Telecom 2020: Preparing for a very different tomorrow

1. 12 September 2014
Telecom 2020:
Preparing for a Very Different Tomorrow
Rob van den Dam
Global Telecom Industry Leader
IBM Institute for Business Value

2. Developing thought leadership
Future
Agendas
Value Realization
Studies
3 to 10 year industry outlook
with action oriented next steps
In-depth assessment of today’s
critical issues, opportunities, etc
CXO
Surveys
Chief Officiers studies – CEO,
CIO, CMO, CFO, CHRO, etc.

3. Demand side: our biennial consumer surveys
2014 Consumer Survey:
22,000 consumers in 35
countries took part in the
survey, covering:
 Customer Spending
priorities
 Adoption of Comms
services
 Sources of Information
 Customers’ attitudes
towards CSPs
 Customer Advocacy
 Customer Trust

4. Country-specific profiles and CSP benchmarking

5. Agenda
•How we see the world changing
•Future trends that are happening right now
•Our vision for a Telco in 2020
•Making it happen
•What does YOUR future like?

6. The acceleration of OTT
50 Million Users
100 Million Users (Int)
300 Million Users (China)
200 Million Users
50 Million
concurrent Users
40 Million Subscribers
Google fiber
1.2 Billion Users
255 Million Users
130 Million Users
230 Mio Active Buyers

7. OTT and the New Generation
26%
25%
19%
17%
13%
30%
45%
55%
58%
66%
71%
76%
79%
27%
55%
54%
72%
41%
77%
68%SOCIAL NETWORKING
EMAIL
INSTANT MESSAGING / Chat
MOBILE MESSAGING (SMS)
MOBILE VOICE calls
INTERNET VIDEO streaming/download
MICRO-BLOGGING
FIXED VOICE calls
VOIP ((Voice over Internet)
VIDEO CALLING
Emerging Markets (age < 25)
Mature Markets (age <25)
2014 IBM Global
Consumer Survey
•35 countries
•22,000
consumers
DAILY USAGE
Source: 2014 IBM Global Telecommunications Consumer Survey

8. Daily usage communication channels in Asia
55%
71%
76%
77%
79%EMAIL
SOCIAL NETWORKING
MOBILE MESSAGING
INSTANT MESSAGING / Chat
INTERNET VIDEO
60%
60%
76%
78%
83%MOBILE MESSAGING
SOCIAL NETWORKING
EMAIL
INSTANT MESSAGING / Chat
INTERNET VIDEO streaming
60%
61%
76%
78%
82%SOCIAL NETWORKING
MOBILE VOICE calls
EMAIL
INSTANT MESSAGING / Chat
INTERNET VIDEO
44%
71%
73%
79%
81%MOBILE MESSAGING
EMAIL
SOCIAL NETWORKING
INSTANT MESSAGING / Chat
MICRO-BLOGGING
1
Instant Messaging 84%
(WeChat, etc)
4
Micro-blogging 70%
(Sina Weibo, etc)
(2014 Global telecom Consumer Survey – all ages)

9. Global OTT / Internet players thrive
2004 data as of 9/17/2004. 2013 Market value as of 12/19/2013. 2012 Revenue is TTM.
List excludes Alibaba ($75B), whose private market value would put it in the Top 10.
List also excludes Skype (bought by MSFT in 2011 for $8.5B), YouTube (reported as part of Google) and Paypal (reported as part of eBay)
2012/13 2004
OTT and Internet category players
What being
Global really
means

10. Global OTT / Internet players thrive
15 vs. 100
800M
$100B+
70%
The top 15 global Internet companies have the same Market
Value as the top 100 publicly-traded CSPs
The top 5 – Apple, Google, Amazon, Facebook and Tencent –
have more than $100B of Cash
Apple iTunes accounts, most linked to a credit card
Mobile Advertising Revenue controlled by Google and Facebook

11. CSP revenue per subscriber has decreased
162
519
2002/2003 2012/2013
413
1319
2002/2003 2012/2013
15 largest Global CSPs
(Opcos in 10 countries or more, revenue > 5 US$ billion)
15 largest Single Market CSPs
-69% -69%
(CSP = Communications Service Provider)

12. CSP EBITDA margin has decreased
33,4%34,7%
2002/2003 2012/2013
15 largest Global CSPs
(in 10 countries or more, revenue > 5 US$ billion)
15 largest Single Market CSPs
-4% -22%
31,0%
39,9%
2002/2003 2012/2013

13. Growth CSPs is stalling
Source: 2014 IBM report: What being global really means
15 largest Global CSPs

14. The implications for CSPs
Soaring customer
expectations
CSP’s are behind consumer
brands in customer experience
and risk losing significant
revenue year-on-year.
Needs new forms
of innovation
A new kind of CSP is required
that involves customers,
employees and partners to co-
create new kinds of products
and services.
With a new enemy
New entrants in your market.
Not your normal competitors,
and they are innovating faster
than you.

15. 93% of CSPs will
focus more on “getting
closer to the customer”
over the next 5 years.
- IBM CEO Study
56% of CSPs plan
dramatic improvements in
internal collaboration
and
70% focus on
significantly improving
collaboration with other
organisations in their
ecosystem.
67% of CSPs to
focus on industry model
innovation to find new
sources of revenue.
- IBM CEO Study - IBM CHRO Study
What Telecom CxOs are telling us

16. 3 key forces will drive changes
FORCES
Traditional telco model will
disappear; new business
models & partnerships
required to sustain revenue
growth
Threats to revenue
The growth in Internet
services and subscription
will not offset declines in fixed
line, voice calls and SMS
Information
CSP’s have to manage a rich
variety of data from both
external and internal sources
sources
Data and analytics move from
back-office to a critical profit
enabler driving innovation
in the front office
Consumers
Consumers want exceptional
service from CSP’s as provided
by consumer-oriented brands
Innovate, partner, or die
becomes an unspoken
mandate as new entrants
reach out directly to
consumers and bypass the
traditional CSP operator
IMPLICATIONS IN 10 YRS

17. © 2014 IBM Corporation
Challenge
Need to innovate and create
solutions faster
Anticipate future needs such as
4G licensing
Organise their business to
leverage unified communication.
Results
Marketing teams can analyse new intelligence from
consumers to launch new services using insight from that
subscriber.
Reduced costs and risk by expanding sources for new
product ideas.
Included 554 new “voices” in the development process
during the first few months, with the publication of the
first idea a mere ten minutes after launch
IBM enabled us to deliver exciting products to the
marketplace at a faster pace than ever before.”
—Niu Gang, Associate Director, Shanghai Research
Institute, CT
China Telecom’s Innovation Platform

18. Major technological advances
Program Learn
Natural
Language
Analytics
DeepQA
Cognitive
Computing
“SyNAPSE”
Silicon
Devices
Nano Scale 1 Billion
Transistors
1,000X
1 Trillion Devices
Nano
Systems
Workload
Optimised
Systems
Exascale Software
Defined
Environments
1,000X
Big
Data
1,000,000X
Real-time Inference &
Knowable
Future

19. Cognitive systems: Applications
Sensor Networks / Internet of Things
Infrastructure
Buildings
Vehicles
Grids
Metering Billions of end points
100K+ elements,10ms
latency
Multiple feedback time-
scales
Social Business Five-in-Five
Watson
Human and
knowledge
capital analytics
TM
Cognitive Sensing Technology:
• Hearing and voice recognition
• Extracting knowledge from pixels
• Sniffing for healthiness
• Haptic technology for retail
• Healthier molecular based
recipes

20. Some predictions
of our own
5 to be
precise IBM Reveals Five
Predictions
That Will Define the Future

26. How we see the world changing
Human Society

27. How we see the world changing
Machine-to-machine communication

28. How we see the world changing
Internet for everyone
Fully open, free to use Wi Fi in the
Moscow metro

29. How we see the world changing
Mobile
as a
remote
for our
lives
To control home heating
And home entertainment
To manage home gaming
Even to control toilet
activities!

30. How we see the world changing
The instrumented life

31. How we see the world changing
True peer-to-peer

32. How we see the world changing
Peer-to-peer innovation

33. In short: a new world
• New classes of services
• Connected lives/ mass personalisation
• Business functions as a service
• Industry value chains reconstructed
• Disrupted competitive landscape
Consumers
Business
Government/
Industries

34. 4 themes for CSPs
Four Common Themes
Cost
Reduction
Telco industry
• Data dwarfs voice
• High growth gone; fight is now for niches and
markets further from the core
• Digital, more demanding empowered customers
shaped by experiences outside of telco
• Industry consolidation just starting
Media industry
• TV everywhere: 195M tablets sold in 2013;
and 5B smartphones by 2018
• Simultaneous consumption: 75% of
consumers surf the web and use social
media while watching TV
• Audiences become collections of “ones”
Customer
Experience
New Revenue
Sources
Reinvent the
Enterprise

35. Four Common Themes
Cost
Reduction
Customer
Experience
New Revenue
Sources
Reinvent the
Enterprise

36. Cost Reduction

37. Cost Reduction

38. Achieving M&A objectives by global CSPs
Group Revenue growth by expanding customer base
Improve long-term competitive advantage
Increase demand for products/ services by entering new
markets
EPS (increase/restore confidence of shareholders
Risk reduction / diversification
Economies of Scale / cost advantages
Increase brand recognition
Increase Innovation power
Better serve global customers
Improve potential for partnering
Increase product portfolio
Achieved to
significant extent
Hardly
achieved
67%
45%
28%
40%
46%
27%
55%
26%
25%
38%
46%
16%
33%
36%
38%
31%
23%
20%
31%
33%
24%
31%
18%
22%
35%
22%
22%
50%
25%
45%
42%
37%
22%
Only 27%
stated that
economies
of scale
has been
realized to
significant
extent

39. Cost savings: Leveraging synergies
In which AREAS was your organization able to
CAPTURE SYNERGIES?
(15 largest Global CSPs)
Capturedsynergiestosome
orsignificantextent
Priority focus areas
Source: 2014 IBM report: What being global really means

40. The road to ‘Global’ Integration Maturity
Back-end
Integration
(Cost-
focused)
Front-end
Integration
(Revenue-focused)
Low
High
High
Low
Organizational
Enablement
Global
CSP
Big-play
Globally
Integrated
CSP
Single-
market/
Regional
Player
Market
(DFO)
Leader
Moving from the lower left to the upper right
requires operational and organizational
alignment in order to improve a wide range
of operational efficiencies.
Global Integration Maturity.
For CSPs to fall into this quadrant, they must
have optimized their resources and assets
across Opcos and seamlessly integrated
their business processes and operations.

41. Four Common Themes
Cost
Reduction
Customer
Experience
New Revenue
Sources
Reinvent the
Enterprise

42. Today’s Consumer
more
Knowledgeable
more Demanding
more Relying on
other customers
more Collaborative
more Empowered
Consumers are becoming
thanks to the popularisation of Internet-enabled devices and better
accessibility to Internet content
due to customers’s redefinition of what value means to them
for news, reviews and recommendations for products, services and
businesses (rather than turning to the CSPs)
as they increasingly determine not just what services they want to consume,
but exactly how they wish to consume those services
as word of mouth enables them to seize control of CSPs’ reputations – and
even some business decisions

43. Sources of information for today’s consumers
in emerging
markets access
Social Media to
evaluate telecom
providers and their
products /services
69%
9%
20%
25%
28%
34%
48%
60%
69%
72%
23%
19%
13%
31%
56%
33%
69%
Internet SEARCH
SOCIAL MEDIA
RECOMMENDATIONS friends/family
CSP WEB sites
CSP EMAILS & promotional offers
Traditional ADVERTISING
Retail STORES
Shopping PORTALS/auctions
Emerging Markets
Mature Markets
Sources of information on telecom providers and their products/services
(2014 Global telecom Consumer Survey)

44. Responses in case of good/bad experiences
20% 46% 35%
21% 46% 32%
29% 50% 21%
38% 55% 8%
40% 50% 9%Would TELL OTHERS about the bad experience
Would COMPLAIN to my telecom provider
Would DISCOURAGE OTHERS to use this provider
Would post a NEGATIVE REVIEW or comment ONLINE
Would COMPLAIN on SOCIAL MEDIA
Always/Often Regularly/Possibly/Sometimes Never
29% 47% 24%
29% 49% 22%
29% 53% 18%
52% 41% 6%
53% 41% 6%Would TELL OTHERS about the good experience
Would RECOMMEND my provider to others
Would TELL MY TELECOM PROVIDER
Would post a POSITIVE REVIEW or comment ONLINE
Would spread on SOCIAL MEDIA
What would you do in case of a POSITIVE experiences with your telecom provider?
What would you do in case of a NEGATIVE experiences with your telecom provider?
(2014 Global telecom Consumer Survey)
United Break
Guitars

45. Emergence of the consumer experience economy
Mobile
revolution
Social media
explosion
Cloud
Enablement
Power of
analytics
Forces ……
Social
PersonalizedContextual
My choice
Perfect
experience
Always,
anywhere
connected
SeamlessMy way
... resulting in
the
emergence of
the
consumer
experience
economy

46. Deliver with an EXPERIENCE in mind
Competitive
position
Needs of
customer
Differentiated Relevant
Undifferentiated Irrelevant
Pricing / Market ValueLow High
Commodities
Goods
Services
Experiences
make
deliver
stage

47. The overall customer experience
Experience
with the
Brand Experience
with the
Product
Experience
with the Service
Best
Customer
Experience
 Experience with the Brand: To what
extent does the company provide
differential value to the customer through
its brand
 Experience with the product/service:
To what extent do the products and
services offered by the provider resolve the
customer’s specific needs
 Experience in interactions: To what
extent are the various interactions the
customers have with their company over
the various channels easy and enjoyable.
Customer Experience

48. Positive customer experiences drive loyalty
34% 55% 11%
34% 52% 13%
48% 45% 7%
51% 44% 6%
52% 41% 6%Would RECOMMEND my provider to others
Become MORE LOYAL
Would use my provider's services MORE FREQUENTLY
SPEND MORE with provider
AVOID considering COMPETITIVE products/services
Always/Often Regularly/Possibly/Sometimes Never
What would you do in case of a NEGATIVE experiences with your telecom provider?
What would you do in case of a POSITIVE experiences with your telecom provider?
13% 62% 25%
25% 57% 18%
26% 59% 15%
29% 50% 21%
41% 49% 9%START considering services from COMPETITIVE providers
Would DISCOURAGE OTHERS to use this provider
Use the services of my provider LESS FREQUENTLY
Would STOP making PURCHASING from my provider
Would NEVER USE my telecom provider again

49. Customer Experience:
CSPs are not leaders by any customer measure
No CSPs in Top 25
Telecom lowest among 7 industry groups
No CSP in Top 50
No CSPs in Top 50
No CSP in Top 100
Wireless industry ranked 44 of 50 industries
No CSP in Top 50
Only one CSP in Top 100, O2 at #46

50. Customer Experience:
Look outside the industry for leadership

51. Business impact of Customer Experience
28%
49%
21%
1%
1%
15%
35%
37%
12%
0%
Significant
Positive
Moderately
Positive
Slightly
Positive
None
Negative
Expectations for 2014
Results 2013
“What impact have customer experience
efforts had on your company’s benefits
results this past year and what do you expect
in 2014?”
Source: Temkin
(February 2014: % of respondents from companies with at least $500 million in annual revenues)

52. Outperformers ánd Customer Experience Focus
29%more
54%
Outperformers
42%
Underperformers
Focus on improving the customer experience

53. C-suite working relationships
17%
Underperformer
30%
Outperformer
Close Telecom CMO-CIO relationship
Where Telecom CMOs have a close working
relationship with the CIO, the organization is
performing better overall

54. Customer Interaction Channels
145%
more
“It’s extremely key to have an Omni-
channel Platform to interact with the
customer (Web, Forum, Business
Stores...).”
Directeur Général Business, Telecommunications,
France
33%
88%
69%
69%
81%
67%
60%
46%
Digital Channels
Call Centers
Face-to-Face
Traditional Media
Today 3 - 5 years
Telecom CMOs intend to interact digitally (social, mobile, Web) with
customers to a much greater extent in the future

55. How to connect with your customers?
Reset the
overall
Customer
Experience
Build
Innovative
Compelling
services
Build Smarter
Capabilities

56. Starts with getting the basic rights
Get the basics right
Consistently deliver the experience
Differentiate the experience
Delight customers
Years
Loyalty
Make sure the fundamentals
(delivery comms services, billing,
customer service, etc) are done right
Consistently deliver the same
message and performance through all
touch points and lines of business
Personalize and do something
distinctive for your
customers that goes beyond
satisfaction
Positively surprise your customers
with an experience that helps form
an emotional engagement
Reset the
overall
Customer
Experience

57. Collaborate with:
Consumers, Employees and partners
Build
Innovative
Compelling
services
of respondents like to
interact with their
provider on improving
an existing product
60%
60%
56%
38%
26%
22%
22%
21%
6%
IMPROVEMENT EXISTING Product/Service
IMPROVEMENT CUSTOMER CARE
DEVELOPMENT NEW Product/Service
FEEDBACK on COMMUNICATION to market
FEEDBACK on Overall STRATEGY
IMPROVEMENT of Existing CAMPAIGN
DEVELOPMENT of New CAMPAIGN
Other
98%
97%
97%
97%
95%
93%
66%
Topics customers are willing to communicate on with their provider
% of respondents
willing to provide
feedback or input
Global

58. Building and Deploying Smarter Capabilities
Build Smarter
Capabilities
Analytics
Cloud
Social
Mobile
Security
Key CSP
capabilities
to improve
customer
experience

59. Analytics / Big Data Objectives
66%
15%
11%
8%
0%
49%
14%
15%
18%
4%
Customer-
centric
objectives
New Business
Models
Risk/Financial
management
Operational
optimization
Employee
collaboration
CSP respondents
All-Industry
respondents
Customer-centric outcomes
Understanding behavior patterns and
preferences provides organizations with
new ways to engage customers
Providing a greater customer
experience, every time, is vital for
limiting churn, building loyalty, and for
competing against over-the-top
players, including Google, Apple,
Facebook, WhatsApp and Skype,
companies that have proven adept at
dreaming up compelling online
experiences for consumers.

60. Providing a distinctive experience
As an example, if high value smartphone customers are experiencing pour thru put performance, big
data analytics enables the CSP to know that immediately and distribute it to the most appropriate
stakeholders in the organization so they can take the necessary steps to alleviate the issue and
ensure customer experience is not affected, or at least acknowledged
Monitoring network performance to improve customer experience
As an example, the subscriber’s phone usage could be automatically analyzed to determine what
free add-on offer they are most likely to value. The provider could then instruct a customer service
representative to call the subscriber and offer them the free add-on. The goal would be to improve
customer satisfaction by demonstrating that the provider values the customer’s business.
Intelligent market campaigns to offer promotions useful for customers
The ability to respond to customers with next best action
As an example, automatically authorizing a call center representative, who is speaking to a customer
known to be having problems with their service, to present the customer with an offer that
compensates them for their trouble and helps retain them as a customer.
EXAMPLES

61. Understand sentiment and digital influencers
• Assess Social Media Impact
• Segment Social Media Audiences
• Discover new ideas…and risks
• Identify Relevant Relationships
• Influence Influencers
Generate
Positive
Word-of-Mouth

62. Apply Cognitive Computing
Dato’ Sri Shazalli Ramly
CEO, Celcom Axiata Berhad
“Celcom will
harness the
power of IBM
Watson
in analyzing raw
data to provide
deeper
customer
insights and
preferences in
near real time.”
 Cognitive technology to help
contact center
representatives provide
faster, accurate, and
consistent responses to
customer questions and
requests.
 Eventually give customers
direct access to the system
for text-based chats
whereever and whenever
from their smartphones,
tablets or computers.
changing plan features.

63. Four Common Themes
Cost
Reduction
Customer
Experience
New Revenue
Sources
Reinvent the
Enterprise

64. New Revenues Sources
Enter higher growth
adjacent spaces
AT&T and IBM
announced its Internet
of Things / M2M
alliance to initially
focus on creating new
solutions targeted for
city governments and
Midsize utilities.
T-Mobile USA
Network analytics
for operations and
CEM
Leverage on
differential insight
Cannibalize before
being cannibalized
iO lets you make
calls, chat and
share images with
other iO users over
the Internet for free
(WLAN and
3G/LTE)
Partner
with OTTs
Selling data to 3rd
parties
Telefonica designed a
service to provide
insights to retailers to
help them tailor local
offerings for existing
stores, and determine
the best locations and
most appropriate
formats for new stores.
…Many Possibilities for growth

65. Four Common Themes
Cost
Reduction
Customer
Experience
New Revenue
Sources
Reinvent the
Enterprise

66. The New Enterprise Model
Developers
ISVs
Banking
Consultants/
SIs
Healthcare
Media
Social
business
Personal
comms
Security
Policy
Analytics
M2M
Etc… Etc…
Managed
customer
interface,
services,
platforms
and
networks
Service providers and
partners
CSP solutions
Consumers Business
Government/
Industries
Example Players in the services
economy today
$1.5B revenue of10K+ Affiliates
Expecting $10B transactions on
mobile in 2012
40% total units sold by outside
sellers
40% new business comes from
non-CRM offerings
API only company reaches 150,000
developers and 1.5M
calls a day
4.5M API invocations per month
In 2020 up to 60% of today’s IT market is
addressable through this delivery model

67. Over to you
What does YOUR
future look like?

68. The CSP role in tomorrows world
1. Lean and mean Network provider OR Smart Teleconnect / Ecosystem provider?
2. Follower OR Leader?
3. Customer driven service company OR Product supplier?
4. Differentiated OR Commoditized?
5. Need for Vertical AND/OR Horizontal integration?
6. Work with new entrants OR Fight them
7. Do it Yourself OR Co-create?
8. Local OR Global?
9. Consolidator OR be consolidated? Or overperform and remain independent?

69. Thank you
Rob van den Dam
Global Telecom Industry Leader
IBM Institute for Business Value
rob_vandendam@nl.ibm.com
www.ibm.com/iibv