Deloitte Technology Media and Telecommunications Predictions 2016

1. Technology, Media and Telecommunications Predictions 2016

2. Welcome and Introduction Mark Casey Global Managing Director - Media & Entertainment Practice Arun Babu National Leader – Telecoms Practice

3. Sponsors THANK YOU

4. TMT Predictions 2016 Agenda Time Agenda Item 09h00 - 09h05 Opening and Welcome: Mark Casey 09h05 - 09h50 Presentation of TMT Predictions 2016: Mark Casey, Arun Babu 09h50 - 10h10 Keynote Address: Lorenzo Gonzales - Strategist EMEA Enterprise Group, Hewlett Packard Enterprise (HPE) 10h10 - 10h50: Panel Discussion: Facilitator: Mark Casey Panel Members: • Lorenzo Gonzales - Strategist EMEA Enterprise Group, Hewlett Packard Enterprise (HPE) • Craig Holmes - Vice President, Cognitive Solutions – MEA, IBM • Dr. Brian Armstrong - Chief Commercial Officer, Telkom Group • Tim Bishop - Director, Deloitte Digital 10h50-11h00 Competition time and closing remarks

6. Technology, 2016

7. Women in IT jobs: it is about education, but it is also about more than just education

9. Women in IT jobs: it is about education, but it is also about more than just education 10© 2016. For information, contact Deloitte Touche Tohmatsu Limited. By end-2016 fewer than 25%of IT jobs in developed countries will be held by women. South Africa ICT sector has 23%women The gender gap in IT costs the UK alone about $4billion annually

10. 11© 2016. For information, contact Deloitte Touche Tohmatsu Limited. US - Computer Science 1985 37% 2013 18% UK - Computer Science 2012-2013 17.4% 2013-2014 17.1% Sweden - Computer Science 2000 30% 2010 24% UK Learnt Coding at School 2012 17% of girls 33% of boys Women in Computer Science globally have declined dramatically over the years Against global trends South Africa has nearly 40% of post-school Science, Engineering and Technology (SET) courses, which provides a significant economic opportunity if we can convert this larger talent pipeline in to increased gender diversity in the ICT sector

12. Trailing Millennials are the pro-PC, not the post-PC generation

13. 14© 2016. For information, contact Deloitte Touche Tohmatsu Limited. Trailing Millennials are the pro-PC, not the post-PC generation 18-24 year-olds are mobile-centric and fervent PC users and buyers 18-24 year-olds consider smartphones and PCs as complements, not substitutes Large tablets are the devices that are actually being ignored. Laptops are the second-most desired device

17. 18© 2016. For information, contact Deloitte Touche Tohmatsu Limited. Trailing Millennials are the pro-PC, not the post-PC generation What are millennials doing on PCs? PCs still preferred for: By 2020 or 2025: Minutes of use of PCs will have likely declined, but PCs will still likely be widely-owned and valued, required by schools or employers, and used for hours per week.

19. Touch commerce: The mobile online checkout gets an express line

23. Q. How frequently do you use your phone to do any of these: "Browse shopping websites/apps", "Shop for products online")? 32% 57% 40% 38% 37% 36% 34% 33% 29% 27% 26% 21% 20% 15% 9% 18% 11% 13% 13% 11% 9% 5% 6% 4% 6% 2% 10% 7% 0% 10% 20% 30% 40% 50% 60% Browse shopping websites/apps (weekly) Make an online purchase of a product (weekly) Source: Deloitte Global Mobile Consumer Survey, developed countries, May-Jul 2015 Weighted base: Respondents who own or have access to standard phone/smartphone: Australia (1,837), Canada (1,676), Finland (963), France (1,829), Germany (1,821), Italy (1,873), Japan (1,420), Netherlands (1,886), Norway (925), Singapore (1,903), Spain (1,891), UK (3,682), U.S. (1,828) © 2016. For information, contact Deloitte Touche Tohmatsu Limited. Browsing shopping websites is a lot more popular than shopping online

24. Graphene: research now, reap next decade

25. Graphene: The Wonder Material Graphene is a two-dimensional structure single atom thick, which is a million times thinner than a human hair and stronger than steel. 26© 2016. For information, contact Deloitte Touche Tohmatsu Limited.

27. Graphene: research now, reap next decade 28© 2016. For information, contact Deloitte Touche Tohmatsu Limited. Graphene R&D Hundreds of millions of $ Graphene materials market Tens of millions of $ $1.3 billion “ The Graphene Flagship” $353 million Graphene research center Investment in developing understanding of graphene

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30. Cognitive technologies enhance enterprise software

32. Cognitive technologies enhance enterprise software Growth in cognitive technologies Mergers & Acquisitions Venture capital Cloud computing Open source AI

33. Media, 2016

34. Virtual reality: a billion dollar niche

35. Virtual reality is a (small) commercial reality Technological advance has enabled the launch of VR, which in 2016 will be almost all about video games. © 2016. For information, contact Deloitte Touche Tohmatsu Limited.

36. ARCHITECTS Creating interactive visualizations of construction projects HEALTHCARE Training and education of staff and members of the public HOSPITALITY Hotels can provide VR guides to properties VR headsets as a virtual concierge VR does have a commercial future Enterprise adoption: a year of experimentation 39© 2016. For information, contact Deloitte Touche Tohmatsu Limited. Teaching via virtual classroom Digitized tours for prospective students EDUCATION MILITARY VR will continue to be used in the military where simulators have long been commonplace EMERGENCY SERVICES Workers have used VR to practice how to respond to faults with nuclear reactors

37. Mobile games: leading, but less lucrative

39. Revenue per gameTitles $4.8 million per console game $2.9 million per PC game $0.04million per mobile game Dramatic variation by platform © 2016. For information, contact Deloitte Touche Tohmatsu Limited. 800k 17k Platform

40. Mobile games: Leading, but less lucrative Size of the installed base Barriers to entry The business model Freemium: free download, additional content charged for. 1.75 billion smartphones and tablets used to play games 600 million who play games on PCs 200 million for game consoles 1 2 PC or Console games: $10s millions to produce $10s millions to market Years to develop 17,000 titles available Mobile games: Low barrier to entry Created in hours 800,000 titles available 3

41. Mobile ad-blockers: saved by the app?

43. Why so few ad-blockers installed? 3400 680 10 1 10 100 1000 10000 All mobile devices Mobile devices with OS content blocking support Mobile devices with active ad-blocker millions Ad-blockers don’t work within apps Few devices have native ad- blockers installed Ad-blockers do not remove 100% of ads Consumer inertia

44. The award for traditional media resilience goes to …

46. Top 5 2015 with a combined domestic gross of US$2,75bn

47. 2016 ….. great, but not as great

48. It’s the social experience and what it says about you The film industry is declining in some markets, but the pace is very moderate compared to other industries that face threats from digital and the Internet. Revenues 0.79% (2002-2015) Admissions 1.17% (2002-2015) Per capita admissions 1.2% (annually 2005-2015) Movie ticket price 1% (annually 1995-2014) above inflation $6.1 billion a year is the estimate of the cost of piracy to the US studios Concession revenues are about 45%, with margins of about 85% Average North American – 4 movies per year (2015) Average 12-24 year old – 6.3 movies per year (2015)

49. US TV: erosion, not implosion

50. US TV: erosion, not implosion The US traditional television market, worth about $170billionin 2016, will see a slow and steady erosion in at least 6 areas. The number of pay- TV subscribers Pay-TV penetration Average pay-TV monthly bill Consumers switching to antennas for watching TV Average daily TV viewing (overall population) Average daily TV viewing (18-24 year olds) Television is not growing the way it used to Traditional TV is not dying, disappearing or irrelevant

51. Cord cutting action = intent Despite 7% of pay TV-consumers saying that they were thinking of cancelling subscriptions, intent was rarely matched by action and the decline has been much more muted. 54© 2016. For information, contact Deloitte Touche Tohmatsu Limited. 8 000 170 000 164 000 1 000 000 - 500 000 1 000 000 1 500 000 2012 2013 2014 2015 Number of pay-TV subscribers cancelling On a base of 100 million homes The number of pay-TV subscribers Pay-TV penetration Average pay- TV monthly bill Consumers switching to antennas for watching TV Average daily TV viewing (overall population) Average daily TV viewing (18-24 year olds)

52. Resilient subscription rates 90%of channels that are being paid for are unwatched. Substituting a traditional TV package with a lower-cost subscription video on demand (SVOD) service 55© 2016. For information, contact Deloitte Touche Tohmatsu Limited. Growth of the average bill for pay-TV 6.1% (annually 1995-2015) CORD SHAVING The number of pay-TV subscribers Pay-TV penetration Average pay- TV monthly bill Consumers switching to antennas for watching TV Average daily TV viewing (overall population) Average daily TV viewing (18-24 year olds)

53. Average daily TV viewing In 2020, average daily TV viewing in the US will likely still be over 240 minutes 56© 2016. For information, contact Deloitte Touche Tohmatsu Limited. 340 344 330 320 300 320 340 360 2013 2014 2015 2016 Daily TV minutes The same as in 1998 The number of pay-TV subscribers Pay-TV penetration Average pay- TV monthly bill Consumers switching to antennas for watching TV Average daily TV viewing (overall population) Average daily TV viewing (18-24 year olds)

54. Maybe the Millennials will grow up 11%of 18-24 year-olds have never had a pay-TV subscription (cord nevers) 57© 2016. For information, contact Deloitte Touche Tohmatsu Limited. 89% 81% 79% 70% 0% 50% 100% 2010 2016 2017 2020 Pay-TV penetration 20% decline from 2010 The number of pay-TV subscribers Pay-TV penetration Average pay- TV monthly bill Consumers switching to antennas for watching TV Average daily TV viewing (overall population) Average daily TV viewing (18-24 year olds)

55. Copyright © 2016 Deloitte Development LLC. All rights reserved. Millennials now spend more time streaming video content than watching live TV 14-18 19-25 26-32 Live programming 30% 29% 28% Streaming 32% 38% 31% Q. When watching television content, what percent of time are you watching the following methods of programming?

56. Copyright © 2016 Deloitte Development LLC. All rights reserved. Consumers are watching an average of five episodes in a single sitting, with the youngest Millennials averaging six Q. When you binge watch, what is the average number of episodes you watch in a single sitting? NUMBER OF EPISODES BINGED PER SITTING 5 6 6 5 5 4 4 14–18 19–25 26–32 33–49 50–68 69+Total 2015 Average # of episodes watched

57. Copyright © 2016 Deloitte Development LLC. All rights reserved. Fewer than one-quarter of multitasking activities are directly related to the programs that consumers are watching 24% 27% 34% 33% 23% 18% 19% Total 2015 14–18 19–25 26–32 33–49 50–68 69+ PERCENTAGE OF MULTITASKING DIRECTLY RELATED TO THE PROGRAM Q. What percentage of your multitasking activities are directly related to the program you are watching?

58. European football scores $30 billion

60. European football scores $30 billion Football is the super premium sport in Europe Combined revenues of the 20 EPL clubs are predicted to surpass $6.5 billion in 2016/2017, more than double that of the next-highest European league

61. European football scores $30 billion Football’s rising revenues, and its universal appeal, make it highly attractive to investors. Chinese investors have been building their football investments within their home country and abroad (UK, Spain). A quarter of EPL club owners are from North America and the EPL has secured a six-year $1 billion broadcast deal with NBC from 2016/2017.

62. eSports: bigger and smaller than you think

63. eSports: bigger and smaller than you think Watching people playing video games is a commercial activity, but a relatively small one . © 2016. For information, contact Deloitte Touche Tohmatsu Limited.

64. eSports revenues are a fraction of traditional sports

65. Telecommunications, 2016

66. The dawn of the Gigabit Internet age: every bit counts

67. The dawn of the Gigabit Internet age: every bit counts The number of Gigabit per second (Gbit/s) Internet connections will increase to 10 million 2016 10 million Gbit/s Internet connections 70% Residential connections 2020 50-100 million Gbit/s Internet connections 90% Residential connections 5%-10% of all broadband connections Higher speeds More applications More devices

68. The dawn of the Gigabit Internet age: every bit counts Faster connection speeds can enable more “bursty” connections In 2016 only a limited number of connectivity technologies are likely to be capable of Gbit/s service: FTTH FTTP FTTB DOCSIS 3.1 The faster and more ubiquitous that fiber technologies become, the greater the incentive for cable networks to update their networks, and vice-versa.

69. The dawn of the Gigabit Internet age: every bit counts

70. Used smartphones: the $17 billion market you may never have heard of

71. Used smartphones: the $17 billion market you may never have heard of In 2016 consumes will sell outright or trade-in approximately 120millionused smartphones, generating more that $17 billion. 2016 120 million used smartphones, generating $17billion $140 Average value per device 2015 80 million used smartphones, generating $11billion $135 Average value per device The used smartphone market is forecast to grow four-five times faster than the overall smartphone market Used smartphones market share (total smartphone sales by units): 2016: 7% 2015: 5% 2014:4%

72. Used smartphones: the $17 billion market you may never have heard of Why would you sell a smartphone? •Increase of annual sales •Devices more affordable to customers with smaller budgets •A likely margin in processing used phones Direct benefits for smartphone vendors 12% of consumers sold their smartphone (mid-2015) Traded-in with an operator or device manufacturer Sold outright

73. The rise of the data exclusive

74. The rise of the data exclusive In 2016, 26%of smartphone users in developed markets will not make any traditional phone calls in a given week. A “data exclusive” – someone that substitutes voice calls for a combination of messaging (including SMS), voice and video services delivered ‘over the top’. 89% 87% 83% 77% 0% 20% 40% 60% 80% 100% 2012 2013 2014 2015 Weekly use of standard voice calling among smartphone owners (2012-2015)

75. The rise of the data exclusive Two contrasting trends with voice Mobile voice volumes (in minutes): 20% increase between 2012 and 2015 Smartphone owners’ usage patterns more data intensive VOICE+ - 60% 52% 51% 48% 19% 18% 10% 5% 0% 20% 40% 60% 80% SMS IM app Emails Social Network VoIP MMS Video calls Other Communication services used in the last week by ‘data exclusives’ 2015

76. The rise of the data exclusive Data and the future generations 31%of 18-24 year olds reported not making phone calls on a weekly basis,…. …compared to the average for adults of 22% This is likely to rise further still, given that upcoming members of this group are likely very accustomed to messaging

77. VoLTE/VoWiFi: capacity, reach and capability

78. About 100mobile operators worldwide will be offering at least one packet-based voice service at the end of 2016, double the amount year-on-year, and six times higher than at the beginning of 2015. For most carriers launching VoLTE or VoWiFi in 2016, the main motivation is likely to be: • To increase network capacity • To extend the reach of their voice services VoLTE/VoWiFi: capacity, reach and capability VoWiFi vs. VoIP

79. VoLTE/VoWiFi: capacity, reach and capability VoWiFi vs. VoIP Customers’ interest in enhanced communication services A network operator managed and controlled service •Users: calls less likely to be dropped •Carriers: more control over the revenue stream Offers native calling •No need to open an app to make or receive calls. The cost of VoWiFi extending reach may be relatively low •Operators need to deploy an IP multimedia subsystem (IMS) It can reduce operator costs •Calls place on a smartphone would be carried over the consumer’s broadband network freeing up some cellular capacity •It enables traffic to be off-loaded to another network Whether an operator launches first one of the two services or it launches both will be influenced by three factors Potential cost savings Need to improve indoor coverage

80. Photo sharing: trillions and rising

81. Photo sharing: trillions and rising In 2016, 2.5 trillionphotos will be shared or stored online, a 15% increase on the prior year. About three- quarters of this total will likely be shares, and the remainder online backups. The expected network impact of all this sharing will be about 3.5 exabytes, a 20% increase over the previous year.

82. Photo sharing: trillions and rising Factors enabling photo sharing Increase in quality of smartphone cameras 2.4 3.4 4.1 4.6 5.0 5.9 6.8 7.9 9.0 0.0 2.0 4.0 6.0 8.0 10.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average camera resolution (MP) (2007-2015)

83. Panel Discussion

84. Craig Holmes: Vice President – Cognitive Solutions IBM for Middle East & Africa Craig has undertaken a number of MEA leadership roles to champion the Industry and Solutions business in MEA. Having built a SA Telco Industry team in 2011, Craig went on and built the Africa Telco strategy and a team of Industry specialists and CTA’s before accepting the role of GMU Communications Sector VP. Here he was responsible for defining the Industry strategies and leading the overall delivery thereof. Lorenzo Gonzales: Strategist, Hewlett Packard Enterprise EMEA Lorenzo is a Strategist within HP’s EMEA Enterprise Group, taking the leadership in strategic initiatives of digital transformation and innovation. Lorenzo works with customers and partners across EMEA as a leader in all aspects of new and emerging technologies to meet client objectives. Tim Bishop: Director - Deloitte Digital Africa & CTO Tim is a Director and Chief Technology Officer at Deloitte Digital Africa. He provides world-class strategy, digital transformation and ‘Meaningful Mobile' solutions to leading global brands in the enterprise and consumer space. Tim is passionate in 'Mobilising the Masses', enabling brands and enterprise to take advantage of the prolific handset usage and growth across Africa. Dr. Brian Armstrong: Telkom Group Chief Commercial Officer Dr. Brian Armstrong is responsible for the strategic growth agenda for the Group, as well as group strategy, regulatory and transformation office portfolios. Brian has over 25 years ICT experience, in ICT research and development, telecommunications, technology management, networking services, and outsourcing.

85. Sponsors THANK YOU

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Deloitte Technology Media and Telecommunications Predictions 2016

David Graham

Deloitte Technology Media and Telecommunications Predictions 2016