Presentation covers ICT Market, ICT investment, and issues core to European Telecoms Development

1. Traicere Consultants
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ICT Business Transformation
– Considerations from a European Telecoms Perspective
Ruth Y. Pollock
Traicere Consultants
VMA
Madrid, España June 2012

2. agenda
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• State of affairs
• Considerations
• Your thoughts…

3. Purchasing Power Parity [GDP]
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1. European Union $ 15,390,000,000,000
2. United States $ 15,040,000,000,000
3. China $ 11,290,000,000,000
4. India $ 4,463,000,000,000
5. Japan $ 4,389,000,000,000
6. Germany $ 3,085,000,000,000
7. Russia $ 2,380,000,000,000
8. Brazil $ 2,282,000,000,000
9. United Kingdom $ 2,250,000,000,000
10. France $ 2,214,000,000,000
11. Italy $ 1,822,000,000,000
12. Mexico $ 1,657,000,000,000
13. Korea, South $ 1,549,000,000,000
14. Spain $ 1,411,000,000,000 The European Union remains the
15. Canada $ 1,389,000,000,000
16. Indonesia $ 1,121,000,000,000 worlds largest economy
17. Turkey $ 1,026,000,000,000
18. Iran $ 928,900,000,000
19. Australia $ 917,700,000,000
20. Taiwan $ 885,300,000,000
Source: CIA Factbook, data 2011 est .

4. Top Mobile Operators
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Total Subscribers (Millions)
Axiata Gp. Berhad
China Unicom
VimpleCom
Orange
Telefonica
Airtel
America Movil
Telenor
Vodafone
China Mobile
0 100 200 300 400 500 600 700 800
Source: GSM 2011

5. Global Market Presence
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6. ICT Global Business Investment
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Europe USA Asia
Telecom
Connectivity
IT hardware
& software
Content / EU light investment in
Media content/media sector
Source: Carlos Lopez Blanco, Telefonica 2009

7. Top Global 15 Publicly Traded ‘Internet’
companies by market value 2011 vs. ‘04
Success through global market Traicere Consultants
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access, and global appeal
…none are European

8. GAMEY vs. traditional Telco Investment
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Services est. probably <$50M Google $2.222B [Jan 2004 – Dec 2006]
Platform Max. US $150M (Tier 1) Google $1.994B [to Mar 2007]
Core Network Mobile Core Network $4 B [est.] Not Public
Access Network UK 3G RAN $3 – 4B [Analysis est.] Google $ 0
License UK 3G $11,928,000,000 [Vodafone] Google $0
*Finance Vodafone $54.3Bn Debt Google $24.5Bn Cash
Telco GAMEY
Source: Company Reports, Company Presentations, Analysis [IBM], SEC Filings USD 2 = GDP 1
*2010 Google’s Business Model, Andrew Collinson, Telco 2.0 Director of Research

9. GAMEY vs. Telco Business Comparison
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Number of Employees
– China Telecom 245K; Deutsche Telekom 244K; Google 7K
Number of customers served per employee
– Verizon 479; Singtel 4,454; Google 54,000
ARPU (per Month) GAMEY companies are orders of
– BT $155 ;Verizon $70; ATT $50; Google $7
magnitude more efficient
Profit
– BT 1.9B; Vodafone $11.5B; Telefonica $5.5B; Verizon $7B ; Google $1.6B … global market access without the
Profit Margin cost.
– BT 5%; Vodafone 21%; Telefonica 11%; Verizon 8% ; Google 27%
Service comparisons
• Massive automation with rapid and substantial application development
• Blended and personalized services – increasingly user-created
• No significant cross boarder trade limitations such as with Telco
• More stringent regulations regarding Customer data usage for Telco than IP-companies
GAMEY companies are highly regarded by the market
• MktCap (Google + Amazon + MSN + eBay (skype) + Yahoo) = $453B
• MktCap (Vodafone + AT&T + China Mobile +Verizon) = $431B
Operators are currently better at charging for content and supporting the commercial retail
chain (device and service selection, billing and customer support)
Source: Company Reports, Company Presentations, Analysis [IBM], SEC Filings USD 2 = GDP 1
*2010 Google’s Business Model, Andrew Collinson, Telco 2.0 Director of Research

10. ICT Business Diversification
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Denotes where business started
Carriers Nokia RIM Apple Qualcomm Google Facebook
Components
Social
Networks
Cloud Services
Developer
Ecosystems
Network
User Interface
Operating
System
Hardware IP
Manufacturing
Source: VisionMobile 2011

11. Mobile Service Growth
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Communication Advice find your way…
Entertainment Government Trade
Retail
According to a new research report by Berg
Home Management Insight, the worldwide number of users of
Learning mobile banking and related services is forecasted
to grow from 55 million users in 2009 at a
Banking compound annual growth rate (CAGR) of 59.2
percent to reach 894 million users in 2015.
Security By 2015, Berg Insight forecasts that mobile
M2M banking will attract 115 million users in Europe
and 86 million users in North America.
Building Management
Healthcare Business Management
Source: Cellular News, 2010 Games

12. Apple ‘Stickiness’
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$6.8 bn Revenues generated by iPhone (hardware) sales in 2009
(22% of Apple’s revenues)
$400 m Revenues generated by App Store sales since its creation
< 1% App Store contribution to gross profit since its creation
Source: Faber Noveli 2010

13. Current ICT Investment
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US Currently invests 30% of
GDP in ICT business
Source: Oxford Economics, 2011
As a percentage of GDP, Europe’s stock of ICT capital has fallen to about two-thirds of
the level in the US, the world leader, having been close to parity in 1991.
…this ICT investment gap has affected Europe’s productivity growth, which has averaged
only half the US rate since 2000.

14. Telecom Challenges
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Spectrum Crunch
• Increase in data demand (primarily Mobile B’band)
through increase in subscribers and data-rich applications
• Rate of demand is exceeding data transfer speeds
• Network efficiency innovation unable to keep up with service demand
End of Profit Source: Stem Tamkivi, GM Skype Estonia 2009
• Cost of service provision will potentially equal (if not exceed ) revenue generation
• Increased ICT profitable businesses have developed ‘over the top’ of operator services such
that operators provide access to market for other ICT services without direct or
proportionate revenue remuneration
• Operators in most markets are anticipated to reach ‘end of profit’ by 2015
Worst case Best case
Region median
scenario scenario
North America Q1, 2013 Q4, 2013 Q2, 2014
Developed Asia Pacific Q3, 2013 Q3, 2014 Q1, 2015
Western Europe Q1, 2014 Q1, 2015 Q2, 2015
Source: Tellabs/ Analysis Mason (February 2011)

15. Telecom Considerations
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Spectrum Crunch - your thoughts?
• Adopt systems/standards with greater efficiency such as LTE? Free cash flow
• Adopt off-loading and intelligent QOS solutions and strategies
across available network?
• Invest in new technologies which demonstrate more efficient
RF spectrum utilization?
• Invest in the development of new technologies which exploit
EM spectrum such as Visible Light Technology/Li-Fi?
1
Cost per Mega Byte.
Li-Fi
<1:300 HSPA only - No LTE
1:3
HSPA, with LTE deployment
1:5
<1:3000 HSPA+LTE, 50% off - load
GPRS EDGE UMTS HSPA LTE
2010 2012 2014 2016 2018 2020
Source: Dr. Kim Kyllesbech Larsen, Deutsche Telekom 2011 Operator illustration
Source: Pure VLC 2012
Visible Spectrum is
unregulated

16. Telecom Considerations
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End of Profit – your thoughts?
• Through economies of scale, reduce CapEx and OpEx via network consolidation (shared
infrastructure, JVC, MVNO, acquisition)?
– Create a common telecoms platform supporting net neutrality throughout Europe – such as in Australia ?
• Impact on innovation, entrepreneurship and business ‘inspiration’
– Free up legislative control such that network control is market driven, and network acquisition easier?
• Security and market stability considerations
– Bundle services
• Standardize where possible to improve network harmonization ?
– The relationship between standards and regulations
– Innovation and standards management
– Commoditization will drive price down to the cheapest labor source and most favorable currency exchange rate
• Update regulations to support greater market competition and future profitability ?
– Resolving different schools of thought
• Deregulate to increase market influence
• Increase regulation to promote net neutrality and/or spectrum harmonization
• Licensed, Authorized or License-exempt who will benefit?
• Invest in growth ICT market segments and businesses ?
– Investment outside of traditional Telecoms business models
– Consider US (and Scotland's ) model of cultivating business entrepreneurship programs with universities
– What changes would be required to create global ICT businesses such as Google in the EU

17. Traicere Consultants
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Think Globally
Act Locally
Thank you…