CANBACK INTRODUCTION AND CELLULAR OPERATOR ANALYSIS … · CANBACK INTRODUCTION AND CELLULAR...
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PREDICTIVE ANALYTICS INTEGRATORS EIU CANBACK Boston, Massachusetts www.canback.com +1-617-399-1300 CANBACK INTRODUCTION AND CELLULAR OPERATOR ANALYSIS TOOL October 2014
Transcript of CANBACK INTRODUCTION AND CELLULAR OPERATOR ANALYSIS … · CANBACK INTRODUCTION AND CELLULAR...
PREDICTIVE ANALYTICS
INTEGRATORS
EIU CANBACKBoston, Massachusetts
www.canback.com+1-617-399-1300
CANBACK INTRODUCTION ANDCELLULAR OPERATOR ANALYSIS TOOL
October 2014
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Contents
Introduction to Canback
Cellular operator analysis tool (COAT)
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Canback is the world’s leading manage-ment
consulting firm leveraging predictive analytics
for strategic purposes.
We operate globally with the world’s largest
companies as clients. This has taken us to
more than 50 countries since our founding in
2004.
We also offer analytic services with the
Canback Global Income Distribution Database
(C-GIDD) as our flagship product.
Canback is a subsidiary of The Economist
Intelligence Unit since 2015.
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Pe
rfo
rma
nce
Time1900 1960 1990
Traditional
management
consulting
Predictive
analytics
2016
A new paradigm
with higher
performance
Few, if any, break-
throughs since the
early 1990s
- Conceptually based
problem-solving
- Experience preferred
over hard analysis
- Datasets at the
center of problem-
solving
- Repeatability and
scalability for
efficiency
Canback prefers fundamental analysis of primary data over conceptual frameworks, achieving
greater accuracy in problem solving at a lower cost
“The future is already here, it is just unevenly distributed”
MANAGEMENT CONSULTING INDUSTRY S-CURVE
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Canback is often cited in the press, research reports, annual reports, and investor presentations by
some of the largest companies and organizations in the world
Quarterly divisional seminar: Africa (2015)
Quarterly divisional seminar: South Africa (2014)
Quarterly divisional seminar: Asia-Pacific (2013)
Mapping the Path to Future Prosperity: Emerging Markets Growth Index (2014)
Abuja +12: Shaping the Future of Health in Africa (2013)
Africans Open Fuller Wallets to the Future (2014)
The Shifting Urban Economic Landscape: What Does it Mean for Cities? (2013)
Annual Results Presentation (2013)
Africa's Middle Class: Few and Far Between (2015)
Hot spots: Benchmarking Global City
Competitiveness (2012)
Why are Africans Either Very Rich, or
Very Poor (2015)
Consolidated Annual Report (2012)
The Future of Retailer Brands (2010)
The War for Nigeria (2013)
Nigeria - A Nation Divided (2012)
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We have worked on the ground in over 50 countries, helping clients draw reliable, fact-based
conclusions through data-driven analyses
PROJECT COMPOSITION
Global projects: 14%
United States: 7%
South America: 30%
Mid America: 11%
Europe: 7%
Africa: 24%
Asia: 8%
Core office
Satellite office
Country projects
Consultants work travel
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Canback works mainly in four consumer-facing sectors where we have distinct competitive
advantages based on methods and experience
CONSUMER GOODS
Capturing exciting but hard to understand opportunities for durable and
non-durable goods, such as assessing new category potential in Asia or
developing a market entry strategy in Africa
RETAIL
Predicting trends in retailing to inform strategic decisions, for example
choosing store formats in Latin America and forecasting the evolution of
modern trade in the Philippines
FINANCIAL
SERVICES
Optimizing credit card, retail banking and consumer finance operations,
including creating a pricing strategy for credit cards in Europe and defining
optimal mix of ATM and retail branches for bank in sub-Saharan Africa
INFORMATION &
COMMUNICATIONS
TECHNOLOGY
Assessing future demand in global markets, such as predicting new
subscriber growth in Central America and analyzing profitability prospects
for a third market entrant in China
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Canback is diversified across functional areas. Strategy development is our largest practice.
This covers business planning, finding new market opportunities, developing corporate and
business unit strategies, and more
Canback
Management consulting
>65%
M&A due diligence
30%
Strategydevelopment
>35%
Predictive modeling
15%
Commercial databases
15%
Market/industry research
<5%
We pioneered, and are still the
world’s only supplier of GDP and
income data at the subdivision
and city level: C-GIDD
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Canback strives to build partnerships that are long-term, collaborative, consistent and relevant to
every level of an organization
Long-term
At every level
Collaborative
Consistent
Enhancing client capabilities is a long-term endeavor. We strive to build
strategic partnerships that will be relevant in any market environment
Working alongside our clients, not in isolation, we maintain high levels of
transparency and communication throughout the course of any project
While our work is conducted globally, we centralize analysis in our core
offices to ensure consistency and quality of output
The structure of a global business is complex. We strive to build
relationships with both central teams as well as regional / local units
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OUR GLOBAL OFFICES AND LEADERS
Canback has offices in twelve key international markets, allowing us direct access to vital
centers of economic growth
OUR CAPABILITIES
Office
Manage-
ment
Consulting
Predictive
AnalyticsC-GIDD
Market
Research
Boston
London
Beijing
Johannes-
burg
Chicago
Dubai
Shanghai
Singapore
Mexico City
Jakarta
Sao Paulo
Tokyo
Core office
Satellite office
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The Canback Global Income Distribution Database (C-GIDD) is used to quantify market size and
demand drivers. C-GIDD is the only commercial database of its kind in the world
C-GIDD
benchmark
products and
services data
Internal to
Canback
C-GIDD
economic,
demographic,
social and
psychographic
data
Internal to
Canback
C-GIDD
income
distribution
data
Available as a
commercial
service at
cgidd.com
The world's only database with GDP, household
income and spending data for 213 countries, 696
subdivisions and 997 cities
Covers 2000 till 2025
Complemented with modules containing social,
demographic and psychographic data
Visit http://cgidd.com for more information
C-GIDD CONTENT
Quantify number of households at specific
income or socioeconomic levels
Compare consumer market sizes across
geographies in a uniform way
Merge with actual market data to spot new
or under-developed opportunities
0 0.25 0.5 0.75 1
Airline passengers
ATM machines
Bank deposits
Electricity consumption
Insurance premiums
Internet users
McDonald's restaurants
Milk consumption
Mobile phone subsribers
Oil consumption
Personal computers
Television sets
EXPLANATORY POWER OF C-GIDD
INCOME DISTRIBUTION DATA
FOR SELECT PRODUCTS AND SERVICESDemand variance explained by income above category-specific threshold
R2
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Contents
Introduction to Canback
Cellular operator analysis tool (COAT)
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The COAT database allows Canback to predict future winners and losers among cellular
operators around the world, and to understand what drives profitability and growth
Australia Lithuania
Canada Malaysia
China Mexico
Czech Republic Netherlands
Egypt Pakistan
Greece Philippines
Hong Kong Portugal
Hungary Russia
India South Africa
Ireland S. Korea
Italy Spain
Japan Sweden
OVERVIEW OF COAT (CELLULAR OPERATOR ANALYSIS TOOL) DATABASE
BACKGROUND
• Originally developed in 1999 to model
cellular profitability and 3rd entrant
probability of success in emerging
European markets
• Later expanded to a global dataset
• Builds on country and operator data
collected from annual reports, analysts,
regulators, and proprietary sources
• Uses pooled time series cross-sectional
analysis for the years 1999-2014
COUNTRY VARIABLES MARKET VARIABLES
* Countries and operators used for a particular effort. There are 12 additional countries and 28 operators in the total database.
OPERATORS*COUNTRIES*
Airtel (India)
Bell Canada (Canada)
Bitė (Lithuania)
Celcom (Malaysia)
China Mobile (China)
China Mobile(Hong
Kong)
China Unicom (China)
COSMOTE (Greece)
Globe Telecom
(Philippines)
Hutchison (Hong Kong)
IUSACELL (Mexico)
KPN (Netherlands)
KTF (S Korea)
Maxis (Malaysia)
Magyar Telekom
(Hungary)
Mobile TeleSystems
(Russia)
Mobilink (Pakistan)
Mobinil (Egypt)
MTN (S Africa)
NTT DoCoMo (Japan)
O2 (Ireland)
Omnitel Vodafone (Italy)
Optus (Australia)
Oskar Mobil (Czech
Republic)
PLDT (Philippines)
Portugal Telecom
(Portugal)
Reliance Infocomm
(India)
Rogers (Canada)
SK Telecom (S. Korea)
SmarTone (Hong Kong)
SoftBank Mobile (Japan)
Tele2 (Lithuania)
Telefonica (Spain)
Telenor (Hungary)
TeliaSonera (Sweden)
Telstra (Australia)
T-Mobile (Czech Republic)
Ufone (Pakistan)
Vodacom (S Africa)
Vodafone (Greece)
Vodafone (Ireland)
Vodafone (Netherlands)
Vodafone Egypt (Egypt)
Vodafone Portugal
(Portugal)
Vodafone Spain (Spain)
WIND (Greece)
Cellular market size
Cellular penetration
Cellular revenue
Cellular revenue growth
GDP
GDP growth
Market age
Market concentration
Number of operators
Population
3G/4G/LTE network starting year
Cellular revenue
Cellular revenue growth
Country ARPU
Country cellular EBIT
Country cellular data usage
Entry order
Global capex
Global total EBIT
Global total revenue
Market share
Users
Years in market
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The COAT database is analyzed using a sophisticated structural equation model (SEM)
PARTIAL PATH DIAGRAM FOR PROFITS IN THE CELLULAR OPERATOR MARKET
Profit
ARPU relative to
GDP/capita
Market age
Market ARPU
Operator
market share
Number of
operators
Entry
positionGDP/capita
GDP growth
Market
penetration
Capital
expenditure
E1
E2
E3
E4E5
E6
.47.51
-.50
-.54
-.07
-.31
.31
.37
.00
.88
-.22
.20
.22
.71 -.34
.15
.13
-.14
.00.31
.15
-.21
.77
-.44
.17
.68
.61
.88 .25.80
.64
.68
Source: COAT, Canback analysis
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This technical approach is converted into a set of simplified relationships, to understand and
explain the drivers of profitability (or growth—not shown here)
PATH DIAGRAM FOR CELLULAR OPERATOR
PROFITABILITY
PROFITABILITY
EBIT/Revenue
ARPU relative to
GDP/capita
Market age
Market ARPU
Operator
market share
Number of
operators
Entry
position
GDP/capita
GDP growth
Market penetration
MIN. IN SAMPLE MAX. IN SAMPLE
0.5 32
3 22
6 80
2 6
5% 90%
1 4
450 48,000
-1% +10%
11% 94%
Independent
variables
Dependent
variable
Note: EBIT/Revenue is the only profitability metric easy to collect for most operators
Source: COAT
16Source: COAT, Canback analysis
The analysis quantifies the importance of each profitability and/or growth driver
R R2
Standard
error of
the
estimate
Durbin-
Watson
0.78 0.61 0.12 2.0
MODEL SUMMARY
Variable t-stat
B Standard error
Constant 0.6019 0.2093
ARPU relative to GDP/capita 0.1170 0.0082 2.36
Market age 0.2239 0.0205 2.28
Market ARPU -0.0982 0.0057 -2.21
Number of operators -0.2281 0.0368 -1.67
Operator market share -0.3585 0.5282 -1.30
Entry position -0.1867 0.0825 -1.20
GDP/capita 0.0200 4.3E-06 0.57
GDP growth 0.4252 1.4244 0.51
Market penetration -0.0300 0.2346 -0.07
Unstandardized
coefficients
0.0 0.2 0.4 0.6 0.8 1.0
No statistical significance
Low
statistical
signifi-
cance
High
statistical
signifi-
cance
Significance
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Operator
market share
The result is a detailed understanding of what drives growth and/or profitability, and how operators
can succeed in a given environment
* Based on a statistical (SEM) analysis of 46 operators in 24 countries between 2008 and 2013 (pooled time series cross-sectional analysis).
Source: COAT, Canback analysis
COMMENTS
The longer the cellular market has existed, the higher the profitability.
(This is true in most markets and industries.)
Profitability declines with the number of operators
Operators with high prices are less profitable.
In a given market, a high ARPU strategy leads to
higher profitability
Third entrants are perhaps slightly disadvantaged, but the statistical
significance is low, and disappears if 1st, 2nd, 3rd entrant groups are
tested separately
Operator market share has a slight negative impact on profitability
The level of market penetration does not affect profitability
Rich (OECD) markets are neither more or less profitable
than emerging markets
General GDP growth does not influence profitability
PATH DIAGRAM* FOR CELLULAR OPERATOR
PROFITABILITY
PROFITABILITY
EBIT/Revenue
61% of profitability
explained (R2)
ARPU relative to
GDP/capita
Market age
Market ARPU
Number of
operators
GDP/capita
GDP growth
Market penetration
-0.17
0.40
-0.40
-0.29
-0.12
n/m
n/m
n/m
0.60
High statistical significance
No statistical significance
Low statistical significance
Entry
position
1st entrant
2nd entrant
3rd entrant
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The COAT database can used, for example, to predict the success of new market entrants or new
price strategies
Average for
comparison
countries
=17%
PROFITABILITY IN THE CHINESE CELLULAR OPERATOR MARKETEBIT/Revenue
PROFITABILITY SENSITIVITY ANALYSIS*2013
* Based on a statistical (SEM) analysis of 46 operators in 24 countries between 2008 and 2013 (pooled time series cross-sectional analysis)
** Data for US includes Cingular, Nextel and Verizon
*** High-ARPU strategy defined as 25% above China Mobile’s 2013 ARPU
Source: COAT, annual reports, Canback analysis
3 players
27%
2 players
26%
30%
22%4 players
30%
3 players
4 players
Total China:
Total China:
High-ARPU
strategy***:
35%
38%39%
32%
18%
30%
35%
38%
31%
2013
22%
US** 2013
15%
20122011
27%
2010
29%
Total ChinaChina UnicomChina Mobile
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EIU Canback contact information
AMERICAS
Boston EIU Canback, Inc.
210 Broadway, Suite 303
Cambridge MA 02139
+1-617-399-1300
Irina Blinova
Mexico City Canback Mexico
Bosque de Ciruelos 194, PH3
Bosques de las Lomas
11700 Ciudad de México, D.F.
+52-55-4164-8500
+52-155-4354-9806
Francisco Maciel Morfin
Chicago EIU Canback USA
500 N. Michigan Ave.
Suite 1925
Chicago IL 60611
+1-312-853-3716 or 3823
Tom Andrews
Maureen Lanigan
Sao Paulo EIU Canback Brazil
Av. Brigadeiro Faria Lima, 3144
3º andar Jardim Paulistano
São Paulo, 01451-000
+55-11-3845 4767
Marcio Zanetti
EUROPE
London EIU Canback Europe
20 Cabot Square
London E14 4QW
+44-20-7576-8181
Chris Pearce
Asif Chaudhary
MIDDLE EAST AND AFRICA
Dubai EIU Canback MENA
Aurora Tower, 13th Floor
Office 1301A, PO Box 450056
Dubai Media City
+971-4433-4202
+971-52-269-8425
Paul Yata
Johannesburg EIU Canback Africa
First Floor, Building 8
Inanda Greens Office Park
55 Wierda Road East
Wierda Valley, Sandton
+27-83-786 2450
Arshad Abba
ASIA
Beijing EIU Canback China
Unit 1711, 17/F, Block 1
Taikang Financial Tower
38 East 3rd Ring Rd. North
Chaoyang District 100026
+86-10-8571-2188
Alex van [email protected]
Shanghai EIU Canback China
Rm 2508A, 25/F, Rui Jin Bldg
205 Mao Ming South Rd,
Shanghai 200020
+86-21-6473-7128
Seumas [email protected]
Singapore EIU Canback Southeast Asia
8 Cross St, #23-01 PWC Bldg.
Singapore 048424
+65-6534-5177
Vanny Dang
Tokyo EIU Canback Japan
Ginza Wall Building UCF 5F
6-13-16 Ginza
Chuo-ku, Tokyo 104-0061
+81-3-6338-0002
Shin Ito
Jakarta EIU Canback SE Asia
Jl. Tiang Bendera 5 no. 2A
DKI Jakarta 11230
+62-812-8743 7578
Teddy Purnomo
