Global digital telecom playbook - Telcos reinvent themselves in the digital age - EY

 
Global digital telecom playbook - Telcos reinvent themselves in the digital age - EY
Global digital
telecom playbook
Telcos reinvent themselves in
the digital age
Global digital telecom playbook - Telcos reinvent themselves in the digital age - EY
About this document

                 ►   In an evermore digital world, telcos face increasingly challenging competitive
                     environments and rising customer expectations.

     Purpose     ►   Operators need to seize digital opportunities and reinforce their positions by moving
                     from being communication service providers to digital service providers.
                 ►   The global digital telecom playbook and EY’s Advisory services can help operators
                     with this transformation.

                                                          Market trends & customer perspectives
                                                           Industry challenges & opportunities

               Content             Communication
                                                               Digital transformation paths
                                                                                                   Digital service
                                   service provider
                                                               Use cases & best practices             provider

                                                                 EY expertise & offerings

                                                      ►    All telco operators: incumbent and greenfield,
                             Target                        quadruple play, triple play, mobile only, emerging
                            Audience                       markets and mature markets
                                                      ►    Adjacent industry service providers

Page 2
Global digital telecom playbook - Telcos reinvent themselves in the digital age - EY
Agenda
         1   The digital revolution: market trends
             and challenges for telcos

         2   Digital transformation path for telcos

1
1
         3   Telcos’ digital best practices and
             use cases

         4   EY offerings for telcos’ digital
             transformation
Global digital telecom playbook - Telcos reinvent themselves in the digital age - EY
1
1   The digital revolution:
    market trends and
    challenges for telcos
Global digital telecom playbook - Telcos reinvent themselves in the digital age - EY
Digital is already part of our daily lives; adoption is driven by
customer demand for real-time information and seamless
interactions across devices

 90% of all consumers              Social media is turning into   Consumers are spending        72 hours of video is
 simultaneously use                a sales and services           over 85% of their time on     uploaded to YouTube
 multiple connected                channel.                       their smartphones using       every minute.
 devices.                                                         native applications.
                                   More than 241 million                                        As of 2011, Amazon.com
 81% of spontaneous                tweets are sent every day.     In a typical month, about     sells more electronic books
 purchases are made via                                           300 million apps are          than printed ones.
                                   Data traffic via
 smartphone.                                                      downloaded in Germany.
                                   smartphone is predicted to
 €216 is the average               grow 53% by 2020.              Instagram is growing
 European spend on online                                         rapidly and now has more
                                   In the last two minutes,
 shopping per year.                80 Americans have              than 400 million active
                                   switched to smartphones.       users ... but at the same
 TVs now provide a wide
                                                                  time, Facebook has
 range of interactive
                                                                  1.5 billion active viewers.
 services.

Sources: TechCrunch; EY analysis

Page 5
Global digital telecom playbook - Telcos reinvent themselves in the digital age - EY
With new digital behaviors, customer expectations and needs shift

 As customer behavior and                                        … telcos have to strive for customer experience
 expectations evolve …                                           excellence.

                     Personalization                             Unpredictable                Service gamification
   “I am adapting my loans to my projects and capabilities.”     omnichannel

                         Autonomy
      “I am managing the level of assistance that I need.”

            Consistency in contact points
  “I am in contact with my telco throughout many channels on
    a continuous basis, and I receive consistent notifications
                        across channels.”

         Multiscreen and seamless experience
     “I can access all my services on each of my devices
                (with a mobile-first mindset).”

             Socialization and simulation
      “I have access to clear, consistent and transparent
                         information.”
                                                                 Win/win big data               Augmented reality

Page 6
Global digital telecom playbook - Telcos reinvent themselves in the digital age - EY
Telcos face many challenges due to stagnant growth of the industry
and increasing direct and indirect competition

                                        Siloed                                                                                    Regulatory
                                                                                         Outmoded
                                    organizational                                                                                 pressure                              Fully saturated markets
                                                                                        IT systems
                                      structures                                                                                   on pricing

                                     Digital will become increasingly                                                                             Total global revenues (US$ billions)
                                                                                                                                 1,200
                                    CAPEX-demanding for telcos, as                                                               1,000
                                    data consumption accelerates traffic                                                           800
                                                 on networks                                                                       600
                                                                                                                                   400
                                                                                                                                   200
                                 Global mobile operator CAPEX (US$ billions)                                                         0

                                                                                                                                                                                      2016E

                                                                                                                                                                                              2017F

                                                                                                                                                                                                      2018F

                                                                                                                                                                                                              2019F

                                                                                                                                                                                                                      2020F
                                                                                                                                           2010

                                                                                                                                                   2011

                                                                                                                                                          2012

                                                                                                                                                                 2013

                                                                                                                                                                        2014

                                                                                                                                                                               2015
                                  250
                                  200
                                  150
                                  100                                                                                                     Global network traffic forecast (PB per year)
                                   50                                                                                         12,00,000
                                    0
         Market                                                                                                               10,00,000
                                                                                      2016E
                                                                                              2017F
                                                                                                      2018F
                                                                                                              2019F
                                                                                                                      2020F
                                            2010
                                                   2011
                                                          2012
                                                                 2013
                                                                        2014
                                                                               2015

     consolidation                                                                                                             8,00,000
     with numerous                                                                                                             6,00,000
       M&A deals                                                                                                               4,00,000
                                            Intense competition                                                                2,00,000
                                     large number of players (including                                                              0
                                                                                                                                      2015            2016E             2017F          2018F             2019F                2020F
                                             over-the-top (OTT))                                                                 Video                           Games                                 Music
                                                                                                                                 Web browsing                    Social networking                     Communications
Sources: Informa; OVUM; GSMA; EY analysis

Page 7
Global digital telecom playbook - Telcos reinvent themselves in the digital age - EY
As a response to this downward revenue trend, telecom operators
should seek opportunities elsewhere in the digital ecosystem

 Global mobile and digital ecosystem value forecast 2010–25                                                       Comments

          US$ billion                                                                                             ►   The mobile and digital
                                                                                                     CAGR             ecosystem will grow
   $4 billion                                                                                                         significantly to a total of
                                                                             US$ 3.65 billion                         US$3.6 billion by 2025.
                                                                                                                  ►   Traditional operators will
                                                                                     21%             +5,5%
                                                                                                                      continue to take a smaller
   $3 billion                                                                                                         share of overall revenues,
                                                                                     11%             +9,6%            putting further pressure on free
                                                   US$ 2.36 billion                                                   cash flow and investment.
                                                                                     19%             +17,9%       ►   The two areas with the
   $2 billion                                              24%
                                                                                                                      strongest growth are the
                      US$ 1.67 billion                                                                                Internet of Things (IoT),
                                                           12%
                             27%                                                     17%             +20,9%           along with content and video.
                                                           13%
                          9%                                                                                          ►   The IoT market will see
   $1 billion                  8%                          12%
                          5%                                                                                              significant growth to reach
                            19%                                                      24%             +10,6%               US$700 billion by 2025.
                                                           23%
                                                                                                                      ►   The content and video
                             32%                           16%                                        -4,7%
                                                                                     9%                                   space will see faster overall
             0
                                                                                                                          growth (25% CAGR).
                             2015                         2020                      2025

     Voice/SMS        Data        Content and video        IoT and M2M      Advertising    Enterprise and cloud

1) IoT market is defined as that portion addressable by mobile operators.
Sources: Informa; OVUM; GSMA; EY analysis
Page 8
Global digital telecom playbook - Telcos reinvent themselves in the digital age - EY
Telecom operators can leverage four main opportunities to grow
their revenues in the digital landscape

                       Content                       IoT
                      and video                    and M2M
                        (OTT)
                                    Telecom
                                   operators
                                   How to grow
                                   beyond core?

                      Enterprise
                                                 Advertising
                                                   and big
                      and cloud
                                                     data

Source: EY analysis

Page 9
Global digital telecom playbook - Telcos reinvent themselves in the digital age - EY
2
2   Digital transformation
    path for telcos
To succeed in the rapidly evolving digital ecosystem, telcos need to
define clear strategies and paths for digital transformation

                          Capturing new digital opportunities                      ►   Growth and adjacent business opportunities with OTT offers,
                                                                                       M2M/IoT services, cloud services, big data and advertising
More

                                    Digital growth and
                                    adjacent business

                         Customer-led digital transformation                       ►   Experience: customer satisfaction measurement (NPS), customer
                                                                                       experience management: product and service experience, customer
                                                                                       journey design optimization
                                                                                       Business digitalization: omnichannel blueprint definition (sales and
Core

                                                                                   ►
               Personalized and                                     Advanced
                                      Digital driven                                   care), design and launch of digital operator (greenfield, sub-brand,
                   improved                                         customer
                                      omnichannel                                      MVNO), online sales strategy/performance improvement
                  experience                                        analytics
                                                                                   ►   Analytics: customer analytics platform specification and implementation,
                                                                                       data monetization (mobile/localization, TV audience measurement)

                  Embracing digital capabilities and shifting culture              ►   IT and technology: reach new customers via internet, provide better
                                                                                       quality and faster services, such as, fiber optic cables, new computers
                                                                                       People, organization and culture: develop internal digital awareness
Capabilities

                                                                                   ►
                                                                                       with initiatives, such as, digital HR and digital supply chain, hire new
                                         People,                     Risk and          talents and develop a digital organization
                Digital IT and
                                    organization and               cybersecurity       Risk and cybersecurity: secure data collection and manage
                 technology                                                        ►
                                    culture evolution              management          associated risks

Source: EY strategic framework for telcos digital transformation

Page 11
On the road to digital transformation, telcos need to strategize and
plan on how to organize for digital, based on their current digital
maturity

                                                                     Digital ambition dampened by high
                                                                     implementation barriers; digital
                                                                     initiatives launched in pockets leading         Established
                                                                     to low maturity
  High

                                                                     Digital ambition to be competitive in the
                     Pioneers                  Transformers          market; quick to implement given their
                                                                                                                    Transformers
  Digital maturity

                                                                     size and scale

                                       Builders      Established
                                                                     Digital ambition; high abilities to embed
                                                                     digital in existing capabilities; digitizing
                                                                     integrated customer interfaces                     Builders
  Low

                     Low        Implementation complexity     High   High digital differentiation; early digital
                                                                     adopter and drivers of digital innovation          Pioneers

Page 12
Large telcos in Europe have initiated three main types of initiatives
to address digital transformation challenges

                     Description and stakes                                                 Examples

                     ►   Digital initiatives need a momentum at the group level             ►   The digital business unit of a leading mobile
                         demonstrating that this is a priority.                                 network operator (MNO) in Germany is in
 Group digital       ►   Digital strategy should be aligned with corporate and business
                                                                                                charge of coordinating most of the digital
 initiative                                                                                     and innovation initiatives of the group.
                         strategy so that it creates a competitive advantage.
 (Center of                                                                                 ►   The leading MNO in Spain has created a
 Excellence)                                                                                    business unit dedicated to innovation
                                                                                                and digital.

                     ►   Increasing competition is reducing margins, so telcos must         ►   The leading MNO in France expects 50% of
                         differentiate their offering, increase their customer base and         client interactions through digital in 2017 vs.
                         reduce customer relationship costs.                                    30% as of today.
 Digitalization of
 the main brands     ►   Customers are becoming increasingly autonomous and able            ►   The MNO challenger in France has engaged
                         (and willing) to manage the online end-to-end journey, with no         an agile digital transformation of its
 (Opco)                  human support.                                                         main brand.

                     ►   Low financial risk (low entry costs, low fixed costs, low exit     ►   In France, all mobile operators launched a
                         costs, etc.)                                                           digital sub-brand to prevent the arrival of a
 Launch of a
                                                                                                no-frills player.
 100% digital        ►   Short time-to-market (four to six months)
 sub-brand                                                                                  ►   An innovative MNO in the UK has
                     ►   High innovative impact (on brand perception and processes)
                                                                                                successfully launched a digital MVNO.
 (e.g., Digital          operation (e.g., creation of new best practices to be replicated
 MVNO)                   in other business units/countries)
                     ►   Differentiation of the offering in a competitive environment

Page 13
Telco operators need to consider six key success factors in order to
succeed in the digital landscape

►   No single strategy will be suitable                                                                ►   Operators should focus on growth
    for every operator, as the digital                                                                     levers with the best probability for
    landscape is extremely diverse.                                                                        success:
►   Successful strategies will vary                                                                        ►   OTT
    according to the following:                                                                            ►   IoT and M2M
    ►    Differences in local conditions                                                                   ►   Big data and advertising
    ►    Strategic appetite for digital                                                                        ICT and cloud-based services
         transformation                           Understand there’s          Focus on key                 ►

                                                  no single winning           growth areas
                                                  strategy

►   Network effects and scale are key to                                                               ►   The right skills and assets are
    success in the digital ecosystem.                                                                      required to compete effectively in the
                                                                                                           digital ecosystem.
►   Operators promising new initiatives                               Key             Build or
    need to scale, and rapidly.                                                       invest for the   ►   M&As will become an important
                                              Scale rapidly        success                                 driver for digital transformation.
                                                                                      right skills
►   Operators need the flexibility to                               factors           and assets
    quickly exit unsuccessful ventures                                                                 ►   Venture Capital funds and
    and redeploy resources to promising                                                                    innovation hubs are also routes to
    growth areas.                                                                                          acquire new skills
                                                                                                           and assets.
                                                                              Realize new
►   Building partnerships through                  Develop                    business                 ►   More flexible business models are
    collaboration and innovation is key            partnerships               models are key               required to compete effectively in the
    for digital success.                                                                                   digital ecosystem.
►   Operators need to be open and                                                                      ►   Operators should invest in platform-
    establish partnerships with other                                                                      based business models that bring:
    operators, established internet players
                                                                                                           ►   Higher customer engagement
    and new entrants.
                                                                                                           ►   Growing range of services to be
                                                                                                               monetized

Sources: GSMA; EY analysis

Page 14
3
3   Telcos’ digital best
    practices and use cases
3
3   Use Case #1: becoming
    a digital life provider and
    capturing adjacent
    business opportunities
A number of operators across the world are already developing
strategies to conquer their space in the rapidly evolving digital
ecosystem

      Leading                                   Leading                                   Leading
      MNO in US                                 MNO in Spain                              MNO in China

 ►    The leading MNO in the US has         ►   The leading MNO in Spain              ►   The leading MNO in China has
      positioned itself as an innovator         wants to become a key player              identified four emerging areas
      in the digital-first mobile,              in the digital universe,                  to focus its efforts:
      defining a strategy based on              identifying talent and                    ►   Smart family
      three main pillars:                       entrepreneurship as key                   ►   Mobile payment
      ►   Leading in terms of network           components.                               ►   Internet of Things (IoT)
          connectivity                      ►   In order to become a referent             ►   Cloud computing
      ►   Developing new platforms around       digital telecom provider, this                and big data
          digital media and IoT
                                                mobile operator has set three         ►   Growth in these areas sits
      ►   Developing new services/              areas to focus its efforts:
          applications on these new                                                       alongside the goals of
          platforms                             ►   Product development and               strengthening the existing two
                                                    innovation                            core business areas: 4G and
 ►    The mobile operator strategy              ►   Partnership and venture capital       fiber broadband
      has a clear focus on developing               (innovation investment)
      new business models on global             ►   New digital services (M2M,
      digital platforms.                            e-health, financial services
                                                    or cloud)

Sources: GSMA; company data; EY analysis

Page 17
The majority of telecom industry players register less than 5%
in digital revenues

 Telecom’s digital revenues as % of total revenues (in 2016)

  16%           15.0%

  14%

  12%                                11.5%

  10%
                                                           8.5%
     8%

     6%                                                                         5.0%

     4%                                                                                               3.5%
                                                                                                                           2.5%
                                                                                                                                                2.0%                 1.8%
     2%

     0%
           Leading MNO Challenger MNO Leading MNO                          Leading MNO          Leading MNO          Leading MNO           Leading MNO          Leading MNO
              Japan         Japan      South Korea                            Spain               Germany               France              Singapore              Nigeria

 ►    MNO exceptions with >5% of digital                                  ►    Other telecom players in mature markets
To capture new revenues, telcos can leverage capabilities and
assets to position themselves as vertical players, offering services
beyond connectivity

                    Example in the IoT industry

                         Smart chip/                        Smart                  Network                   Service               SI/application/
                          module                       device/machine            connectivity              enablement                 solution

                    ►   SIM card                   ►    Camera              ►    Network               ►   Platform and        ►    Packaging/
                    ►   Sensor                     ►    Car                 ►    Connectivity              solution buildup         bundling
    Core            ►   Actor                      ►    Domestic            ►    Availability          ►   Back-end            ►    Service
                                                        appliance                                          configuration            provisioning
  business          ►   Aggregator                                          ►    Quality
                                                        Electricity meter                              ►   Capabilities        ►    CRM and analytics
   activity         ►   Transponder                ►
                                                                                                           enablement          ►    Business customer
                                                                                                       ►   Interface                sales to end user
                                                                                                           development

                                         Possible partnerships to provide                   MNO core            MNO possible             MNO possible
                                                       end-to-end service                   business              expansion                expansion

  Share of
 total value              5%–10%                        10%–15%                   10%–15%                  30%–40%                   20%–25%
  by 2020

                                                                                Opportunities for telcos to seize business from applications

Sources: EY analysis; GSMA; Ericsson; Alcatel Lucent; ADL

Page 19
3
3   Use Case #2: reinventing
    the customer experience
    and simplifying the
    commercial model
Customer experience improvement is considered a top priority by
telcos, and digital is a key facilitator

 Customer experience management dominates the                                                                  Improved service levels and personalization can unlock new
 strategic agenda                                                                                              customer experiences

Q: What are your organization’s most important strategic priorities over the next                              Q: What are your organization’s most important initiatives to improve customer
three years? (Top three responses)                                                                             centricity? (Top three responses)

100%                                                                                                            100%
          82%
 80%                                                                                                               80%     69%          69%

 60%                   50%                                                                                         60%                               53%

 40%                                  35%       32%                                                                40%                                                 31%                 31%
                                                               29%          29%                                                                                                                                  28%
                                                                                       18%       15%
 20%                                                                                                               20%                                                                                                             9%
                                                                                                       6%
     0%                                                                                                            0%

                                                                                                                                     Create more

                                                                                                                                                                          Provide wide

                                                                                                                                                                                           pricing options

                                                                                                                                                                                                             Strike partnerships

                                                                                                                                                                                                                         players
                                                                                                                                                                                                             with other industry

                                                                                                                                                                                                                                   Others
                                                                                                                          Improve

                                                                                                                                                          Improve
                                                                                                                                     personalised

                                                                                                                                                                                          Provide flexible
                                                                                                                         customer
                                                                                                                           service

                                                                                                                                        customer
                                                                                                                                      experience

                                                                                                                                                    network quality

                                                                                                                                                                      range of services
                                                                                                       Other
                                                                                        talent
           Customer

                                                               IT systems

                                                                                                 M&A
                                                                                       HR and
          experience

                       Cost control

                                                Organization
                                      Network

                                                                                New
                                                                            services

 ►    Customer experience management is emphatically the top priority                                          ►    Digital native consumers (who have never lived without digital)
      for operators (68% citing it as first priority; 82% as top three).                                            have high expectations of service providers; when convenience
 ►    The drive to focus on customers’ experience dictates other                                                    and quality fail to live up to expectations, these customers are
      priorities: agility, efficiency and network quality.                                                          quick to switch providers.
 ►    New service development ranks fifth as a top three priority, but                                         ►    This is well-recognized by service providers that set customer
      second as first priority, underlining how some operators are highly                                           centricity, customer support, personalized services and
      focused on capturing digital growth opportunities.                                                            network quality as the most important levers at their disposal.

Source: 2015 Global telecommunications study: navigating the road to 2020, EY, 2015

Page 21
Customer 2.0 is forcing ecosystem players to provide digital
interfaces and consistency of digital experiences across channels

Customer interface evolution: from customer 1.0 to 2.0 experience

      ►   Voice                              ►   Word of mouth       ►   E-wallets                         ►   Social media
      ►   Data                               ►   Traditional media   ►   Video on demand                   ►   Online communities
      ►   Value-Added Services                                       ►   Music on demand                   ►   Chat

                         Customer 1.0                                                  Customer 2.0

                     ►   Call center                                                   ►   E-care
                     ►   Traditional marketing                                         ►   Digital marketing
                     ►   Traditional sales                                             ►   Online sales

Page 22
In their digital transformation path, telcos have started reinventing
the customer experience through digital-driven omnichannels

 Leading mobile operator                     Mobile operator in the                   Leading mobile operator
 in France                                   Middle East                              in Germany
      Aiming for 50% digitization of           Digitizing interactions with its         Increasing its exposure in digital,
      interactions with its customers by       customers, simplifying servicing         including development of digital
      2018 (vs. just over 30% today)           mechanisms and                           customer experience (digital
                                               optimizing costs                         billing, e-sales and e-servicing)

     ►    The company is offering a low-       ►   Encourage customer self-care         ►   The company is targeting
          cost and no-frills service range         generates ~4%–5% cost                    various levers of revenue and
          under its youth-oriented brand,          reduction per year                       cost optimization through
          available only online (sales                                                      digital and commits on the
                                               ►   Increase online sales to reduce
          and care).                                                                        following KPIs in its strategy:
                                                   the number of stores
     ►    Several partnerships to                  contributes to ~8%–10% cost              ►   Increase e-sales from 10% in
                                                                                                2014 to 18% in 2018
          develop a set of self-service            reduction
          apps to encourage digital                                                         ►   Decrease servicing costs by
                                               ►   Portfolio simplification reduces             16% in 2018 to focus on
          interaction with its customers
                                                   marketing expenses by ~5%                    self-service portal
          (part of omnichannel strategy).
                                               ►   Customer satisfaction
                                                   increased after these changes

Sources: GSMA; company data; EY analysis

Page 23
A digital-driven omnichannel strategy has a proven impact on
customer satisfaction — telcos should develop in-house
capabilities to make it work

 Optimize performance goals with digital                            Build capabilities

                                                                                        1          2

          NPS vs. use of digital channels for sales and service*        CEX analytics                              Personas
                                                                            platform

                                                                                        3          4
                                                                                                                   CEX
                                                                    Journey mapping                                value models

                                                                                        5          6
                                                                        Measurement                                Structure
                                                                             system

                                                                                        7          8

                                                                           Incentives                              Leadership

 Digital has a positive impact on customer satisfaction:            Putting in place the key enablers to:
 ►   The correlation between NPS satisfaction scores and            ►   Baseline the current customer experience
     number of customer digital interactions has been               ►   Size the value impact and prioritize improvement
     statistically proven in several studies done for different         initiatives with delivery organizations
     telcos in Europe.

Note: NPS means Net Promoter Score, CEX means Customer Experience

Page 24
3
3   Use Case #3: leveraging
    analytics to improve
    performance and better
    address customers
Telcos best practices: leveraging analytics to boost business
performance

 Global telco and cable                      Pan-European telco                      European pay TV provider
 company
      Customer analytics:                      Data monetization:                       Big data transformation:
      In-house capability of                   Actor is now focusing on the             Aiming to get additional value
      expandable data collection and           following offers to monetize and         from analytics:
      treatment:                               commercialize its data:                  ►   Identify new use cases and
      ►   Audience TV data                     ►    Third-party data                        revenue streams
      ►   Customer data                        ►    Targeted advertising                ►   Design the operating model
      ►   Online behavior                      ►    Consumer measurement                ►   Prioritize investments

     EY Customer Analytics platform            The company monetizes its data to       Client would an outline on how to
     allows the leveraging of data and         target advertising on linear TV,        generate additional value from big
     achieving the following                   VOD (on-demand, replay and              data and analytics across the firm,
     performance uplifts:                      catch-up) and second screens and        quantifying expected benefits and
     ►    Segment customer groups and          to create more granular ad              emerging costs, with a clear road
          push product upgrades and            segments:                               map.
          cross-selling initiatives            ►   Additional revenues up to €50        The objective is to define the long-
     ►    Increase customer retention              million in five years               term big data transformation
          and optimize the cost-side of        ►   High margin expected, main          enablers while implementing early
          operations (i.e., customer care)         costs being data processing IT,     value quick wins

     ►    Measure the correlation                  internal team and external
          between customer satisfaction            contractors
          and customer value                   ►   A few million CAPEX
                                                   investment for the big data
Sources: GSMA; company data; EY analysis           infrastructure

Page 26
The EY Customer Analytics platform develops advanced models
and visualization tools for customer life cycle management

   A toolset that works across                                                                                                                         Description                                  Value for operators
      three data dimensions
                                                                                                                                                       ►   Build the company customer               ►   Monitor business performance
                                                                                                                                                           segmentation                                 by segment
                                           Profiles                             Description                   % Base    Bundle      ARPU    Tenure     ►   Provide to operators the                 ►   Optimize targeting actions per
          Customer
A
                                                                    Old customers that joined the company
                        1        Legacy 1P CATV customers                                                      14%     1P. CATV     €17,0   20 years
                                                                    before the year 2000

                                                                                                                                                           customer profiling model                     customer profile
                                                                    Customers that joined as 1P, are active
                        2      1P customers ready for migration                                                9%      1P. CATV     €25,0   11 years
                                                                    but never migrated to other bundle
                             Opportunistic and always on the move   Young customers, always looking for
                        3                                                                                      3%      2P. DTV-BB   €58,8   5 years
                                          customers                 better options / prices
                                                                    Customers that are close to the end of
                        4             At risk customers                                                        2%       3P. DTV     €54,4    1 year
                                                                    their engagement period (around 12m)
                                                                    Customers that joined the company

          profiling
                        5              New customers                                                           3%       3P. DTV     €40,8
Customer Analytics platform stands as a powerful tool, unifying
customer profiling, CLV and customer experience analytics into
one model

Advanced customer analytics and business intelligence modules
Customer profiling/personas       CLV                                   Churn prediction                    Value from CEX
Socio-demo, product, value and    Automatic CLV calculation next        ► Possible to establish churn       ► Multiple customer satisfaction
usage-driven segmentation —       to each customer and by profile         and root cause analysis             analyses (NPS-CLV
based on statistical approach     (ARPU, margin, churn, cost            ► Churn prevention analytics          correlation, super detractors
                                  to serve)                               campaigns                           focus, CEX deep dives)

                                                – Customer analytics platform data set –

                    ~200 data points per                       Product,                             Data available at
                    customer (up to 350)         Socio-       offers and                            customer ID level
                                                 demo                            Revenues
                                                                CPEs

                      ~12m customers            Customer                      Channels and         12 months revolving
                                               movements        Usage
                         profiled                                              interactions             history

                                                  NPS         Cost-to-serve        Digital          Automatic monthly
                      ~2.5b data points                                                             update of customer
                                                                                                     profiling and CLV

                                   Country 1     Country 2     Country 3       Country 4      Country 5

Page 28
Telcos can leverage analytics to improve performance and
efficiency of both their front-end and back-end activities

Growth                                           Optimization                                      Protection
Maximize                 Identify new            Improve customer Improve                          Optimize support        Regulatory
revenue                  revenue streams         experience       productivity and                 functions and           compliance
                                                 and loyalty      efficiency                       processes

Commercial                           Strategy and                          Programming                          Supply chain and
                                     business development                                                       fulfillment
►   Improve analytical model         ►   Monitoring competitor             ►   Optimizing the programming       ►   Optimize distribution through
    supporting lead generation,          behavior using web scraping           to increase viewership based         real-time event triggering
    acquisition, up-selling and          and bots to gather intelligence       on customer behavior data        ►   Reduce inventory leakage
    cross-selling                        and develop tactics                   and analyzing the customer           thru IoT
►   Real time reaction to            ►   Brand image analysis                  and product mix
    customer triggers and event      ►   Subs evolution forecast and
►   Content recommendation               simulation
    supporting up/cross sell and
    acquisition

Customer                             Human resources                       Advertising                          Technology
Service (CC and FS)
►   Call and contact prediction on   ►   Optimize hiring process           ►   Introduce targeted advertising   ►   Predictive STB maintenance
    specific events (e.g., social    ►   Measure employee                      revenue stream                       and life cycle through IoT
    media analysis and speech            performance                       ►   Introduce interactive and        ►   Predict systems, network and
    analytics)                       ►   Predict employee attrition            targeted advertising in              signal outages
►   Call and on field visit                                                    real time                        ►   Increase cybersecurity
    avoidance through proactive                                                                                     through predictive modeling
    management                                                                                                      and simulation

Page 29
From similar projects in telco space, EY experienced firsthand the
tangible benefits of a robust customer analytics practice

                                                                                                                Illustrative — not exhaustive

Impact of customer analytics-related activities on telecom operators’ performance
                           Area                     Customer analytics-related activity                         Impact
Revenues   New business    Data monetization        Sell off anonymized customer data                           +100%–200% revenues
                           Targeted advertising     Target ads based on customer profile                        +100%–200% revenues
           Marketing and   Churn                    Reduce churn by identifying key groups of                   -10%–20% churn
           sales                                    customers at risk
                           Customer profiling       Increase revenue through personalized offers                +1%–3% ARPU
                           Social                   Use client feedback to optimize product portfolio           -5%–10% churn
                                                    and service
                           Audience and content     Analyze viewership for commercial decisions                 -5%–10% content spend
                           Billing and collection   Reduce fraud and false invoices                             +1%–2% revenues
                           Pricing                  Optimize pricing decisions                                  +1%–3% ARPU
                           Campaign management      Improve campaign efficiency and effectiveness               +40%–80% conversion
OPEX       Customer        Contact center           Use call elimination and quality improvement                -5%–10% calls
           operations      Fulfillment              Reduce faults, fallout and cancellations                    -5%–10% fulfillment costs
                           Omnichannel              Lower cost to serve by improving channel mix                -5%–10% cost to serve
                                                    and service
                           Supply chain             Reduce truck rolls by better understanding the customers’   -5%–10% supply chain costs
                                                    reasons
           Corporate       Procurement              Use client feedback to optimize the spending on             -2%–5% spend reduction
                                                    CPEs/handsets
                           HR                       Increase the learning effectiveness and reduce turnover     -10%–50% learning costs
                                                    (call center)
           Network         Network maintenance      Predict outages using customer network data                 -5%–10% maintenance

Page 30
4
4   EY offerings for telcos’
    digital transformation
EY has established five distinct digital offerings reflecting the
holistic set of challenges that digital creates for our clients

Digital enterprise                            Experience                                    Digital trust
strategy                                      transformation

                      Incubation and                                  Digital
                      innovation                                      operations
We help our clients   We establish an         We analyze the world    We align, optimize    We scan the digital
rethink their         end-to-end              of the customer, then   and automate          risk horizon
business strategy     innovation capability   design and              operations and        and help our clients
and operating model   to incubate new         implement new           supply chain to       build agility
for a digital age.    ideas and business      experiences.            deliver on the        to respond to
                      models.                                         promise of digital.   digital risks.

Page 32
EY possesses a dedicated multidisciplinary team to accompany
telcos in their digital transformation

EY has a cross-functional team dedicated to                              EY digital assistance to reinvent businesses
digital transformation                                                   in a digital world

                                                       Change                   Internal multidisciplinary teams dedicated to digital,
 Digital strategy             Data                                              these are supplemented by functional and sectorial
                                                    management
  consultants               scientists                                          subject matter professionals
                                                    professionals

                                                                                A broad range of offers to accompany digital
                         Cybersecurity                 Service                  transformations
 IT professionals
                         professionals                designers

Functional professionals                                                        “Advanced analytics” solutions to inform and simplify
                                                                                the processes of making key decisions

                                                                                A “digital factory” approach that favors rapid
                                                              Finance           development and appropriation of innovation
                                         Client
                                                                and
 Strategy           Marketing           relation-
                                                              internal
                                          ships
                                                                audit
                                                                                A “digital lab” that offers organizations digital
                                                                                transformation support in a joint development spirit

                             Supply
                              chain                    IT                       A global and multi-sectorial approach to digital
            HR
                               and                  systems                     transformation of organizations
                            purchases

Page 33
EYs digital offers serve telcos transformation

 1                             2                                3
        Digital growth and             Telcos’ customer                Telcos’ operations
      innovation for Telcos        experience transformation              digitalization

 Digital growth strategy      Customer experience              Digital Supply Chain
                              digitalization
 Digital due diligence                                         Digital finance
                              Digital-driven omnichannel
 Digital innovation and                                        Digital HR
 digital factory

       IT digitalization              Data governance                       IT security

Page 34
We work to help deliver digital solutions to your needs, combining
our technical, scientific and functional experience

                                                   Company Group         Company                    Category                                                                                                                                                                                        Amount
                                                   Tout                  Tout                       Tout                  Tout                             Tout                      Tout                       Tout                                                                                $0M                                                                     $1,348M

                                                                                                               Purchase To Pay Process Map                                                                                                     Company Group                                                                            Category
                                                                                                                                                                                                                                                    Europe                                  $222M                            Non Inter-Company                               $268M

                                                                                                                                                                                                                                                   America                                 $211M                                 Inter-Company                       $182M

                                                                                                                                                                                                                                                   Oceania     $12M
                                                                                                                                                                                                                                                      Asia     $4M
                                                                                                      $8M         $579M
                                                                                                                                                   $0M
                                                                                   $840M
                                                                                                                                                                                                                                                     Company                                                                              Vendor
                                                                                                                                                                  $0M                                            $1M
                                                                                                      $0M         $10M                                                                                                                      US10 - XYZ USA                                  $200M            9900033592 - XYZ Equipment Poo..                              $55M

                                                                                                                                                                                                                                       GB10 - XYZ UK LTD                      $112M                                     0000152477 - Chase NYC                        $47M

                                                                                                                  $0M                              $0M            $0M                                            $1M                ES10 - XYZ España SA                     $98M                             0000123349 - BANK MENDES GA..                          $45M
                                                                                                                                                                                                                                PL10 - XYZ Polska Sp. zo.o.    $12M                                          9900033027 - ABC Enterprise Ltd ..                      $45M

                                                                                   $24M                           $0M                                             $589M                                                                                User                                                                        Transaction Code
                                                                   $209M
                                                                                                                                                                                            $0M
                                                                                                                                                   $589M                                                                          RODRIGES - Anonymous                                      $197M                       FB01 - Post Document                              $299M

                                                                                                                                                                                                                                   VERCAUC - Anonymous                      $89M                               FB60 - Enter Incoming Invoices                $132M

                                                                                                                  $300M                                                                                                            WHEELES - Anonymous                $51M                                      FBVB - Post Parked Document          $12M

                                                                                                                                                                                                                 $1M
                                                                                                                                                                                                                                 BASWARE1 - Anonymous                $36M                                       FV60 - Park Incoming Invoices        $3M
                                                                                                                                                                                                                                    BARNARI - Anonymous          $31M                                                   FBR2 - Post Document         $2M
                                                                                                      $12M        $449M           $12M                                                      $3M                                  WF-BATCH - Anonymous          $11M                                          FBS1 - Enter Accrual/Deferral Doc.      $1M
                                                                                                                                                                                                                 $166M
                                                                   $187M                                                                                                                                                                             Account                                                                        Document Type
                                                                                                                                                                                                                             0000031210 - National Vendors                                  $261M                             KR - Vendor invoice                         $269M

                                                                                                                                                                                                    $12M
                                                                                                                                                                                                                         0000031300 - Inter-Company Paya..                         $177M                                P3 - IC PAL Vend Invoice                  $171M
                                                          $0M      $17M
                                                                                                      $1M         $32M            $2M                                                                                    0000031310 - Inter-Group Payables     $3M                                                       Z4 - IR - Auto Depot Exp    $6M
                                                                                                                                                                                                                         0000031220 - International Vendors    $3M
                                                                                                                                                                                                                                                                                                                            KZ - Vendor payment      $1M
                                                                                                                                                                                                                            0000031290 - Employee Ledger       $2M
                                                                                                                                                                                                                                                                                                                                                     $1M
                                                                                                                                                                                                                                                                                                                     ZA - Employees Reclasific
                                                                                                                                                                                       $1,146M                           0000031227 - Vendors With Debit ..    $1M
                                                          $1M      $0M
                                                                                                                                                                                                                                                   Posting Key                                                                    Posting Key Scheme
                                                                                                                                                                                                                                                31 - Invoice                                   $449M                                       31_40                          $229M
                                                                                                                                                                                       $202M
                                                                                                                                                                                                                                                                                                                                        31_40_50                   $169M
                                                          $0M      $10M                                                                                                                             $1,348M
                                                                                                                  $12M                                                                                                                                                                                                                                     $51M
                                                                                                                                                                                                                                                                                                                                        31_40_60
                                                                                                                                                                                                                                                                                                                                           31_71      $0M

                                                                                                                  $0M                                                                                                                                                                                                                      22_31      $0M

                                                                                                                                                                                                                                                                                                    Trend
                                                                                                                                                                                                                 $0M
                                                                                                                                                                                                                         $80M
                                                                                                                                                                                                                         $60M
                                                                                                                  $1M                                                                  $1M          $0M                  $40M
                                                                                                                                                                                                                         $20M

                                                                                                                                                                                                                                   201201          201202              201203                 201204            201205           201206             201207                201208

    Spend cube 2.0             Social media                        Audit explorer/satellite                                                                                                                                                                                                                                                                                              Cyber intelligence
                                                                                                                                                                             2. STOCK OVERVIEW
                                                   Sales / Predictability per Segment - CN                                                                                                                                           Stock Value (1)                                          # Live EAN (1)                                MONTH FILTER
                                                                                                                                                                                               Shipments (1)                                                                                                                                February 2016
                                                                                   X                                      Y                                         Z
                                                                                               55                                  148                                        70                                                                                                                                                            Tout
                                                                                                      (cov)                               (cov)                                    (cov)

                                                            A                              €2.5M     (ship)                      €1.8M    (ship)                          €0.6M    (ship)
                                                                                            €4.2M      (stk)                     €3.2M     (stk)                           €0.7M    (stk)

                                                                                                                                                                                                                                                                                                                                            Tout

                                                                                              113     (cov)
                                                                                                                                   176    (cov)
                                                                                                                                                                            213    (cov)

                                                            B                              €0.2M     (ship)                      €0.2M    (ship)                          €0.3M    (ship)                                                                                                                                                   CN
                                                                                            €0.5M      (stk)                      €0.6M    (stk)                           €0.9M    (stk)                                                                                                                         931
                                                                                                                                                                                                              €5.8M                                  €11.4M
                                                                                                                                                                                                                                                                                                                items
                                                                                                                                                                                                                                                                                                                                            (All affiliates)
                                                                                              146     (cov)
                                                                                                                                   204    (cov)
                                                                                                                                                                            431    (cov)

                                                            C                              €0.1M     (ship)                      €0.1M    (ship)                          €0.1M    (ship)

                                                                                            €0.2M      (stk)                      €0.3M    (stk)                           €0.7M    (stk)

                                                                                                                                                                                                                                                                                                                                            COVERAGE
                                                                                                                                                                                                                                                                                                                                                                              55
                                                                                                      (cov)                                                                                                                                                                                                                                                                  200
                                                            O                              €0.0M     (ship)
                                                                                                                                                                                                                                                                                                                                                                             300
                                                                                            €0.0M      (stk)

                                                                                                                                                                                                                                                                                                                                                                             431

                                                   Sales / Predictability per Segment - (All affiliates)                                                                                       Shipments (2)                         Stock Value (2)                                          # Live EAN (2)
                                                                                   X                                      Y                                         Z
                                                                                               60     (cov)
                                                                                                                                   108     (cov)
                                                                                                                                                                            181     (cov)                                                                                                                                                   Sales / Predictability
                                                            A                              €9.1M     (ship)                   €6.3M       (ship)                          €4.6M    (ship)                                                                                                                                                        A/X
                                                                                           €18.8M     (stk)                   €14.9M       (stk)                          €15.5M    (stk)
                                                                                                                                                                                                                                                                                                                                                 A/Y
                                                                                                                                                                                                                                                                                                                                                 A/Z
                                                                                               90     (cov)
                                                                                                                                   160    (cov)
                                                                                                                                                                            238    (cov)                                                                                                                                                         B/X
                                                            B                              €1.2M     (ship)                      €1.0M    (ship)                          €1.8M    (ship)                                                                                                                                                        B/Y
                                                                                            €3.1M      (stk)                     €3.4M     (stk)                           €8.4M    (stk)                                                                                                                       3,813
                                                                                                                                                                                                              €25.2M                                 €72.7M                                                                                      B/Z
                                                                                                                                                                                                                                                                                                                items
                                                                                                                                                                                                                                                                                                                                                 C/X
                                                                                              123     (cov)
                                                                                                                                   188    (cov)
                                                                                                                                                                            369    (cov)                                                                                                                                                         C/Y
                                                            C                              €0.3M     (ship)                      €0.3M    (ship)                          €0.6M    (ship)
                                                                                                                                                                                                                                                                                                                                                 C/Z
                                                                                            €1.4M      (stk)                      €1.9M    (stk)                           €5.3M    (stk)

                                                                                                      (cov)

                                                            O                              €0.0M     (ship)

                                                                                            €0.0M      (stk)

      Analyze FEC          Resource optimization                   Supply chain analytics                                                                                                                                                                                                                                                                                             CBCR data visualization

 Weather-sensitive sales      Process mining                                                         HR cockpit 360°                                                                                                                                                                                                                                                                  Sales force sectorization

Page 35
EY Advisory has relevant references of telcos digital transformation

   Operator type        Project name                                     EY support/added value

                                              ►   EY supported the end-to-end digital transformation for the customer
                                                  experience transformation project, working mainly on:
      Tier 1
                     Customer-led digital         ►   Identification of the key customer pain points/definition of the customer journey
 European telecom      transformation             ►   Definition and implementation of Customer Experience improvement initiatives
     operator
                                                  ►   Run of digital sprints, from “the customer stories” to the “minimum viable product”
                                                      with a three-month cycle to assist in implementation

                                              ►   End-to-end asset management solution: real time asset tracking, supports
                                                  redeployment of assets and consequent capex avoidance, Enables supply
  Global leading                                  chain analytics
                         Digital Asset
 operator (Europe,       Management           ►   Improved monitoring and informed decision making for end to end lifecycle
  MENA, APAC)                                     tracking of assets, improved utilization / deployment of existing unused assets
                                              ►   Use of mobile app to ease field operations and enable real time asset tracking

                                              ►   Benchmark of multichannel disruptive initiatives
                                              ►   Assessment of multichannel maturity and performance of six operations
      Tier 1            Digital-driven            in Europe
 European telecom    omnichannel strategy
                        and blueprint         ►   Definition of the multichannel blueprint and vision
     operator
                                              ►   Detailed specification of 12 concrete multichannel use cases, including
                                                  organization, IT and processes impact

                                              ►   Digital maturity assessment vs. best in class
        MNO          Digital transformation   ►   Definition of the three-year digital strategy and road map
      in MENA              execution          ►   Implementation of quick wins: new website launched, mobile app
                                              ►   Specifications of key digital projects: E-care, social CRM

Page 36
EY Advisory has relevant references of telcos digital transformation
(continued)

   Operator type         Project name                                     EY support/added value

                                               ►   Conducting a Pan-European Digital MVNO feasibility study in four European
                      Pan-European Digital         markets
 Tier 1 operator in
                       MVNO strategy and       ►   Building a disruptive customer value proposition (price, all-inclusive, digital,
 Europe and MENA        feasibility study          customer experience)
                                               ►   Defining a lean organization model and digital-oriented processes

                                               ►   EY and the client worked together to shift the customer service paradigm
                                                   through digitization in face of declining market dominance.
       Tier 1
                      Shifting the customer    ►   This included the following:
     operator in        service paradigm           ►   Transformation of governance of digital channels
    New Zealand                                    ►   Key risks and controls to manage digital interfaces
                                                   ►   Streamlining of social media channels

                                               ►   EY supported the client in deploying a large-scale digitization project
                                                   revolutionizing telecoms in the country.
                                               ►   Through the EY Go-To-Market strategy and digital operating model for
                      Go-To-Market strategy
Greenfield telecoms                                customer operations, the client benefited from the following:
                       and digital operating
 operator in India        model design             ►   Significant lead time reduction for activation
                                                   ►   Paperless activation — a first in India
                                                   ►   Customer experience as a differentiator using digital approach
                                                   ►   Designed digital concepts

                                               ►   EY assisted the client in achieving significant productivity improvements and
       Tier 1           Productivity and           improved customer services to gain a competitive advantage in the market.
                       customer services
     operator in         transformation        ►   The process redesign allowed productivity improvements; reductions in costs;
      Australia             program                and reduction in transaction times, variance and rework, resulting in
                                                   annualized benefits of approximately US$650m.

Page 37
More than 5,000 EY collaborators work on digital-related topics

                    1,000                          250                                     950

        Customer experience            Innovation and incubation                     Digital strategy

 Analyze the company environment   Put into place innovation structures     Develop digital strategies aligned
   to design and implement new     to incubate and test new ideas and      with long-term vision and integrated
       journeys and solutions                business models                   within the company strategy

                                   Transform and automate operations,
   Understand and manage digital       and align the organization to            Develop and construct the
     risks, especially fraud and    facilitate digitalization and reduce   technology underlying digitalization,
            cyber attacks                     operational costs            particularly use and analysis of data
                                         Digital operations and
             Digital security                 organization                       Technology and data

                     400                          1,100                                   1,600

   # of EY collaborators

Page 38
EY digital telecom community

 Prashant Singhal, Partner, EY Global Telecoms Leader                                                      Bart Van Droogenbroek, Global Telecoms Tax Leader,
                                                                                                           Luxembourg
Industry subject matter professional, leading transformations for
operations and selection, pricing, distribution and launch                 Network                        Supply chain management as well as financing, holding and
                                                                         convergent
strategy                                                               technology and
                                                                                                          intellectual property structures through Luxembourg
                                                                        infrastructure                    intermediate entities

 Amit Sachdeva, Partner, EY Global Telecoms Advisory Lead                                                  Joanna Truffaut, Director, UAE
                                                                                           Products and
                                                                                             services
Industry advisor, leading transformations for operations and                                              Has led major engagements in digital transformation, digital
selection, pricing, distribution and launch strategy                                                      business, operating and technology models, digital ventures
                                                                                                          investments, cybersecurity and innovation
                                                                         Fulfilment
                                                                         assurance
                                                                         and billing
 Laurence Buchanan, Partner, EY Digital Advisory Leader                                                    Praveen Shankar, Partner, UK

EMEIA Lead digital partner, specializing in digital transformation,                         Customer      Leads the UK and Ireland supply chain team in the telecoms,
                                                                                             interface
customer experience and CRM; has led digital transformation                                 operations
                                                                                                          media and technology industry sector
initiatives for clients including TMT, retail, GPS, auto and
pharma

                                                                      Talent and culture

 Vincent Douin, Partner, TMT Industry, EMEIA                                                               Adrian Baschnonga, Associate Director, UK

Fifteen years of experience in telecoms, with capabilities/                                               Lead analyst at Global telecoms center, responsible for EY’s
                                                                                           Partner and
experience in emerging markets, marketing and sales strategy                               ecosystem      thought leadership output
and go-to-market

                                                                          Enterprise
 Patrick James, Partner, UK                                              technology                        Joongshik Wang, Partner, Singapore

Digital strategy transformation specialist, projects across the                                           Capabilities/experience in commercial due diligence,
customer life cycle (CRM and e-commerce platforms                                                         turnaround strategy, digital business and strategic marketing in
implementations) in airlines, telco, banking, insurance,                                     Devices      telecoms and media industry, payment and retail industry
government, automotive and consumer products industries

 Pierre Beaufils, Partner, USA                                           Regulatory                        GK Anand, Director, India

Marketing strategy expert in the TMT industry with 15 years of                                            Customer experience and service strategy design, business-
consulting experience                                                                                     wide cost reduction, IT strategy and transformation

Page 39
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