Delivering a Superior Customer experience

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Digital Switchover

Presentation to SABA Digital Infrastructure and Platforms

19 July 2013 • Robert Schumann

About Analysys Mason DSO experience Tanzania case study Risks and challenges The future of TV

Contents 2

Analysys Mason is a global specialist in telecoms, technology and media § Analysys Mason is a global specialist

in telecoms, technology and media (TMT), with offices on four continents

§ We have had a major influence on the industry for more than 25 years: - led the liberalisation of telecoms

across Europe and Asia and mediated in policy issues for operators and regulators

3 About Analysys Mason

Analysys Mason offices Assignments completed

Analysys Masons’ s global presence and experience

- supported several hundred transactions and licence acquisition processes for operators and financial institutions

- provided strategic and operational support to major operators in the roll-out and expansion of businesses across the sector, enhancing enterprise value

§ With over 260 staff in 13 offices, we are respected worldwide for our exceptional quality of work, independence and flexibility in responding to client needs

We are uniquely positioned to provide consulting and research to the TMT sectors

4 About Analysys Mason

§  Our focus is exclusively on telecoms, media and technology (TMT).

§  We support multi-billion dollar investments, advise clients on regulatory matters, provide spectrum valuation and auction support, and advise on operational performance, business planning and strategy.

§  We have developed rigorous methodologies that deliver tangible results for clients around the world.

§  We analyse, track and forecast the different services accessed by consumers and enterprises, as well as the software, infrastructure and technology delivering those services.

§  Research clients benefit from regular and timely intelligence in addition to direct access to our team of expert analysts.

§  Our dedicated Custom Research team undertakes specialised and bespoke projects for clients.

Research

Consulting

Transaction support

Strategy and planning

Operational consulting

Procurement Regulation and policy

Consumer services

Enterprise services

Telecoms software

Regional markets

Network technologies

Our selected media project experience 5 About Analysys Mason

Case study Key capabilities TV advertising in France Understanding of the nature of the TV advertising ecosystem

European media group growth plans

Competitive analysis, benchmarking and business planning for production, channel aggregation and Internet expansion plans

Telecoms operator football rights

Role of premium content, and ways of accessing this content for broadcast

Content rights business and regulatory models

Evolution of media delivery technologies, for possible regulatory intervention in the content market

South American broadcaster DTT strategy

Planning of genre and business model for a broadcaster moving to a digital platform

Irish government DTT planning

Leadership and planning of digital terrestrial television, involving all stakeholders

Broadcaster online content distribution strategy

Costs and strategy for a broadcaster evaluating alternative platforms for delivering content

Asian studio facilities provider business plan

Comprehensive business planning (vision, services, clients, pricing, marketing) for a state-of -the-art movie studio facility


Contents 6

What is TV? 7

TV Proliferation of CONTENT

Proliferation of PLATFORMS

Revenue model?

A framework for DSO 8

Source: Plum Consulting, Farnborough for GSMA

Stakeholder Activities Government 1.  Develop DSO policy and legal framework

2.  Establish and implement staged plan for ASO 3.  Develop funding policy and establish fund 4.  Establish principles for Help Scheme 5.  Establish DSO/ASO Implementation Task Force

Regulator 1.  Decide on technology and standards 2.  Implement licensing framework 3.  Manage radio spectrum and coordination matters

Industry 1.  Develop consumer proposition 2.  Establish DTT branding and conformance regime 3.  Develop communications plan 4.  Plan and deploy DTT network 5.  Establish receiver specifications and costs

Cost of DSO in other countries 9

Source: Digitag

Country Purpose Amount Source UK Help scheme €693m BBC

Marketing activities €230m Digital UK DSO total €4.37b Private + Public

France Marketing activities €255m Government + PSBs Help scheme €142m Government

Italy Help scheme €50 per qualifying HH Government ASO pilots €55m Government DTT rollout €33m Government DTT subsidy €220m Government

Spain DSO projects €75m Government DSO total €12b Public, private, viewers

Sweden Help scheme No special budget Government Marketing activities €5.5m Government

Netherlands DSO § DTT platform launched in 2003 offering limited free‐to‐air

services from the PSB and extensive pay services from Digitenne § Focus on portable and mobile reception: DVB‐H services

launched in June 2008 § ASO completed on a single day on 10 December 2006 § Since then, DTT penetration has increased from 3‐5% to 12% of

the population – and strong growth continuing

10

Source: Digitag

Sweden DSO § Launch of DTT services in 1999 offering a largely pay DTT

platform operated by Boxer § Attractive programme offer combined with competitive pricing has

allowed Boxer to effectively compete with other television operators

§ Five phases to switch‐off starting in September 2005 and completed in October 2007

§ 40% of viewers waiting until last month to purchase DTT receivers

11

Source: Digitag

France DSO § Launch of DTT services in March 2005 offering viewers 18 free‐

to-air and 9 pay‐DTT services § Combination of MPEG‐2 and MPEG‐4 AVC compression formats § Five HD/DTT services launched § France Télé Numérique set up to manage analogue switch‐off § Two DTT pilot projects completed in 2009 § Analogue switch‐off began in February 2010 for completion by 30

November 2011

12


Contents 13

TV viewers in Tanzania 14

19%

21%

7%

53%

Urban - at least weeklyRural - at least weeklyUrban - less frequentRural - less frequent


Contents 15

What are the key risks for DSO, particularly with a short ASO deadline? § Expensive receivers and low engagement from retailers to make

receivers widely available in the market § Cost of meeting roll-out and coverage obligations (e.g. when

country/broadcast specific features are required) § Poor communications campaigns, leading to confusion about

DTT benefits and how to obtain them – this can be particularly damaging in remote communities with poor literacy skills

§ Insufficient co-ordination with adjacent countries increasing the risk of cross border interference (shorter transition periods may make this more complex)

§ Inadequate DTT network planning, which may cause delays to network roll-out and switch-on schedules.

16


Contents 17

Summary of relative impact and degree of complementarity of linear and non-linear TV … at least so far

18

Element Key trends over last 10 years Scheduling / type of service

▪  Complementarity of non-linear and linear TV for popular TV series and programmes – potentially having a significant impact

▪  Importance of new players offering Internet-based non-linear TV

Device / service ▪  Simultaneous growth of HDTV and non-linear TV ▪  Simultaneous growth of traditional and non-traditional non-linear TV

Transmission ▪  Simultaneous growth of traditional transmission TV services (DTT, cable, satellite, IPTV) and broadband/Internet-based networks

Consumption ▪  High growth in non-linear TV viewership needs to be put in line with the current evolution of the overall TV market

Business model ▪  Although growing fast, non-linear TV revenues still make up a very small part of the whole TV market

▪ We expect non-linear TV to continue to grow – but it could grow: –  along with linear TV, i.e. as a complement –  at the expense of linear TV, i.e. as a substitute

Although revenue from online TV is increasing exponentially, it still represents less than 2% of total TV revenues

19

Source: EAO, Analysys Mason

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

Germany Spain France UK Italy

2007 2008 2009 2010

0 20 40 60 80

100 120 140 160 180 200

Pay-TV FTA

Total non-linear revenues by source in larger EU countries, 2008–11 (EUR million)

Non-linear revenues as % of total TV revenues in larger EU countries, 2008–11

Free models seems to be gaining momentum in most countries, but pay-TV models are also growing in relative terms in Germany

Future TV consumption – will connected TV be a complement for linear TV, or a substitute?

20

Connected TV as a complement – traditional TV follows historical trend

Connected TV as a substitute – erosion or decline in traditional TV

Figures illustrative – for discussion only

0

50

100

150

200

250

Con

sum

ptio

n of

onl

ine

vide

o vs

TV

(min

)

TV Online Video

0

50

100

150

200

250

Con

sum

ptio

n of

onl

ine

vide

o vs

TV

(min

)

TV Online Video

Concluding remarks

§ Complexity and uncertainty in short, medium and long term -  tactical approach for short term -  strategic planning for medium to long term

§ Established and new players have different perspectives -  a land of opportunity for new players -  limited ‘losses’ for established players, but a threat in medium

and long term – prepare tactically!

§ You are not observer but KEY PLAYERs § Your actions can change current forecasts!

21

COMVERSE 1 Proprietary and Confidential 200 Quannapowitt Parkway Wakefield, MA 01880, USA Q2 – 2013 v02

Ofer Segev

Head of Digital and Value Added Services Sales, EMEA

Optimize the Digital Customer Experience for African Markets

Evolving Operator’s Services To the Digital World

COMVERSE 2 Proprietary and Confidential

SMS/MMS Voicemail Voice Call


MNO’s Flat Rate Communication Service Package

The Bread & Butter of Communication Services

Even the heaviest OTT users buy this package


Monetary Value of Communication Service Package

Flat Rate Voice &

Messaging +

X Gb of Data

X Gb of Data Only

Plan A Plan B

UK

A-B (US$) +$17 +$42 +$17

% Difference +51% +73% +52%

Subscribers 22.9M 26.1M 19.5M

Total Monthly

Difference +$0.38 Billion +$1.09 Billion +$0.33 Billion



Plan A Plan B

Germany

A-B (US$) +$57 +$35 +$49

% Difference +70% +74% +62%


Total Monthly




Plan A Plan B

Italy

A-B (US$) +$34 +$39 +$18

% Difference +63% +59% +72%


Total Monthly




Plan A Plan B

A-B (US$) +$30 +$30 +$55 +$30

% Difference +50% +50% +79% +50%

Subscribers 105.2M 98.9M 53.9M 34M

Total Monthly

Difference +$3.16 Billion +$2.97 Billion +$2.96 Billion +$1.02 Billion

US


Monthly Diff. ($US) +$153 +$138 +$73

% Difference +94% +92% +91%

Subscribers 31M 25M 11.5M

Est. Yearly Value

assuming 80% Pre-Paid +$14.2 Billion +$10.4 Billion +$2.5 Billion

Monetary Value of Communication Service Package – South Africa

Flat Rate Communication

Package +

Data Data Only

SA

COMVERSE 9 Proprietary and Confidential 9

Africa - Mobile Penetration

Africa Mobile Penetration

Source: Industry sources, Blycroft estimates c. Blyrcoft 2012

As device ownership (penetration) grows, so too will the use of services, creating revenue opportunities for operators

Mobile subscriptions in Africa to reach one billion in 2015 (Informa)

In Africa, it is need, not convenience, that drives adoption, leading to plenty of mobile applications


Feature Phone User vs. Smartphone User

Source: IBM; Analysys Mason 2012

In 2015 Smatphone connection in Africa will reach 20% - (Informa 2013)


Voice vs. Data

Across Africa, voice services dominate. However, Africa will have highest regional mobile data traffic growth rate with CAGR of 104%

Data revenues 2008-2011:

increased by CAGR of

67%

Source: Africa Mobile Observatory 2012

Mobile Data Traffic 2011-2016:

CAGR of

118%

South Africa Kenya

Mobile data 2011-2016 to generate

$11.1bn

Egypt

Data: 26% total revenues


The Race to LTE

Several African countries are ahead of Europe (UK, Italy, France) in the race to LTE

No LTE yet? Subscribers with smartphones still consume services over WiFi


Africans Join the Global Social Conversation

When Africans go online via mobile phones, a majority of their time is spent on social media platforms.

Source: Report by World Wide Worx with the backing of First National Bank,


MNOs need to safeguard their position As the incumbent provider of the bread & butter of communication services


Why Does Everyone Still Buy this Package?

100% ubiquity & reach

Default Voice call service

Default Identity

(MSISDN)

555-4712


Communication Service Package - Projected erosion

100

75

50

25

0

Com

munic

ation P

ackage U

sage

%

Negative Tipping point


Maybe We Should Focus on Voice Only?

MNO’s Communication Service Package Operators will lose their incumbency

It’s the whole package (bread & butter services) or

nothing at all


What’s Risking This Operator’s

Position?


Voice is under direct attack of the Internet Giants

Google Facebook Microsoft, Apple Google



Google Facebook Microsoft, Apple

Launches Hangouts on all devices and platforms - merges Google Talk with Google+

May 2013

Oct 2013

Oct 29th

Google Voice integrates with Hangouts – Low rates calls to MSISDNs. Free calls in US & Canada

SMS/MMS Integration



Google Microsoft, Apple

Dec 2012

Jan 2013

Facebook

Integrates SMS into messenger conversations (Android only in selected countries)

Integrates Voice Calling in US & Canada


Facebook


Google Microsoft, Apple

Beyond all that, WebRTC will eventually turn voice call from a service to a feature


The do nothing option means that by 2020

MNOs will loose their position

together with a significant part of their revenues

will


CSP’s must evolve their communication service package to the digital era

React to Changing User Preferences

User expectation of communication services is shaped by OTT services

Mainstream adoption of some IP Services

Group chat Video call

Modern features

Services enabled on any internet

connected device

Rich UX Soon: WebRTC Access

Modernize existing services And make them available as a feature for developers

Introduce IP communication services that are becoming mainstream


Subscribers

Operators Device Manufacturers

Vendors

native support of RCS on devices: “Just there, just works”?

There is no way around downloadable clients Hence, reach is limited to others who downloaded the client

How to get subscribers to:

Download the operator’s client app

Use the client app Key challenge in 2014 reality

Challenge of Introducing New IP-enabled Services


“If I have seen further it is by standing on the shoulders of Giants”, Isaac Newton

19 months

54 months

49 months

1 year 2 years 3 years 4 years 5 years

Leveraging Social Networks

Piggyback Riding on the Shoulders of Giants

Time to reach 100 million users


Focus on 4 KPIs in your Digital Strategy

Value for the early adopters

100

75

50

25

0 Innovators

2.5% Early

Adopters 13.5%

Early Majority

34%

Late Majority

34%

Laggards 16%

Critical Mass point

Ma

rke

t Sh

are

%

Leverage of Social Networks Utilization of WebRTC

IP Strategy KPIs

Digital Experience


It’s not about competing with OTT MNOs do not have to be cool, glittery or spontaneous

ROI is easily identified

Clear sense of direction Focus on constantly improving the bread & butter communication services

It’s All Clear Now….


Comverse Digital and Value Added Services

Thank You!

[email protected]

Delivering a Superior Customer experience

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confidential

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