New Business Model - iktissadevents.com · HUAWEI TECHNOLOGIES CO., LTD. ... Network KPINetwork KPI ... ATIF 2011 Panel III - New Business Model_Huawei Tony Huang_final Author:

www.huawei.com

2011-6-20

New Business Model

June 2-3, 2011Beirut, Lebanon

Tony HuangDirector, CTO Office

Middle EastHuawei Technologies

HUAWEI TECHNOLOGIES CO., LTD. Huawei Confidential Page 2

Operators are facing both operational and financial challenges under the fierce competition environment

High Debt Ratio• High finance fee Balance Sheet Re-engineering

High OPEX• High Operation cost Lower OPEX solution

High Churn rate• Intense competition• Inefficient loyalty program

Faster go-to-market

High CAPEX • High investment on new

servicesRisk sharing

Challenges Requirements


Operators are seeking Vendors to provide Business solutions to address their Business requirements

1

Balance Sheet Reengineering

Lower OPEX Solution

Faster go-to-market

Risk sharing

Financing Solution

2Hosting Solution

3 Revenue Sharing

4Managed Services

√

√

√

√

√ √

√

√


Finance solution helps operator improve its financial performance in the Capital market

Key Financialindex

Debt / assets, net debt / equity, net debt / EBITDA

EPS and P/E Ratio compared with the regional peers

High CAPEX / Sales Ratio leads to Negative FCF

Challenges Debt Covenants Leverage Impact Debt Covenants Leverage Impact

Profitability Growth Profitability Growth

Free Cash Flow CAPEX Intensity Free Cash Flow CAPEX Intensity

OperationStrategies

De-leveraging to rebuild financial strength

Revenue stimulation and Cost reduction

Transforming CAPEX structure to reasonable CAPEX / Sales Ratio

Financing solution Hostingsolution Managed servicesRevenue

sharing


Operator should work with a vendor who has strong financing capability to offer customized solutions

Seller’s Credit

Project Finance

AR Financing

Leasing & Off Balance Sheet Solutions

Syndicated Loan

Buyer’s Credit

Strong support from institution: a vendor being supported by powerful finance institutions;

Respond quickly and innovative:drives innovative financing solutions in line with customer objectives;

Professional service: staffed by professional financing managers providing a first class service to customers


sharing


Hosting services helps operators focus on core business, lower OPEX and improve service offerings

• Improves financial and operation efficiency,

• Enable operators focusing on their core business objectives

• Shares risk by using “Risk Sharing” agreements which is based on the service revenue

• Provides total communication solution and accelerate the TTM of new services

Network and Services Maintenance

Network and Services Operation

Service Deployment

Systems O&M

Logistics & Spare parts

New Services Design

Planning

25-30%

20-25%

15-20%

10-15%

5-10%

5-10%

4-5%

Core business

OPEX Split by Network & Service Area


sharing


Hosting services can be sub-divided into 5 layers, ranging from Network equipment to Operation supports

Provision of hardware platform and software

Running, maintenance of service platform, i.e. SDP, CDN

Integration of application and service

SP / CP management and support

Business consulting, and Operation support

Network

Application

Platform

Management

Operation


sharing


Revenue sharing model helps operators launch new services quickly and limit their risk

$

Year-1 Year-2 Year-3 Year-4

Minimum monthly fee line

Assumed Payee Fee curve

Launch

Maximum re

venue sh

aring cu

rve

Revenue sharing Business Model Description

Payee Period: usually 3-4 years Payee Fee is linked to service revenue or

traffic The detailed covenant is related to

equipment value plus business commitment

Faster Time-to-Market Risk sharing Align costs with benefits Improve cash flow and liquidity Facilitate budgeting control Off -balance sheet financing

Key Benefits

Max revenue sharing curve: protect operators’ benefit

Min monthly fee line: protect vendors’ benefit


sharing


Network leasing from third party could reduce large upfront CAPEX investment for operator

Right-to-use Network

Revenue Sharing Model

Equipment Payments

Equipment SupplyFrame Work Agreement

VendorNetwork Supplier

LeaserNetwork Owner

OperatorNetwork User

This model is similar to “pay as you grow”This model is similar to “pay as you grow”


sharing


Managed services business model is well proven working for many operators for many years

Network Operation

Network OperationNetwork Operation

Network KPINetwork KPI

• Power / Transmission / Site acquisition• O&M / Spares / Support / Training• Power / Transmission / Site acquisition• O&M / Spares / Support / Training

• Network KPI measure and improvement

• Network KPI measure and improvement

With the managed service, operator can focus on its Core business, Reduce OPEX, Improve Network Quality thus making Performance Predictable.

Finance, G&AFinance, G&A

Marketing & SalesMarketing & Sales

Strategy and PlanningStrategy and Planning

CRM and CEMCRM and CEM

Operation Support System

Operation Support System

Business SupportSystems

Business SupportSystems

IT (ERP, OA, etc...)IT (ERP, OA, etc...)

VAS(SDP, SMS, WAP...)

VAS(SDP, SMS, WAP...)

IT & App.CoreBusiness


sharing


Managed services process can be divided into transition and operation stages

Service Responsibility

Transition

EmployeeTransition

Asset Transition

Infrastructureand FacilityTransition

Contract Transition

Due Diligence

Pre Transition Transition Stabilization

Transition Phase

Transformation Continuous Improvement

Operation Phase

• Focus on the core business;• Manageable & predictable OPEX;• Accelerate technology evolution;• Business Transformation for increasing competitiveness


sharing


Looking into the Future, We See Beyond Telecom…

In the next five years…2.5 billion MBB users，680 million FBB users

300 million wireless M2M users，

120 million IPTV users

270X MBB traffic，5X FBB traffic

US$ 100 billion data center market

Beyond Voice booming mobile broadband is the next engine of telecom

Beyond Population the Internet of Things is creating a large

subscriber base

Beyond Telecom home networks will open new markets to operators because of the disruptive user experience

Beyond Bit-pipe cloud computing brings new

opportunities driven by a new business model

Source: MBB users is from “Ovum”, FBB users is from “broadband trends”; M2M users is from “berg insight”, IPTV users is from “MRG” , Traffic and Data centre market is from IDC


Highlights of Huawei Technologies

2010

28

2005 2006 2007 2008 2009

68.5

12.8

18.3

21.8

CAGR：34%

We are serving 45 of the top-50 telecom operators worldwide; We provide end-to-end ICT solutions in Network, Software, Devices and

Professional Services


HUAWEI TECHNOLOGIES (Headquarters)

R&D centerHuawei Headquarters

Technical support center

22 regional HQ, 100+ branch offices 17 R&D centers (40,000+ R&D employees), 36 training centers 95,000 employees worldwide Contract Sales exceeded USD 30 billions (2009) Global 500 Corporations - ranked 397 in 2009

Our Global Presence ensures Supports Everywhere


We achieved Sustainable Growth in Middle East Region

Progressive Contract sales of US$2.7 Billion (2010)

Responsive 2800+ highly qualified employees, with

60% local staff

11 branch offices, serving 13 countries customers and their business globally

Innovative Leading Solution Provider in Telecom

Market including Fixed, Mobile and All IP ;

Solutions for Enterprise Market ;

Our business scope also includes Software & Applications, Devices & Terminals, and Professional services

Lebanon

Jordan

Kuwait

Iran

Saudi Arabia

Afghanistan

Pakistan

Oman

United Arab

Emirates

QatarBahrain

Iraq

HUAWEI TECHNOLOGIES CO., LTD.

47pt

www.huawei.com

To Enrich Life Through Communications

Thank youwww.huawei.com

Copyright©2010 Huawei Technologies Co., Ltd. All Rights Reserved. The information contained in this document is for reference purpose only, and is subject to

change or withdrawal according to specific customer requirements and conditions.

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New Business Model - iktissadevents.com · HUAWEI TECHNOLOGIES CO., LTD. ... Network KPINetwork KPI ... ATIF 2011 Panel III - New Business Model_Huawei Tony Huang_final Author: