SVP Advisors - Rethinking Communications

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Company Presentation

SVP Advisors

October 2011


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Contents

Experience in Regulation2

Experience in Economic Modelling3

About Us1

Experience in Business Strategy4

Experience in Corporate Finance5


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3

SVP Advisors is an international management

consulting firm for the TMT sector1, with expertise in

regulation, economic modelling, business strategy

and corporate finance

Established by seasoned professionals in 2006, we

have earned over time a solid reputation within the

TMT sector thanks to our quantitative and practical

approach to problem solving

Our work combines various disciplines such as

economics, econometrics, finance, accounting,

marketing and engineering

Who we are

1 Telecommunications, Media and Technology


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Areas of Expertise

REGULATION

CORPORATEFINANCE

ECONOMICMODELLING

BUSINESSSTRATEGY

Regulatory Strategy

Competition & Market

Analysis

Policy Setting

Transaction Support& Placement

Due Diligence

Valuation &

Benchmarking

Commercial Strategy

Business Planning

Business & ProductDevelopment

Costing Systems

Pricing Models

Margin & Profitability

Analysis


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Approach

Partnership

We believe in the potential of effective teams

(designed as networks of value, to best serve the interests of our Clients)

Focus

Our services are built around our core competencies and experience

(so that we can have a tangible, positive impact on the results of our Clients)

IndependenceWe provide impartial and sound advice

(so that our Clients can take fully informed decisions)

Fact-driven

We use clear and measurable evidence to reach relevant conclusions

(using sound arguments and with the support of quantitative analytical tools)

Practicality

We conceive solutions for the real world

(taking into full account constraints and specific circumstances)


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International Footprint

SVP Advisors Assignments (15 countries)

Previous Team Experience (26 countries)

Miami

Madrid(HQ)

BangaloreAssociate office

SVP Advisors Offices


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We work with some of the worlds largest and well-

respected institutions and operators, and we areoften invited to present at international conferences and

workshops addressing the latest topics in the TMT sector

Our international client base includes:

Telecom Operators such as Telecom Italia, Telefnica

and Turkcell

Media and Internet Companies such as Babelgum

and BetonLive

Telecom Regulators such as AGCOM, CMT, CITC, EETT

and NITA

Intl Organizations such as the European Commission

and the IADB

FinancialInstitutions such as Santander and Citibank

Clients

Clients distribution, by type


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People

Dimitri Kallinis

Partner

Business StrategyExpert

Julio Villalobos

Partner

Technology &Regulatory Expert

Over 10 years experience in

technology and regulation in the

TMT sector

Extensive international track-

record of modelling, regulatory

and strategy consulting projects

for fixed and mobile operators in

several Countries worldwide.

Former Team Leader of

Technology Strategy at Telefnica

Areas of expertise: fixed and

mobile networks, regulatory

strategy, regulatory accounting

and techno-economic modelling


strategy advice and financing in

the TMT sector

Telecoms financing expert,

participated in over 10 large M&A

transactions and in over 20

syndicated loan transactions over

the last few years. He has actively

participated in innovative ventures

through an investment fund

Areas of expertise: new

technology and media ventures,

start-ups, innovation, financial

transactions

Francisco Velzquez

Partner

New Ventures &Financing Expert


strategy advice and operations in

the TMT sector

Has lead several international

strategy consulting assignments.

Former Head of Residential Unit at

On Telecoms, a leading Greek

3Play Operator, responsible for

Content, Pricing, Sales Strategy

and MarkComms

Areas of expertise: broadband,

MVNO, IPTV, business planning,

commercial strategy and market

analysis


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Contents



About Us1




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Price Squeeze Analysis of Narrowband and Broadband Offers

Results & Benefits

Analysis of bundles fixed-line offers comprising

narrowband and broadband services, using an ad hoc

developed prize squeeze tool which calculated costs and

revenue of a reasonably efficient operator

The tool takes into account a vast array of wholesale

services including narrowband origination and

termination, broadband bitstream access and LLU

Additionally to the analysis, we assisted the Regulator in

drafting the methodology on margin squeeze

Allows the Regulator to assess whether an alternative

operator can market its services profitably based on the

wholesale inputs provided by the incumbent operator

Project Description

Note: chart has been altered for confidential ity purposes

Margins of a typical double-play offer considering

economies of scale and technology choice

Client

NITA (Telecoms Regulator) - Denmark

Key words: competition analysis, margin squeeze


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Audit of the Regulatory Cost Accounts of a Mobile Operator

Results & Benefits

Audit of the cost accounts for the year 2007 of a mobile

operator, prepared using the fully distributed cost

methodology under both the HCA and CCA1 standards.

The audit included the following main tasks:

Review of the methodology employed in the

preparation of the cost accounts

Reconciliation of financial and other relevant data

Review of the re-valuation of assets at current costs

Review of the full cost allocation process

We identified necessary and/or suggested amendments

to the operators costing systems and quantified the

impact of such changes on the cost of regulated services

Project Description

Schematic Overview of the Mobile OperatorsRegulatory Cost Accounting System

Client

AGCOM (Telecoms Regulator) - Italy

AllocationStage I

Allocation

Stage III

ServicesCost

CentresAllocation

Stage II

ActivitiesInputs

CostAccounts ActivitiesCost

Centres

AGCOM

Results

Table 1

Internal

Management

System

FAR

Traffic

Volumes

Revenues

AGCOM

Results

Table 2

Input AllocationModel

Stages Output

LEGEND

1 HCA: Historic Cost Accounting, CCA: Current Cost Accounting

Key words: regulatory accounting, cost models


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0%

20%

40%

60%

80%

100%

CDMA 450 Copper wire GSM 800 UMTS 100 WiMAX ADSL

%P

opulation

coverage

M arke t e ffi ci en cy fro nti er M arke t s us ta in abili ty fro nti er C urren t c ove ra ge

Fixed telephony Mobile telephony Broadband

Assessment of the Telecommunications Policy in a Latam Country

Results & Benefits

Strategic review of the Mexican telecoms sector aimed at

identifying areas where public intervention would be

required. We established market boundaries for each of

the services considered and assessed, among others:

Benefits and costs of several alternate technologies

Role of communications in low income & rural areas

The review took into consideration the current market

situation and international best practices on technology

developments and market structure/competition

Provided recommendations on several policy areas

including regulation, social service, internet access

programs, spectrum management and education

Project Description

Market efficiency gaps with differenttechnologies

Client

COFETEL (Telecoms Regulator) - Mexico

Key words: telecoms policy, market analysis


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Establishment of Regulated Wholesale Tariffs

Results & Benefits

Development of a Discount Cash Flow Model to support

the establishment of regulated wholesale tariffs for

broadband services based on a retail-minus methodology

The DCF model was based on the typical operations of afixed operator while also taking into account the specific

market and operator conditions

Further support was provided to the client in carrying out

a public consultation to ensure adequate reflection of the

views of the different stakeholders and market realities

The results of the model were used by the Regulator in

establishing the tariffs to be applied to the incumbent

operator for its broadband services

Project Description

Client

EETT (Telecoms Regulator) - Greece

Retail-Minus Calculation Model

Key words: tariffs setting, broadband, retail-minus


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Contents



About Us1




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Bottom-Up LRIC Model for determining the cost of Mobile Services

Results & Benefits

Development of a bottom-up LRIC model to calculate the

cost of a range of mobile services including wholesale

access, origination and call termination

Based on the pure-LRIC approach, the model takes into

consideration several factors such as QoS, demand

seasonality, technology choice (2G, 3G and LTE) and the

different use of available spectrum (refarming)

The model's several applications include the calculation

of the impact of network sharing on costs

The model built is highly flexible as it can provide results

for any type of existing or hypothetical/efficient

operator, depending on the inputs provided

Project Description

Calculation flow of the Bottom-up LRIC ModelClient

CMT (Telecoms Regulator) - Spain

Key words: mobile termination, bottom-up models, LRIC


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Design of a Costing System

Results & Benefits

Design of a costing system aimed at fulfilling our client's

regulatory and operational needs

Through a step-by-step process, the system allocated

the company's actual costs to wholesale and retail

services (voice, SMS, data, etc...)

In addition to actual financial information, additional

inputs such as routing factors were used in allocating

network, retail and common costs to cost centres and

subsequently to services

The system allowed the operator to prove full compliance

with regulatory obligations and to carry out a profitability

analysis of its wholesale and retail tariffs

Project Description

General overview of the Costing SystemClient

Turkcell (Mobile Operator) - Turkey

FIXED ASSET

REGISTER

P&L

STATEMENT

BALANCE

SHEET

COST ALLOCATION PROCESS

REVENUE ALLOCATION PROCESS

(DIRECT TO SERVICES)

ACCOUNT

SEPARAT

REPOR

-Intern

report

-Regula

report

SPLIT BY CHANNEL SPLIT BY SEGMENT

SPLIT BY TARIFF

STAGE 6.3 -CORP

General corporatecosts

STAGE 3.2 RETRetail activities

Primary activities(customer related)

Support activities

COGSTaxes & Fees

STAGE 4.2 RETRetail functions

Sales -Acquisition

Collections

Front-End

Rev Stim-Retention

ProductManagement

Back OfficeCOGS

Taxes & Fees

STAGE 2.3 RESTCorporate Costs by

Department

Allocation to businessunits by type of costs

Allocation of common andjoint costs to activitiesand network elements

Allocation of supportactivities to functional

blocks

Allocation to internalservices

Allocation to serviceswithtransfer charges and

routing factors

STAGE 2.1 NW

NW business unit

Capital relatedcosts by AssetOperating networkcosts

Costs byDepartment

Other ExternalCosts

STAGE 5.1 NW

Internal NW services

Statements at

wholesale markets

Origination

Termination

Roaming

Other

Internal retail services

STAGE 6.2 RETRetail services

Statements at

retail markets

Voice & Video calls

Messaging

Data

Roaming IN

Roaming OUT

Other

STAGE 1

Stage 1.1 FAR

Fixed Assets

Stage 1.2 P&LOrganization costs

Personnel

G&A

COGSInterconnectionRoaming

Handsets

SIM cards

Other expenses

Sales & Marketing

Other costs ofsales (e.g. NWoperating costs)

External expenses

Power

Taxes

Non-attributable totelecoms activity

Stage 1.3 BS

Working capital

STAGE 2.2 RETRetail business unit

Costs byDepartment

Retail costs bynature

Non-op. Assets

COGS

Taxes & Fees

STAGE 3.1 NW

NW elements

Primary plant

Support equipment

STAGE 4.1 NW

NW Functional Blocks

Radio Link

Backhaul

Core

Backbone

IX

DB & Platforms

STAGE 6.1 - NW

WH services

Statements WH

product 3rd parties

Voice & Video calls

Messaging

Data

Roaming IN

Roaming OUT

Other

STAGE 5.2 RETInternal retail services

Service-specific

Service Group-specific

Acquisition-driven

Customer-driven

Revenue-driven

Churn-drivenGeneral & other

TC TRANSFER CHARGESRF ROUTING FACTORS

RF

DW TRAFFICDATA

OPERATINGVARIABLES

NWROUTINGFACTORS

DWSUBSCRIBER

DATA

Key words: cost accounting, profitability analysis


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Calculation of the net cost of Universal Broadband Service

Results & Benefits

Development of a model to determine the net cost

associated to the provision of broadband to every

European household under several technological

scenarios, including wireline and wireless technologies

The calculation of the net cost was carried out at the

Member State level and took into account several factors

including the (possible) availability of spectrum from the

Digital Dividend or a mandated minimum bandwidth in

the broadband service provision

The outcome of the model was instrumental in the

impact assessment of EU Policy options for the revision

of the Universal Service provision

Project Description

Average net cost per capita of universalbroadband service, by EU Member State

Client

EU Commission - EU

Key words: cost models, universal service, broadband

1 2 3 4 5 6 7 8 9 10 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 0 2 1 2 2 2 3 2 4 2 5 2 6 2 7

EU27 MEMBER STATES


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DEMAND

NETWORKDIMENSIONING

OUTPUTSMAPPING

TO

DRIVERS

MAPPINGTO

ACTIVITIES

COSTING

AND

ALLOCATIONResources byactivity

By resourceBy cost categoryBy activity

By service

By serviceBy geo-type

List of servicesList of geo-types

List of ext. Factors

List of service groupsList of drivers

List of activities

List of resourcesList of Routes

List of cost types

EXTERNALFACTORS

By geo-type

PROCESSES

By service

1. INPUTS 3. DIMENSIONING 5. OUTPUTS2. ALLOCATION

MATRIXES

4. COSTING(ALLOCATION TO

SERVICES)

UNIT COSTS

By resource

GEO-MODEL

By route

CHARTS

LRIC analysisGraphsKPIs

SCENARIOANALYSIS

Sensitivity

Bottom-Up Model for determining the Cost of Postal Services

Results & Benefits

Development of a bottom-up LRIC model covering all

services and activities of Cyprus Post in the postal value

chain: collection, sorting, transport and delivery

The model took into the account cost efficiencies

achieved in certain processes, variations in costs due to

different service parameters and geographical specifics

The model provided the following outputs: unitary cost

by service, cost by activity, cost by category, cost by

resource employed

The model was instrumental in the assessment of the

pricing policy of Cyprus Post, including compliance with

regulatory obligations and competition principles

Project Description

Calculation flow of the Bottom-up costing modelClient

OCECPR (Telecoms Regulator) - Cyprus

Key words: postal services, bottom-up models, LRIC


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Contents



About Us1




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Assessment of MVNO Business Models

Results & Benefits

Development of a tool for determining the economics of

different MVNO business models to be potentially hosted

in our clients network

For each MVNO business model, the tool provided

financial accounts (P&L, CF statement) and KPIs

(subscribers, ARPU, MoU, etc.) over a 5-year period

The modelling tasks were preceded by the definition of

the different MVNO business models, in terms of MVNO

type, business proposition and target market segment

The tool was instrumental in assessing the viability of

different MVNO business models under different market

penetration scenarios and cost structures

Project Description

Schematic Overview of the MVNO toolClient

Private Client (Mobile Operator) Eastern Europe

Key words: MVNO, business modelling, wholesale strategy


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Study of Mobile Infrastructure Sharing Options

Results & Benefits

Review of mobile infrastructure sharing in EU25

countries covering different types of agreements ranging

from site sharing to national roaming, taking into

account regulatory and commercial aspects, and

identifying the best practices in different countries

This study was followed by the development of a

business case for calculating the financial gains/losses at

the wholesale and retail level associated with the nation-

wide provision of 2G national roaming

The results of this study were used by our client in

shaping the most appropriate strategy and commercial

approach with regards to infrastructure sharing

Project Description

Overview of alternate options of mobile

infrastructure sharing

Client

Private Client (Mobile Operator) Eastern Europe

Increasingdepthofnetworksharing

MNOs share the same physical compound but install

separate masts and mobile equipment (e.g. antennas)

Site Sharing

MNOs share the same mast or other structures (e.g.

rooftops)Masts Sharing

MNOs share all access network equipment, but use

their own software and assigned frequenciesRAN Sharing

A host MNO provides mobile services to the users of

the roaming MNO in areas not covered by its network

NationalRoaming

Sitesharing

Mastssharing

RadioAccess

Networksharing

Nationalroaming

Key words: infrastructure sharing, national roaming


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Development of a business plan for an international

betting company for a real live interactive football

betting application, provided over the Internet

As part of our work, we assessed and provided inputs on

the business model selected for the new application

Following that, we identified and analysed national

markets showing greater potential for the application

based on the broadband penetration, average spend per

user and features of multiservice platforms

Year 1 Year 2 Year 3

Addressable market (Units) 000 4,000.0 4,800.0 5,600.

Active users 000 86.4 178.6 282.

Penetration % 2.2% 3.7% 5.0%

Net ARPU (mth) 4.7 4.6 4.

Total net revenue 000 4,915.0 7,282.6 12,048.

Total recurring costs 000 1,161.7 2,228.1 3,635.

Total one-off costs 000 798.1 1,040.0 1,388.

Gross Margin 000 2,955.2 4,014.5 7,025.

Gross Margin % % 60% 55% 58%

Business Plan for an Internet Content Provider

Results & Benefits

The model produced a full range of financials based on

different scenarios, and was instrumental in the

definition of our clients markets entry strategy

Project Description

Overview of the key economics of the Business PlanClient

Private Client (Internet Company) - UK

Key words: interactive services, business planning

Note: figures have been altered for confidential ity purposes


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100%

60%

25%

15%

7%

100%

60%

15%

10%

5%

100%

60%

8%5%

3%

Hypothesis Licensing /

upfront payment

Phase I-II Phase III Market

Authorization

BEST

BASE

WORST

Business Plan for a Biotech Company

Results & Benefits

Development of a business plan reflecting the new

enhanced operations of our client, a biotech company

generating medicinal products through an innovative

Internet-based technology platform

In addition to opex and capex, the model calculated

revenue and costs for each single product in the

companys pipeline based on the development lifecycle

and discounting the probabilities of success in each

clinical phase up to market authorization

The business plan was instrumental in successful capital

increase round made by our Client for financing its future

planned operations

Project Description

Illustrative graph of % of products achievingmilestones under different scenarios

Client

Private Client (Biotech Company) - Switzerland

Key words: biotech, business planning

Contents


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Contents



About Us1




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Due Diligence of a Mobile Operator

Results & Benefits

Technical and market due diligence of a mobile operator

undergoing a round of re-financing through a $600

million syndicated loan

We reviewed the operators business plan, focussing on

revenue, opex and capex forecasts, using market

information and intl benchmarks as appropriate

The assignment included on-site visits to perform

management interviews, on the ground market analysis

as well as network and operational facilitiesmonitoring

We produced a due diligence report and a revised

business case based on our recommended values for

some sensible hypotheses and parameters

Project Description

Illustrative example of the analysis carried outduring the Due Diligence process

Client

Inter-American Development Bank - Colombia

Argentina

Colombia

Chile

Ecuador

Peru

Venezuela

Brazil

Mexico

Argentina

Colombia

Chile

Ecuador

Peru

Brazil

Mexico

Company A

Company B

0%

10%

20%

30%

40%

50%

60%

0% 20% 40% 60% 80

EBITDA

margin

market share

Key words: due diligence, market analysis, business planning


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Content

Target

market

Niche /Specialist

Professionally-generated

User-generated

Mainstream /Hit

Transaction Support in the Sale of an Online Video Company

Results & Benefits

SVP Advisors acted as financial advisor in the sale of an

integrated web and mobile video platform providing

innovative, professionally produced and curated content

to a global audience

From preparation to execution, we supported the

company throughout the transaction process

Our activities included drafting due diligence material,

identifying and contacting potential buyers, and setting

up meetings and negotiations rounds

Based on an assessment of the companys market value

and potential, we defined a clear sale strategy and

provided a narrowed-down list of potential investors

Project Description

Competition Map US Online Video MarketClient

Private Client (Media Company) - USA

Note: Size of the bubbles indicates Monthly Unique Users in the US

Key words: transaction support, online video


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For further information please contact:

SVP Advisors Ltd.

Almagro, 15Madrid, Spain

Dimitri Kallinis

[email protected]

Documents

SVP Advisors - Rethinking Communications