Telecom Trends, Challenges &...

Telecom Trends, Challenges & Opportunities

2Telecom trends / Ogilvy Asia_082412

* As at 31st March 2012

RM16.4bn (USD5.5bn)Revenue in 2011

Over RM44.1bn* (USD14.2bn)Market cap

AXIATA GROUP AT A GLANCE

10Countries

>20,000Employees

>207*million customers

Pakistan Iran Thailand


THE LEADER IN EMERGING ASIA MOBILE TELECOMSONE OF THE THREE MAJOR TELCO GROUPS IN SOUTHEAST AND SOUTH ASIA

Non-mobile assets

#1

#3 #3

#3

#3

#2

#3

Affiliates

Subsidiaries

Note: Data as at end Mar 2012. Market position w.r.t. subscriber base


MOBILE TELECOM’S QUICK STATSAN INDUSTRY FOR THE DECADE

1.2bPersonal

Computers

1.1bLandline Phones

1.6bTelevision

Sets

1.0bRegistered Vehicles

1.7bCredit Card

Users

2.3bInternet Users

2.2bUnbanked Persons

3.9bRadio

Receivers

6.3bMobile Lines

4.4bUnique Users

1.2tIndustry Revenue

1.8b3G

Users

1.6bHave No Electricity

4.2bHave a

Toothbrush

5.0bHave a

Job

4.2bUse SMS

1.0bFacebook

Users

1.4bEmail Users

2.1bMMS Users

2.3t*Internet

Revenue*BCG G20 Internet Economy Value (2010)


TECH CYCYLES TEND TO LAST 10 YEARSTHE NEXT COMPUTING CYCLE BEGAN WITH THE iPHONE LAUNCH IN 2007

Mainframe Computing

1960s

Mini Computing

1970s

Personal Computing

1980s

Desktop Internet

Computing1990s

Mobile Internet

Computing2000s


1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

1,000

2,000

3,000

4,000

5,000

6,000

FIRST GENERATION OF RE-IMAGINATION - AFTER 125 YEARS, LANDLINES WERE SURPASSED BY MOBILES IN 2002

Global Fixed Telephone Lines vs. Mobile Subscriptions, 1994-2012

2006 LandLines

Peaked at 1.3b

2002 : Inflection PointMobile > Landlines

2012 6.3b Mobile Subscribers

Fixed Telephone Lines

Mobile Subscriptions


RE-IMAGINATION OF COMPUTING DEVICES


RE-IMAGINATION OF CONNECTIVITY


RE-IMAGINATION OF LIFE STORIES


RE-IMAGINATION OF NEWS & INFORMATION FLOW


RE-IMAGINATION OF NOTE TAKING


RE-IMAGINATION OF PHOTOGRAPHY


RE-IMAGINATION OF MAGAZINES


RE-IMAGINATION OF MUSIC


RE-IMAGINATION OF SOUND


RE-IMAGINATION OF VIDEO


RE-IMAGINATION OF NAVIGATION & TRAFFIC INFO


RE-IMAGINATION OF COUPONS & LOCAL SERVICES


Marketing & Advertising Smart poster Targeted consumer information Leisure Data Collection

Ticketing Transport ticketing Airline check-in Parking Venue access

Payments Point-of-sale payment Vending machines Utilities Multiple cards

Loyalty Loyalty schemes Personalized offers Incremental services Multiple cards

Information Sharing Peer-to-peer vCard distribution Social networking and

location based services Call request SMS notification Education

Vouchers and Coupons Vouchers Social media Consumer reach Targeted marketing

Identity Health Public health Prescription tracking Events Workforce management Asset tracking Vehicle information

Access Control Smart poster Targeted consumer information Leisure Data Collection

RE-IMAGINATION OF TELECOMS


Note: Data on left-hand side as of Q1 2012Source: SNL, Euromonitor; Facebook, Pyramid, Endgaget, Appdata, GlobelWebIndex, KPCB Top Mobile Internet Trends 2011, IDC Mobile VoIP report, Google report: the mobile movement, BCG analysis

Consumers radically shifting their behavior to the online world

...and mobile also becoming integral part of daily life

of people shopping on smart phones

use applications

watch videos

What are people willing to give up for Internet usage on Smart phones?

43%Beer

36%Chocolate

34%Superbowl

tickets

26%Highheels

20%Cable TV

Social: 901 MnFB users

VOIP: 250 Mn Skype

users

Shopping:400 Mn users

Gaming:250 Mn users

Apps: 15 Bn+

Apple apps downloadedMusic: 10 Bn+

iTunes songs downloaded

A FUNDAMENTAL SHIFT IN CONSUMER BEHAVIOR IS TAKING PLACE FROM BRICK-AND-MORTAR TO DIGITAL SERVICES

79%68%48%


DIGITAL SERVICES REPRESENT A HUGE GROWTH POTENTIAL FOR TELCOS AS DISPLACEMENT OF OFFLINE REVENUE CONTINUES

Mobile Advertising

Mobile Payments

Digital Commerce

Mobile Remittances

Digital Ad spend > Print Ad spend for the

first time in 2010

+60% mobile payment transactions in 2012

(USD 172 Bn)

USD 5 Bn mobile sales at eBay in 2011 (+455% since 2009)

35% annual growth globally – USD 55 Bn

market in 2016

Source: Press search, Gartner, Juniper Research


MOVIES – DIGITAL SERVICES APPSAMAZON PRICE CHECK – GROUPON NOW – TESCO


BUT UNFORTUNATELY, ‘PURE INNOVATION’ WEB PLAYERS ARE THREATENING FUTURE MOBILE GROWTH…

Many potential opportunities for monetization are now being delivered native with mobile as just a bit pipe

Operator service OTT service

Backup service

Radio service

Video service

Picture service

Messaging service

• Per SMS charge or bundled with price plan

• Per MMS charge or bundled with price plan

• Monthly TV package with 3G service

• Additional charges for extra channels

• Monthly radio service

• Phone book solution with monthly recurring fee

• Full and incremental SIM backup

• Free text messaging, now includes free voice calls

• Native integration with phone camera linked to share on FB/Picasa.

• Native integration with phone to view Youtube,

• Free radio service – ability to created own stations based on preference

• Ability to share playlist

• Free 5GB storage service• Synchronization between devices

From To


…AND MAKING OUR INDUSTRY NO LONGER A GROWTH INDUSTRYEven low penetration markets are under revenue pressure: growth slowing disproportionately to penetration increase

Few markets are still ‘growth markets’… …despite high penetration levels

22%20%

15%

6%8% 8%

6%5%

4% 4%2%

31%

28%

18%

14%

10%9%

6%4%

3% 3% 2%

47%

42%

40%

32%

18%

14% 14%

11%9%

7%6%

43%

37%

25%

18%

15% 15% 15%

8%7%

5% 5%

44%

38%

32% 33% 34%

27%

21%

15%

10%8% 7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Revenue Growth - Axiata MarketsMalaysiaIndonesiaSri Lanka

86%

98%108%

120%

131%140%

147%153%

157% 160%

44%

69%

81%

97%

109%

120%129%

137%144%

150%

41%

52%

65%

80%90%

98%104%

109%113%

116%

23%

29% 35%44%

52%59%

65%70%

75% 79%

17% 26%

42%

60%

72%

82%91%

98%105%

111%

20%29%

44%

62%

77%

92%102%

110% 116%123%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Market Penetration - Axiata MarketsMalaysiaIndonesiaSri Lanka

Source: Frost & Sullivan


Nationwide retail presence

Customer relationship

Trusted, ubiquitous

brand

We will focus on leveraging our core mobile assets…

…but offer Voice, Messaging and Digital Services, anywhere, anytime and on any device

Anywhere

Anytime

Any service

Any device

Mobile network / platforms

Mobility-Centric

Lifestyle Services

MOBILE OPERATORS OWN CORE ASSETS THAT WE CAN LEVERAGE TO OFFER MOBILITY-CENTRIC LIFESTYLE SERVICES


Content-based

DIGITAL SERVICES OFFER ATTRACTIVE GROWTH OPPORTUNITIES ACROSS AN INCREASING SET OF PRODUCT CATEGORIES

Digital Services Ecosystems

Mobile Advertising Digital Commerce Localized Data Services (LDS) Mobile Financial Services

Segment-specific e.g.

Career

Classified

Games

Music

Sports

Service-based

Coupons

Dining

Travel

Cloud Machine-to-machine Mobile Health

Regional players

Payment (NFC)

Payment (Non-NFC)

Mobile Banking

Remittance

Con

sum

ers

Acc

ess

Mer

chan

ts, E

nd-c

onsu

mer

s an

d us

ers

Over-the-top voice

Over-the-top

messaging

Over-the-top entertainment(video/ IPTV)

Existing services

Adjacent space

Enabling services and infrastructure

Relationship


MobileAccessibility,

Immediacy

Multi-deviceCapability

Brand

Customer Service

AdvertisingInventory

Customer knowledge

Customer Locator

DistributionNetwork

Social NetworkIntegration

Local market knowledge

Billing

Extensive mobile subscribers base

Multiple devices access capabilities

Established trusted brand

Existing 24/7 customer service and walk-in centers

Advertising real-estate across multiple channels

Behavioral and spending data (demographics)

Customer locator

SnS1 deployment and zero-rated SnSsites

Extensive local market insights

Extensive coverage of distribution network

Existing billing relationship with customers

1 Social networking services

DEVELOPING MARKETS MOBILE OPERATORS ARE UNIQUELY POSITIONED TO PLAY IN THESE SPACES

Competitive Advantage


07:00• Wake up to

have quick breakfast

12:00• Pay for lunch at

McDonalds using mobile paytments

00:00• Go to bed

08:00• Attend

morning classes and receive ads on mobilefor special promotion at McDonalds

20:00• Have dinner

with friends while downloading music from XL Entertainment

07:30• Check Twitter and

Facebook before going to class

21:00• Look up Wikipedia on

internet to research for class homework

22:00• Takes short breaks in

between by watching Youtube and browsing Lojai on my mobile for new products

Angga

11:00• Send Whatsapp

to classmates to meet at McDonalds

15:00• Play Warcraft against my friend on

Android phone to kill time between classes

• Send BBM to class project team to set up time for meeting

Source: Face-to-Face interview conducted in Indonesia

DIGITAL SERVICES CAN ALLOW TELCOS TO BE MORE RELEVANT TO CONSUMERS BEYOND CONNECTIVITY SERVICES

Telecom trends / Olgivy Asia_082412 29

Click on display ad on mobile

portal

Consider offer based on location

and popularity

Select and confirm offer to purchase

Pay for offer using mobile money

account

Unlock exclusive deals based on

past transactions

AwarenessM-Ads

ConsiderationLocalized Digital Svcs

PurchaseM-Commerce

PaymentM-Payment

LoyaltyLocalized Digital svcs

Advertiser will be charged

based on CPC/ CPM/ CPL or other agreed

rate

Payment provider

charges for transacting sale ~ 1-2% of gross

value

Merchant spends on loyalty –

typically 1% of gross value

Platform owner charges for

facilitating sale –typically 5% of

gross value

Share of LDS revenue will be captured in

localized ad spending & commerce

Advertising revenue

LDS transaction fee

Advertising revenue

Commerce revenue

Commerce transaction fee

based on commerce

value

Payment transaction fee

based on commerce, and other

payment value

LDS transaction fee

Advertising revenue

Commerce revenue

Note: Numbers are indicative and can vary by merchantsSource: BCG analysis

DIGITAL SERVICES ARE HIGHLY INTERDEPENDENT AS THEY FOLLOW THE CUSTOMER WALK-THROUGH


MILLION DOLLAR QUESTION: WHICH ONE TO FOCUS ON?!

How do we?...

Internet users / world population

Converting RAW DATA into ACTION is the new challenge!

Reach

Engage

Monetize

time spent online / week1

Online advertising share of total advertising spend

14%

31%

>8% eCommerce share of total retail…

16%

Source: ITU, World Bank, Trade Sources, Euromonitor, Forrester, UN Department of Economic and Social Affairs, Goldman Sachs1 Assumes 8hrs sleep per day and 2.5hrs spent at meals per day

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