TELECOM ITALIA GROUP

Creating value by addressing adjacent markets: a path towards data monetization

2

Telecom Italia Group – different focuses on the ICT stake

OlivettiTelecomItalia

Telecom Italia Digital Solutions

TIGroup

TI Group

IT ConsultingSystem Integration

SaaS & PaaS

Infrastructure, IaaS& Mgmt Services

HWVertical Solutions

TLC Services

ICT

Sta

ke

TLC Solutions&ICT Infrastructural

Services as the technical platform

to support customer services

development

Specialized HW & Services for

vertical offerings

PaaS &SaaSServices Development Innovative Solutions

IT Cloud TrasformationConsulting & SI

to integrate & valuethe ICT elements

3

Market context - mobileCAGR 2009-2013 (%)

(revenue, ARPU)

Structurally declining revenues …and ARPUs …and margins

Hyper competition Saturated markets Price wars

Quest for consolidation

Source: analysis mason, 2014

-10.1% -11.7%

-7.0% -10.7%

-8.8% -9.8%

-3.0% -5.5%

-1.3% -3.4%

-4.8% -4.7%

4

Market context - ItalyItaly vs UE, penetration (%)

(fixed/broadband; mobile)

4 mobile operators, several MVNOs Hyper competition and saturation on

human Low and declining mobile ARPU TIM’s market share 60% of business,

40% of postpaidPotential ARPU upside on mobile

servicesFocus on VAS and innovative services:

m marketing and advertising, machine 2 machine, e/m payments

Source: analysis mason, 2014

5

Adjacent Markets - competitors and enablers

User Experience

Public Sector

Ecosystems

Devices

New networks

OTT players

Smart Spaces

E-Health

Robotics

Social

DigitalHome

Gaming

Payments

Multimedia

Mobile

M2M/IoT

Infomobility

IPNETWORKS

HSPA

3G

FiberxDSL

WiFi

LTELocation

Based

BigData

Regulators

Impacts: Very complex Go/No Go

process

«Infinite» time to market

Long time even for customer feedback, and difficulty to incorporate

that feedback

Good Money follows Bad Money: tough/impossible

to «reverse» a bad decision

Cost of adding a new feature vs. process phase

“Basically an RFQ will always bring you yesterday’s technology. After integrating this technology, at launch you will be working with the day-before-yesterday’s technology while others are working on tomorrow’s technology. Launching an innovative service via an RFQ process is as such impossible.

“It takes 3 months from idea to finalizing an RFQ document. 1,5 month to get a reply. 1,5 month to do procurement. Half a year in total. Not counting the deployment time which is likely to be another 6 months. Telcos take 12 months for any new system.”

Classic Telco Innovation Framework

The classic Telco innovation framework does not work

6

Several Ideas and Application… in a Darwinian environment

Incremental approach, low development cost barriers at the start, costs growing with penetration of the service

Agile Open Innovation Framework

Impacts: Easy Go/No Go

process

Alfa/Beta Time to market

Short time for customer feedback, easy to incorporate that feedback

Good Money follows only Good Money: easy to «reverse» a bad decision

A different approach is needed

7

Abstract and virtualize the control layer (std HW)

Connect network software with the Data Center/ Cloud software

APIs as a new way to create “over the Telco” services, both internally and with partners

Leverage on Big Data, both external and extracted from the network

Quickly develop incremental applications either directly or through partners (Open Innovation)

8

So What? Digital SolutionsBuild a new Cloud Based Innovation Framework

Screens

Computingcapacity

SoftwareEvolution

Memoriesbatteries

Wireless

Devices

UBB & IP

Networks

Convergence on IP networksUltra BB Access

TCP/IP

Web&Cloud

AppsAPI Cloud

SW Nwk

SDN

Innovation and Application

Development on Cloud and API

Innovation and Infrastructure Investment

EcosystemsThird Parties Open

Innovation

Implications

VDSL, FTTH,

LTE, WiFi

Growth in adjacent marketsa focused approach

Main Targets: Public Sector, Utilities, Corporations, Telcos, Vertical PlayersBusiness Models: B2B2b/c

Professional Services

Cloud & OTTServices

ICT Security Solutions

Digital Identity Management

M2M & Internet of Things

Digital CRM

Web

Applications

Social

Digital Cloud Provider and Broker

Reselling e OTT approach

NetworkSecurity

ICTSecurity

End 2 End Solution Provider

Echosystem Integrator

Digital Identity Certification

Managementof Secure

transactions

9

Digital Identity – Management

Qualified player for Conservazione

Sostitutiva

PEC Management(Posta Elettronica

Certificata)

Qualified Certificator of Firma Qualificata

10

Partnership networks

Value chain control

Integrated approach

Business footprint

Platforms

Internet of Things – E2E Solution Provider

11

Hor and Verticals mgmt

Cloud Market Place – Cloud Brokering

White label ServicesBranded Services

SaaS IaaS PaaS

International Markets

Domestic Market

DirectSales

PartnersISVResellers

1112 3

Digital Marketplace

12

Data Monetization - A Business Case for a Telco Playerrationals and issues

Advertising Online Market increasingly growing, driven by mobile e video advertising.

Display Advertising growth driven by video online e on mobile audience, with advanced metrics.

Paid-for-Search growth driven by the long tail effect and by searches in mobility.

Privacy and Customer behaviour

Analytics and dedicated platforms and tools

Do we really know our customers and know how to manage the information

Scope and focus

Fierce and increasing competition, driven by OTTs.

The big G effect, Apple, Facebook

Several TLC operators and specialized players, e.g. Millennial Media, InMobi, Smaato, Nexage, Madvertise e Amobee.

Industry in consolidation.

A Market opportunity to grow in an adjacent market worth more than 250 €mln/year, growing double digit.

No need for relevant upfront investments. Possible collaborations with specialized

players, with revenue sharing models.

13

Data Monetization - A Business Case for a Telco Playera possible path

Create/establish a dedicated organization devoted to address the opportunity, identify an initial set of specialized partners

Set an on field trial in order to test operational and commercial issues start

to deliver value added services based on analytics e CB profiling

Diversify (merchant) offering with more profiled and taylored services

Redirect parent organization in order to extract the value embedded in the customer knowledge and to redesign the existing and new services within the new framework

Verify and solve issues related to privacy, to consumer

behaviour and to market acceptance

Start commercial operations

Enrich the echosystem of web agencies and media partners

Leverage on Telco’s salesforce

Leverage Telco’s offerings in order to increase knowledge of customers and improve customer’s experience: security in transactions, digital identity mgmt, e/m payments,digital marketplace

Diversify customer offering with better segmented services and applications

Extract more information and obtain permission from more customers to reach them

14

www.tidigitalsolutions.com

15

TELECOM ITALIA GROUP

Creating value by addressing adjacent markets: a path towards data monetization