Analyzing the ICT Market : Technology and Trends and the Impact of Technology on the Market

Carlo M. Rossotto, Tim KellyCairo, March 10, 2009

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Technology Trends and the ICT Market

Main Technology Trends Affecting the ICT Sector

Broadband Wireless Technologies Convergence Handsets Digital Content

How technology is affecting the ICT industry

Revenues and Industry Structure Business Model Firm Specialization Product Differentiation

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Technology Trends and the ICT Market

Main Technology Trends Affecting the ICT Sector

BroadbandWireless TechnologiesConvergenceHandsetsDigital Content

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Main Technology Trends in ICT

Source: Pyramid Research.

Broadband Technologies I : Throughput and Range

0

20

40

60

80

100

120

ADSL ADSL 2+ WiFi WiMax VDSL

Peak Throughput(Download), (Mbps)

Range (Km)

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Main Technology Trends in ICT

Source: Pyramid Research. Note: shared throughput

Broadband Technologies II : Throughput and Range

0

500

1000

1500

2000

2500

3000

FTTP (BPON-ATM) FTTP (BPON-Ethernet)

FTTP (GPON-Ethernet/GEM)

FTTP (GPON-Ethernet/ATM)

Mb

ps

0

5

10

15

20

25

Km

Peak Throughput(Download), (Mbps)

Range (Km)

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Technology Trends and the ICT Market

Wireless Technologies: main trends

• Trend 1. Growth of 3G+3G+ users to increase at a 38% CAGR from 2008 to 2013 and to

account for 46% of all 5.9Bn mobile subscriptions in 2013 (Pyramid Research)

• Trend 2. Fixed wireless for development31 African countries have deployed CDMA2000 1X Networks (ITU)833,000 customers of W-CDMA in Africa (GSM Association)

• Trend 3. Wireless broadband for developmentEVDO growth in Africa

Source: ITU

Country Operator Download Speed Monthly Subscription (US$)Nigeria Starcomms 300-600 kbps 124Rwanda Rwandatel 400-700 kbps 62Morocco Wana 128-1000 kbps 24Sudan Canar Up to 2 Mbps 29Angola Movicel Up to 1 Mbps 257

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Technology Trends and the ICT Market

Convergence

• Convergence across technologies: multiple platforms are consolidating into a single IP-based platform, allowing voice, data and video consumption. The same digital content can be accessed and delivered across multiple platforms.

• Convergence across services: bundles of services, double-play and triple-play (Orange, for example, reported that 11% of its ADSL subscribers were also triple-play subscribers in 2007, up from 2.7% in 2005, Pyramid Research).

• Convergence across devices: Multiservice connectivity on a single end-user device. Dual-mode (WLAN-mobile) handsets and 3G-embedded computing devices has expanded over the past two years.

Operators still look at the bottom line whenthey consider diversify across technologies and services

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Technology Trends and the ICT Market

Broadband-enabled devices

Dual-mode (WLAN-mobile) Devices

PCs with embedded 3G capabilities (50% of laptops by 2010; Pyramid Research)

iPhone and Blackberry

Smartphone unit sales globally to grow at a CAGR of 17%, or nearly three times as fast as the total handset market, to reach 313m in 2013. Smartphones from 8% of total handsets in 2008 to 18% of total handsets in 2013 (Pyramid Research)

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Technology Trends and the ICT Market

Digital contentComputer and video games1 Film and video2 Music3 Advertising4

Global revenues (offline + online) USD 37.5 billion USD 84 billion USD 30 billion USD 445 billion

Growth of market (offline + online) 19% (2006-07) 4% (2006-07) -6% (2006-07) 5% (2006-07)

USD 6.5 billion

Increasingly all new games are Internet-enabled

Growth of online market 28% (2006-07) >100% (2006-07) 27% (2006-2007) 28% (2006-07)

Marginal

(under 1% in most markets)

Low for Internet-enabled games but growing quickly

(i.e. ”server piracy”)

Share of online in total 17% but increasingly all new games are Internet-enabled

16% 7.50%

Global online revenues Marginal USD 4.7 billion USD 31 billion

Unauthorised downloading of online content and its impact

Medium and growing High n.a.

Source: OECD 2007

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Technology Trends and the ICT Market

Digital content and Internet trafficGlobal consumer Internet traffic 2005-11 in million

terabytes/month

Source: OECD 2007

0

0.5

1

1.5

2

2.5

3

3.5

2005 2007 2009 2011

P2P

Internet video (PC, TV,communication)Web, Emai l , FTP

Onl ine games

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Technology Trends and the ICT Market

Digital Content and User Created Content

BlogsWikisPhoto-sharingPodcastingSocial Network SitesVirtual WorldsFile-Sharing P2P

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How Technology is affecting the Industry

Revenues and Industry Structure: A fast-changing picture

• PSTN revenues sharply down. less in global PSTN revenue down $103bn in 2013 than in 2008 (Pyramid)

• Mobile subscriber growth rates decelerating in most regions, with penetration rates hovering around the 80-120% range (CAGR of 8% for mobile subscriptions in 2008-2013) (Pyramid)

• Fixed and mobile broadband lines to increase threefold between 2008 and 2013, from 964m to 3.3bn (Pyramid)

• Internet access will generate nearly 55% of total fixed revenue in 2013.• Mobile data to grow at a 16% CAGR from 2008 to 2013, making up 34% of

global mobile revenue in 2013. • Revenue per fixed broadband line, currently at an average of $33, are to decline

(CAGR of -5%). FTTx has highest ARPS — 2X cable or DSL in 2008

Source: Pyramid Research

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Revenues and Industry Structure: A fast-changing picture

• Egypt is the seventh fastest growing broadband market in the world, with over 30% compounded growth rate

• Ten fastest growing broadband markets are in Asia, MNA, Latin America and Africa

• Operators boasting the highest data ARPS are those with the highest percentage of subscribers using 3G-enabled devices.

• Messaging revenues (email, SMS and MMS) were 58% of mobile data revenues in 2008 (projected 44% in 2013)

• Web access was 21% of mobile data revenues in 2008 (projected 28% in 2013)

• The rest is applications : music (high growth rate), games, graphic, ringtones…

• Source: Pyramid Research

Data Revenues as a % of total mobile revenues

0 5 10 15 20 25 30 35

2007

2008

2009

2010

2011

2012

2013

How Technology is affecting the Industry

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Digital content development and on-line business models

–Advertisement (e.g. 99% of Google revenues)–Voluntary donations (e.g. blogs)–Pay-per-view and pay-per-item (e.g. IPTV model)–Licensing content to third parties–Online sales (e.g. portals Amazon, eBay)–Sale of user data, clickstream analysis

How Technology is affecting the Industry

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Technology Trends and the ICT Market

• Convergence may destroy as much value as it creates by bringing in new sources of revenue (Pyramid)

• Bundles, access to digital content and advertisement are key to the evolving business models

• Bundles:–fixed offers: bundles are key to customer acquisition and

customer retention–mobile offers: increase data usage and ARPS.

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Technology Trends and the ICT Market

•How are firms reacting:–New services–Organisational restructuring–Mergers and Acquisitions–Firm Specialisation–New Entry