The irrational exuberance of the Enron era led many communications service providers (CSPs) to financial ruin, and paying penance for past excesses consumed the first decade of the 21st century. But Yankee Group argues that it's time to shed the hair shirt. Despite a crowded competitive environment, new business models are emerging to lead CSPs into a vibrant future. However, CSPs must have the courage to transform. Hard decisions about what is core and non-core are required. In this webinar, Yankee Group VP and Senior Research Fellow Camille Mendler explores the ever-evolving CSP business model.

1. Evolving Service Provider Business Models Camille Mendler May 25, 2010

2. Agenda Structural Choices Partnering to Transform The Role of Wholesale Q&A

3. Telecom: An Industry in Decay - or Transition? Picture source: Tantrum_dan/Flickr

5. Competition Grows on Multiple Fronts Wishful thinking: The telco is no longer the center of the universe. Media & broadcast BBC, Bertelsmann, Disney, Sony Music ICT equipment, software & services Cisco, Ericsson, HP, IBM, Microsoft, NSN Consumer electronics Apple, HTC, Nokia, Samsung, Sony Cloud Amazon, Google, Facebook, YouTube, Salesforce.com Source: Yankee Group & Telecom Italia, 2009 Telecom operators

6. Service Providers Are Rethinking What’s Core n=53 Source: Yankee Group / TEN2009 Telecoms Barometer Survey (of European telecom executives)

7. When Capex Remains Tight, Pragmatism Emerges Source: Yankee Group / TEN2009 Telecoms Barometer Survey (of European telecom executives) n=53 Will network infrastructure sharing become the norm?

8. New Business Models Become Visible Direct Indirect High Low Focus on network plant & operations Focus on customer intimacy Regulated Openreach, Chorus Independent GTL Infra Joint Venture Net4Mobility Digital Distributor Qwest Trusted Intermediary BT Virtual Telco Aircel Media Maven Orange OpCo ServCo Status quo Status quo Source: Yankee Group, 2010 Profound structural and strategic realignment is underway globally.

9. Understanding the OpCo OpCos have no direct relationship with the final consumer. Examples Definition Model GTL Infra (India), TowerCo (U.S.) Specialist firm managing physical network plant assets (towers, fiber) for shared use. Often offers sale/leaseback deal to telcos. Independent Net4Mobility (Sweden), MBNL (U.K.) Infrastructure sharing joint venture pooling passive and/or active network assets for cost-efficient network reach, expansion and build. Joint Venture Openreach (U.K.), Chorus (NZ), OpenNet (Singapore) Functionally or structurally separated incumbent operator division managing access network (copper, fiber) for shared use on equal access terms. Regulated

10. Understanding the ServCo Many telcos currently operate as digital distributors by default. Examples Definition Model Qwest, Neutral Tandem (U.S.) Provider of connectivity-centric services to one or multiple client segments (e.g., service providers, enterprises, consumers). Digital Distributor Orange, SK Telecom (Korea), MTN (Africa), Telefónica Consumer-focused telco (typically 100 million-plus subscribers) aiming to be primary lifestyle services (entertainment & content) as well as connectivity provider to clients; dependent on holistic view of end customer. Media Maven BT Global Services, T-Systems, Orange Business Services Enterprise-focused telco asserting prime contractor role for multi-sourced service delivery and assurance across IT and telecom domains. Trusted Intermediary Aircel, Bharti Airtel (India) Telco externalizing all functions non-core to service differentiation, customer acquisition and retention activities. Virtual Telco

11. Agenda Structural Choices Partnering to Transform The Role of Wholesale Q&A

12. Telcos Need Help To Become OpCos or ServCos Telco functions Source: Yankee Group, 2010 Integrators & BPOs Accenture, Atos Origin, IBM BSS & OSS specialists Amdocs, Convergys, Comverse, Telcordia Digital transactions & interconnect Intec, Neustar, Syniverse, Telarix, TNS CDN providers Akamai, Edgecast, Limelight Ethernet exchanges CENX, Equinix, Neutral Tandem Wholesale operators Belgacom ICS, BT Wholesale, Tata Equipment vendors ALU, Cisco, Huawei, Ericsson, NSN Construction, engineering & logistics firms Bechtel, Relacom, Service Stream Partner examples

13. OpCo Examples and Activities T-Mobile and 3 (and now Orange UK) joint venture is pooling 3G access networks Various functions outsourced to Ericsson and NSN Western Europe (U.K.) Joint Venture (3G) MBNL OpenReach is the functionally separated and regulated access division of BT Group, controlling its copper and fiber access Copper infrastructure support services outsourced to Carillion Telent Western Europe (U.K.) Regulated Openreach Tower portfolio acquired from operators and own build N/A Southeast Asia (India) Independent GTL Infra Telenor and Tele2 joint venture is building LTE network with shared infrastructure and spectrum Western Europe (Sweden) Joint Venture (4G) Net4Mobility Type Geography Physical plant Network operations

15. Agenda Structural Choices Partnering to Transform The Role of Wholesale Q&A

17. Wholesalers Are Partnering With Other Service Providers -- and in the Wider Economy Network operations Billing & OSS IT infrastructure management Application management General administration Interconnect & settlement Business transformation services Hosted content & apps Voice & capacity Business process outsourcing IT outsourcing Wholesale Physical plant & field maintenance Network outsourcing Telco functions Housing Wider-economy services Traditional service cluster 21 st -century wholesale Digital infrastructure & delivery services + + + Source: Yankee Group, 2010

18. Redefined ‘Wholesale’ Could Grow the Top Line Smart grid, international remittances, remote home control, M2M, health care White label SaaS, UC, contact center, app store, mobile TV & IPTV, digital advertising and ad insertion CDN and P4P mgmt, media transcoding, IPX, ENUM, app store management, IaaS, PaaS, APIs, mobile payments, analytics, device and CPE management, Ethernet exchange, cloud federation, compliance management, security and fraud mgmt, content partner management, broadcast distribution, M2M MVNE, presence and identity management Infrastructure build-operate-manage, process design and optimization, service design and launch, marketing, sales support Portfolio additions Business transformation services Hosted content & apps Wider-economy services 21 st -century wholesale Digital infrastructure & delivery services AT&T BT Wholesale BT Wholesale Global Crossing KPN/iBasis Tata Communications Innovators AT&T BICs Verizon BT Wholesale DTAG ICSS Level 3 TeliaSonera Intl Carrier

19. Smart Wholesale Is About Reselling Intelligence, Not Capacity Source: Yankee Group, 2010

21. Agenda Structural Choices Partnering to Transform The Role of Wholesale Q&A

23. Thank You www.yankeegroup.com Camille Mendler VP, Global Service Strategies [email_address] Twitter: @cmendler Read analyst blogs at blogs.yankeegroup.com Watch analyst videos at youtube.com/yankeegroup Follow us on Twitter: @YankeeGroup Fan Yankee Group at facebook.com Upcoming Yankee Group webinar: Preparing for 4G Video Services Tuesday, June 29, 2010 | 11 a.m. ET Register at www.yankeegroup.com