1. Capturing the opportunities from
the New Digital World
A view from the top
Barcelona, February 15th, 2011
César Alierta
Chairman & CEO

2. Index
01 A growth and dynamic industry
02 ICT sector challenges
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3. A growth and dynamic industry
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4. ICT industry : back to solid growth rates
(Bn USD) 2010F CAGR CAGR
ICT Market 2007-10F 2010F-14F
North America 1,042.9 1.3% 4.4%
Europe 916.0 -3.5% 2.3%
Asia & Pacific 894.0 6.3% 5.4%
Latin America 263.6 5.9% 6.1%
Middle East and 212.4 3.5% 4.8%
Africa
Worldwide 3,329.0 1.5% 4.3%
Source: Gartner Market Databook (Oct 2010)
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5. Customers
We are very positive about our industry future Apps Devices
Customers
Great
Digital
Apps & Opportunity Devices
Services
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6. Customers
Telco industry growth will be driven by Fixed and Mobile Apps Devices
Broadband
Total accesses Net adds of accesses
(Million) 2010F – 2014F
CAGR
4.1% 91% Emerging
markets
2.018 Mill
7.3% 85% Mobile
6.6% CAGR 2010 - 2014
MBB: 31% FBB: 11%
* BB: Fixed BB + 3G+ suscribers)
Source: Pyramid Data Forecast (Jan 2011)
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7. Customers
Improved user interface devices and M2M new applications Apps Devices
are boosting demand growth
From Internet of People to
Internet of Things
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8. Customers
Massive smartphone uptake Apps Devices
Worldwide Smartphone Installed Base*
(Million)
CAGR 2010-2014
Emerging Economies*: 32%
Advanced Economies: 24%
Source: Strategy Analytics
Emerging markets: Latin America, Eastern Europe, MEA, and Asia Pacific (ex-Japan, South Korea and Australia)
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9. Customers
Digitalization of the real economy broadens the scope of Apps Devices
our market
Customer expenditure breakdown 2009
Source: U.S. Bureau of Economic Analysis - U.S. national income and product accounts (NIPAs) (Aug 2010)
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10. Telco players have a key role to play in the ICT ecosystem
Telco as service
platforms
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11. ICT sector challenges
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12. Customers
This growth opportunity is supported by networks Apps Devices
Customers
Networks
Apps & Devices
Services
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13. Network
Development of NGN and upgrade of existing ones is needed Apps Devices
to allow the exponential broadband growth
Technology evolution
TODAY
Broadband capacity /user
FTTH
NG-GPON
FTTH
GPON IMT
VDSL Advanced
ADSL2+ LTE
ADSL
HSxPA
UMTS
EDGE
Price no longer a barrier for uptake of mobile data Time
Heavy investments are needed - Who is going to invest?
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14. Mobile data growth increases the importance of the Fixed
network
For the evolution of mobile network… … Fixed network will be key
BACKHAUL
Every Mobile Base Station will have to
LTE Nodes capacity
be connected by Fiber Fixed Network
New Wireless Access
Technologies require bigger > x10
network capabilities POINTS OF PRESENCE
Massive Points of Presence in
buildings (home/enterprise)
# Nodes (long term)
New Wireless Network
> x10 MULTIMODE
Architecture need sites nearer
to the customers Intensive Use of Technologies usually
characterized as “fixed” ones: WiFi,
all-IP, video…
Growth of mobile traffic >> x10 INTERNATIONAL
Strength of capacities in submarine
cables and satellite
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15. Network
Expected traffic increase will require incremental CapEx, Apps Devices
both in Fixed and Mobile Networks
A.T. Kearney EU 27 Capex required estimation
Cumulated 2010 - 2014
Bn € CapEx Trendline Additional CapEx required
at current level
~ 10
Fixed Internet
Network ~26 +
~ 116 in FTTx accesses
Mobile Networks
(3G and LTE) ~ 65 ~ 21 Bn€
Source: Oppenheimer, A.T. Kearney analysis. FTTx investment assuming 50% household coverage by 2014
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16. Telcos are the main contributors to investment and employment in
our industry
e European Market Latam Market
ra tiv
st
Illu
Investment Employment Investment Employment
(CAPEX) (CAPEX)
Telco 37 billion€1 2.0 million2 13 billion€ 0.7 million
IT
3 billion€1 2.9 million3 0.4 billion€ 0.5 million
Internet
0.03 billion€1 10,0005 0.01 billion€ >3,000
Content and service providers hardly contribute to network costs
1 The 2009 EU Industrial R&D Investment Scoreboard
2 European Business. Facts and figures. Edition 2009. Eurostat. EU-27 in 2005
5 Estimated Google’s employees in Europe from 20,222 worldwide (December 2008)
3 European Business. Facts and figures. Edition 2009. Eurostat. EU-27 in 2006 for Business services-Computer and related activities http://investor.google.com/releases/2008Q4_google_earnings.html
4 Digiworld-2009. IDATE 6 Online advertising – Western Europe – Strategy Analytics
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17. Current regulation doesn’t guarantee necessary investments
Telco
operators
Regulated Fragmented
Not regulated Concentrated
Communications,
Apps. &
Services
Device suppliers Internet players
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18. Conclusions
Our industry has very positive growth prospects, driven by mobile
data
New business models are needed to finance network investments that
will make sustainable the whole internet ecosystem based on a virtuous
circle of growth . Cooperation within the industry is essential to get
the most of the digital world
New engagement of telecom operators with content providers is
needed to be able to deliver contents with new quality requirements
Regulation should allow the recovery of network costs, promoting
investment, traffic efficiency and fostering new services development
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