Telco 2015 five telling years, four future scenarios

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  • 2010 IBM Corporation

    Telco 2015 five telling years, four future scenarios

    Franco Prampolini IBM Italy, Telco Industry Business Development Team Leader

  • 2010 IBM Corporation2Telco 2015- five telling years, four future scenarios

    Contents

    A decade of structural change in Telecom

    Forces shaping the future of Telecom

    Uncertainties and Scenarios for Telco 2015

    Scenario Realization, Financials and Imperatives

    Survivor Consolidation

    Generative Bazaar

    Clash of Giants

    Generative Bazaar

    Summary and Conclusions

  • 2010 IBM Corporation3Telco 2015- five telling years, four future scenarios

    Contents

    A decade of structural change in Telecom

    Forces shaping the future of Telecoms

    Critical Variables and Scenario Framework

    Detailed Scenario Descriptions

    Survivor Consolidation

    Generative Bazaar

    Clash of Giants

    Generative Bazaar

    Summary and Conclusions

  • 2010 IBM Corporation4Telco 2015- five telling years, four future scenarios

    Over the past decade global communications penetration and in mobile cellular telephony specifically has been phenomenal

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

    Mobile celluar telephone subscriptions

    Internet Users

    Fixed Telephone lines

    Fixed Broadband Subscribers

    A decade of structural change in Telecom

    Source: International Telecommunications Union (ITU) ICT Statistics Database available at http://www.itu.int/ITU-D/icteye/Indicators/Indicators.aspx . 2009 figures are estimated published in ITU, The world in 2009: ICT Facts and Figures; ITU Geneva 2009, available at http://www.itu.int/ITU-D/ict/material/Telecom09_flyer.pdf

    Telecom Penetration1999 - 2009

  • 2010 IBM Corporation5Telco 2015- five telling years, four future scenarios

    37%

    14%

    5%

    1%2%

    -3%

    11%

    33%

    21%

    8%5%

    13%

    4%

    11%

    -10%

    -5%

    0%

    5%

    10%

    15%

    20%

    25%

    30%

    35%

    40%

    2005 2006 2007 2008 2009

    MiddleEast & Africa

    Latin America (excl. Brazil)

    Brazil, Russia, India, China (BRIC)

    Asia Pacific (excl. India & Japan)

    North America

    Europe (excl. Russia)

    Japan

    However, the key engines for growth - mobile cellular telephony and emerging markets expansion - have begun to stall

    A decade of structural change in Telecom

    Telecom Services Revenue Growth2004 - 2014

    Source : IDATE, in "World Telecom Service Market", 2008 Edition - January 2009, revision in July 2009; IBM Institute for Business Value (IBV) Analysis

  • 2010 IBM Corporation6Telco 2015- five telling years, four future scenarios

    There is a long-term decline in fixed telephony (PSTN) lines and revenues

    121 113 105 96 88

    136128

    120

    9791

    86

    4443

    1617

    17

    17

    142151

    103102

    45

    4445

    18

    0

    50

    100

    150

    200

    250

    300

    350

    400

    450

    2005 2006 2007 2008 2009F

    North America Europe Asia Pacific Latin America MEA

    EU5 PSTN/ISDN Lines (000s)2004 - 2009

    -8,000

    -6,000

    -4,000

    -2,000

    0

    2,000

    2004 2005 2006 2007 2008 2009F

    France Germany Italy Spain UK

    -2,321

    -6,317

    -5,243

    -2,530

    -7,657

    -10,000

    -8,000

    -6,000

    -4,000

    -2,000

    0

    2002 2003 2004 2005 2006

    US Wireline Losses2002 - 2006

    A decade of structural change in Telecom

    Source: IDATE; Federal Communications Commission, Trends in Telephone Service, August 2008, Ofcom, UK, Communications Market Report, August 2009 IBM Institute for Business Value (IBV) Analysis

    -5% CAGR

  • 2010 IBM Corporation7Telco 2015- five telling years, four future scenarios

    Fixed-mobile substitution continues

    645 632 608 582 576 560

    239 275 316 365 430495

    2003 2004 2005 2006 2007 2008E

    PSTN Mobile

    167 163 159 149 147 139

    59 64 71 83 100 111

    2003 2004 2005 2006 2007 2008E

    Fixed Mobile

    EU 5 - Outgoing Voice TrafficBillion minutes

    Source: IDATE, National Regulatory Authorities' Reports, Federal Communications Commission, Trends in Telephone Service, August 2008, Ofcom, UK, Communications Market Report, August 2009 IBM Institute for Business Value (IBV) Analysis

    59%

    84 81 75 71 70

    46 5258

    6572

    2003 2004 2005 2006 2007

    Wireline (-4% CAGR) Cellular (12% CAGR)

    UK - Outgoing Voice TrafficBillion minutes

    US Personal Telecom Consumption Expenditure

    US$ Billion (2003-2007 CAGR)

    CAGR

    14%

    -4%

    CAGR

    16%

    -3%

    A decade of structural change in Telecom

  • 2010 IBM Corporation8Telco 2015- five telling years, four future scenarios

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    2004 2005 2006 2007 2008 2009

    North America

    EMEA

    Asia-Pacific

    Latin America

    Dial-up access is in decline as connectivity shifts to broadband fuelled an expansion of xDSL, cable modem and FTTx

    Hou

    seho

    ld P

    enet

    ratio

    n (%

    )

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    2004 2005 2006 2007 2008 2009

    North America

    EMEA

    Asia-Pacific

    Latin America

    Broadband Household Penetration

    Dial-up HouseholdPenetration

    Source: PwC Media and Entertainment Outlook 2009-2013; IBM Institute for Business Value (IBV)

    A decade of structural change in Telecom

  • 2010 IBM Corporation9Telco 2015- five telling years, four future scenarios

    In markets with high mobile penetration, such as Europe, revenuegrowth and ARPU are declining

    Mobile market penetration Europe (% pop.)

    Mobile ARPU (/month)

    Mobile revenue Growth in EU 5

    0%

    30%

    60%

    90%

    120%

    150%

    2004 2005 2006 2007 2008 2009F

    EU-15 EU-12 (NMS)

    -5%

    0%

    5%

    10%

    15%

    2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 F

    0

    10

    20

    30

    40

    2004 2005 2006 2007 2008

    France Germany Italy Spain UK

    A decade of structural change in Telecom

    Source: Ronald Montagne Telcos views of openness, IDATE, October 2009

  • 2010 IBM Corporation10Telco 2015- five telling years, four future scenarios

    2.1

    6.0

    5.0

    2.7

    4.5

    8.2 8.1

    9.3

    23%

    34%

    60%

    43%

    65%

    54%

    46%

    33%

    0

    1

    2

    3

    4

    5

    6

    7

    8

    9

    10

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    However emerging markets telecom providers continue to secure growth and profits from serving low ARPU customers

    6.1

    8.1 7.8

    4.55.6

    9.4

    7.1

    12.1

    42%36%

    66%

    40%

    65%

    57%

    48%

    30%

    0

    2

    4

    6

    8

    10

    12

    14

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    3.1

    7.5

    5.5

    2.8

    4.8

    8.17.3

    9.6

    26%

    35%

    60%

    43%

    67%

    55%

    46%

    28%

    0

    2

    4

    6

    8

    10

    12

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    2006

    2008

    2010

    (USD/ month)

    114 128136 138

    62

    89

    127147

    24

    44

    71

    98

    16

    30

    45

    56

    APAC BRIC MEA LatAm

    Emerging Markets mobile ARPU and EBITDA margin

    Emerging Marketsmobile revenue,

    (US$ Bn)

    2004 201206 08 10

    Source: IDATE, Bank of America/Merrill Lynch, Global Wireless Matrix 1Q09

    ARPU

    A decade of structural change in Telecom

  • 2010 IBM Corporation11Telco 2015- five telling years, four future scenarios

    Overall communications have increased but much of the growth in is over-the-top; traditional telco services share remain unchanged

    Notes: (1) An SMS/MMS or e-mail is considered as a 30 second call.

    FRANCE TOTAL COMMUNICATIONS MARKET(billions of call minutes and equivalents)

    Stable use of traditional communications services

    Increased share of communication services by Internet Communication services providers

    Service are not easily monetized through traditional pricing models

    2005 2006 2007 2008 2009 2010

    Wireline Mobile SMS/MMS E-mail(excl. spam) IM P2P VoIPSource: Idate: Telcos views of Openess, Digiworld Summit 2009

    A decade of structural change in Telecom

    Source: Ronald Montagne Telcos views of openness, IDATE, October 2009

  • 2010 IBM Corporation12Telco 2015- five telling years, four future scenarios

    A bright spot has been the phenomenal growth of mobile broadbandwith the rollout of High Speed Packet Access (HSPA) networks

    Source:, Frdric PUJOL, Open Mobile , IDATE , 2009, Antoine Pradayrol, European mobiles: is the data opportunity big enough?, Exane BNP Paribas:

    HSPA traffic growth World average

    Voice & Data contributions Europe

    Voice & Data contributionsUSA

    Overall, global mobile traffic has more than doubled in the past year, reaching 33 Petabytes (PB) per month in 2008, and 85 PB per month in 2009

    A decade of structural change in Telecom

  • 2010 IBM Corporation13Telco 2015- five telling years, four future scenarios

    driven in part by increased penetration of Smartphones and HSDPA-enabled USB keys and dongles for laptops / Netbooks

    122

    151

    178

    2007 2008 2009F

    0.6

    14.6

    28.4

    2007 2008 2009F

    Smartphone Sales2007 2009(Million Units)

    Netbook Sales2007 2009(Million Units)

    21%CAGR

    588%CAGR

    A decade of structural change in Telecom

    Source: IDATE

  • 2010 IBM Corporation14Telco 2015- five telling years, four future scenarios

    The explosion of mobile applications is driven by devices like iPhone and AppStores but the latters revenue contributions are low

    -

    500 000

    1 000 000

    1 500 000

    2 000 000

    2 500 000

    July

    '08Se

    ptem

    ber '

    08No

    vem

    ber '0

    8Ja

    nuar

    y '09

    Mar

    ch '0

    9

    May

    '09

    July

    '09Se

    ptem

    ber '

    09No

    vem

    ber '0

    9

    -

    20 000

    40 000

    60 000

    80 000

    100 000

    120 000

    Downloaded Applications (000) Number of applications

    iPhone AppStore: A success with low revenues

    Average Price of Application remains very low US$2.5

    Revenues from AppStore estimated to US$25m-45m

    Apple however sold 13.7m iPhones in 2008; 13% of all handsets shipped (16% in 1H of 2009)

    Apple is using the AppStore to drive demand for hardware and foster audience monetization

    Nokia Ovi Nokia Ovi Blackberry Blackberry

    Mobile application stores

    Google Android Google Android

    iPhoneiPhone

    AppStore: Downloaded and available applications

    Source:, Frdric PUJOL, "Open Mobile ", IDATE , 2009,

    A decade of structural change in Telecom

  • 2010 IBM Corporation15Telco 2015- five telling years, four future scenarios

    The cost of delivering data however is not matched by revenues as revenue and traffic volumes are decoupled in a data-dominant world

    How to improve revenue /traffic for data?

    Traffic

    Revenues

    VoiceDominant

    Data Dominant

    Source: Nokia-Siemens; IBM Institute for Business Value (IBV) Analysis

    Network Cost How to lower network

    costs for data?

    Profitability

    A decade of structural change in Telecom

    Time

    Traffic Volume

    US$/bit

  • 2010 IBM Corporation16Telco 2015- five telling years, four future scenarios

    Telecom revenues from Telecom IPTV subscription and content services remain woefully low

    3,698

    16,988

    357

    6%

    2%

    0.40%

    0

    4000

    8000

    12000

    16000

    2005 2008 2012F0%

    2%

    4%

    6%

    8%

    IPTV Revenues

    Penetration (of PayTV)

    Source: IBM Institute for Business Value (IBV) Analysis based on PwC Media and Entertainment Outlook 2009-2013. IPTV Revenues include subscriptions, VOD and multi-channel advertising based on penetration. Additionally assumes telcos secure of 5%,10% and 20% of multi-channel advertising inventory in 2005, 2008 and 2012 respectively

    Global IPTV Revenues2005 -2012(US$ million)

    A decade of structural change in Telecom

  • 2010 IBM Corporation17Telco 2015- five telling years, four future scenarios

    In emerging markets, however, there is growing adoption of SMS-based applications, notably public information and advisory services

    Indian operator Tatas service mKrishi allows farmers to send queries and receive personalizes services

    India China

    China Mobile offers Nong Xin Tong for farmers to provide news, weather information and details of farming-related government policies (50 million users)

    Uganda

    SMS Services from Grameen, Google & MTN providing agricultural advice and targeted weather forecasts, health tips, clinic finder, and Google Trader matching buyers and sellers of agricultural produce and commodities

    A decade of structural change in Telecom

    Source: IBM Institute for Value (IBV) Analysis

  • 2010 IBM Corporation18Telco 2015- five telling years, four future scenarios

    ... as well as money transfer and mobile payment services

    New mobile economics World economic pyramid

    Philippines South Africa

    Zambia Ghana

    A decade of structural change in Telecom

    Source: IBM Institute for Value (IBV) Analysis

  • 2010 IBM Corporation19Telco 2015- five telling years, four future scenarios

    Ericssons operation center in Reading, UK, 2008

    Early 2009, Vodafone UK signed a 7-year agreement with Ericsson to take over maintenance and operational support for Vodafone UKs 2nd and 3rd generation radio access networks. Expects to achieve cost-efficiencies of 25% over the 7 year period.

    ~25%

    On March 18, 2009, France Telecom-owned Orange announced a 5-years deal to outsource the management of its networks in Britain and Spain to Nokia.

    Network outsourcing has gathered momentum in recent years and become mainstream even among tier 1s as part of cost restructuring

    Outsourcing

    621

    32 30 30

    6

    27

    59

    89

    2004 2005 2006 2007 2008

    Cummulative deals per year

    Deals per year

    Network Outsourcing Deals

    A decade of structural change in Telecom

    Source: IDATE, Kerry Capell , Vodafone and Orange Outsource To Ericsson and Nokia , March 18th Business Week; downloaded at; http://www.businessweek.com/globalbiz/blog/europeinsight/archives/2009/03/vodafone_and_or.html

    AT&T and France Telecom used to manufacture their own equipment but divested these to create Lucent and Alcatel. Now operators are giving up running their networks; what does this portend?

  • 2010 IBM Corporation20Telco 2015- five telling years, four future scenarios

    Consolidation of fixed and mobile markets continues in Europe

    108

    140

    103 99

    2000 02 04 06 2008

    -29%

    na

    Mobile networks operators EU27

    18% 22%

    10%

    23%27%

    1%16%

    6%9% 10%

    18% 19%

    11%

    9%

    2005 2008

    Others

    Tiscali**

    CPWAOL*

    BT

    Telewest*

    Virgin (ntl)

    Alice*

    47% 47%

    17% 24%

    12%

    22%6%

    15%3%

    7%

    2005 2008

    Club Internet*

    Others

    Neuf

    Free

    Orange

    Source: IDATE, Eurostat European Commission, Ofcom * Acquired between 2005 and 2008 ** acquired in 2009 or currently being sold

    Be Toucan Bulldog Video NW AOL Pipex Tiscali

    O2 Pipex Pipex Tiscali CPW Tiscali CPW

    2006 2007 2009Target

    Acquirer

    The number of mobile network operators peaked in 2002 after UMTS licenses had been issued. Since then, the number of MNOs decreased by almost one third

    Fixed broadband market

    France: The top three ISPs extended their subscriber market share from 76% to 93%, facing limited competition from cable

    UK: Market consolidation still under way. CPW being a major consolidator expanded its market share from 1% to 16%.Proposed T-Mobile UK and Orange JV will

    drive further European consolidation

    A decade of structural change in Telecom

  • 2010 IBM Corporation21Telco 2015- five telling years, four future scenarios

    and has gone a long way in the US already

    Not exhaustive

    Partners

    Fixed Mobile

    Source: IDATE, operator web sites, press

    A decade of structural change in Telecom

  • 2010 IBM Corporation22Telco 2015- five telling years, four future scenarios

    The telecom industry has undergone signficiant structural changeover the last decade; how will it evolve over the next 5 years?

    Phenomenal expansion in communications and industry growth driven by mobile and emerging markets over the past decade has begun to stall

    While long-term PSTN decline appears inevitable, mobile penetration is peaking in most mature markets, ARPU is falling and in some advanced markets mobile revenues have even started declining

    Migration from dial-up to fixed broadband continues and while global penetration remains low, adoption rates in advanced markets are increasing steadily though not enough to compensate for PSTN losses

    Rollout of HSPA networks have driven adoption of mobile broadband helped in part by the penetration of Smartphones and HSDPA-enabled USB keys /dongles for Netbooks and are somewhat mitigating the impact of voice revenue losses

    The cost of delivering data, however, is not matched by revenues as revenues and traffic are decoupled in data-dominant world

    Much expected revenues from both mobile and fixed content services such as IPTV remain woefully low

    although SMS-based data applications such as money transfer and mobile payment services have taken off in emerging markets

    For the first time, some telecom operators are handing over their networks to external providers (i.e. NEPs) to run/operate on their behalf

    Industry consolidation continues

    How will communications evolve over the next five years?

    A decade of structural change in Telecom > Summary

    Source: IBM Institute for Value (IBV) Analysis

  • 2010 IBM Corporation23Telco 2015- five telling years, four future scenarios

    Contents

    A decade of structural change in Telecom

    Forces shaping the future of Telecom

    Uncertainties and Scenarios for Telco 2015

    Scenario Realization, Financials and Imperatives

    Survivor Consolidation

    Generative Bazaar

    Clash of Giants

    Generative Bazaar

    Summary and Conclusions

  • 2010 IBM Corporation24Telco 2015- five telling years, four future scenarios

    Forces shaping the future of telecommunications in 2015

    Describe underlying incontrovertible trends in the evolution of the communications industry

    In the absence of a major exogenous shock the degree of uncertainty about these trends is virtually nil

    Definition:

    These trends provide a common background and context for all scenarios

    Forces shaping the future of telecoms

    Source: IDATE and IBM Institute for Value (IBV) Analysis

  • 2010 IBM Corporation25Telco 2015- five telling years, four future scenarios

    A number of forces are shaping the future of the telecommunications industry into 2015

    FORCES SHAPING

    FUTURE OF TELECOM

    ACCESS

    BUSINESS MODEL

    INDUSTRY STRUCTURE & REGULATION

    USAGE & SERVICES

    Usage

    Stable demand for

    telecom services

    Fragmented

    Communications

    Data Services growth

    Services

    VOIP migration

    accelerates

    PTSN declines

    Basic Broadband pervasive

    as TV

    3rd party access /

    enablement

    Shared Comms

    Capabilities

    Smartphone

    NetbookProliferation

    Comms becomes a

    feature

    Ubiquitous seamless

    open access

    New broadband

    infrastructure competition

    NGA and Net

    neutrality

    Source: IBM Institute for Business Value (IBV) and IDATE Analysis

    Green Revenue Models

    Forces shaping the future of telecoms

    Fixed mobile barriers

    fadeTermination

    rates converge and low

    Ultra-low cost

    devices

    LTE for Mobile

    Broadband

  • 2010 IBM Corporation26Telco 2015- five telling years, four future scenarios

    Mobile and broadband are emerging as critical necessities and essentials consumers are most unlikely to give after their homes

    79%

    51%

    26%

    26%

    17%

    12%

    12%

    11% 9%

    12%

    18%

    15%

    13%

    27%

    15%

    5%

    79%

    76%

    70%

    68%

    61%

    47%

    16%

    34%

    Unlikely to give up Neutral Likely to give up

    Q34: If the current economic downturn persists, which of the following are you least likely to give up?

    LIK

    EL

    Y T

    O G

    IVE

    UP

    UN

    LIK

    EL

    Y T

    O G

    IVE

    UP

    Newspapers / Magazines

    Pay TV

    Going Out (e.g. restaurants, bars,

    cinema)

    Family Holiday

    Landline/fixed telephony

    Broadband internet Access

    Mobile Phone

    Home

    LIK

    EL

    Y T

    O G

    IVE

    UP

    UN

    LIK

    EL

    Y T

    O G

    IVE

    UP

    Source: IBM Institute for Business Value Global Telecom Consumer Survey, 2009; N= 7722

    Forces shaping the future of telecoms >Usage

    Usage

    Fragmented

    Communications

    Data Services growth

    Ubiquitous seamless

    open access

    Stable demand for

    telecom services

  • 2010 IBM Corporation27Telco 2015- five telling years, four future scenarios

    14%

    15%

    27%

    22%

    61%

    56%

    62%

    26%

    24%

    17%

    16%

    14%

    13%

    14%

    11%

    12%

    13%

    7%

    7%

    60%

    58%

    58%

    57%

    56%

    53%

    51%

    52%

    49%

    28%

    29%

    29%

    33%

    35%

    36%

    44%

    41%

    No Change

    11. How do you anticipate your use of COMMUNICATION services will change over the next 5 - 7 years?

    Will increase useWill decrease use

    Net % change in frequency

    of use

    Communications are becoming increasingly fragmented across mobile, email, VoIP, text / instant messaging and social networks

    Postal Service

    Landline

    Voice Conferencing

    MMS

    Social Networking

    Instant Messaging

    Video calls

    Text messaging

    Mobile Email

    VOIP

    Email

    Mobile Voice

    34%

    37%

    23%

    23%

    22%

    15%

    16%

    14%

    12%

    9%

    -10%

    -6%

    Fragmented

    Communications

    Data Services growth

    Ubiquitous seamless

    open access

    Usage

    Forces shaping the future of telecoms >Usage

    Source: IBM Institute for Business Value Global Telecom Consumer Survey, 2009; N= 7722

    Stable demand for

    telecom services

  • 2010 IBM Corporation28Telco 2015- five telling years, four future scenarios

    Use of video and other data services will grow as internet data traffic quintuples and mobile broadband consumptions soars

    6,0358,844

    12,836

    18,762

    25,312

    32,154

    2008 2009 2010 2011 2012 2013

    Ambient Video

    Internet Video to TV

    Internet Video to PC

    Internet Voice, VideoCalls and GamingFile Sharing

    Web/Email

    Global Consumer Internet Traffic, 20082013

    Petabytes/ month

    6 17 4191

    201

    397

    80

    182

    406

    867

    65

    158

    342

    615

    15

    37

    89

    34

    207

    483

    1076

    2184

    85

    2008 2009 2010 2011 2012 2013

    Middle East & Africa

    Latin Amercia

    Central and Eastern Europe

    Western Europe

    Asia Pacific

    North America

    Mobile Internet /Data TrafficPetabytes/ month

    Source: Cisco Visual Networking Index, June 2009, http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-481360.pdf, IDATE, IBM institute for Business Value (IBV) Analysis

    40% CAGR

    135% CAGR

    Fragmented

    Communications

    Data Services growth

    Ubiquitous seamless

    open access

    Usage

    Forces shaping the future of telecoms >Usage

    Stable demand for

    telecom services

  • 2010 IBM Corporation29Telco 2015- five telling years, four future scenarios

    Communications and content will become more ubiquitous with open access enabling interaction with any device, service/provider

    70%

    62%

    44%

    6%

    28%

    32%

    50%

    62%

    2%

    6%

    6%

    32%

    Access content with anydevice (PC,TV, phone etc)

    from any provider

    Alllow access/ use contentfrom other service providers

    Real-time inter-modalcommunications

    Multi-lingual communicationswith real-time translation

    Likely Likely or Unlikley Unlikely

    7. How likely are the following interaction models over the next 5 10 years?

    2009 IBM Institute for Business Value Telecom Industry Survey N=61

    For the first time we are moving from a voice world to a visual world of messaging, emailing, internet browsing and downloading, social networking and entertainment, all experienced on the moveUbiquity is the key in the next decade. Anywhere, anytime, any deviceChairman's Office, Global Telecom Provider, Europe

    Fragmented

    Communications

    Data Services growth

    Ubiquitous seamless

    open access

    Usage

    Forces shaping the future of telecoms >Usage

    Stable demand for

    telecom services

  • 2010 IBM Corporation30Telco 2015- five telling years, four future scenarios

    170.8188.1

    473.8

    75.4

    139.8 134.5

    457.6

    103.9

    North America EU15 BRIC MEA

    2008 2014

    PSTN circuit switched lines will continue to decline although in some emerging countries there may be some growth as they catch-up

    Source: IDATE

    Global PSTN lines2008 2014 (millions)

    Decline in advanced markets

    accelerates

    BRIC turn from growth to

    declining market

    MEA is largely under-

    penetrated and has substantial

    catch-up potential in fixed

    -3.3% -5.4%

    -0.6%

    5.48%

    CAGR

    Services

    PTSN declines

    Shared Comms

    Capabilities

    VOIP migration

    accelerates

    Forces shaping the future of telecoms >Services

  • 2010 IBM Corporation31Telco 2015- five telling years, four future scenarios

    Increasingly VOIP is replacing fixed voice access lines

    29 26 22 18 16 14 13 12

    11 14 1820 23 25 26 28

    0

    10

    20

    30

    40

    2007 2008 2009F 2010F 2011F 2012F 2013F 2014FPSTN VoIP

    Source: European Commission, NRAs, IDATE Analysis

    Voice Access Lines

    FRANCE

    7 6 5 5 54 4 4

    2 44

    5 55 5 5

    0

    2

    4

    6

    8

    10

    2007F 2008 2009F 2010F 2011F 2012F 2013F 2014F

    PSTN VoIP

    NETHERLANDS

    Acc

    ess

    Line

    s (M

    illio

    n)A

    cces

    s Li

    nes

    (Mill

    ion)

    Services

    PTSN declines VOIP

    migration accelerates

    97% 92%79%

    64%

    0% 2%10%

    21%

    3% 6% 11% 15%

    2005 2006 2007 2008e

    PSTN VoIP Cable

    Share of Voice Access Lines

    GERMANY

    Forces shaping the future of telecoms >Services

    Shared Comms

    Capabilities

  • 2010 IBM Corporation32Telco 2015- five telling years, four future scenarios

    and the proportion of operator managed mobile VOIP will increaseas penetration of mobile VOIP accelerates

    10%20%

    40%

    60%70%

    80%

    90%80%

    60%

    40%30%

    20%

    2009 2010 2011 2012 2013 2014

    Managed (incl. Partnerships) Unmanaged

    0.8 1.5 4.5104.5

    812

    15

    23.5

    6

    10

    6

    12

    4

    40

    22

    75

    45

    25

    13

    7

    2009 2010 2011 2012 2013 2014

    US

    Germany

    UK

    France

    Source: IDATE

    Mobile VoIP users( million)

    Ratio Managed / Unmanaged VoIP users

    Mobile VoIP

    Services

    PTSN declines VOIP

    migration accelerates

    80%CAGR

    Forces shaping the future of telecoms >Services

    Shared Comms

    Capabilities

  • 2010 IBM Corporation33Telco 2015- five telling years, four future scenarios

    and operators begin to relax their attitudes

    Attitude towards mobile VoIP

    Market position(shares)

    Partner withVoIP provider

    Impose asurcharge

    Challenger

    Leader

    Prohibituse of VoIP

    Allow usewith data plan

    Attitu

    de no

    t nec

    essa

    rily

    the sa

    me fo

    r MNO

    s

    opera

    ting i

    n diffe

    rent

    coun

    tries

    Market leaders exploring possible revenue models:T-Mobile / Vodafone (DE) have lifted the ban on VoIP and imposed a surcharge

    Market challengers using VoIP as a means of competitive differentiation:3 partnering with Skype

    Mobile VoIP:Strategies of leaders versus challengers Services

    PTSN declines VOIP

    migration accelerates

    Shared Comms

    Capabilities

    Forces shaping the future of telecoms >Services

  • 2010 IBM Corporation34Telco 2015- five telling years, four future scenarios

    Device compatibility: while all major mobile VoIP solutions are now available on major smartphone OS platforms (Symbian, iPhone, Blackberry and Android), all sorts of cross interference issues have been reported with other applications installed (particularly carrier-customised) by early adopters, limiting widespread adoption by non-geeks

    Cellular network coverage and reach: current mobile VOIP codecs at 28.8kps could theoretically work on EDGE network but user tests have shown unacceptable latency and jitter. So service availability remains confined to public Wifi and 3G network coverage areas.

    USABILITY ISSUES

    3G to 2.5G cell handover: while cell handover within 3G coverage zone works reasonably well (although longer handover times are clearly perceived and reported by users), handover from a 3G to 2.5G cell site does not currently work in practice with dropped sessions in nearly all cases

    Shortened battery duration: current mobile VOIP solutions rely on particularly intensive processing within terminal both on call and always-on wait modes, resulting in substantially shortened battery duration

    Increased delays across all mouth to ear delay components Increased latency due to permanent packet retransmissions required

    Obstacles to mass market adoption of (unmanaged) mobile VoIP on 3G networks

    Source: IDATE

    Mass migration to mobile VOIP however is unlikely until HSPA andLTE are deployed widely to address known limitations

    AVAILABILITY ISSUES

    QoS ISSUES

    Services

    PTSN declines VOIP

    migration accelerates

    Shared Comms

    Capabilities

    Forces shaping the future of telecoms >Services

  • 2010 IBM Corporation35Telco 2015- five telling years, four future scenarios

    Shared capabilities enabling interoperability across fragmented tools will become standard through Google Voice and initiatives like RCS

    Google Voice also gives a user a Google Phonenumber that links all their phones together into one central communications network enabling

    Interoperable services between mobile devices and PC terminals, across different access networks

    The Enriched Call experience initially provides the capability to share multimedia content during a call.

    Enhance phone book service capabilities and presence-enhanced contacts in a network address book

    Enhance messaging expands on traditional instant messaging to simplify and unify multiple messaging mediums and provide a richer user experience

    Rich Communications Suite RCS)

    One number: a single phone number that rings all yourphones

    Free SMS: send, receive & store text messages online Block calls: send unwanted callers straight to voicemail Record calls: record phone calls and store them online Conference calls: join several people into a single call Screen callers: hear who is calling before you pick up Google voicemail: voicemail like email Voicemail transcription: read what your voicemail says Custom greetings: vary voicemail greetings by caller International calling: low cost calls to the world Notifications: read voicemail messages via email or SMS Share voicemails: forward, embed, or download

    voicemails

    Source: GSMA, http://www.gsmworld.com/our-work/mobile_lifestyle/rcs/index.htm, Google, RCS Overview, Colibra

    Services

    PTSN declines

    VOIP migration

    accelerates

    Forces shaping the future of telecoms >Services

    Shared Comms

    Capabilities

  • 2010 IBM Corporation36Telco 2015- five telling years, four future scenarios

    A number of telecom operators have RCS trials already underway

    RCS Timeline

    Forces shaping the future of telecoms >Services

    Services

    PTSN declines

    VOIP migration

    accelerates

    Shared Comms

    Capabilities

    Source: IDATE

  • 2010 IBM Corporation37Telco 2015- five telling years, four future scenarios

    Majority of households in advanced markets and urban areas of most emerging markets will have access to basic broadband

    89 99 108 115 120 124 127

    99 106114 121 127

    131 134

    146177

    210249

    292

    408

    2736

    4657

    70

    84

    100

    811

    15

    18

    22

    26

    560

    713

    799

    347

    30

    632

    492429

    370

    2008 2009 2010 2011 2012 2013 2014

    Fixed BB subscribers, millions

    Global 3G Deployments

    75 110151 194

    233 266116144

    177212

    245275

    160

    200

    237

    278

    332

    9

    14

    20

    27

    37

    53

    17

    20

    22

    2

    26

    27

    714

    1,022

    401

    377

    488

    606

    874

    2008 2009 2010 2011 2012 2013

    Middle East/ Africa

    Latin AmericaAsia Pacific

    EU 15North America

    3G subscribers, millions

    Satellite links from incumbent players and new players (e.g. Google-backed O3B) to eliminate most white spots

    Forces shaping the future of telecoms >Services

    ACCESSACCESSSmartphone

    NetbookProliferation

    Ultra-low cost

    devices

    Broadband pervasive

    as TV

    LTE for mobile

    braodband

    Source: IDATE

  • 2010 IBM Corporation38Telco 2015- five telling years, four future scenarios

    In many advanced markets, broadband will be generalised with household penetration levels similar to those of Television

    Source: IDATE, Eurostat, US Census Bureau *includes IPTV

    DE

    US

    81%57%

    91%96%

    2008 2009 2010 2011 2012 2013 2014

    92%68%

    92%96%

    2008 2009 2010 2011 2012 2013 2014

    Penetration of households (%)

    96%66%

    92%100%

    2008 2009 2010 2011 2012 2013 2014

    FR

    UK

    78%

    67%

    95%99%

    2008 2009 2010 2011 2012 2013 2014

    Forces shaping the future of telecoms >Services

    ACCESSACCESSSmartphone

    NetbookProliferation

    Ultra-low cost

    devices

    Broadband pervasive

    as TV

    LTE for mobile

    braodband

  • 2010 IBM Corporation39Telco 2015- five telling years, four future scenarios

    The race for mobile broadband appears to have been decided in favour of LTE

    71%

    67%

    44%

    43%

    27%

    20%

    8%

    27%

    33%

    48%

    48%

    39%

    42%

    38%

    2%

    7%

    9%

    34%

    38%

    54%

    FTTx

    4G/ LTE

    3G

    xDSL

    CATV

    2G

    WiMAX

    Critical to Success Neither Not Critical to Success

    Source: IDATE, IBM Telecom Executive Survey 2009,

    Which of the following access technologies are going to be critically important to the success of your business over the next 5 -10 years?

    Forces shaping the future of telecoms >Access

    Major operators LTE commercial deployment schedule

    Geographical mapping of early LTE commercial deployment

    ACCESSACCESSSmartphone

    NetbookProliferation

    Ultra-low cost

    devices

    Broadband pervasive

    as TV

    LTE for mobile

    braodband

  • 2010 IBM Corporation40Telco 2015- five telling years, four future scenarios

    One in five phones and laptops sold will be a Smartphone and a Netbook respectively - i.e. devices with mobile internet access

    115

    28 4049 56 61

    103130 142

    179208

    245

    285

    0

    50

    100

    150

    200

    250

    300

    2007 2008 2009 2010 2011 2012 20130%

    5%

    10%

    15%

    20%

    25%

    30%

    35%

    40%

    NetbooksalesLaptopSalesNetbookShare

    Netbook vs. Laptop Sales(millions)

    Source: IDATE, IBM Institite for Business Value (IBV) Analysis

    122 151 178216 252 287

    321

    1136 1202 1136 11961298

    13821485

    0

    400

    800

    1200

    1600

    2007 2008 2009 2010 2011 2012 20130%

    5%

    10%

    15%

    20%

    25%

    30%

    SmartphoneSales

    Phone Sales

    SmartphoneShare

    Smartphone vs. Phone Sales(millions)

    Forces shaping the future of telecoms >Access

    ACCESSACCESSSmartphone

    NetbookProliferation

    Ultra-low cost

    devices

    Broadband pervasive

    as TV

    LTE for mobile

    braodband

  • 2010 IBM Corporation41Telco 2015- five telling years, four future scenarios

    The market for ultralow-cost handsets is expected to grow quickly as more than 2/3 of new subscribers come from developing countries

    The mobile handset market is becoming increasingly polarised between low cost handsets for emerging markets and high-end smartphones for developed regions with the mid-range handset market being squeezed.

    US$

    Rapid growth of subscriber base and and forecasted ULC handsets in emerging markets

    Handsets Increase in Complexity but Prices Continue to Decline

    Source: https://electronics.wesrch.com/User_images/Pdf/WSS_1244733431.pdf, May 2009

    ACCESSACCESSSmartphone

    NetbookProliferation

    Ultra-low cost

    devices

    Forces shaping the future of telecoms >Access

    Broadband pervasive

    as TV

    LTE for mobile

    braodband

  • 2010 IBM Corporation42Telco 2015- five telling years, four future scenarios

    Fixed voice communications will be monetised largely as features of broader connectivity packages rather as a standalone service

    12%18% 18%

    32%

    30%

    40%47%

    43%23%

    16%12%

    2%15%

    13% 8% 8%5%

    4%2% 1%

    14%9% 13% 15%

    0%

    20%

    40%

    60%

    80%

    100%

    Q1 2005 Q1 2006 Q1 2007 Q1 2008

    Other

    Fixed voice, dial-up andmultichannel TV

    Fixed voice andmultichannel TV

    Fixed voice and dial-up

    Fixed voice andbroadband

    Fixed voice, broadbandand multichannel TV

    Service bundles take-up in the UK

    Source: Ofcom (2008), Communications Marketing Report, Office of Communication, UK, IBM Institute for Business Value AnalysisOPTA market Monitor (2009) http://www.opta.nl/nl/actueel/alle-publicaties/publicatie/?id=2926

    10% 13%15%

    19% 22%4.5%

    10.5%

    21.5%20.5%

    19.5%

    0%

    0%

    5%5%

    5%

    0%

    0%

    4%3% 3%

    17%

    16%

    15% 13%13%

    69%61%

    40% 40% 38%

    0%

    20%

    40%

    60%

    80%

    100%

    Q2 2006 Q4 2006 Q2 2007 Q4 2007 Q2 2008

    Fixed voice, TV and broadband Fixed voice and broadband Fixed voice, broadband and mobile Fixed voice and mobile voiceBroadband and TV Other

    Service bundles take-up in the Netherlands BUSINESS

    MODEL

    3rd party access /

    enablement

    Comms becomes a

    feature

    Green Revenue Models

    Forces shaping the future of telecoms >Business Model

  • 2010 IBM Corporation43Telco 2015- five telling years, four future scenarios

    Operators will provide open wholesale interfaces to drive innovation on their networks

    BUSINESS MODEL

    Major actors of the mobile industry are involved at different levels

    APIs will be engineeredto prevent fraudulent and malicious activity

    Development of new mobile technologies, applications and services to accelerate the commercial deployment of mobile internet services

    3rd party access /

    enablement

    Comms becomes a

    feature

    Green Revenue Models

    Forces shaping the future of telecoms >Business Model

    Source: IDATE, IBM Institite for Business Value (IBV) Analysis

  • 2010 IBM Corporation44Telco 2015- five telling years, four future scenarios

    Telcos will enable other industries to reduce their environmental impact and in the process generate additional revenues

    Balance of telcos internal CO2 emissions and overall CO savings

    Source: IDATE

    Replacement Conference calls, videoconferencing and telecommuting are directly responsible for 12.6 million tonnes of

    saved carbon in 2008 Videoconferencing will continue to grow its impact as solutions become more widespread within

    businesses and usage increases Telecommuting has an exponential impact on the environment allowing reduction of vehicle emissions

    Systemic effects: Online shopping will save 6.2 million tonnes of CO2 in 2008, and will continue to grow and improve its efficiency Dematerialisation of products will continue to increase, as more and more delivery channels migrate Online Virtualized interactions will become the most significant CO2 savings contributor

    Optimisation Telecommunications significantly reduce the carbon emissions of many industrial and logistical activities Paper and physical delivery are replaced by online information Smart power management will become an important source of savings over the period

    BUSINESS MODEL

    3rd party access /

    enablement

    Comms becomes a

    feature

    Green Revenue Models

    Forces shaping the future of telecoms >Business Model

  • 2010 IBM Corporation45Telco 2015- five telling years, four future scenarios

    The boundaries between fixed and mobile will blur as an increasing number of players offer a combination of products.

    Mobile TV offerings

    Cable TV and DSL quad play

    offerings through MVNO

    agreements

    Description

    DSL and cable modem

    internet access

    Examples

    Phone service of cable

    companies

    Dual and triple play offerings

    of unbundled carriers

    IPTV and TV content rights

    acquisition by telecom carriers

    Fixed Mobile Substitution

    ( Homezone ) offerings

    MVNO service of TV

    channels

    Unbundled or wholesale DSL

    offerings of mobile and

    satellite TV providers

    FIXED TELEPHONY

    MOBILE TELEPHONY

    CABLE TV

    BROADBAND ACCESS

    SATELLITE& OVER THE

    AIR TV

    1 1

    3 3

    2

    4

    5

    7 7

    6

    8

    99

    3

    4

    Source: IDATE

    1

    2

    3

    4

    5

    6

    7

    8

    9

    New broadband

    infrastructure competition

    NGA and Net

    neutrality

    Fixed mobile barriers

    fade

    Termination rates

    converge and low

    INDUSTRY STRUCTURE & REGULATION

    Forces shaping the future of telecoms >Industry Structure and Regulation

  • 2010 IBM Corporation46Telco 2015- five telling years, four future scenarios

    Increasingly new infrastructure competition will come from government, municipality and local initiatives

    Source: IDATE

    146

    93

    2005 2009

    x1.6

    European municipality and housing company driven FttX projects

    Where incumbents and other telcos fail to build out fiber networks non-traditional players will step in

    Local FttX networks driven by local players, including communities, typically adopt an open access approach

    Broadband leaders are

    also FttX pioneers:

    Netherlands 19

    Sweden 46

    Forces shaping the future of telecoms >Industry Structure and Regulation

    New broadband

    infrastructure competition

    NGA and Net

    neutrality

    Fixed mobile barriers

    fade

    Termination rates

    converge and low

    INDUSTRY STRUCTURE & REGULATION

  • 2010 IBM Corporation47Telco 2015- five telling years, four future scenarios

    Across Europe a significant portion of FTTH deployments are local or municipal projects

    MidtVest Bredband(2006-2012) 175M householdsSydfyns Intranet (2006-2009)30 M households

    M-net Munchen (2007-2011) 200M householdsCityNetCologne (2007-2011)50 M households

    Blizznet Vienna (2007-2009) 50M households

    Citynet Zurich (TBD) TBD Million households

    Pau Broadband Country France (2006-2011) 40M householdsSipperec (2007-2008) 22 M households

    GlasvezelNet Amsterdam (2006-2008) 40M householdsKPN Glasnet Enschede (2006-2009) 25 M households

    Hafslund tele Oslo (TBD) TBD M householdsLyse Tele (2006-2009)90 M households

    Uddevalla (2008) 10M householdsStokAB Stockholm (2006-2012)100 M households

    Important FTTH municipal projects in Europe

    Forces shaping the future of telecoms >Industry Structure and Regulation

    INDUSTRY STRUCTURE & REGULATION

    New broadband

    infrastructure competition

    NGA and Net

    neutrality

    Fixed mobile barriers

    fade

    Termination rates

    converge and low

    INDUSTRY STRUCTURE & REGULATION

    Source: IDATE, IBM Institite for Business Value (IBV) Analysis

  • 2010 IBM Corporation48Telco 2015- five telling years, four future scenarios

    In the Unites States the Federal Government is providing stimulus funds to local communties and organisations to expand broadband

    U.S. VP Biden lists $182 million in awards for 18 projects. The projects are the first to receive part of the $7.2 billion in funds dedicated to expanding broadband access -- which includes high speed Internet connections -- into rural areas, poor neighborhoods and Native American communities

    Awardees include: the North Georgia Network Cooperative, which will receive a $33.5

    million grant the Biddleford Internet Corp. which is to receive a $24.5 million grant North central Ohio's Consolidated Electric Cooperative, which will

    receive a combined grant and loan of $2.4 million Alaska Native Corporation, which will build out a 4G wireless network

    in southwestern Alaska a New Hampshire FTTH project an Arizona project to build computer centers for 84 libraries in that

    state.

    Total States Stimulus Funds

    Source: http://telecomengine.com/article.asp?HH_ID=AR_5994

    Forces shaping the future of telecoms >Industry Structure and Regulation

    INDUSTRY STRUCTURE & REGULATION

    New broadband

    infrastructure competition

    NGA and Net

    neutrality

    Fixed mobile barriers

    fade

    Termination rates

    converge and low

    INDUSTRY STRUCTURE & REGULATION

  • 2010 IBM Corporation49Telco 2015- five telling years, four future scenarios

    There will be new local access competition rules as NGA is deployed but commitment to net neutrality will remain

    23%

    52%21%

    12%14%

    56%39% 34%

    49%

    New competiton ruleslikely with NGA

    Abandon commitment toNet Neutrality

    Telcos and OTTssubject to similar

    regulations

    Likely

    Possibly

    Unlikely

    Existing remedies for enforcing competition in the local loop will be replaced with the deployment of next generation access technology

    Regulators will abandon commitment to net neutrality in order to stimulate investment and improve customer experience/quality of service

    Unregulated over-the-top services will be subject to the same regulatory obligations as traditional services (e.g. contributions to universal service funds)

    Forces shaping the future of telecoms >Industry Structure and Regulation

    INDUSTRY STRUCTURE & REGULATION

    New broadband

    infrastructure competition

    NGA and Net

    neutrality

    Fixed mobile barriers

    fade

    Termination rates

    converge and low

    INDUSTRY STRUCTURE & REGULATION

    2009 IBM Institute for Business Value Telecom Industry Survey N=61

  • 2010 IBM Corporation50Telco 2015- five telling years, four future scenarios

    to regulation

    Unsatisfied with the absolute levels and discrepancies of MTR between EU member states, the Commission presented a recommendation for voice call termination

    The Commission aims at harmonising the approaches used to fix MTR

    The Commission aims at enabling lower retail charges and putting an end to de facto subsidies from fixed to mobile operators

    In developed markets mobile and fixed termination rates will converge to symmetric, low levels

    From appeals

    The EU put pressure on the mobile industry to significantly cut termination rates

    The Commissioner's long term vision is to bring down mobile termination rates to levels comparable to fixed termination, i.e. ~ EUR 0.01 0.015 per minute

    Call termination markets in the E.U. need a regulatory plumber. Over the next 3 years, I expect [] to bring the costs for mobile phone calls down by around 70 %V. Reding, EU Commissioner

    USEU

    MTR are generally lower than in the EU

    Operators free to negotiate rates as long as rate is symmetric

    Fixed incumbent operators typically required to set cost-based termination rates ( typically less than one US cent/minute)

    Frequently no MTR charged between mobile operators and new entrant fixed operators

    RPP scheme applied for mobile users

    Source: IDATE, European Commission

    New broadband

    infrastructure competition

    NGA and Net

    neutrality

    Fixed mobile barriers

    fade Termination rates

    converge and low

    INDUSTRY STRUCTURE & REGULATION

    Forces shaping the future of telecoms >Industry Structure and Regulation

    Source: IDATE, IBM Institite for Business Value (IBV) Analysis

  • 2010 IBM Corporation51Telco 2015- five telling years, four future scenarios

    The world in 2015

    ACCESS

    BUSINESS MODEL

    INDUSTRY STRUCTURE & REGULATION

    USAGE & SERVICES

    Forces shaping the future of telecoms >Summary

    PSTN decline accelerates and VOIP grows. Ubiquitous and seamless access models prevail with high levels of rich digital content consumption accessible

    from any device, platform or network. Communications remain fragmented across several tools but shared capabilities enable interoperability

    Mobile and fixed broadband become as pervasive as TV in advanced markets. The battle

    of mobile broadband now favors LTE. 3G penetration

    increases in emerging markets. A bifurcated market of devices emerges with high penetration of ultra low-cost

    devices in emerging markets. One in three devices in

    advanced markets is a high-end internet-enabled smartphone, MID or,

    Laptop/Netbook.

    Voice is monetized as a feature of connectivity. Operators provide open wholesale access and interfaces to a wide range of capabilties including connectvity,

    customer information and billing services, to drive traffic on networks. Communication providers benefit from environmental mitigation programs.

    New infrastructure competition come from

    government, municipality and local initiatives, will

    new rules as NGA is deployed. Mobile and fixed termination rates

    disappear and boundaries among fixed, mobile and internet fade

    Source: IBM Institute for Business Value (IBV) Analysis

  • 2010 IBM Corporation52Telco 2015- five telling years, four future scenarios

    Contents

    A decade of structural change in Telecom

    Forces shaping the future of Telecom

    Uncertainties and Scenarios for Telco 2015

    Scenario Realization, Financials and Imperatives

    Survivor Consolidation

    Generative Bazaar

    Clash of Giants

    Generative Bazaar

    Summary and Conclusions

  • 2010 IBM Corporation53Telco 2015- five telling years, four future scenarios

    Alongside determining trends a number of uncertain variables with multiple contrasted outcomes will shape future industry scenarios

    Regulatory Uncertainty

    Ultra-fast Broadband Availability

    Network sharing vs. Outsourcing

    User funded vs. 3rd party funded

    OTT vs. Network optimized content

    Silo vs. unified communications

    Demand for voice communications

    New Verticals

    Machine-to-machine (M2M) communications

    Premium /Enriched Connectivity

    Closed/Packaged vs. Open connectivity

    Range of uncertainties Selected Critical Variables

    Vertical vs. Horizontal Integration

    Uncertainties and Scenarios for Telco 2015

    Source: IBM Institute for Business Value (IBV) and IDATE Analysis

  • 2010 IBM Corporation54Telco 2015- five telling years, four future scenarios

    Dominant themes across selected critical variables - addressable market growth and the dominant industry model

    Vertical vs. Horizontal Integration

    Regulatory Uncertainty

    Ultra-fast Broadband Availability

    Network sharing vs. Outsourcing

    Closed/Packaged vs. Open connectivity

    User vs. 3rd Party / ad funded

    Addressable Market/ Growth Areas

    Industry / Integration Model

    OTT vs. Network optimized content

    Silo vs. unified communications

    Demand for Voice communications

    New Verticals

    Machine-to-machine (M2M) communications

    Premium /Enriched Connectivity

    Uncertainties and Scenarios for Telco 2015

    Source: IBM Institute for Business Value (IBV) and IDATE Analysis

  • 2010 IBM Corporation55Telco 2015- five telling years, four future scenarios

    provide the dimensions that define four corner scenarios within the sphere of possible futures for telecom in 2015

    Critical variable #1

    Dominant Industry / integration model

    Concentrated/ Vertical

    Fragment/ Horizontal

    Addressable market

    Declining/ Stagnant

    Expanding

    The major dimensions for our scenario construction are addressable market and dominant industry structure/ integration model

    Uncertainties and Scenarios for Telco 2015

    Future

    Scenario C

    Scenario D

    Scenario B

    Scenario APresent

    Telco 2015 SCENARIOS

    SURVIVOR CONSOLIDATION

    CLASH OF GIANTS

    MARKET SHAKEOUT

    GENERATIVE BAZAAR

    Source: IBM Institute for Business Value (IBV) and IDATE Analysis

  • 2010 IBM Corporation56Telco 2015- five telling years, four future scenarios

    each with contrasted industry dynamics D

    eclin

    ing

    / S

    tag

    nan

    tE

    xpan

    din

    gA

    dd

    ress

    able

    M

    arke

    t

    Concentrated / Vertical Fragmented /HorizontalCompetition/ Integration Model

    SURVIVOR CONSOLIDATION MARKET SHAKEOUT

    CLASH OF GIANTS GENERATIVE BAZAAR

    Source: IBM Institute for Business Value (IBV) Analysis

    Carrier cooperation and alliances (e.g. RCS) pave way for global consolidation in response to the rising stakes from global application/content providers (Google, Microsoft, Sony etc.) or OEMs (Nokia, Apple, Ericsson)

    Mega carriers expand their markets through selected verticals (smart grid, e-health...) for which they provide packaged end-to-end connectivity

    Carriers succeed in stemming communications services revenue erosion through shared capabilities

    Few, mega carriers compete with OTT some of whom integrate backwards into the network

    Telcos develop a portfolio of premium network services (e.g. 3D TV) to deliver new digital experiences

    Barriers between OTT and network providers blur as regulation, technology and competition drive open access

    Infrastructure providers (The Net Co-op) integrate horizontally and cater to multiple service providers, based on co-operative /shared risk funding model

    A myriad of asset-light service providers emerge, packaging connectivity with new services revenue models

    Pervasive affordable open connectivity are enabled for any person or object and unleash a wave of generative innovation

    Reduced consumer spending leads to revenue stagnation or decline

    Advanced market operators have not significantly changed their voice communications/closed connectivity service portfolio and have failed to expand horizontally or into new verticals

    Investor loss of confidence for telecoms sector produces cash crisis that triggers survival consolidation

    Under prolonged economic downturn, investors force carriers to disaggregate assets into separate businesses with different return profiles and retail brands emerge to aggregate and package services from disaggregated units

    The market is further fragmented by government/ municipality and alternative provider (e.g. local housing associations or utility) initiatives to extend ultra-fast broadband to gray areas, as traditional infrastructure investment concentrates in densely populated areas

    Operators look for growth through horizontal expansion and premium connectivity services sold to application and content providers as well as businesses and consumers

    Uncertainties and Scenarios for Telco 2015

  • 2010 IBM Corporation57Telco 2015- five telling years, four future scenarios

    Contents

    A decade of structural change in Telecom

    Forces shaping the future of Telecom

    Uncertainties and Scenarios for Telco 2015

    Scenario Realization, Financials and Imperatives

    Survivor Consolidation

    Market Shakeout

    Clash of Giants

    Generative Bazaar

    Summary and Conclusions

    Scenario Characteristics

    Scenario Triggers / Realization Path

    Financial Assumptions

    Revenue and Profitability Implications

    Critical Success Attributes

  • 2010 IBM Corporation58Telco 2015- five telling years, four future scenarios

    Packaged communications and connectivity services dominate with minimal service innovation based on traditional revenue models

    Usage

    Services

    Business Model

    Communications are silod and fragmented across multiple but limited suppliers Connectivity usage similar to today - personal, active, download

    Consumers opt for OTT and user generated content

    In emerging economies communications remains voice-centric on mobile; internet and data usage remain anecdotal and limited to large cities but some deployment of basic mobile data services e.g. mobile money

    Services are as today as telco fail to enter new industry verticals and /or expand horizontally to offer open network services to application/third-party providers

    Packaged connectivity and communications services prevail

    User funded revenues continue to dominate and carrier revenue structure remain largely based on maintaining high ARPU across limited # of accesses

    Retail driven with a multiplicity of tariff packages, including metered and bundles for different segments with an emphasis on cost control

    Content is not a very dynamic market for telcos. Service providers absorb network costs from increased OTT content consumption or pass connectivity costs to users

    SURVIVOR

    CONSOLIDATION

    Survivor Consolidation

    SCENARIO CHARACTERISTICS

    Scenario Realization, Financials and Imperatives >Survivor Consolidation

    Source: IBM Institute for Business Value (IBV)

  • 2010 IBM Corporation59Telco 2015- five telling years, four future scenarios

    Economies of scale drive integrated (fixed and mobile) model dominance and network investments are curtailed

    Consolidation of declining private players in advanced markets and competition revolves usually around a limited number of large integrated players as fixed and mobile pure-plays disappear/fade

    In emerging markets a duopoly of mobile operators is the norm

    Emerging mobile centric giant operators from BRICs successfully gain foothold across emerging regions (Africa) by replicating their low cost model

    Industry Structure

    Access

    Regulation

    As is, with ongoing regulatory uncertainty

    NGA investment is stifled by very restrictive regulation or regulatory uncertainty

    Operators reduce rollout speed and geographic coverage of NGA

    Survivor Consolidation

    SURVIVOR

    CONSOLIDATION

    Ultra broadband availability is limited to 10-15% of households primarily in economically profitable areas

    For smaller operators, active network outsourcing to NEPs and passive sharing amongst one another are sustained beyond downturn with FTTx and LTE

    Handset subsidies remain and telecom networks are closed to unapproved devices, third-party providers or applications/services

    SCENARIO CHARACTERISTICS

    Scenario Realization, Financials and Imperatives >Survivor Consolidation

    Source: IBM Institute for Business Value (IBV)

  • 2010 IBM Corporation60Telco 2015- five telling years, four future scenarios

    Stagnating penetration and lack of growth/capital investment lead to investor loss of confidence and triggers survivor consolidation

    SURVIVOR

    CONSOLIDATION

    2010 2011 2012 2013 2014 20152009

    Prolonged economic downturn

    Increased price competition

    Reduced capital expenditure

    Constrained access to capital / reduced

    capex

    Higher wholesale / inter-connect charges

    Stagnating penetration levels at /near current levels

    Relaxed competition rules to encourage M&A to build scale

    Inability to monetize Value-Added

    Services (VAS) to

    Declining/flat revenues/margins

    Investor loss of confidence

    Consumers cut-back spending/turn to lower

    cost alternatives

    TRIGGER EVENTS / REALIZATION PATH FOR SCENARIO

    Economic and Financial

    Competition and Regulation

    Consumers and Markets

    Investment and Technology

    Scenario Realization, Financials and Imperatives >Survivor Consolidation

    Source: IBM Institute for Business Value (IBV)

    Illustrated trends

  • 2010 IBM Corporation61Telco 2015- five telling years, four future scenarios

    Critical success attributes for Survivor Consolidation

    Exploit fixedmobile substitution to increase revenues /growth

    Contain voice ARPU erosion

    Reduce cost to serve and preserve/ increase operation margins

    Secure significant fixed / mobile broadband market share

    Scale (across access types and regions)

    Integrated Operators

    Mobile Operators

    Fixed Operators

    Weak Moderate Competitive StrongHow well operators are positioned

    Critical Success AttributesSURVIVOR

    CONSOLIDATIONRECOMMENDATIONS

    Stimulate mobile voice usage through competitive commercial packages with fixed alternatives

    Fixed operators acquire/partner for mobile capability

    Invest in fixed mobile convergence with cost synergies

    Move to flat rate/ all-you-can-eat packages and bundle with other services (e.g. content / Broadband)

    Integrate voice with popular OTT communications services e.g. IM, social networking

    Optimize cost structures through process simplification, automation and transition to self-service

    Accelerate migration to converged/single core network Leverage global delivery for non-core functions

    Current Capability Assessment

    Use handset/Netbook subsidies and long-term contracts to acquire / lock-in mobile internet customers

    Bundle fixed broadband with content and voice offers at attractive prices

    Actively pursue in-country and regional consolidation opportunities to build scale

    Enhance M&A integration capability to enable rapid integration of IT, business processes and systems

    Source: IBM Institute for Business Value (IBV)

    Scenario Realization, Financials and Imperatives >Survivor ConsolidationSURVIVOR

    CONSOLIDATION

  • 2010 IBM Corporation62Telco 2015- five telling years, four future scenarios

    Contents

    A decade of structural change in Telecom

    Forces shaping the future of Telecom

    Uncertainties and Scenarios for Telco 2015

    Scenario Realization, Financials and Imperatives

    Survivor Consolidation

    Market Shakeout

    Clash of Giants

    Generative Bazaar

    Summary and Conclusions

    Scenario Characteristics

    Scenario Triggers / Realization Path

    Financial Assumptions

    Revenue and Profitability Implications

    Critical Success Attributes

  • 2010 IBM Corporation63Telco 2015- five telling years, four future scenarios

    Consumers have greater choice from a variety of providers /brands some of who leverage premium connectivity for new services

    Communications are silod and fragmented from a wide range of suppliers and aggregators across the value chain leveraging premium connectivity

    Users have greater choice of device/handset, services and service providers with more ala carte packages and online/OTT video/TV consumption increases

    In emerging markets mobile money paves the way for other simple data applications catering to specific needs of emerging markets

    Usage

    Services

    Multiplicity of tariff packages including metered and bundles that appeal to different segments supplied under a variety of market brands

    Greater focus on wholesale backbone business as well as ICT services as

    telcos expand horizontally to offer premium connectivity to enable content /application providers to offer own OTT content services with QoS and SLAs

    Emerging market operators focus on growing mobile data usage

    Market Shakeout

    MARKET SHAKEOUT

    Business Model

    User funded but wholesale driven in parts as device OEMs and application content providers leverage premium connectivity to deliver customized and vertical solutions

    Ultra-fast broadband (FTTH and LTE) offers are priced at levels comparable to broadband connectivity, encouraging rapid migration

    Open access models financed by government/ municipalities in gray/sparsely populated areas

    SCENARIO CHARACTERISTICS

    Scenario Realization, Financials and Imperatives >Market Shakeout

    Source: IBM Institute for Business Value (IBV)

  • 2010 IBM Corporation64Telco 2015- five telling years, four future scenarios

    in a more fragmented market as governments/municipality and alternative providers extend ultra-fast broadband to gray areas

    Some tier-2 operators divest network / assets and focus on customers and brand

    Multiple service provider brands emerge to package and bundle low-cost no frills services targeted at specific consumer segments

    Major device manufacturers enter communications service provision as MVNOs in major markets

    A handful of NEPs manage networks for 50% of global telecom providers

    Industry Structure

    Access

    Regulation

    Strong access obligations on infrastructure and strong net neutrality stance undermine investment incentives.

    Local not-for profit network initiatives provide open access

    MARKET SHAKEOUT

    Government, municipality and alternative provider (e.g. local housing associations, Utilities) broadband initiatives increase household coverage to 20-25%

    Passive infrastructure sharing becomes the norm for most operators for FTTx deployment and for 2G/3G mobile infra optimization

    Low end SIM-only, open devices and high-end devices based on exclusivity periods and strategic partnerships with OEMs, co-exist

    Market ShakeoutSCENARIO CHARACTERISTICS

    Scenario Realization, Financials and Imperatives >Market Shakeout

    Source: IBM Institute for Business Value (IBV)

  • 2010 IBM Corporation65Telco 2015- five telling years, four future scenarios

    Break-up of the vertically integrated model and alternative provider, government / municipality initiatives trigger market shake-out

    Prolonged economic downturn

    2010 2011 2012 2013 2014 20152009

    Infrastructure sharing / outsourcing becomes

    prevalent Governments/

    municipalities and others invest in

    broadband

    Declining/flat revenues/margins

    Disaggregated assets attract superior /

    sustainable returns

    Private sector capex is constrained

    PE acquire under-performing behemoths

    and split them

    Voluntary/forced separation for efficiency or regulatory reasons

    Brands emerge to package services from disaggregated assets

    MARKET SHAKEOUT

    OEMs and ACPs offer services using premium

    connectivity services

    Demand services available on other provider networks

    Consumer demand greater choice of

    provider

    Economic and Financial

    Competition and Regulation

    Consumers and Markets

    Investment and Technology

    TRIGGER EVENTS / REALIZATION PATH FOR SCENARIO

    Scenario Realization, Financials and Imperatives >Market Shakeout

    Source: IBM Institute for Business Value (IBV)

    Illustrated trends

  • 2010 IBM Corporation66Telco 2015- five telling years, four future scenarios

    Critical success attributes for Market Shakeout

    Powerful brand(s) plus strategic asset (e.g. excl. device partnership, network)

    Ultra-fast broadband coverage and optimized network delivery

    Collaboration with device OEM and application /content providers

    Open API propositions with low-priced tariffs for 3rd

    party services

    Agile, flexible and reconfigurable processes and infrastructure

    Integrated Operators

    Mobile Operators

    Fixed Operators

    Weak Moderate Competitive StrongHow well operators are positioned

    Critical Success AttributesMARKET SHAKEOUT RECOMMENDATIONS

    Leverage capabilities (e.g. devices partnerships, network quality, service innovation, no frills) to establish a distinctive reputation in market place

    Target specific brands at key customer segments

    Establish partnerships with municipalities and owners of multi-dwelling units to extend and share BB costs

    Develop deep insights into network and data usage to optimize core and access networks to reduce costs

    Define and implement common / interoperable standards and processes for collaboration

    Develop a shared platform capability to enable collaboration

    Potential Capability Assessment

    Provide standard connectivity interfaces to enable 3rd

    parties to leverage premium connectivity capabilities Develop low-cost tariff packages to enable affordable

    machine-to-machine connectivity across many devices

    Develop common platforms integrating technology, processes for rapid business/operating model innovation

    Leverage global delivery skills

    Source: IBM Institute for Business Value (IBV)

    Scenario Realization, Financials and Imperatives >Market ShakeoutMARKET

    SHAKEOUT

  • 2010 IBM Corporation67Telco 2015- five telling years, four future scenarios

    Contents

    A decade of structural change in Telecom

    Forces shaping the future of Telecom

    Uncertainties and Scenarios for Telco 2015

    Scenario Realization, Financials and Imperatives

    Survivor Consolidation

    Market Shakeout

    Clash of Giants

    Generative Bazaar

    Summary and Conclusions

    Scenario Characteristics

    Scenario Triggers / Realization Path

    Financial Assumptions

    Revenue and Profitability Implications

    Critical Success Attributes

  • 2010 IBM Corporation68Telco 2015- five telling years, four future scenarios

    Users opt for packaged integrated communication services as end-to-end OTT and network optimized digital lifestyle services co-exist

    Users opt for leading suppliers of shared capability (presence, contact list) aggregators across voice and online communications

    Premium network optimized services coexist with OTT content Significant portion of consumers purchase packaged digital content / lifestyle

    services from healthcare, payments, security to energy management, from carriers Voice services dominate in emerging market as it is extended to base of pyramid

    Usage

    Services

    Carriers generate sizeable traction for packaged end-to-end solutions (connectivity+IT) for strategic verticals (e-health, smart grid)

    Some premium network optimized entertainment services (multi sensorial, 3D, immersive reality) are met with commercial success from differentiated and uniqueuser experiences

    Integrated /unified communications ala Google Voice and Rich Communication Suite

    Clash of Giants

    Revenue Model

    Communications are free for users who pay for shared capabilities

    Retail dominated. Focused on customer ownership providing end-to-end targeted services and experience based on network / customer insights

    Connectivity revenues from packaged end-to-end digital content / lifestyle services

    Emerging market operators focus on maximizing their asset utilisation by growing voice revenues through the bottom of pyramid

    CLASH OF

    GIANTS

    SCENARIO CHARACTERISTICS

    Scenario Realization, Financials and Imperatives >Clash of Giants

    Source: IBM Institute for Business Value (IBV)

  • 2010 IBM Corporation69Telco 2015- five telling years, four future scenarios

    The vertical integration model prevails and some OTT players integrate backwards in a light-touch regulatory environment

    Market expansion gives rise to global carrier consolidation in response to rising stakes as OTT players integrated backwards

    Following the example of emerging region carriers, European and North American operators consolidate at regional level (e.g. 2 or 3 pan European operators)

    Some emerging market operators enter mature markets

    Active global industry alliances and standards for shared communications capabilities

    Industry Structure

    Access

    Regulation

    Light-touch regulation on infrastructure to encourage infrastructure competition. No endorsement of strong net neutrality positions

    Fewer, big carriers compete with OTT.

    Telcos develop a portfolio of premium services (3D TV) but have to carry competing OTT services

    Operator infrastructure sharing Next Generation Access (NGA)

    enabling coverage of 40%-50% of households. No more than 3-4 players in market

    Operators enter strategic partnerships with selected OEMs for devices that conform to their platform architectures and standards

    Custom closed devices to support shared communications capabilities and RCS

    CLASH OF

    GIANTS

    SCENARIO CHARACTERISTICS Clash of Giants

    Scenario Realization, Financials and Imperatives >Clash of Giants

    Source: IBM Institute for Business Value (IBV)

  • 2010 IBM Corporation70Telco 2015- five telling years, four future scenarios

    Carrier cooperation and alliances (e.g. RCS) pave way for globalconsolidation in response to rising stakes from OTT providers

    2010 2011 2012 2013 2014 20152009

    CLASH OF

    GIANTS

    Growing vibrant global economy

    Increased consumer confidence/ spending on communications

    Investor confidence in vertical models

    delivering better returns

    Greater access to capital and

    increased capex

    OTTs integrate backwards into access

    provision

    Providers invest in selected verticals

    Global industry consolidation

    OTT provider consolidation with a

    small # of global players

    Some emerging market providers expand

    globally

    Partnerships between OEMs and content

    providers

    Greater demand for end-to-end customer

    experience

    Increased customer adoption digital lifestyle

    services

    Consumers demand rich communications

    with sharedcapabilities

    Economic and Financial

    Competition and Regulation

    Consumers and Markets

    Investment and Technology

    TRIGGER EVENTS / REALIZATION PATH FOR SCENARIO

    Scenario Realization, Financials and Imperatives >Clash of Giants

    Source: IBM Institute for Business Value (IBV)

    Illustrated trends

  • 2010 IBM Corporation71Telco 2015- five telling years, four future scenarios

    Critical success attributes for Market Shaekout

    Vertical Industry solutions and expertise

    Global Integrated Enterprise

    Deliver end-to-end network-enabled digital experiences OTT cannot replicate easily

    Integrated Operators

    Mobile Operators

    Fixed Operators

    Weak Moderate Competitive StrongHow well operators are positioned

    Critical Success AttributesCLASH OF GIANTS RECOMMENDATIONS

    Leverage real-time network and customer analytics to deliver personalized experiences

    Enable seamless interactions across access types and devices and new content experiences (e.g. 3D)

    Build partnerships with domain expertise for selected verticals to develop and deliver solutions

    Focus on delivering customer experience measureable by SLAs commensurate with industry expectations

    Potential Capability Assessment

    Actively participate an drive inter and intra industry alliances to deploy shared communications capabilities

    Collaborate with other providers to build common infrastructure for shared communications capabilities

    Build global centers of excellence to optimize capability and delivery

    Develop common platforms integrating technology, processes for rapid business/operating model innovation

    Source: IBM Institute for Business Value (IBV)

    Seamless interoperability between telecom and online communications

    Scale (across access types and regions)

    Actively pursue in-country and regional consolidation opportunities to build scale

    Enhance M&A integration capability to enable rapid integration of IT, business processes and systems

    Scenario Realization, Financials and Imperatives >Clash of Giants

    CLASH OF

    GIANTS

  • 2010 IBM Corporation72Telco 2015- five telling years, four future scenarios

    Contents

    A decade of structural change in Telecom

    Forces shaping the future of Telecom

    Uncertainties and Scenarios for Telco 2015

    Scenario Realization, Financials and Imperatives

    Survivor Consolidation

    Market Shakeout

    Clash of Giants

    Generative Bazaar

    Summary and Conclusions

    Scenario Characteristics

    Scenario Triggers / Realization Path

    Financial Assumptions

    Revenue and Profitability Implications

    Critical Success Attributes

  • 2010 IBM Corporation73Telco 2015- five telling years, four future scenarios

    Pervasive affordable open connectivity are enabled for any person or object, unleashing a wave of generative innovation

    Advanced users mix and match silod communication tools; most adopt open source shared capabilities (presence, contact list) across voice and online communication

    Voice services continue to be paid-for on mobile but fixed communications become an embedded feature of connectivity

    Open "do it yourself" connectivity integrated/ packaged by individuals/organizations On demand consumption of OTT digital content/ services with delinearisation

    Usage

    Services

    Carriers cater to enhanced connectivity for OTT providers that deliver industry-specific solutions e.g. wellness services, energy management

    Premium connectivity (e.g. guaranteed low latency, security, CDN...) for OTT Local applications that meet emerging markets specificities boom New voice usages (e.g. human to machine for mobile internet)) lead to voice-rebirth

    Generative Bazaar

    Revenue Model

    Wholesale driven with premium connectivity a key feature for revenue generation Carriers are able to generate premium prices for ultra broadband (FTTX, LTE)

    OTTs co-operate with network providers and pay carriage fees or share revenues in return for network optimized delivery that enhance end-user experience

    Carriers are successful in ramping M2M models to generate low ARPU on an infinite number of connected objects

    Net Co-ops leverage analytics for service providers and for cross-access and platform advertising.

    GENERATIVE BAZAAR

    SCENARIO CHARACTERISTICS

    Scenario Realization, Financials and Imperatives >Generative Bazaar

    Source: IBM Institute for Business Value (IBV)

  • 2010 IBM Corporation74Telco 2015- five telling years, four future scenarios

    in a netco / servco separation model with open devices, platforms based on open network access

    A co-operative of horizontally integrated infrastructure providers catering to a myriad of asset-light service providers such as VNOs, OTTs, Banks, Utilities, Governments etc.

    Horizontal model (Netco/Servco separation) and passive infrastructure sharing but no network outsourcing

    Industry Structure

    Access

    Regulation

    Evolution to internet-style model with light-touch regulatory approach towards telcos.

    Abolition of the majority of sector-specific regulations, forcing telcos upwards the investment ladder

    Structural separation of access networks. Wholesale access to essential services (HDTV, search algorithms)

    Open Access becomes the norm.

    Widespread fixed and/or mobile ultra-broadband availability with access to 60% - 80% of households

    Open devices (unlocked phones, netbooks) dominate market as carriers retreat on handset subsidisation

    Open and standardized devices platforms supported by Net Co-ops and device manufacturers

    Generative Bazaar

    SCENARIO CHARACTERISTICS

    GENERATIVE BAZAAR

    Scenario Realization, Financials and Imperatives >Generative Bazaar

    Source: IBM Institute for Business Value (IBV)

  • 2010 IBM Corporation75Telco 2015- five telling years, four future scenarios

    Barriers between OTT and network providers blur as regulation technology and competition drive open access models enabled by

    2010 2011 2012 2013 2014 20152009

    Growing vibrant global economy

    Increased consumer confidence/ spending on communications

    Investors confident of higher return from open connectivity innovation

    Widespread deployment of ultra-

    fast broadband

    Increased access to capital and

    increased capex

    Providers invest in standardized service and device platforms

    Providers devise funding model for open access infrastructure

    National govt. fund open infrastructure

    for economic growth

    Infrastructure to services-based

    competition /regulation

    Asset-light providers emerge to innovate on

    open infrastructure

    Increased use / availability of

    connected devices

    Organizations package connectivity

    with own services

    Consumers want to use service from many providers

    GENERATIVE BAZAAR

    Economic and Financial

    Competition and Regulation

    Consumers and Markets

    Investment and Technology

    TRIGGER EVENTS / REALIZATION PATH FOR SCENARIO

    Scenario Realization, Financials and Imperatives >Generative Bazaar

    Source: IBM Institute for Business Value (IBV)

    Illustrated trends

  • 2010 IBM Corporation76Telco 2015- five telling years, four future scenarios

    Critical success attributes for Generative Bazaar

    Dynamic Business Design

    Leverage insights from connectivity, data,ecosystem to enable 3rd Party innovation

    3rd-Party connectivity / capabilities access and developer communities

    Integrated Operators

    Mobile Operators

    Fixed Operators

    Weak Moderate Competitive StrongHow well operators are positioned

    Critical Success AttributesGENERATIEV BAZAAR RECOMMENDATIONS

    Enable 3rd party access to premium connectivity based on open APIs

    Enable access to common capabilities (Billing, SDP) Stimulate and support vibrant developer communities

    Enable applications/service providers access to insights from network, data and users for innovation

    Develop deep insights into network and data usage to optimize core and access and reduce costs

    Potential Capability Assessment

    Infrastructure / processes to facilitate connectivity of a multitude of objects, sensors, devices and applications

    Build modular business architectures based on standards and flexible, common technology platforms

    Create new operating model and organization to support structural separation

    Deploy systems, processes to support differentiated and dynamic wholesale pricing for various SLAs

    Funding model for Net Co-op / open access network infrastructure

    Partner with other infrastructure providers including municipalities extend ultra-fast broadband coverage

    Agree to shared/co-operative funding model for open network access

    Structurally separated network and services operations

    GENERATIVE BAZAAR

    Source: IBM Institute for Business Value (IBV)

    Scenario Realization, Financials and Imperatives >Generative Bazaar

  • 2010 IBM Corporation77Telco 2015- five telling years, four future scenarios

    Contents

    A decade of structural change in Telecom

    Forces shaping the future of Telecom

    Uncertainties and Scenarios for Telco 2015

    Scenario Realization, Financials and Imperatives

    Survivor Consolidation

    Market Shakeout

    Clash of Giants

    Generative Bazaar

    Summary and Conclusions

  • 2010 IBM Corporation78Telco 2015- five telling years, four future scenarios

    Communications-connectivity substitution will increase over the next 5 years regardless but dominates revenue mix in Generative Bazaar

    1%

    24%

    75%

    2008

    Communications

    Connectivity

    Content

    1% 2% 5% 5%

    30%

    49%31%

    60%

    69%49%

    64%

    35%

    SurvivorConsolidation

    Market Shakeout Clash of Giants GenerativeBazaar

    1% 0% 1% 3%14% 20% 18%

    34%

    85% 80% 82%63%

    SurvivorConsolidation

    Market Shakeout Clash of Giants GenerativeBazaar

    Advanced Markets

    2015 Revenue Mix Scenarios

    Emerging Markets

    2015 Revenue Mix

    Scenarios

    2008 2015 Changes to Segment Revenue Mix by Scenario

    Communications: PSTN Voice, VoIP/ VoBB, Mobile Voice, SMS revenues

    Connectivity: Fixed Broadband, dial-up internet, legacy corporate data service, 3G/Mobile Broadband and Machine-to-Machine revenues

    Content: IPTV and Mobile Content (music, video, mobile TV, games, advertising)

    Source: IBM Institute for Business Value (IBV) and IDATE Analysis

    Summary and Conclusions

  • 2010 IBM Corporation79Telco 2015- five telling years, four future scenarios

    -1%

    0%

    1%

    2%

    3%

    4%

    5%

    6%

    7%

    2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

    that represents the most optimistic outlook for telecoms, relative to the IMFs global GDP forecast fro 2010 - 2014

    Global GDP vs.. Telecom Services Growth Scenarios

    Source: International Monetary Fund (IMF), World Economic Outlook Database, October 2009; http://imf.org/external/pubs/ft/weo/2009/01/weodata/index.aspx, IBM Institute for Business Value (IBV) and IDATE Analysis, 2004 - 2009 growth forecasts are based on IDATE "World Telecom Service Market", 2008 Edition -January 2009, revision in July 2009. 2010 -2015 are IBM Telecom 2015 scenario forecasts

    Generative Bazaar

    Clash of Giants

    Market Shakeout

    Survivor Consolidation

    2009 2015 Telecom Growth Scenarios (Stylized)

    Global GDP

    Global Telecom

    5.3%

    3.3%

    1.8%

    0.2%

    4.5%

    Gro

    wth

    Summary and Conclusions

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