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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
About Analysys Mason DSO experience Tanzania case study Risks and challenges The future of TV
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
About Analysys Mason DSO experience Tanzania case study Risks and challenges The future of TV
Contents 13
TV viewers in Tanzania 14
19%
21%
7%
53%
Urban - at least weeklyRural - at least weeklyUrban - less frequentRural - less frequent
About Analysys Mason DSO experience Tanzania case study Risks and challenges The future of TV
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
About Analysys Mason DSO experience Tanzania case study Risks and challenges The future of TV
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
COMVERSE 3 Proprietary and Confidential
MNO’s Flat Rate Communication Service Package
The Bread & Butter of Communication Services
Even the heaviest OTT users buy this package
COMVERSE 4 Proprietary and Confidential
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 +$0.33 Billion
COMVERSE 5 Proprietary and Confidential
Monetary Value of Communication Service Package
Plan A Plan B
Germany
A-B (US$) +$57 +$35 +$49
% Difference +70% +74% +62%
Subscribers 37.5M 19.3M 33.9M
Total Monthly
Difference +$2.15 Billion +$0.68 Billion +$1.65 Billion
COMVERSE 6 Proprietary and Confidential
Monetary Value of Communication Service Package
Plan A Plan B
Italy
A-B (US$) +$34 +$39 +$18
% Difference +63% +59% +72%
Subscribers 32.1M 22.6M 21.46M
Total Monthly
Difference +$1.08 Billion +$0.88 Billion +$0.38 Billion
COMVERSE 7 Proprietary and Confidential
Monetary Value of Communication Service Package
Plan A Plan B
A-B (US$) +$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 +$1.02 Billion
US
COMVERSE 8 Proprietary and Confidential
Monthly Diff. ($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
COMVERSE 10 Proprietary and Confidential 10
Feature Phone User vs. Smartphone User
Source: IBM; Analysys Mason 2012
In 2015 Smatphone connection in Africa will reach 20% - (Informa 2013)
COMVERSE 11 Proprietary and Confidential 11
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
COMVERSE 12 Proprietary and Confidential 12
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
COMVERSE 13 Proprietary and Confidential 13
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,
COMVERSE 14 Proprietary and Confidential
MNOs need to safeguard their position As the incumbent provider of the bread & butter of communication services
COMVERSE 15 Proprietary and Confidential
Why Does Everyone Still Buy this Package?
100% ubiquity & reach
Default Voice call service
Default Identity
(MSISDN)
555-4712
COMVERSE 16 Proprietary and Confidential
Communication Service Package - Projected erosion
100
75
50
25
0
Com
munic
ation P
ackage U
sage
%
Negative Tipping point
COMVERSE 17 Proprietary and Confidential
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
COMVERSE 18 Proprietary and Confidential
What’s Risking This Operator’s
Position?
COMVERSE 19 Proprietary and Confidential
Voice is under direct attack of the Internet Giants
Google Facebook Microsoft, Apple Google
COMVERSE 20 Proprietary and Confidential
Voice is under direct attack of the Internet Giants
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
COMVERSE 21 Proprietary and Confidential
Voice is under direct attack of the Internet Giants
Google Microsoft, Apple
Dec 2012
Jan 2013
Integrates SMS into messenger conversations (Android only in selected countries)
Integrates Voice Calling in US & Canada
COMVERSE 22 Proprietary and Confidential
Voice is under direct attack of the Internet Giants
Google Microsoft, Apple
Beyond all that, WebRTC will eventually turn voice call from a service to a feature
COMVERSE 23 Proprietary and Confidential
The do nothing option means that by 2020
MNOs will loose their position
together with a significant part of their revenues
will
COMVERSE 24 Proprietary and Confidential
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
COMVERSE 25 Proprietary and Confidential
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
COMVERSE 26 Proprietary and Confidential
“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
COMVERSE 27 Proprietary and Confidential
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
COMVERSE 28 Proprietary and Confidential
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 29 Proprietary and Confidential 29
Comverse Digital and Value Added Services
Thank You!