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Infobalt 2002
Darius Masionis,Chief Executive Officer
UAB Bite GSM
Global role of mobile companies in the world
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About Bitė GSM
Slowdown on the global market
European telecommunication sector development
What can we expect in the future of telecoms?
Conclusions
Outline
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Bitė GSM in brief
• Bite GSM was established in 1995 • Full scale provider of mobile and internet services • GSM 900 and 1800 mobile network • Data and Internet license
• Roaming with 155 operators in 74 countries • 427 employees • TDC is 100% shareholder
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Bite is 100% owned by TDC Mobile International, the member
of TDC group
TDC Tele Danmark
TDC Tele Danmark
TDC Mobile International
TDC Mobile International
TDCSwitzerland
TDCSwitzerland
TDCInternet
TDCInternet
TDCDirectories
TDCDirectories
TDCCable TV
TDCCable TV
TDCServices
TDCServices
100% 100% 78.7% 100% 100% 100% 100%
TDC group consists of 20 companies, operating in 12 Europe countries
In first half of 2001 Bitė GSM has been listed by independent international experts as one of the most effectively operating companies in TDC group
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TDC Mobile International
Bité (100%)
Talkline (100%)
Polkomtel (19.6%)
UMC (16.3%)
Connect Austria (15.0%)
TDC Mobil (100%)
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A capital markets’ perspective on the recent evolution
Early 2000
Number of customers
Increased penetration
Third generation, m.data
Optimistic growth prognosis
Long term growth, UMTS
Hype over new economy
Consolidation
Early 2002
Increase ARPU, reduce customer acquisition costs
Penetration peak
Mobile data disappointment
Heavy debts, growth slowdown
Cash, short term return
Back to balance sheet approach
Consolidation
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30
40
50
60
70
80
90
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Nokia
CreditSuisse
2002perspective
Data as the ARPU driverEstimations seen in 2000 and 2002
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Slowdown ahead in the absence ofa new killer application
Source:WEFA-WMM; Dataquest; ITU
Annual revenue and GDP growth for telecoms operating in EU15Annual revenue and GDP growth for telecoms operating in EU15
-10%
0%
10%
20%
30%
40%
50%
60%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Telecom RevenuesTelecom Revenues
MobileMobile
GDPGDP
FixedFixed
DataData
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In wireless:concentration around six large groups
European market share (subscribers), percent 1997-2000
0%
5%
10%
15%
20%
25%
30%
1997 1998 1999 2000
Telefonica, SpainTelefonica, Spain
Deutsche TelecomDeutsche Telecom
Telecom ItaliaTelecom Italia
France Telecom/ OrangeFrance Telecom/ OrangeBritish TelecomBritish Telecom
VodafoneVodafone
SourceEMC Database; Company websites; Eurotel Analysis
Aggregate share of six largest operators is over 70% of European Market
Aggregate share of six largest operators is over 70% of European Market
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In wireline: incumbents will face challenges along three horizons
Level of uncertainty
Magnitude of opportunities
Characteristics • Challenges clearly identified• Incumbents have a chance
to achieve positive outcome through excellent execution
• Challenges identified, but still unclear dimensions
• Incumbents have to set-up enhanced capabilities to face challenges
• Challenges/opportunities unclear
• Broadbandaccess
• Infrastructure competition• SME battle• Price decline• Wireless substitution• Attacker consolidation
• Broadband content/ services
• New attackers (new business models)
• Technologyinnovation
• Technology substitution
Magnitude of threats
Horizon 1
Horizon 2
Horizon 3
• Regulatory issues(e.g., rebalancing, separation of network)
Potential real threat
+
+
- +
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Search of growth opportunities
Development within current businesses
Development within current businesses
Expansion within the value chainExpansion within the value chain
Deployment of intangibles into other industries
Deployment of intangibles into other industries
+ +
+
+
• Continues to be top priority– Current markets– New markets
• Option to explore– Content provider– Content owner/
developer– Device design, offering
and installation– Service outsourcing for
clients– Redeploying intangibles
into adjacent industries
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The landscape of the European Telecom Industry will evolve towards larger and more focused
players via restructuring at BU level rather than at group level
Future European landscapeEuropean landscape today
SmallIntegrated Large Integrated Focused
WirelineWireline
WirelessWireless
DataData
WirelineWireline
WirelessWireless
DataData
SmallIntegrated Large Integrated Focused
• Incumbents maintain local positions
• Possibly some turnaround plays
• Incumbents maintain local positions
• Possibly some turnaround plays
• Some small players will shred data assets
• Some large players will grow internationally
• Increased focus
• Some small players will shred data assets
• Some large players will grow internationally
• Increased focus
• Some small players will shred wireless assets
• Possible moves to complete/develop pan-European coverage and regional plays
• Increased focus
• Some small players will shred wireless assets
• Possible moves to complete/develop pan-European coverage and regional plays
• Increased focus
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Integrated players should opt to become multifocused operators with a value-added
corporate role
Financialholding
Operationally integrated company
Integrated multi-focused player with value adding corporate center
Operational
Strategic• Group
configuration• Development of
synergies and shared skills
• Management of critical resources
Financial
Ro
le o
f co
rpo
rate
cen
ter
Degree of Business Unit Integration
Unrelated, autonomous businesses
Same business systems and dynamics
For telecom players that will remain integrated, this is the configuration to adopt
For telecom players that will remain integrated, this is the configuration to adopt
Current situation for many Telco's, leading to significant discounts in many cases
Not suited for value adding, integrated model
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Consequences and implications
Balance sheet restructuring and focus on earnings
Focus or multi-focus strategy in the context of sector restructuring
Search of growth opportunities
• Balance sheet restructuring is a first priority for players with high debt levels
• Performance improvement needed to address the turnaround play• Responding to changed priorities from the capital markets
perspective: from growth to ROI, EBITDA. Cash is king: efforts to reduce Capex and Opex
• Corporate strategy: decide on core areas to strengthen, businesses on which control will be maintained, revise value of options developed
• Have an M&A roadmap in place to strengthen core-areas and, potentially, to divest non-core areas
• Organizational model for the corporation and role of the corporate center
• Cope with the growth challenge; organic, inorganic, business building
• Explore activities to grow new business and leverage skills and intangibles
• Develop and cultivate networks of partners. Critical for new businesses
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Bitė – communication for everyone
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