Opportunities for reshaping the future of your industry? 27 June 2012

www.pwc.co.uk

Colin Brereton, Partner

Future of wireless international conference

PwC

• Introduction

• The opportunities

• How can you influence them?

• What needs to change?

• Questions...

Contents

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PwC

www.pwc.com/communications

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PwC

Glancing back

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2007

Hard wired internet

“Cloud....what?”

Smart phones for a select few

“IT approved apps”

Broadcast to dedicated devices

Profitability = voice services

Passive online experience

2012

Mobile internet

Cloud hype giving way to reality

Smart phones and tablets go mainstream

App explosion

Content on any device

Profitability = IP data services

Online interaction reshaping society

PwC

Mainframe Computing 1960-1980 (1M Users)

Mini Computing 1980 -1990 (10M Users)

Personal Computing 1990-2000 (100M Users)

Desktop Internet Computing 2000-2010 (1,400M Users)

Mobile Internet Computing 2010 (5,000M Users)

0%

20%

40%

60%

80%

100%

120%

140%

160%

2011 Global Mobile Penetration Rates by Region

Today Mobile is ubiquitous with far greater impact and adoption than previous technologies

5 Source: International Telecommunication Union

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Consumers today

Source: GSMA MWC 2012 unless otherwise indicated

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• 425 million Facebook mobile users

• 18-34 year old survey - felt more naked without their smart phone - than without their wallet

• Volume of IP-based social text messages sent in 2011 was equal to $13.9 bn in text messaging services offered by cellular providers that carriers may have lost (Ovum)

• Significant attitude shift from “It’s going to take over my life” to “it makes my life richer” - but they want certainties around security and privacy, trust and convenience

• 40% of users of tablets - use their tablets while they are watching TV (Nielsen Q2 2011)

• Increased demand for video streaming

• 10% increase in mobile penetration increases 0.6% increase in GDP

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Business today

• 10 million people employed by mobility by 2015 (8 million 2012)

• Overall 1/2 of all retail transactions in US - access the web during some point of their shopping experience

• 2011 Skype provided 300 billion minutes of communications - 50% was video

• Best Buy: 77% of orders purchased on the phone are picked up in the store

• Ebay: 10% of all transactions closed on a mobile device today – company feels it will triple in the next 3-5 years

• Apps are now a ~$10bn market, growing at ~100% a year with companies enjoying staggering growth rates - Draw Something achieved 1m users in 9 days, it took Facebook 9 months and AOL 9 years (source – Business Intelligence)

Source: GSMA MWC 2012 unless otherwise indicated

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After tomorrow Explosive rises and falls • US wireless penetration reached 102% by the end of June 2011 (CTIA)

• Wireless penetration exceeds 100% in various countries around the world e.g. Argentina exceeds 120% and is still growing (S&P Industry Survey 19 Jan 2012)

• By 2013 consumer spending on wireless data will be $108bn (up 47% from 2011) and $91.5bn on wireless voice (down by 11% from 2011).

• Ebay: 10% of all transactions closed on a mobile device today – company feels it will triple in the next 3-5 years

• Global internet traffic will quadruple by 2015

• 25 fold increase 2010 - 2015 - to 788 million access the internet only via mobile

• Mobile video forecast to represent 70% of all data traffic by 2016

• By 2017 mobile broadband traffic will be 35 times current levels

• 24 billion connected devices by 2020

• 2.3bn M2M connections in 2020

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Source: TIA 2012 ICT Market Review & Forecast/GSMA MWC 2012

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After tomorrow Explosive rises and falls

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A connected and mobile ecosystem of challenges and opportunities

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• For operators

• For newer market entrants and OTT providers

In new service areas

In changing regions

Within new vertical markets

• By 2020 the impact of connected devices is expected to create a market opportunity for global business worth $4.5 trillion

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Partnership opportunities for all?

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• The Yankee Group forecasts that ~20% revenue growth ($0.5-1.0 tn) is available through the provision of new services:

• Video streaming and video download

• Digital TV

• CDN services

• Cloud services (SaaS, Paas, IaaS)

• Mobile advertising

• Location based services

• Mobile broadband

• Mobile data services

• Managed tele-presence

• VOIP

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Three regions lead world economic growth rates

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Source: IMF

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Africa a leading growth region

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Source: CIA World Fact Book

1. 54 countries

2. Continent size 30.1 mn sq km

3. Continent pop. 1.1bn

4. Africa GDP (PPP) $300-$36,600

5. Africa inflation range 1.2-26.2%

6. Africa literacy range 34%-92%

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Africa

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Source: CISCO VNI Global Mobile Data Traffic Forecast (2010)

Leads the world in mobile money with 40 million users

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Asia a leading growth region

• Asia - population: 4,2bn (60% of world population)

• Expected to peak at around 5.14 in 2055

• China most populous in world has peaked at over 1.3 bn, the majority of whom live in the east of the country

• Rapidly ageing and forecast to fall by 400m between now and 2100. (United Nations/The Economist)

• To be over taken by India currently 1.24 bn around 30% of Asia’s population growing to 1.7bn by 2065

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Asia a diverse mix of markets

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• Japan, Australia and much of SE Asia are

developed and fairly mature

• Emerging markets like India, parts of Middle East and China represent huge volumes and opportunities for m-Health, m- Money, m-Education, regionalisation

• Indian market ARPU on average US$2 - commercial onus is on how to encourage consumption

• 60% of the Indian population lives in rural areas and contributes 20% of GDP

• Rural users commonly depend more on mobile communications to stay connected and have a greater need for channels to deliver them all manner of services and goods

• How to encourage a profitable rural business by:

understanding the customer base better

addressing user’s needs for services to be micro local and in language of comfort

developing service models fit for a varied user base

53.250.743.4

30.930.3

13.913.613.212.110.8 9.6 9.32.2

ARPU per month, USD, India and Other Selected Countries/Regions, 2010

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Latam a leading growth region

• IP traffic is growing fastest in Latin America (Cisco Visual networking index forecast and methodology 2010-2015)

• According to the IDB, specifically for Latin America, it is estimated that a 10% rise in BB penetration increases the GDP by 3.2% on average and boosts productivity by 2.6 %

• Economy reached a critical level of development by surpassing 10.000 USD per capita barrier

• Region reaching a socially sustainable model of growth:

• > 80% urban population

• 200m middle class population and growing

• + a young segment with 150m < 14 years of age

• Telecom market expected to grow at 7.7% - faster than GDP in Latin America

Source: IMF unless otherwise stated

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New vertical markets • Mobile payments are changing emerging

markets, retail and potentially banking as we know it

• mHealth is anticipated as part of a solution to care access in emerging markets and to care cost reduction in the developed world - revenues mostly from diagnosis or monitoring services are projected to accelerate to $23 billion by 2017

• mAgriculture - by connecting relevant information sources mobile can increase farming incomes with forecasts of c. $140bn by 2020

• mEducation - technology can enable an inclusive education for all by increasing access, boosting confidence, providing links to funding

• Mobile advertising (always on, portable, multi device, location data) offers an untapped and uniquely powerful marketing channel

• M2M - no longer a thing of the future... smart grid utilities set to grow 15-20% per year

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mPayments

• 25% of US retailers have already deployed an NFC capable terminal and POS.

• NFC/mobile wallet - the in and out fast services is highest adoption (30% convenience and 30% vending) - Osama Bedier – VP Wallet and Payments Google

• “People born in the last 5 years will never have a physical wallet.” - John Partridge, President at Visa

• Digitizing cash is the next big thing for financial services and telecom sector 45 mobile operators committed to SIM based NFC services

• 41M NFC devices sold in 2011 - 498M by 2016

• Global mobile transactions are expected to nearly double by 2014 to $1.13tn (CITI)

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mPayments

• Over 2.5bn adults (~72%) in developing world are unbanked (Boston Consulting Group April 2011)

• Currently 92% of all transactions in emerging countries is cash.” (Visa)

• Almost 2.5 bn people in developing world have mobile phones – potentially 2bn unbanked mobile users could be served through mobile financial service (Boston Consulting Group April 2011)

• Operators see proximity payments as a key revenue stream inside emerging markets

• NFC and carrier billing are also seen as major opportunities for telecom

• Telecom operators are partnering with FS organizations to leverage best of breed approaches

• Mobile banking is inevitable

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mHealth Worldwide revenues are projected to accelerate to $23 billion by 2017 … Worldwide mobile health revenue forecast 2013 – 2017E

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Key assumptions:

• 2-3% of chronic disease patients

• 20-30% of post-acute discharge

• 10-15% of ageing

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mHealth Europe, North America and Asia Pacific dominant markets

Global mHealth Market Opportunity by regions, US$ Billion and share in %, 2017E

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mHealth Opportunities vary by region Mix of Revenues by Mobile Health Service Categories in various Regions, 2017E

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(Source Qualcomm)

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mHealth

• Remote regions - clinical use for quick look and triage:

Emergency medicine trauma management

Field use, disaster response

Remote monitors in obstetrics and gynaecology to confirm pregnancy/detect complications

Guided procedures in remote locations

• Established health regions

NHS choices - to meet to help citizens manage their health & wellbeing and make informed choices about their care

United Healthcare Group – myuhc treatment

provider search facility and claim processing service

Source: Mobisante, NHS

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mAgriculture

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mEducation

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Mobile advertising

Mobile is unique to marketers because it combines four characteristics that otherwise can’t be found in any ad channel – together they make for an incredibly personal and immediate experience

Source: Millennial Media-GSMA presentation MWC 2012

1. Always on

2. Portable

3. Multi-device (e.g. camera)

4. Available location data

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Machine to machine now a reality • Growing demand, rising energy costs and EC

targets to reduce carbon emissions by 20% by 2020; smart grid utilities set to grow 15-20% per year

• A number of operators have already established dedicated M2M practices (e.g. Vodafone) or are active in the space

• Roll-out of 3G & LTE will help drive the growth of M2M

• As M2M devices grow; so too will the pressure to rollout IPv6 e.g Ford connectivity strategy combines designing vehicles with built in software, connectivity for brought in devices and beamed in data from the cloud

• Health compliance – remote patient monitoring

• Home security

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Source: Factiva

1. Automotive

2. Energy & Utilities

3. Security: home & business

4. Health

5. Manufacturing

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A connected and mobile ecosystem of opportunity for all? • By 2020 the impact of connected devices is expected to create a

market opportunity for global business worth $4.5 trillion

• For operators

• For newer market entrants and OTT providers

• In new service areas

• In changing regions

• Within new vertical markets

• But....

• Who will decide who is connected?

• Who will influence the future created by your industry?

Source: TIA 2012 ICT Market Review & Forecast

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PwC

Opportunities waiting at your doors

• Mobile technology can increase farming incomes in the developing world by billions

• Mobile technology can transform healthcare in the developed and developing worlds

• Mobile technology can enable an inclusive education for all

• Mobile technology can drive social benefit through awareness in disease prevention, combating alcohol and drug abuse, connecting disaffected groups

• Mobile penetration correlates to GDP growth – for every 10 new phones amongst 100 people in a developing market their country’s GDP grows by 0.8% (World Bank 2009)

But....pricing remains an access issue for the most disadvantaged in remote, high-density, poor populations most likely to benefit

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• 60-80% network energy

consumption attributable to base stations

Challenges for operators

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Source: Cisco VNI, iSuppli, NSN, IEEE

• 107% LTE CAPEX

CAGR 2011-2014

• 86% operator

energy budget used by the network

• High costs of continuous investment (fibre, LTE, 4G, spectrum) to meet the low margin data demands of their customers

• 18x data traffic increase

on mobile networks 2011-2016

• Government regulation has impacted operator ability to afford more spectrum to meet the data demands of their customer

• Declining share of wallet as high margin (SMS/Voice) services are being absorbed by free “over the top” providers

• Industry cooperation on standards and open platforms remains a barrier

May 2012

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Strategic changes needed in your industry

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“customer data is the new oil” (Etisalat)

May 2012

An open infrastructure and proactive co-investment without continued recourse to shareholders

Supportive regulation for interoperability, common standards and privacy laws

Broader, looser collaborations:

• with and between governments

• supra government

• with and across industries

• within and across the industry supply chain on new services

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The real issue

“The problem is not whether business will survive in competition with other business, but whether any business will survive at all in the face of social change.”

Laurence Joseph McGinley, President of Fordham University

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In this ecosystem what is your role as an industry group?

Slide 34

• As collaborators...?

• As individuals...?

• Who will lead you..?

• Who will be the interface with society?

Network service

providers

Infrastructure providers

Analogue/digital service providers

Analogue/digital service retailers

Technology providers

Device providers

Analogue/digital service enablers

Cloud computing & storage

Banks

Education

Farmers

Governments

Healthcare

Householders

Industry

Markets

Patients

Retailers

Shoppers

Students

Utilities

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Questions for you

• What is your role as a group?

• Given your relationships – are you really influencing yet?

• Is your reach wide enough – are you supporting yourself, your industry, your home economy, or society on a wider platform?

• What needs to change in your relationships and in your industry for these benefits to be reaped for more than commercial gain?

• As an industry “player” do you take ownership for the shape the future of your industry?

• How can you influence who benefits?

• This is your time.....how will you remember it?

Slide 35

PwC

Answers @ www.pwc.com/communications

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Source: Colin.brereton@uk.pwc.com

Questions...

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EP6-2012-05-25-12 16-MS