Winning in the Converged Multimedia Landscape

Team Buenos AiresMarch 29, 2008

The Value Intersection:High Value Content meets User Generated

Content

Executive Summary• Convergence in mobile multimedia is inevitable.

However, a catalyst is required for operators and equipment makers to monetize services

• We propose Vodafone to become the glue that joins the disparate stakeholders together through securing high-value content rights for mobile distribution

• Ericsson will support Vodafone with optimized infrastructure, enhanced handsets, and value-added applications leveraging the social community while augmenting the content- thus delighting consumers

Doom and Gloom•Consumers and savvy web companies

will find ways to bypass the carrier and offer high value content on cell phones - relegating the carrier as a ‘dumb pipe’

•By coming late to the market with valuable content, the operator will have to compete with free

•The future of mobile media convergence is ours to lose

Evolve the Landscape

Vodafone will be the glue that brings these Vodafone will be the glue that brings these stakeholders together for a converged mobile stakeholders together for a converged mobile

multimedia experiencemultimedia experience

Operators

Content Providers

Equipment Makers

• Vodafone to spearhead licensing high-value content for distribution on a differentiated mobile content distribution network

• Ericsson to leverage this high-value content with specialized network infrastructure and augment it with value-added-services like tv chat, social networking, and other exciting applications

Operators

Content Providers

Equipment Makers

glue

Apple and the Digital Music Parallel

Apple was the catalyst that transformed digital Apple was the catalyst that transformed digital music from a free-for-all to a revenue generatormusic from a free-for-all to a revenue generator

Record Labels

Music Stores

Hardware

Makers

Record Labels

iTunes Music Store

iPod Hardwar

e

glue

# of Consumers Downloading Music Illegally

[millions of users]

Apple Introduces iTunes

Revenue for Record Labels

[$/song title]

Source: http://www.1115.org/2005/08/30/the-major-labels-vs-appleagain/ http://www.msnbc.msn.com/id/3860823/

Ericsson & Vodafone: Moving Forward Together

Strategic partnership between Ericsson and Strategic partnership between Ericsson and Vodafone allows for a better network, better Vodafone allows for a better network, better

content, and better service, all through a better content, and better service, all through a better user interfaceuser interface

Content AcquisitionAdvanced Network

DevelopmentHandset

Manufacturing

• Vodafone to take the lead role in licensing content; Ericsson to have a stake as a partner

• Leverage Vodafone’s global scale and Ericsson’s content management, Service Delivery Platforms (SDP), and Internet Payment Exchange (IPX)

• Provide content exclusively to Vodafone’s customers and increase $/customer and number of customers

• Ericsson’s advanced network equipment/ infrastructure to be developed collaboratively with Vodafone to ensure seamless delivery of content

• Exploit the intersections of high-value content and user-generation through unique applications

• Sony Ericsson handsets to lead device convergence and ensure an exceptional user experience

• Premium Sony Ericsson multimedia handset available to Vodafone subscribers only

Hybrid Business Model

Content Providers Often Win in Single-Revenue Models

National Football League (NFL)Howard Stern, Oprah & Friends Movie Studios

Advertising OnlySubscription Only Pay-Per-Use

Hybrid Revenue Model Will Help Operators and Network Providers Win

•Subscription model for service usage

•Per-use charge for specialized content accessibility

•Additional revenues from content-based advertising

Comparing the current ecosystem to the proposed model using Five Forces Analysis

Content Network Operator Handset

Bargaining Power of

Customers

Bargaining Power of Suppliers

Barriers to Entry

Threat of Substitution

Rivalry

Industry Impact

Creating Value through Convergence

By Vodafone licensing high-value content, and Ericsson

creating specialized

equipment and applications that

leverage this content- value will

be created; Primarily through

decreased customer

bargaining power combined with

increased barriers to entry

KeyIncreased Profitability

Same Profitability

Decreased Profitability

By offering great content with great interfaces, Vodafone will create a powerful value proposition to mobile customers

Value PropositionContent Providers

[Assumes] Exclusive agreements with Vodafone/Ericsson

Ericsson Network[Assumes] Great capability for mobile media

delivery

Vodafone[Assumes] Best mix of content, quality and

interface

Users[Assumes] Attracted to Vodafone high value content and

Sony Ericsson handsets

Sony Ericsson Handset[Assumes] Enhanced interface for mobile media &

servicesincluding social community integration

Exclusive Content Agreements

Investment in Ericsson network

equipment

Subscriber market share and spend growth

Content License Opportunities

Ericsson Deliverables

Ericsson to Develop Features and Deliver Content on Converged Handsets to Create an Exceptional User

Experience

The Latest Games and Applications

Social Networking Capabilities

High Quality Video Content

Instant Messenger

INSTANT MESSAGING:Jordan: Look those moves!Ajay: Whoa! I saw that!

We will create a competitive advantage by

harnessing user

generated content on

mobile phones with

professional content

Economic Framework

ARPU$45/month

Variable cost for a new

subscriber$30 per month

Contribution margin for additional

subscriber$15 per month

Churn1.5% per month

Time value of money1% per

month

Lifetime value of customer(r-

g)

Phone subsidies

Marketing

Subscriber acquisition cost($350)

Present value of a new subscriber$15/(.025)-$350

$250

We calculate the value of new subscriber at $250We calculate the value of new subscriber at $250

Mobile media will increase customer

value through

higher CM, lower

churn and lower SAC

The Difference in Winning and Losing in Mobile Media is

Roughly $13BVodafone global market share ~10%

New broadband subscribers by 2012

1B

Base case Vodafone broadband subscribers

100M

Vodafone broadband subscribers as mobile media ‘winner’

120M

Vodafone broadband subscribers as mobile media ‘loser’

80M

Subscribers from winning in mobile media

40M

Value per marginal subscriber $250

Loss if mobile media loser ($5B)

Value per marginal mobile media subscriber

$400

Gain if mobile media winner $8B

Value of winning in mobile media

$13B

Source: Subscription estimates from Ericsson internal data. Vodafone market share from Vodafone 10-k and analyst global estimates

Win/Lose Scenario

Win

Lose

+$8B

-$5B

In Conclusion• The opportunity to lead the mobile media

convergence is real and here today

•We propose Vodafone immediately invest in high-value content acquisition and network upgrades

• In turn, we (Ericsson) will invest in our media network infrastructure, software development of services, and handset technology through Sony Ericsson

Q&A Session

Ericsson services to help Vodafone• Charging and Mediation

• Ericsson Charging System 4.0 - Reduces OPEX, CAPEX, increases customer satisfaction through real time pricing and promotions

• Enriched Communication Products

• Ericsson Call Completion Applications 1.0

• Ericsson Messaging over IP 5.0

• Ericsson Mobile Internet Enabling Proxy 4.0

• Fast and secure Internet Browsing, Content adapted to fit most devices, URL-filtering, Scanning for viruses in MMS messages, browsing content and downloads, Notification services, Simplified handling of RSS feeds

• Media Products

• Ericsson Content Delivery Systems 3.0

• Personalized Greeting Service 1.0

• Service Management and Control

• Ericsson Automatic Device Configuration 3.0 - maximize experience by timely and accurate info, minimize time to market and drive service uptake to multimedia services

• Ericsson Intelligent Network Server 3.0 - Base for other network services by Ericsson

• Ericsson Mobile Positioning System 9.0