Booz&Co Gsma-2012 Futurecmt

Booz & Company World Telecommunications Outlook 2012+
February 2012
Booz & Company Febrero 2012
In 2011 we have observed how certain Communication and Technology trends became a massive reality, opening a new world of opportunities...
Enablers of Change New Business models New Reality
Devices
Data centricity
Social Media
Ultra Broadband
Cloud
Digitalization
... and thus forcing the ICT sector and other industries to rethink their future reality
Booz & Company February 2012
Enablers of Change
New Business models
New Reality
Devices
Ultra Broadband
Data centricity
Social Media
Cloud
Digitalization
Devices: Smartphones
The mobile arena is undergoing a radical change of its handsets towards smartphones
Handsets sales mix
(Western Europe) 90% Forecast Smartphones 32%
Smartphones per capita (Dic 11)
47%
54%
61% 64% 72% 52% 81% 47% 46% 44% 44% 43%
Feature 58% Phone
45%
39% 8% 2012
28% 7% 2013
22% 6% 2014
Low cost
9% 2010
8% 2011
14% 5% 2015
Singapore Hong Kong Sweden Austria Spain Denmark Israel Finland
Source: Pyramid Research Smartphone Forecast Pack 2Q11, Booz & Company analysis
The decrease on cost of smartphones has proven critical, however current subsidy policies are becoming non-sustainable
Commercial costs increase driven by Smartphone subsidies
Average relative handset cost
(based on the average cost of LC)
x3
8.7
Broad range 120-500
Sprint losses hit $1.3 billon over iPhone costs

by Matt Peckham, PCWorld
x3
3.1 1.0 Low Cost Feature Phone Smartphone
Examples
Sprint says it sold 1.8 million iPhones between October and December 2011, of which roughly 720,000 were new customers, but the cost of subsidizing Apples smartphone raised the companys losses to $1.3 billion (43 cents a share), compared with $929 million (31 cents a share) year-onyear. The losses after excluding one-time costs were 35 cents a sharelower than the 38 cents analysts had forecast.
January 2012
Source: KPN, JP Morgan, Pyramid Research Smartphone Forecast Pack 2Q11, Booz & Company Analysis (1) Most common smartphones by sales Western Europe
Among smartphones, Android will capture the biggest market share, while Apple stabilizes around its core customer segment
Handset base by Operating system
(Western Europe) Forecast Android Apple iOS Blackberry OS 3% 11% 12% 19% 20% 15% Symbian 57% 14% 13% 19% 11% 4% 2015 21% 22% 29% 32%
36% Windows Phone Other
26% 8% 3% 2013
13% 2% 2009 3%
6%
2011
Source: Strategy Analytics 2011 Nota: Windows evolution remains a big question mark
Devices: Tablets
Tablet sales are expected to reach 252M units by 2014 half of PCs units expected to be sold that year
Expected MarketShare
M units 350
300
Tablet sales forecast Worldwide

(M of units) Forecast 326
252
250 200 150
178
40-50%
104
100
64
50
20-30% Other
(1)
18
0
2010
Units Sold Tablets /PCs
2011
18%
2012
27%
2013
41%
2014
52%
2015
61%
20-30%
5%
Source: Gartner (1) Windows evolution remains a big question mark

Devices: Tablets
Early adopters used it as a complement to the PC (at home for News and Games), but in H2 2011 already 75% use it for work
Tablet Use of early adopters (H1 2011)
70% Home 65% Where 29% Travel Commute 6% Work Role 30% 25% 5% My home PC My work PC My home PC My work PC
Complement of Substitute of
Work Related
General Usage Downloaded Apps

70% News Games Social 70% 55% 40%
<2 h/day How Much 2-4 h/day >4 h/day 7% 3%
90% What for
Email Office docs Pdf Only personal 45% 40% 25%
4.5 10.5 2.5
25% paid
Source: Booz & Company Survey. Jan 2011. 330 respondents worldwide, 35% US, 35% EU, 30% rest
Enablers of Change
New Business models
New Reality
Devices
Data centricity
Social Media
Ultra Broadband
Cloud
Digitalization
Infrastructure: UltrabroadBand
Consumer behavior increases the bandwidth demand and thus adds pressure for the development of new networks
Consumer Needs
Needs Size GB 0,001 0,01 0,10 2,00 4,50 12 25 150 Mobile Graphical website Music track Music album 250 photos DVD movie 1 hour of personal HD video HD movie Full online back-up
Required Bandwidth for each Need

1 mbps 4 sec 40 sec 13 min 4.5 hours 10 hours 27 hours 2.5 days 14 days 3G UMTS
ADSL
10 mbps <1 sec 4 sec 1 min 27 min 1 hour 2.5 hours 4.5 hours 1.5 days 3.5G 4G LTE
30 mbps <1 sec 1 sec 27 sec 9 min 20 min 53 min 1.5 hours 11 hours
100 mbps <1 sec <1 sec 8 sec 2.5 min 6 min 16 min 27 min 3.5 hours
Expected future incrrease of demand
Network that serves that bandwidth

Inacceptable by current standards
4G+ LTE advanced Optic Fiber

FTTB FTTH
Fixed
xDSL
VDSL
FTTC Cable
A mix of F&M Technologies will have to be deployed depending on their location and traffic profile
Potential Future Technology Deployment Map Location Urban
Limited Volume
ILLUSTRATIVE
Sub-urban
LTE <900MHz LTE 2.6GHz 3G
Rural
Mobile
High Speed
Traffic Demand Profile
Bursty traffic
FTTB/FTTH
WiFi ADSL VDSL
High Volume
Fixed
Medium Speed
Real-time/ Streaming
10
However the development of the Ultra Broad Band infrastructure will depend on several factors
FFTH LTE
(Fixed UBB infrastructure)
(Mobile UBB infrastructure)
Regulation towards investments KSF for rapid development Government moves/decisions Co-operation models Depending on competitive and regulatory environment
Regulation Auction conditions and covenants Cooperation models Depending on competitive and regulatory environment
11
Enablers of Change
New Business models
New Reality
Devices
Data centricity
Cloud
Social Media
Ultra Broadband
Digitalization
Data centricity
Consumers are demanding a wider range of communication services to engage with a larger group of contacts than in the past
Consumer Mobile Communication Services Trend
Location sharing Group Messaging Status File/Video sharing SMS Activity sharing Invites (viral) Social reviews Opinions
Presence Voice Calls SMS Video Calls
Voice Calls
MMS Voice mail Email
Instant messaging Collaborative music playlists Voice mail In-game messaging
MMS Email Social networks
twitting
Social mobile Video games Conference
Past
Today
13
Data centricity
In the mid-term operators will experience Voice/SMS-to-data substitution to a much larger degree
HIGH LEVEL ESTIMATE
MOU(1) 700 600 500 400 300 200 100 0
Forecast OTT impact in Usage

Selection of New Communication Service Apps Voice, Messaging, Video
Mobile Communication Usage1 Minutes of use Nordic countries Forecast 10% 35% OTT Messaging
20% SMS
Ping
beluga
35% Voice
2008
2009
2010
2011
2012
2013
2014
2015
1) Messaging calculated in minutes of use based on average time usage per messaging type of service (including social media apps like FB, excluding usage for mobile internet surfing) Source: Bofa/ ML wireless report Q12011, PTS, Booz & Company analysis
14
Data centricity
Today, this substitution is already a visible reality, which needs to be addressed by the Telcos
SMS revenues cannibalization by OTT services SMS growth destruction by OTT services
Y Axis
Smartphone adoption impact on SMS revenues*

SMS consumption decrease among Whatsapp users 60%-80%
SmartPhone
Whatsapp impact in the youth segment

WhatsApp Penetration Annual SMS growth 35% 13% 12% 9% 2% -8% 1Q 2Q 2010 3Q 4Q 1Q 2011 70%
100
20-40
6 months
Month 0
* Among WhatsApp users
Month 6
Source:
KPN, JP Morgan, Pyramid Research Smartphone Forecast Pack 2Q11, Anlisis Booz&co
15
Data centricity
Telcos have to choose their strategic alternatives in meeting IP-based OTT communication services
Telco Operators Strategic Options
Launch own rich communication offerings
Value Chain Control
Go-to-it-alone
HD Video Call Voice Blogging Video/File sharing
Roaming VoIP App
Rich Comm Serv-Europe Plattform
Partners with OTTs
Leverage existing OTT functionality
Pipe & Access Service Provider
No Action
2008
2011
16
Data centricity
Additionally, Telcos will have to redesign their offering structure to rebalance the revenues between voice and data provide angles of differentiation in data services
Offering structure evolution Past Today
Packages Price Price Price Price
Current transition
Future
Volume
Volume
Services
Volume
Download Speed limitations % over revenues
Service Levels (QoS) DATA
VOICE
17
Enablers of Change
New Business models
New Reality
Devices
Data centricity
Social Media
Ultra Broadband
Cloud
Digitalization
Cloud services
Cloud Computing is seen as next stage in the evolution of IT delivery: seamlessly scalable and standard in a virtual way
Cloud Computing
Data Servers Applications Storage
Cloud Computing is the delivery of IT capabilities in a scalable, virtualized, and standardized manner. Provided over Internet standards and infrastructure High level of hardware abstraction Pay-per-use / variable cost pricing
Products Services Solutions
Source: Booz & Company analysis

19
Cloud services
Many services have emerged across the cloud stack around the three areas which cover from just infrastructure to a full application
Infrastructure as a Service [IaaS] Platform as a Service [PaaS] Software as a Service [SaaS] Application Operating System Middleware API Automation Software CPU Storage Network Connectivity
Standard infrastructure to run own solution - purchase CPU, storage, memory as a service
Source: Booz & Company analysis
Cloud Service Stack
Hosting Remote storage Back-up Network connectivity
Pure infrastructure
Hosting Application engines Billing Universal Address Book API hosting
Frameworks for applications
ERP CRM Salesforce automation Virtual Office Messaging Web / m-commerce/ social/ retail enablement
Full application
Integrated development platform offered as a service Run software on standardized platforms
Purpose-built applications delivered over the web
20
Cloud services
Strong demand for all cloud service models is expected in the next years, with nearly a third of businesses already using them
Adoption of Cloud Services (Businesses)
Europe and North America
80% 9%
Sales Forecast Cloud Services Europe

(in billion euros) 12 Sevices 9 Software SaaS CAGR 34%
40%
7 5
12%
Platform PaaS
55%
4 2
12% 7%
Infrastructure 41% IaaS
Adopters Not decided Interested
Piloting Implementing Expanding 31% already uses it
2009
2010
2011
2012
2013
2014
Source: Forrester - Market overview of cloud IT services from major Telcos, Booz & Company analysis
Source: IDC, Gartner, Booz & Company analysis (1 USD = 0.74 EUR)
21
Cloud services
Cloud services will represent a relevant change and important opportunities for all stakeholders
Selection of benefits from cloud services
Telcos
Increase of their offering to Business customers (alone or as a trusted broker or aggregator) Increase clients BroadBand needs and network utilization Better buy-in of the Quality of Service premium Focus on key value adding activities Seamless operations throughout multiple locations Standardization and fast deployment of solutions Cost reduction and CAPEX-free IT Relevant cost reductions and control Speed up the e-government initiatives Increase collaboration between agencies Continuity of operations/Disaster recovery
Industry
Government
SaaS PaaS IaaS
Vendors
Higher turnover, thanks to an easier selling proposition (pay-as-you-go, high automatization/low implementation requirements) Broader portfolio of products on reach Better visibility on clients real product usage Access to services previously reserved for corporations Scale your IT as needed Increased level of competition will foster better services and lower prices
SME and Consumers
22
Cloud services
Many players are chasing the opportunity Telcos must seek a way to solidify their position as value adding players
Integrated Giants
SI and outsourcing powerhouses with assetheavy offers across IaaS, PaaS, SaaS
Asset-light integrators
Already strong in outsourcing; partnering for IaaS; making asset-light bets
Web and Cloud Masters

End-to-end IaaS to SaaS players with huge data centers, significant scale economies
Service Providers and Telcos

Role evolving, many going asset-heavy, and exploiting reach and cloud-relevant assets
Virtualization & Automation SW Specialists

PaaS focused players partnering broadly; seeking to set standards
Equipment Players
Computing, PC and handset/device OEMs seek to exploit device proliferation Network equip. players looking to enable NaaS services and play selectively in PaaS
Enterprise SW Specialists
Like cloud masters, but focused on enterprise suites; can be asset-heavy or light
Pure Play ISVs

Broad swath of SaaS ISVs vying for pieces of cloud market
Aggregators
Potential new class of SaaS/ PaaS players, including SaaS app stores
Web VAPs
Fragmented, but could leverage strength in web services into cloud
Note: This is an idealized view of the future cloud ecosystem, showing the primary player types; logos are illustrative only. Booz & Company analysis.
Enablers of Change
New Business models
New Reality
Devices
Data centricity
Social Media
Digitalization
Ultra Broadband
Cloud
Social Media
Social networks, led by Facebook, already represent more than 845 million users
> 1200 M user accounts
Reach of Social Networks
1 out of 13 worlds inhabitants has a Facebook account.
If Facebook was a country, it would be the 3rd in the world.
G+
90 million
Linkedin
135 million
Twitter
200 million
Facebook
845 million
With more than 845 million of users, it is still growing 50% y-on-y
+53%
360 608
845
Dec 2009
Dec 2010
Dec 2011
Source: Facebook IPO 2012, Google reporting at jan2012, Linkedin reporting at November 2011. Booz & Company analysis
25
Social Media
A developing ecosystem, with new and continuous additions that are exploiting the micro segmentation of this phenomenon
Explosion of Social Networks
PHOTOGRAPHY
RECOMMENDATION
MUSIC
More than 400 social network initiatives have been set up in many different categories and segments: automobile, languages, travels,
CORPORATE SOCIAL NETWORK
MICROBLOG
LOCATION
26
Social Media
Corporations and businesses should take social networks very seriously: upgrade from the fans site to making social-business
Collaboration between employees Collaboration with customers
More than 200,000 companies are using Yammer as a corporate social network including 85% of the Fortune 500 companies
# Yammer Users (MM) # Companies using Yammer ( 000)
Walmart is vey active in social networks Get on the Shelf, where customers vote the products they would like to find in Walmarts shelfs Shopycat, that recommends gifts based on your Facebooks profile Back in 2011, it acquired Kosmix for $300 Millon, a company specialized in social media and mobile commerce, . ... Additionally, it acquired companies specialized in mobile publicity and retail technology associated to mobile phones
X2.5
4,0 1,6 80
X3
250
2010
2011
2010
2011
Source: Yammer, Walmartlab

27
Social Media
However, social spend today is mostly focused at top of funnel we believe there is even greater promise further down the funnel
Marketing Funnel Typical Activities
Branding
What Social Media Enables
New environment for promoting broader brand Forum for new social/viral content (often user-generated)
Awareness
Typical focus today
Content Creation
Traffic Generation
Additional ways to drive traffic to own site or social network presence New microsites/widgets/apps to engage potential customers Engage customers proactively in product/service innovation New mechanisms for targeting and incenting potential customers Additional e-commerce channel Unique buying propositions Purchases as syndicated social content Deeper connection with customers after-sale Activation of brand loyalists to market/sell on your behalf Additional mechanism for community-based support Rich sociographic data set for effective real-time social targeting 28
Consideration
Engagement 1 Innovation / Ideation 2 Lead Generation Purchase Decision
Conversion
Greatest ROI transparency
Loyalty / Advocacy After-Sale Service
Loyalty / Service
5
Measurement
Social Media
Social Network relevance and the increasing digitalization changes marketing and requires a stronger presence in digital channels
Change towards Digital Marketing in Germany Media Usage evolution
(Media use minutes/day) 594 96
67
(% of respondents changing their marketing expenses) 623 140

109
Marketing Expenses evolution
Internet Messaging, Gaming, others TV
574 44 49 220
Use of digital media ~10% CAGR
Reduction Digital Mobile Direct advertisng TV
Increase
209
189
Radio Print
221 40
194
166
Print Radio 100 -50 0 0 20 40 60 80 100
28 2010
19 2015
2005
% of subscribers
Source: Media map in 2010-2015, OMD Germany, Booz & Company analysis
Source: Marketing & media Ecosystem 2010 survey and Booz & Company analysis
29
Social Media
having the media companies, the first to be affected and to react, given the potential of information and of real time interaction
Social Media Response Analysis for Media Companies
Social Media Sentiment analysis for Advertising (Superbowl 2012)
BlueFin detects, registers and analyzes all the comments and the sentiment that is being generated in the social network regarding TV programs and advertisements In near-real-time, you can visualize the success of the TV programs, the profile of the most hooked viewers, the geographical origin of comments Regarding advertisers, they have been able to identify that ads efficiency not only depends on creativity and prime time but also on the contents of programs taking place before and after the ads
Advertising Analysis Superbowl 2012
The most appreciated advertisement
Segmentation
Source: Booz & Company Anlisis, Bluefinlab

30
Enablers of Change
New Business models
New Reality
Devices
Data centricity
Social Media
Ultra Broadband
Cloud
Digitalization
Digitalization of industries
Digital habits will be increasingly embedded in our daily life

Upcoming Eras
2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020
VIEW 2012
Working Nomads - flexible working times, teleworking, flexible employment relationships
OnLineLife - ubiquitous and seamless connectivity at no incremental cost or effort Smart Cloud - remote data storage, software as a service, distributed computing SensorEconomy - environment aware devices, location aware services, near range ad hoc communication The Internet of Machines- proliferation of machine-to-machine interfaces and interaction Semantic Networks
32
Transformation will happen in waves over more than a decade but it pays to have the end vision in mind today
The Digitalization Waves
Transformational Impact Leaps, Bounds and Fall-Backs
eRecords for Patients Track & Trace Toll Roads Connected Supply Chain Smart Metering CRM Connected Health Ecosystem Converged Personal Health Self-optimizing Transportation
Congestion Management Self-Adapting Supply Chain Crowdsensing
Early Exploration
eCommerce
Virtual Business
Augmented Reality
Smart Infrastructure Immersive Converged Shopping
Real-Time Segment-of-1 SelfAdministrating Infrastructure
Now
Todays Opex: What Companies currently worry about
3-5 years
eCommerce
5-10+ years
The End-Game: What you should have in mind
Tomorrows Growth: Where Venture Money currently goes to
33
Digitalization is expanding to all industries, generating increased demand for connectivity and ICT infrastructure
Examples of New Digital Demands
CAGR 2009-2014 1.6%
4 2 4 5 6 16 18 22 26
Industry Education Transportation Wholesale Trade Retail Healthcare Providers Utilities Government Manufacturing Com., Media & Services Financial Services
ICT Spending 2014

2
Possible ICT Solutions

eLearning Collaboration Communication networks Payment solutions Supply Chain Management (RFID) Payment solutions Supply Chain Management (RFID) Mobility solutions eHealth solutions
1.4% 1.7% 2.5% 2.2% 5.0% 1.7% 2.0% 3.1% 2.5%
M2M solutions Smart fields, Smart grids eGovernment solutions Safety and security solutions M2M solutions IPTV / Mobile TV Interactive content and games Transaction infrastructure/systems M-banking
1) Gartner:Total ICT in 2014 incl. telecommunication equipment and services, in billion EUR (Germany) CAGR 2009-2014
34
Digital opportunities and shift of the paradigm in other industries

Possible ICT Solutions
E-govement
M2M
Digital Security
e-health
Optimize supply of pharmaceuticals & medical equipment Enhance primary care services National Healthcare Plan
Financial services
Implement quality assurance programs Optimize hospital capacity Improve healthcare skills and expertise
Loyalty
Ticketing
Facilitate patient transfer between facilities Develop patient transfer systems
Promotions & coupons
Self-scanning & Self-checkout
Shopping lists
In-store price comparison
Develop a National eHealth strategy
Store location
Payment
35

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Booz & Company World Telecommunications Outlook 2012+

Booz & Company Febrero 2012

New Business models

Smartphones per capita (Dic 11)

Feature 58% Phone

Broad range 120-500

Sprint losses hit $1.3 billon over iPhone costs

36% Windows Phone Other

Tablet sales forecast Worldwide

Source: Gartner (1) Windows evolution remains a big question mark

General Usage Downloaded Apps

<2 h/day How Much 2-4 h/day >4 h/day 7% 3%

90% What for

Email Office docs Pdf Only personal 45% 40% 25%

4.5 10.5 2.5

New Business models

Booz & Company February 2012

Required Bandwidth for each Need

Expected future incrrease of demand

Network that serves that bandwidth

4G+ LTE advanced Optic Fiber

Traffic Demand Profile

WiFi ADSL VDSL

Booz & Company February 2012

(Fixed UBB infrastructure)

(Mobile UBB infrastructure)

Booz & Company February 2012

New Business models

Presence Voice Calls SMS Video Calls

MMS Voice mail Email

Instant messaging Collaborative music playlists Voice mail In-game messaging

MMS Email Social networks

Social mobile Video games Conference

Forecast OTT impact in Usage

Smartphone adoption impact on SMS revenues*

Whatsapp impact in the youth segment

Booz & Company February 2012

Value Chain Control

HD Video Call Voice Blogging Video/File sharing

Roaming VoIP App

Rich Comm Serv-Europe Plattform

Partners with OTTs

Leverage existing OTT functionality

Pipe & Access Service Provider

Booz & Company February 2012

Download Speed limitations % over revenues

Service Levels (QoS) DATA

Booz & Company February 2012

New Business models

Products Services Solutions

Source: Booz & Company analysis

Cloud Service Stack

Hosting Remote storage Back-up Network connectivity

Hosting Application engines Billing Universal Address Book API hosting

Frameworks for applications

Integrated development platform offered as a service Run software on standardized platforms

Purpose-built applications delivered over the web

Booz & Company February 2012

Sales Forecast Cloud Services Europe

Infrastructure 41% IaaS

Adopters Not decided Interested

Piloting Implementing Expanding 31% already uses it

SaaS PaaS IaaS

Booz&Co Gsma-2012 Futurecmt

Booz&Co Gsma-2012 Futurecmt