Innovation for Telecoms - The only way to survive - Gary Miles, Amdocs

Information Security Level 2 – Sensitive© 2014 – Proprietary and Confidential Information of Amdocs

Israel Mobile Summit: Value Chain Effects from Google, Apple and Facebook (“GAFA”)

Information Security Level 2 – Sensitive© 2014 – Proprietary and Confidential Information of Amdocs2

Traditional Value Chains: Network Access and Digital Services Tightly Bundled

Advertiser Customer

Vid

eoV

oice

& T

ext

Industry Value Chain

Communication Service & Device

BrandsConsumer

s

Content Creation

Content Curation

Distribution Screen

Ad Agenc

ies

Consumers

Consumers

Information Security Level 2 – Sensitive© 2014 – Proprietary and Confidential Information of Amdocs3

Today’s Value Chains: Modularizing due to IP and Market Disruptors and Squeezing the Role of CSP

AdvertiserAd

PlatformContent

Service &Aggregation

OperatingSystem

ConsumptionMedium

Customer

Vid

eoV

oice

& T

ext

Network

Cur

atio

n

Scr

een

Com

ms

Acc

ess

Dev

ice

OS

Dev

ice

Set

-top

-box

Agg

rega

tion

Acc

essBrands

Consumers

Consumers

Ad

Age

ncie

s

Pro

duct

ion

Str

ateg

y

Information Security Level 2 – Sensitive© 2014 – Proprietary and Confidential Information of Amdocs4

Google, Amazon, Facebook & Apple (GAFA)The financial advantage the innovation gap

2 8 7 14

155

62

Facebook GoogleAppleAmazonVerizonAT&T

1%

23%29%

24% 27%

36%

2.5

6.6

1.4

4.5

8.0

~1.5

Cash & Marketable Securities

Operating Profit Margin, FY13

R&D ($B), FY13

19%

9%

55%

22%

4%1%

YoY Growth

129 121

74

8

183

60

Revenues, FY13

-73-101

4 14

120

57

Net Cash

GAFA’s profitability is similar to CSPs, however they are growing at a much faster rate

… they have more available cash and are heavily investing in R&D

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Apple: historically focused on devices but evolved into a high-end consumer lifestyle platform

197

0’s–

2000

AdvertiserAd

PlatformContent

Service &Aggregation

TransportNetwork

AccessNetwork

AccessProtocol

OperatingSystem

ConsumptionMedium

Customer

200

0–20

0920

10–

2014

Information Security Level 2 – Sensitive© 2014 – Proprietary and Confidential Information of Amdocs6

Apple is now defending its position against low-end disruptors like Android (and Spotify…and Netflix)

Unconnected(non-consumption)

• AppleSIM could potentially be disruptive and further commoditize Access

• Yet unknown if Apple TV will grow to viable alternative to current Pay-TV offerings

• Unified Comms strategy via iMessage and Facetime erodes core communications revenue

Source: Gartner, IDC

20%

60%

40%

20122010 2013 2014E2011

Market shares of devices, installed base

657650686710702

254276320380441

2014E2010 2011 2012 2013

Average selling price of iOS, Android handsets

disrupted by

Information Security Level 2 – Sensitive© 2014 – Proprietary and Confidential Information of Amdocs7

Google and Facebook have much stronger motivations to invest in improving internet access

Ad Funded

Consumer Funded

Market focus Upmarket DownmarketCompeting with non-consumption

Benefit from improving access

Limited – unconnected unlikely to consume Apple/Amazon products

High - Connecting unconnected translates to more ad revenues

Low/indirect – higher bandwidth could mean more consumption of media

Medium – more bandwidth means more consumption of content and ads

EM:

DM:

To be determined: has access has moved from an “experiment” to a full line of business for Goolge

Information Security Level 2 – Sensitive© 2014 – Proprietary and Confidential Information of Amdocs8

Facebook is posing a rising threat to CSP revenue streams with Whatsapp and internet.org initiative

AdvertiserAd

PlatformContent

Service &Aggregation

TransportNetwork

AccessNetwork

AccessProtocol

OperatingSystem

ConsumptionMedium

Customer

201

0–20

1420

04–

2009

• Currently focused primarily on social platforms and disrupting communications via WhatsApp

• An unpredictable threat in Access, but proclaiming a global mission to improve internet access to

all

Information Security Level 2 – Sensitive© 2014 – Proprietary and Confidential Information of Amdocs9

Google: a key disruptor with assets spread across the new value chain

199

9–20

03

AdvertiserAd

PlatformContent

Service &Aggregation

TransportNetwork

AccessNetwork

AccessProtocol

OperatingSystem

ConsumptionMedium

Customer

200

4–20

0920

10–

2014

Information Security Level 2 – Sensitive© 2014 – Proprietary and Confidential Information of Amdocs10

Google’s platform businesses result in even greater market power, with Access in the middle

199

9–20

03

AdvertiserAd

PlatformContent

Service &Aggregation

TransportNetwork

AccessNetwork

AccessProtocol

OperatingSystem

ConsumptionMedium

Customer

200

4–20

0920

10–

2014

Monetization platform

Development Platform

Contentplatform

Access “ClosesThe Loop”

Information Security Level 2 – Sensitive© 2014 – Proprietary and Confidential Information of Amdocs11

What Steps Should the Telcos Take?

● Strong shift to consolidation and multi play● AT&T & DirectTV (45bl), Voda Spain & Ono (7.2bl), Vivo Brazil and GVT (9.3),

Charter acquires TWC (55bl) and Bright House (10bl), BT acquires EE….

● Need to leverage connectivity and local capabilities as innovation angles. Areas of focus beyond connectivity:● Managed security service (‘clean pipe’)

● Cloud enablement and virtualization

● Connected everything● App to door (physical access control)

● Flow designed for IoT for service design

● Matrix.org

● Connected Car

● Connected Home

Information Security Level 2 – Sensitive© 2015 – Proprietary and Confidential Information of Amdocs12

Information Security Level 2 – Sensitive© 2014 – Proprietary and Confidential Information of Amdocs13

The Importance of ADT Pulse

Pulse Take Rate across the Years (New/Resale)

New Entrants (Telcos) bringing

innovation, lifestyle services

ADT US Resisting To New Entrants with Pulse

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Designed To Support 100’s of Use-Cases

14

Watch your Baby upstairsTemperature control Lightning control

TV, DVD, Home Theatre Get your pack deliveredControl your blinds

Temperature control Pillbox dispenser

PERS Personal

Emergency Response System

Nurse Easy Access

Remote Surveillance

Motion/Presence controller

Act on smoke detection

Act on intrusion

Know when kid back school

Stop a water-leak Check your doorRecord who’s ringing

Information Security Level 2 – Sensitive© 2015 – Proprietary and Confidential Information of Amdocs151

5

An Open, Scalable and Standards-Based SolutionA layered architecture to cover multiple home services silos