Data-centric market challenger strategies in Europe
LTE World Summit 2012, Barcelona
24th May 2012
© Rewheel Ltd. All rights reserved
Rewheelo n e • s t e p • a h e a d
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Strategic mobile data advisory Specialising into the mobile data transformation
Market modelling & commercial strategy
Technology strategy
Spectrum valuation & strategy
Strategic infrastructure procurement advisory
CEO, CTO, CMO, CFO, CSO, shareholder sponsored client engagements 10+ European operator clients (mostly challengers)
Several European regulators
Several European data-centric non-MNO-startups
5 European spectrum renewal/acquisition processes (800, 900, 1800, 2100, 2600 Mhz multi-band auctions) since H2 2011
EUR 1 bn+ of European spectrum investments/state proceeds impacted directly by Rewheel’s strategic advisory since H2 2011
Established in 2009 Team HQ in Helsinki
Tier 1 and most progressive data challenger clients, mainly in Europe
Rewheel – who we are
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External megatrend, everybody knows: surging demand for mobile data
The surge of mass consumer demand for smartphones poses a skyrocketing mobile data traffic demand worldwide
The traffic volume demand is growing both due to the rapid growth of the data-centric customer and device penetration and the average data usage per customer
Source: http://www.morganstanley.com/institutional/techresearch/pdfs/Internet_Trends_041210.pdf
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While the mobile data consumer demand surge is universal, the actual data uptake observed in different markets is often heavily constrained by local market specific constrains of supply
Source: EUROSTAT
Number of MNO players: 4th and 5th palyers are more incentivesed to disrupt the voice-centric status quo by driving data-centric market transformation
MNO ownership: is there at least one independent player not owned by incumbent Tier-1 telco groups? Are there independent players with fixed/cable ISP infra and customer base synergies?
Spectrum positions: do the MNOs that are the most incentivised in pushing mobile data have access to the needed low and high frequency spectrum?
Regulatory attitude: is there the willingness to push data uptake even if it takes heavy confrontations with the incumbent ”historic” telcos and their owners?
Market competitivenes
But local market specific constrains often throttle actual growth
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The local market specific factors typically constrain not only the penetration uptake but also the average volume generated by customer. In progressive markets, with unconstrained data offerings the usage per customer is set to rise, exceeding the 1GB per month per smartphone customer mark already today or in the near future.
Source: Elisa Finland
Source: T-mobile USA Q1 2011
Source: Telenor Group, Q1 2011
Source: TeliaSonera, Q1 2012
Source: Swedish Regulator (PTS), 2011 H2
Source: Three UK, Q1 2012
>1GB in 2012
3GB in 2017 (est)
579 MB in H1 2011
1 GB in 2015 (est)
300-600 MB in Q1 2011
>1GB in Q1 2011
Progessive markets: average smartphone usage is already on GByte level ...
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In progressive markets, where at least one MNO player strated driving the mobile data uptake truly aggressively, the combination of rising penetration and usage per customer results in sustained, sharp network traffic growth
Source: Austrian Regulator
Source: FICORA, Finnish Regulator
Finland 900 MB/month/capita
in H1 2011
Austria 400 MB/month/capita
in Q2 2011
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Moible Data Consumption per CapitaGB/month/pop in H2 2010
Source: Rewheel estimations based on various sources
The large per capita consumption observed in progressive markets already today projects ahead a high likelyhood of traffic exlosion in currently consumption constrained markets
... Driving steep, sustained aggregate traffic growth
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MNOs future, even if historic telcos are trying to slow down the transition ...
Yesterday Today
Mobile operator developed proprietary ”value added
services”: Vodafone live, Vodamail, Mobile TV, Ringtone, Permium voicemail, weather, stock news,
daily news, traffic info, navigation, mobile parking, music download,
game download
Voice & SMS services (MNO core business)
Mobile internet access (marginal)
Mobile internet access (main growth driver)
Voice & SMS services (MNO core business)
Mobile internet access (”bit pipe”)
(MNO future core business)
Layering (”Denial”) Utility (”Acceptance”)
Tomorrow
Vertical service centric
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... will be pure, no-frills mobile data connectivity
Source: Tele2 Capital Markets Day September 2011
Source: Telenor Group Q1 2011
Source: Vodafone Group CEO public presentation September 2011
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Europe: 900, 1800 MHz license re-auction ”avalanche” started in H2 2011 ...
Radio Spectrum Policy Programme (RSPP)
EU Bands harmonised for high speed data: 800, 900, 1800, 2100, 2600, 3400-3800
Historic bands: 900, 1800, 2100 New bands: 800, 2600, 3400-3800
Fit for MNO strategies: 800, 2600 Currently free or occupied by analogue television or military radars
Currently Assigned Blocks of 900, 1800, 2100
Currently Unasigned Blocks of 900,1800, 2100
Strong MNO strategic and
valuation interdependencies
FWA: 3400-3800
GR RO IR CH NL A ... Europe 2020
Strategy A Digital Agenda
For Europe
: typical scope of combined multi-band auctions
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... is disruptive for ”historic” telcos, catalyst for new data-centric utilities
Core consumer value proposition: unconstrained
fast mobile internet affordable for all, on all
connected devices
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Sustainable capacity advantage Comparable spectrum Less customers
Lowest cost base, no frills utility business model
Partnerships with competitors’ big enemies
Monetize on speed and add-on devices
Europe: slow moving incumbents, falling behind in mobile data adoption, facing expensive license renewal investments
Fundamental industry transformation: mature 3G technology and ecosystem, internet going mobile, infinite demand for capacity, mobile operators shifting to utility role, eroding ”network effect”
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From the digital mobile utilities’ perspective this is a new, growth market 2
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Market service revenue forecast by device category
Machine-machine connections
Mobile broadband & tablet connections
Smartphones
Voice only phones
Multiple, inactive, sporadic SIMs
Data centric consumer needs Market trigger: very cheap (sub €150) touchscreen smartphones Primary use: Data Key selling point: unrestricted data use Voice + SMS + Data Revenues Higher ARPU, growth market No price war Revenue CAGR ~30% Concentrated in urban areas 2G network irrelevant
Source: Illustrative extract from a Rewheel market entry business plan
”Historic” consumer needs Primary use: Voice & SMS Key selling point: price Collapsing market Subject to price war Fast eroding ARPU (accelerated by MTR cuts, data centric push, voip and SMS substitution) Low ARPU users with cheapest 2G only phones
Historic market: Voice-centric / services
New market: Data-centric / Digital utility
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“Smartphone capacity friendly” spectrum (Europe: 2.1 GHz, HSPA+)
Nonexistent or small “historic” voice/SMS centric revenue streams (= new entrant or existing MNO with small existing mobile base) – as part of those will be cannibalised inevitably LTE (1800 MHz, 2.6 GHz) will not be widely supported by affordable mainstream smartphones in the next 2-3 years
Some “Smartphone coverage friendly” spectrum (Europe: 900 MHz, HSPA+)
Without sub-GHz frequencies the footprint will be limited to urban areas – but a challenger does not necessarily need to shoot on the entire country to crack the market 800 MHz (LTE) will not be supported by affordable mainstream smartphones next 2-3 years
Slow moving voice centric telco competitors – preferably owned by large incumbent slow moving telco groups
Existing internet subscriber base, brand, distribution network and IP backbone/backhaul infrastructure (fixed broadband operators, ISPs, cable-cos) Existing lean mobile operator business, all-IP infra, base, brand, etc
Needed:
Nice to have:
Very useful synergies:
What does it take to become a mobile digital utility in Europe?
The ongoing and planned multi-band 800 and 2600 MHz auctions combined with 900, 1800, 2100 MHz re-auctions open an attractive window of opportunity for data-centric new entrants in Europe. While incumbent telcos put a large demand for these spectrum assets, hence driving the market value high, EU Regulators often reserve blocks for potential new entrants, substantially lowering the barrier of new entries.
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Thank you
Visit insights.rewheel.fi for more Or contact us at [email protected] / +358 44 203 2339
Rewheel is specialised into being in the forefront of the mobile data transformation
Since 2009 we have advised over 10 European mobile operators, including independent players and Tier-1 OpCos, as well as several regulators and a number of private equity and institutional investors and various mobile-date centric startups.
Since the onset of the mobile broadband centric 900, 1800 and 2100 MHz license renewal avalanche in 2011 in Europe we have been providing strategy, spectrum valuation and auction theory advice (together with our world class CCA/SMRA auction theorist partners) to five European award processes (operator or regulator side depending on country), including new entrants and acquisitions as well as license renewals in multi-band (typically 800,900,1800,2100 and 2600 MHz) auctions. So far our advisory support has been directly impacting over EUR 1bn of European spectrum investments/state proceeds.
Rewheelo n e • s t e p • a h e a d