14858_04_2002 © 2002, Cisco Systems, Inc. All rights reserved. TELKOM SA Executive Briefing April 14, 2005 Bill Brownell, Vice President Cisco Internet

14858_04_2002 © 2002, Cisco Systems, Inc. All rights reserved.

TELKOM SAExecutive Briefing

April 14, 2005Bill Brownell, Vice President

Cisco Internet Business Solutions Group

2© 2002, Cisco Systems, Inc. All rights reserved.

Outline

• Introducing IBSG

• Service Provider Market Trends

• Next Generation Service Provider


Introduction to IBSG: Capabilities

FinancialFinancialServicesServices RetailRetailMfg.Mfg. EnergyEnergyHealthHealth

CareCarePublicPublicSectorSector

EnterpriseEnterprise

eBusiness Solutions – Customer Care, eLearning,eBusiness Solutions – Customer Care, eLearning,Outsourcing, SCM, Web Foundation, Workforce OptimizationOutsourcing, SCM, Web Foundation, Workforce Optimization

Service ProviderService Provider

ChallengerChallenger MobileMobileSystemSystemintegratorintegrator

SP Solutions Business PlanningSP Solutions Business Planning SP eBus and eOps SolutionsSP eBus and eOps Solutions

IncumbentIncumbent


Operational transformation Operational transformation

SP CxO SP CxO Agenda Agenda

Profitable ServiceCreationProfitable ServiceCreation

Go To Market EffectivenessGo To Market Effectiveness

Business transformation

Business transformation

IBSG Areas of Focus

IBSG Programs

Drive Drive RevenueRevenueGrowthGrowth

Drive Drive ProductivityProductivity

ImprovementsImprovements


Outline





ConsumerConsumerss

EnterprisEnterpriseses

Small Small BusinessBusiness

• Enable the real time enterprise• Lower costs• Broader reach

• Access to customers• Scaleable growth• Partnering• Learning and

knowledge• Entertainment• Mobility, convenience

Service Providers Will Enable the 21st Century Economy

Service ProviderService ProviderInfrastructureInfrastructureand Servicesand Services

$1.2T Industry WW$1.2T Industry WW

$600B $400B$200B


Consumers And Businesses are spending more on Communications

Talk More, Eat Less?

Source: OECD 2003


Growth in Mobile, Data

0

200

400

600

800

1,000

1,200

1,400

1,600

2004 2005 2006 2007 2008

Value AddedServices(Layers 4-7)

Layers 2-3

Mobile Voice

Fixed Voice

Source: IDC/Gartner/Ovum/Yankee Cisco IBSG January 2005

$ Billion

-1.2% CAGR

7.1% CAGR

19.5% CAGR

11.9 % CAGR


Mobile Subscribers (M)Mobile Subscribers (M) Broadband Households (M)Broadband Households (M)

Growth Engines

IP Voice over Broadband Users (M)IP Voice over Broadband Users (M) Managed Services: IP VPN ($B)Managed Services: IP VPN ($B)

Source: Cisco IBSG, January 2005; IDC; Gartner Dataquest; Softbank

0

50

100

150

200

2003 2004 2005 2006 2007 2008

0

500

1000

1500

2000

2003 2004 2005 2006 2007 2008

0

5

10

15

20

2003 2004 2005 2006 2007 2008

0

50

100

150

200

250

2003 2004 2005 2006 2007 2008


Customer Are Willing to Pay(and Stay) for Value

SecuritySimplicityIntegration

PersonalizationControl

Speed ReliabilityLow cost

VoiceData

Video

WiredWireless

Foundational Requirements

Source: OECD Communications Outlook, 2003

111111© 2005 Cisco Systems, Inc. All rights reserved.10652_01_2005

Challenge:Complex, Costly Operating Models

• Market change has generated increasingly complex hybrid model

New networks for new services

Overlays to create integration, bundling, and customer care

• The hybrid model does not work

High complexity and increasing costs, despite cost reduction efforts

Limited ability to integrate

Constrained service innovation

Vulnerable to focused competitors

IBSG - 11


Challenge:Intensifying Competition (US Example)

Old – Static vertical integration: Markets are generally mutually exclusive

Source: Cisco IBSG, January 2005

New – Deconstructed model: Competition comes from all directions

Cable Companies(Comcast)

Service Layer Players(Vonage, Skype)

Mobile Operators(Sprint, Verizon, Vodafone)

Application

Core

Access

Incumbent WirelineMobile Cable

Incumbent Wireline


Traditional Revenue Streams Under Attack

Source: IDC, Yankee and Gartner, Q3 2004

Country 2003 2008 CAGR

USA 169 127 -5.6%

Japan 40 30 -5.6%

UK 16.9 15 -2.4%

Spain 7.2 6.4 -2.3%

Italy 12 11 -2.3%

France 14.3 12.7 -1.7%

Germany 19.5 18.2 -1.3%

Fixed Voice Market Size$-Billions


Level of Innovation

PriceCompetition

Low

High

HighLow

Germany

Mexico

Italy

France

Spain

=Less liberarilized competitive structre

UK

U.S.Canada

Japan

= More liberalized competitive structure

Regional Variations In Pace

General direction of customer demand and service mix similar but pace and competitive dynamics vary


Outline





Keep the Business On

Track

Change the Engine While Flying

Grow the Top Line


• Respond to deregulation

• Limit competitive inroads

• Get the “house in order”

• Improve productivity• Improve financial

performance

• Grow new and existing segments; transition to IP services

• Manage fixed and mobile convergence

• Become more customer and marketing oriented

• Reduce operating expenses through IP shift

• Adapt organization• Maintain customer

quality; enhance customer experience

• Evolve to a new business model

Management Agenda for Most Incumbents


CreateCreate Build and OperateBuild and Operate Market, Sell, Service

Market, Sell, Service

SupportSupport

Outlines of a New Model:The Next Generation Service Provider

Service Innovation and

Partnering

Service Innovation and

Partnering

Intelligent InformationNetwork and OperationsIntelligent Information

Network and OperationsCustomer

AgentCustomer

Agent

Responsive Business ProcessesResponsive Business Processes

Dramatically change:• Cost structure• Time-to-innovation• Brand value and customer experience• Revenue and profit trajectory

Source: Cisco IBSG, March 2005



Note: Dollars expressed as billions; results displayed for U.S. and Western Europe

Customer agent

$43$43

Intelligent information

network and

operations

$70$70

2004 Industry margin

$230B$230B

39% EBITDA

2008 Industry margin

$345B$345B

50% EBITDA

Legacy revenue decline

($95)($95)

Responsive business

processes

$70$70

Potential for Significant Profit Improvement and Competitive Strength

ServiceInnovation

And Partnering

$27 $27


Customer Agent:A Higher-Margin Customer Relationship

Services ReachExtend network intelligence to customer devices

Serve as the network capabilities manager for the customer

Services Management

Use brand to offer service packages customized for different markets

Market Segmentation

Solutions IntegrationProvide tools and services to integrate third-party applications


Customer Agent: NTT DoCoMo

• Offers iMode high-speed wireless data services

• First operator to deploy 3G W-CDMA (in 2001)

• 42M subscribers

• Operating revenues (FY ending March 04) ¥5T

• Strong services reach:

Worked closely with device manufacturers to define handset specifications

Established content search tools and navigation aids

Billed customers on behalf of content providers

IBSG - 20


Customer Agent: France Telecom Group

Use the best available Use the best available NetworkNetwork

UsersUsers’’ features features• Connection kit

• password• Security strategy

• Users services

Secure Secure AccessAccessSingleSingle

passwordpassword

Secure Secure AccessAccessSingleSingle

passwordpassword

Wi-Fi public Wi-Fi public

ADSLADSL@ Home@ Home

GPRSGPRSUMTSUMTS

PSTNPSTN

IT manager servicesIT manager services• Contract• Bill• SLA• Service deployment• Reporting• Administration services & tools

Enhance employee efficiencywith a single, simple & secure connection to the best

network available

Enhance employee efficiencywith a single, simple & secure connection to the best

network available

© 2005 Cisco Systems, Inc. All rights reserved. IBSG - 22

Service Innovation: Top 60 SPs Getting Traction on a Range of New Services

% Applicable SPs Offering

2004

Growth Rate of SPs Offering

2003–2004

% of Generally Available

Services On or Ahead of Plan

Enterprise Mobile Office

75% 11% 82%

Layer 3 VPN 62% 20% 80%

Broadband Video

33% Not measured in 2003 67%

Metro Ethernet 52% 26% 76%

Broadband VoIP

58% 65% 83%

Managed Security

61% 27% 68%



MPLS MPLS VPNVPN

SecuritySecurity

CoSCoSQoSQoS

Enhanced Enhanced Voice Voice

IP PBXIP PBX

VoVPN VoVPN

Service Innovation: Gaining Share of Wallet--Equant

Built a broader VoIP portfolio based on a strong MPLS VPN base

• Managed End-to-End solution

• VPN service with Quality of Service

• Simple Migration Path from traditional telephony to VoIP

• Broad LAN & WAN support– Consulting– Deployment– Maintenance

IBSG - 23


Innovating with Others: BT Rich Media

• BT Rich Media aims to be a “one-stop enabler for the distribution of content”

• Hosting and distribution = premium performance connectivity:

“BT Rich Media allows you to create new opportunities from your existing content … through the ability to multicast, stream and download to many channels.”

• Web-services-based billing and customer care

IBSG - 24


Communications Entertainment OnlineModular service construction


Network operational cost 40–60%Operating Expense Savings

Shared servicesCentral office expense

Outside plant

20–40%15–30%5–10%

Customer service 5–10%

Intelligent IP infrastructure

Need extensive horizontal scale to managebillions of IP-addressable devices

Operations Integrated, service

component “factories”

IP network (policy, QoS, security, multicast …) Other networks

Fully extended services

The Factory: Intelligent Information Network

and Operations


Total Fixed Network OpEx

0%

20%

40%

60%

80%

100%

2002 2006

0%

20%

40%

60%

80%

100%

2002 2003 2004

Total Wireline CapEx: Innovative vs Traditional

Traditional Innovative

Telecom Italia: NGN

Operations expenses decline through converged core

2004


CustomerCare

Employee Automation Supply Chain

Ideato

Offering

Ideato

Offering

Marketto

Order

Marketto

Order

Quoteto

Cash

Quoteto

Cash

Forecastto

Delivery

Forecastto

Delivery

Issueto

Resolution

Issueto

Resolution

Support the Business

Streamlined, automated business

processes

Responsive Business Processes


Employee productivity 20 – 40%Processes time reduction

Customer satisfaction >20%

25 – 50%

Applications

Abstraction layer

Sharedcomputer services

Shared storage services

Dedicatedcomputer services

Dedicatedstorage services

Limiteddedicated capacity to help ensure real-time operations

Web services interface

Third parties

Web services-

based applications

Shared service-

oriented IT infrastructure

WS WS WS WS WS WS WS WS


Capabilities of BusinessDirect:• Pay bills electronically• Place voice, data, and IP orders

and check status• Report and track service problems • Test circuits• Reroute network traffic in real time

Results:• Order-to-bill-cycle time reduced by 50%

through unified Web portal• One-third of all trouble reports managed

on Web• 18% increase in employee productivity• 80% maintenance issues automated• 60% increase in customer satisfaction

Automated, Customer-Focused Solutions


Making the Move

• Approach the process as a broad, synchronized business transformation

• Adopt a customer-centric perspective

• Focus on productivity and value improvement, rather than cost reduction

• Use a strong leadership strategy. Help ensure business units work together, silos are removed, and business goals are achieved

• Develop a clear roadmap


Evolutionary(7–10+ years*)

Pace Depends on Situation

Accelerated(3–5 years**)

NPV* gains 15–20% greater than evolutionary approach

OR

*Net present value**Estimated time to convert 80% of service revenue to IP

Most appropriate for service providers with

• Little or no competition

• Limited capital

• Slowly developing service markets

Business Impact

• Conserve capital

• Minimize risk of customer loss

• Avoid start-up OpEx cost

Most appropriate for service providers with

• Intense competition

• Capital availability

• Rapidly developing service markets

Business Impacts

• Maximum OpEx savings

• New revenue generation

• Platform for profitability


MS Edge+Core for IP NGNMS Edge+Core for IP NGN

Cisco Helping Service Providers to Transform

Enabling 3G ServicesEnabling 3G Services

PSTN Migration to IP NGNPSTN Migration to IP NGN

Broadband for Triple Play Broadband for Triple Play

Largest MPLS/Metro E Deployment

Largest MPLS/Metro E Deployment

Biggest Broadband Metro E for Triple Play

Biggest Broadband Metro E for Triple Play

The All DigitalNGN for CableThe All DigitalNGN for Cable

Core for IP NGNCore for IP NGN


Documents

14858_04_2002 © 2002, Cisco Systems, Inc. All rights reserved. TELKOM SA Executive Briefing April 14, 2005 Bill Brownell, Vice President Cisco Internet