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Strand Consult
Possibilities in the Future Telecom Market….
John W. Strandwww.strandreports.com
Everybody is talking about innovation….
Consumer driven innovation, innovation as a
differentiator on technological innovation –
the problem is what should we do with all
this innovation and how will we finance it,
if there are no business models that can
transform new functionality and services
into hard cash…
Strand Consult
10 taboos in the mobile industry that are hampering business and preventing a
dynamic development in a sector that needs drive and innovation!
1. Revenue sharing models for mobile services - we need to move forward from CPA / premium SMS
2. Mobile services - how do we get consumers to change habits and purchase more advanced services?
3. Distribution - how should distribution channels be rewarded in the future ?
4. The mobile broadband - business models -Will mobile operators develop towards being mobile ISPs
5. The MVNO market - is it small operators or segmented distribution channels?
6. Outsourcing - what are the operators’ core competencies?
7. Mobile payments - the future is simple, but many are trying to make it complicated.
8. Mobile marketing - is the market that big and will it evolve as many optimists are predicting?
9. Network technologies - we all know GSM and UMTS, but what about all the competing technologies?
10. Mobile market regulation - the regulative authorities and politicians want to regulate the mobile market.
Strand Consult
Strand Consult
Classic value chain – 5 main layers - 16 sub-layers
Strand Consult
Operators OPEX & CAPEX va. Net Sales….
Ericssons Cash flow in 2007 - 188 Billion SEK…..
Strand ConsultTotal salget voksede 4% totalt PS voksede 16%....
What is their core business…
Strand Consult
Case: Zyb…
Strand Consult
The big boys are expanding…
Facebook is becoming a dating site
Plaxo has been purchased by Comcast
Microsoft has MSNBC & tried to purchase Yahoo
Vodafone is purchasing Zyb.com
Google is a content aggregator
Nokia is offering free music
Skype – what are they and where are they heading?
Youtube – is this a TV station?
Strand Consult
The dream of creating a brand ….
Strand Consult
Strand Consult
Brand strategy for 2 - 2.5 - 2.8 - 3G…..
2G 2.5G 2.8G 3G
Consumer
Business
Consumer
Business
MVNO
Consumer
Business
MVNO
Subbrands
Prime segment
Volume segment
MVNO
Subbrands
Competitors
Strand Consult
The five SP/BR/MVNO mobile phases
The mobile suppliers
use same business
model as MNO’s
The mobile suppliers
are often MVNO’s
The penetration is
relatively low and
mobile suppliers are
mainly competing for
new mobile
customers with high
subsidies, rather
than existing mobile
users
More mobile
suppliers means
increasing churn
Discount mobile
suppliers means a
shift in paradigm
The market is very
innovate because
discount mobile
suppliers are
launching new
products (internet as
distribution, self
service, new services
etc.)
Many new mobile
suppliers are stake
on low prices, and the
market experiences
stiff competition and
price pressure
High penetration
No subsidisation of
costumers’ mobile
terminals
Increasing churn
Increasing MoU
caused by the falling
prices
Copy
The Consolidisation
phase is the
culmination of the
competition in the
discount phase
The MNO’s are
forced to lower the
competition
MNO’s buy up the
most successfull
mobile suppliers and
are thereby getting
more control over the
market
The positive trends
from the discount
phase continue –
lower MoU
Increasing number of
discount mobile
suppliers are using
subsidisation to keep
customers and as A
countermove to
MNO’s subsidisation
strategies
Segmented mobile
suppliers are
launched by MNO’s
and SP’s
Focus is on lowering
churn and increase
ARPU
Increased number of
independent
segmented mobile
suppliers
MNO’s use SP’s and
MVNO’s actively as
extra sales channels
MNO’s launch own
subbrands
Discount Consolidation Segmentation
The brand phase is
characterised by new
mobile suppliers that
not have a
backgound in the
telecommunications
market
Not least media
companies, brand
owners and retailers
Retailers are
becomming important
customers for MNO’s
High degree of
fragmentation/
segmentation
Brand and Retail
Strand Consult
Case: E-Plus – EBITDA vs. SAC….
Strand Consult
Cost compared to ARPU per customer…
Casts Procent of ARPU
SAC 999,70 22 %
Subsidies 901,10 20 %
Commission 71,74 2 %
Marketing 26,90 1 %
Distribution 337,70 7 %
Network 509,10 11 %
Interconnection 521,80 11 %
Total cost 2368,40 51 % of ARPU*
ARPU 4619,51
*difference is consequence of VAS
Overview of the five mobile broadband phases
Strand Consult
Phase I: Access for
the mobile business
customer
Companies with
employees in the move
are requiting
employees with mobile
internet access
Employees can then
communicate with the
company, customers
and partners
Phase II: The
young and the
innovative on the
move
Phase III: PC’s are
used for mobile
communication and
machine to machine
communication
Phase IV: Mass market
– mobile broadband
are getting a common
item
Phase V: Change
and fragmentation
of the market
Mobile internet access
are getting used by
them that are on the
move in the city and
who live out in café’s,
at friends, at the
university
These young people
will see it as a natural
part of live and will
perhaps not have a
cable based internet
access at home
For all age groups,
mobile broadband
access will be as
common in a wi-fi card
Laptops will be sold
with mobile internet
access
Machines will use the
internet through
mobile internet
solutions in stead of
traditional broadband
solutions or as a
supplement
The market for mobile
broadband connections
will be saturated. The
mobile broadband
market will look like
the mobile market – all
people will have a
mobile phone and a
mobile broadband
solution
The market will shift
from being focused on
acquire new mobile
internet customers to
preserve them they
have
The same development
as we have seen on the
mobile market will we
see on the mobile
broadband market
There will emerge
different terminal
types, ways to see the
market, and it will be
as defragmented as the
mobile market
16
• Sweden and Finland
are price leaders
• Denmark to see price
erosion shortly as
resellers enter the
market
• Austria: EUR 7 (DKK
52 per) month
• Sweden: 35% (and
increasing) of mobile
broadband clients have
no wireline connection
(Tele2)
• In Finland, it is 20%
Mobile broadband
Denmark Price (DKK) Usage
TDC na
Sonofon 499 1GB
Telia 299 10GB
3 0,5 199 Unlimited
3 1,5 299 Unlimited
3 3,0 499 Unlimited
Finland Price (EUR) Usage
Sonera
Elisa 9,9 Unlimited
Norway Price (NOK) Usage
Telenor n.a.
Netcom 499 Unlimited
Sweden Price (SEK) Usage
Telia 199 Unlimited
Tele2 99 Unlimited
Telenor 199 Unlimited
3 0,4 99 Unlimited
3 up to 7,2 199 Unlimited
Mobile broadband – huge prices differences...
Case: SFR Quatroplay in france…
Strand Consult
50Mb to 250Mb, 10€ more pr. month.
251Mb to 500Mb, 20€ more pr. month.
501Mb to 1Gb, 30€ more pr. month.
Each extra 1 Gb costs 0.10 €
These tariffs are offered for a 24 month
subscription.
It costs 5 Euro extra per month if the
customer chooses a 12 month
subscription.
Free IP TV is everywhere……
Strand Consult
Free music and almost free TV…..
Strand Consult
Price in Denmark DKK 350 for TV and DKK 259 for Internet
Broadband subs:
TeliaSonera 2,368k
Telenor 1,574k
TDC 1,315k
Strand Consult
The reality…
Current heroes/winners…. Yesterdays heroes/winners….
Strand Consult
Case: Telenor – Good intentions, few services ….
Strand Consult
Case: Skype few people, many services….
Strand Consult
The big question– IP or not to IP….…
IP Centric
Network Centric
What is the value of a network
What is the value of infrastructure
What is the value of a customerWhat is the value of trafficWhat is the value of a Telco brandRegional presence
Global presence
If the future services are IP based….
Strand Consult
Open vs. Walled garden..….
On the move..
WALLED OPEN
3-UKTelenor
Vodafone Live
SK-Korea
Strand Consult
”Open garden” value chain – Simultaneous parallel roads…
With an ”open garden” value chain, consumers choose the
providers of mobile services
Strand Consult
What to invest in…..
Walled
Understanding the market
Platforms
Services
Marketing
Employees
Product development
Open
Billing platform
API solution
Legal aid
Partner Programmes
Partners
Market development
Strand Consult
Open vs. Walled garden….
Walled
High CAPEX
Long production time
High customer knowledge
Focus on products
Few services
Less dynamic
Open
Low CAPEX
Fast production time
High market knowledge
Focus on the Market
Many services
Very dynamic
Strand Consult
An arms race for the chosen few….
Strand Consult
TV
Rad
io
New
spap
ers
Mag
azines
Vertical vs. Horizontal media products…
Intern
et
Mo
bile
Bro
adb
and
Old media New media
Distribution
Interaction and payment
Strand Consult
Revenues on Premium services 2006 (2005)
•Denmark: € 45 millions (36) – 8,33 € by inhabitant in 2006
•Sweden: € 54 millions (44) – 6,06 € by inhabitant in 2006
•Finland: € 84 millions (70) – 16,47 € by inhabitant in 2006
•Norway: € 125 millions (100) – 27,77 € by inhabitant in 2006
•Baltic: € 31 millions (22) – 3,44 € by inhabitant in 2006
Strand Consult
Services POS Coustomers
One stop shop
Service
Aggregation
The importance of sales in the future telco market…
Strand Consult
From high expences to... …
We believe that the succesfull telco’s of the future will have few fixed expences and
utilize a combination of focusses strategy, partnerships, as well as diversified business
models to create traffic in their networks and on their platforms. In the end it is all
about who have most traffic in their billing system, not who sends out mosy Press
Releases...
Strand Consult
Four main trends from an investor’s point of view…
Innovation is moving from traditional companies to smaller and more flexible players
A changed value chain opens a number of new business possibilities
Business models based on revenue sharing make it easier to build a healthy business
Consolidation continues and continues and continues
Strand Consult
What are they purchasing…
Players
Infrastructure players
Technology providers
New players media/banks
Operators
Venture players
What are they seeking
Innovation
Cross selling
Market knowledge
Distribution
Consolidation
10 Digital winner tips….1. Mobile broadband – not via the mobile phone but via our PCs
2. CPA broadband on mobile and ordinary broadband
3. Services that can take advantage of the operators billing systems, networks and
service platforms
4. Wide distribution, either via handsets or via existing media channels
5. Those that can reduce the operators costs
6. Those that realise that advertising can not finance much in the mobile world
7. Those that can make everyday life easier for end users – mobility is one of
many subjects in this category
8. People that can think outside the box and that do not pay attention to
technology providers talking about a bright future
9. Those that do not try to create local copies of global concepts, but instead
focus on creating unique companies
10. Those that know the difference between innovation and evolution
Strand Consult
Strand Consult
Main trends in relation to an exit strategy…
Many companies quickly attain a positive cash flow
Many smaller and medium exits
Few large exits
Few real fiascos if you avoid the ”dreamers”
Innovation becomes valuable
Distribution becomes valuable
Globalisation becomes valuable
Cash flow becomes valuable
The role as consolidator becomes valuable
The classical virtues will win…
Strand Consult
It’s about 44 things....
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models
Business models Business models Business models Business models….
Strand Consult
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