.informatm.com Confidential 40
Croatia: key opportunities & recommendations
1. Expand the reach of high-speed wireless broadband (FTTx, HSPA(+), WiFi) to build aleading platform for the enablement of connectivity
2.3. Leverage position as integrated incumbent player to drive the penetration of convergent
offerings and enhance customer loyalty4.5. Grow penetration of data usage through the i mplementation of data tariff plans that are
appealing to the dominant prepaid segment (add-ons, micropayments,microsubscriptions, opt-in, loss leaders)6.7. Profitably target the mobile broadband segment with the introduction of sustainable
pricing models and experiment beyond pricing based on volume/time8.9. Bring affordable smartphones to market to grow the addressable market for advanced
data-centric devices. Work closely with handset manufacturers such as RIM that canhelp grow adoption of data services (e.g. BBM) and target subsidies strategically ondevices proven to generate higher customer lifetime value
10.11.
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
41/42
11/08/10www.informatm.com Confidential 41
Croatia: key opportunities & recommendations
7.
9.
11.
13.
15.16.17.
8/8/2019 Informa - Telecom Croatia_Aug2010_Final
42/42
Top Related