What's hot in the mobile world? Dagfinn Myhre, SVP & Head of Research Agenda, Telenor Group

What's hot in the mobile world?VERDIKT, 1 November 2010

Dagfinn MyhreSVP & Head of Research AgendaTelenor Group

Our industry is experiencing a rare expansion in the importance of our services

• Mobile operations in 11 markets across the Nordic region, Central and Eastern Europe and Asia

• A stake of close to 40% in VimpelCom Ltd, operating in 10 markets

• Headquartered in Norway

• Among the top performers on Dow Jones Sustainability Indexes

• Revenues 2009: NOK 98 bn

• Listed on the Oslo Stock Exchange

Among the largest mobile operators in the world

More than 180 million mobile subscribers*

Aproximately 40 000 employees

Present in markets with 2 billion people

NorwaySwedenDenmark

Central and Eastern Europe

HungarySerbia

Montenegro

Nordic

Thailand

Malaysia

Bangladesh

Pakistan

India

Asia

Russia

Ukraine

Kazakhstan

Georgia

Uzbekistan

Tajikistan

Armenia

Kyrgyzstan

Cambodia

Vietnam

Vimpelcom

Telenor Group is an international provider of tele, data and media communication services

Telenor Group mobile operations

Nordic

Norway

Sweden

Denmark

Central and Eastern Europe

Hungary

Serbia

Montenegro

Asia

Thailand

Malaysia

Bangladesh

Pakistan

India

VimpelCom Ltd.

Russia

Ukraine

Kazakhstan

Georgia

Uzbekistan

Tajikistan

Armenia

Kyrgyzstan

Cambodia

Vietnam

Telenor Group holds 39.6% of the economic ownership in VimpelCom Ltd.

2231

53

83

115

143

164

2002 2003 2004 2005 2006 2007 2008

Mobile customer yearly growth 2002 - 2009

174

2009

Yesterday Today Tomorrow

Industry changes will create continued opportunities for growth

Our industry has changed…

• From monopoly to market competition

• From national to global players

• From telecom to data technology

• High growth

…and the change will continue at high speed

• Growth flattening

• Increased competition

• Continued technological development with explosion in mobile data traffic

• Stronger focus on partnerships and the enabler role

• Software based services

• Customer power will grow

• Communities and social networks

Growth is driven by technology shifts, innovative services and changing customer behavior

-

1 4,59

28

45

96

Plain GSM

Year 1995

(10 MHz)

GSM/EDGE

Year 2010

(10 MHz)

3G Rel.99

(15MHz)

Turbo-3G

(HSPA)

(15MHz)

LTE 1800

(10 MHz)

LTE 2600

(20 MHz)

Tota

l cap

acit

yp

er s

ite

(M

bp

s)

Evolution in site capacity from GSM to LTE- downlink, sum of voice and data

Nokia N97 iPhoneSE w595Nokia 6300Nokia 1112

Feature phonesInternet/

smartphonesVoice-only

Five-year evolution in device prices

50% 20%30%

Changes in customer behavior: Social networks and the way young people communicateNew services

New competitive dynamics and interdependencies

HardwareOperating System

User Interface

Online Services

Device apps

Content Market

Apps market

Device User experience

Mobile operators

Device vendors

Internet companies

Core competence Recent moves

Core competence

Recent moves

Core competenceRecentmoves

Communi-cation

Example: Apple App store

Example: Google Android

Example: Orange App shop

Google: Mobile first

• Most important segment for internet companies in thefuture

Three important trends

1. Improvements of hardware in mobile devices

2. Increased number ofconnections between services

3. New services in the cloudEric Schmidt – CEO Google

February 2010

Changing mobile industry – usefulness and user experience important

• Major players lead the way

• Mobile applications important

• Large memory, high quality screens, music, camera, 3G, WiFi, GPS …

Innovation is key to our future

We innovate in services that will change the shape of communication and our business - and we do this in close cooperation with our customers and partners in an open landscape of research and exploration

Expand and defend core

business

Develop new business

Create options for future business

Time horizon

Un

certa

inty

Horizon 1

Horizon 2

Horizon 3

Innovation across three horizons- balance between shorter and longer term initiatives

‒ Customer and brand experience

‒ Based on the daily need of people and business

‒ Co-creation and open innovation processes with customers

Customer driven innovation

Mature markets ….

Emerging markets ….

Mobile consumer behaviour segmentation model

May overlap

Source: Forrester Research

Network effects

When the customers value from a product depends on who else has adopted the product we speak of a

network effect

M. Katz and C. Shapiro, AER, 1985

Spreading of new services (Norway)

MySpace

Facebook

Twitter

• Facebook and Twitter dominate

• Comprehensive service innovation for social networking on mobile phones

• More than 200 mobile operators in 60 countries offer mobile Facebook solutions*

• There are more than 150 million active users currently accessing Facebook through their mobile devices*

• People that use Facebook on their mobile devices are twice as active on Facebook than non-mobile users*

Social networks go mobile

* Facebook 2010

Telenor research shows that you want what your friends want

• Understand social influences on service adoption

• Better user experience

• Better service offering

Creating value through service innovation

Access to the Internet

-

Norway 85.7%

Asia 18.5%

World average 24.7%

Europe 50.1%

North America 73.9%

Internet users (% of population)

India 7%

South Korea 96.8%

The mobile broadband opportunity

• Consumers will gradually embrace the mobile Internet, with large country differences

• Access to the Internet will contribute significantly to productivity, FDI, GDP growth, job creation and government revenues

Access to the InternetIt’s about access anywhere, anytime

Access to the InternetA broad range of social benefits

Source: The Boston Consulting Group

Increasing Internet use has extensive social benefits:

• Education

• Healthcare

• Access to government services

• Rural development

Creating value through service innovation

Open innovation

• Opening up fixed and mobile networks through significant investments

• Opening up the value chain

• Partnering spanning from enabling new applications to close cooperation on innovations

Innovation with partners

Open InnovationService enablement

Open innovationLocation based services

Darkslide.Shows all public Flickr pictures at a given location

TV2 SkattelistenShows register of taxplayers based on your location

Open innovationAugmented reality

Theodolite Peaks

London Tube Wikitude

Creating value through service innovation

Financial services

• Telecom and banks/card companies are increasingly teaming up to create new services

• Serving the unbanked - low and variable cost structure through telecom distribution

• Telenor has positioned itself to launch innovative services with high impact in one of the most untapped markets in the developing world

The financial services opportunity

• Telenor Pakistan purchased 51% of Tameer bank, a microfinance bank, in 2008

• Enabling Telenor Pakistan to offer branchless banking

Example: Pakistan

Financial servicesServices based on mobile handsets

Discover

Read

Share

Purchase

Creating value through service innovation

Internet of Things

• Internet of Things a potentially significant market

• Telenor becomes a vital part of the customers’ own product offering

The IoT opportunity

• Global M2M connectivity provider with dedicated organization, product and services - supporting national OpCo value chains

• Separate entity with global focus established in 2008

Example:

Internet of Things

Internet of ThingsICT in healthcare

• Healthcare systems

• Medical sensors

• Automatic warning aid

• Smart house

• Robots

• Tracking technologies

Internet of ThingsTelenor Home Monitoring Trial

• Identify drivers and inhibitors

• Identify organizational effects and potential for cost reductions

• Evaluate the system’s impact on the client’s and close relatives’ well being

• Identify aspects crucial to user accept and adoption

• Understanding the markets, customers and brand positions to deliver excellent customer experience

• Open innovation in the new converged landscape – service innovation

• Internet of Things – platforms, ecosystems and business models

• ICT in healthcare – services, platforms and cost benefit

• Mobile payment - how to make payment more convenient and secure

• SFI/NFR application together with NHH and several large partners:

– Center for Service Innovation - CSI

Further research challenges- who will take part?

Growth comes from truly understanding the needs of peopleto drive relevant change