ICT Convergence: Consolidation or Shakeout Stage!

Member of
ICT Convergence:
Consolidation or Shakeout Stage!
Guy Alain Djopmo Komguep
London - January 24th, 2008 Think forward
Designing Future Business

ICTCONVERGENCE-CONSOLIDATIONORSHAKEOUTSTAGEV50.PPT
Page 1
Foundation:
1954 Diebold
1977 DETECON
Restructuring:
2002
Detecon International GmbH
Turnover 2006:
EURO 148 million
650 consultants
Shareholder:
T-Systems Enterprise Services GmbH
Offices in Germany:
Bonn (HQ), Dresden, Eschborn, Munich
International locations:
Abu Dhabi, Bangkok, Johannesburg,
Mexico City, Beijing, Reston, Riyadh,
San Mateo, Singapore, Zurich
Detecon’s global presence ensures the international success of our clients.
To have an impact, you have to be there

Page 2
Know-how und Do-how
 Fact-based quantitative analyses provide
the foundation of our work
 On-site integration of our do-how expertise
for the development of strategies and
implementation processes
Clear Commitments
 Independent evaluation
 The client is our partner: Joint teams and
knowledge transfer
 Our success can be measured
ICT Talents
 Experienced staff with multi-cultural
competence in the global ICT markets
 Implementation of complex ICT projects
which demand the combination of
commercial, technological and legal
expertise
Global Reach
 3500 successfully completed management
and technology projects in 106 countries
 Universal quality standards and worldwide
knowledge transfer through the networking
of our consultants in Global Competence
Teams
Global activities, know-how und ‘do-how’ expertise in ICT markets characterize our
consultancy services.
The experience of more than 3500 projects

Page 3
Content
1. Breakthrough Insights
2. Value Creation Leads
3. Levers for Value Capture
4. Spheres of Action
5. Outlook Notes

Page 4
 No standards
 Regulatory issues
 Technology was not ready
 Driven by network standpoint
 Niche focus, high price and low competition
Yesterday
Breakthrough Insights
 Mature standards
 Regulatory framework enhancements
 Technology readiness
 Users demand seamless services
 Mass market, low price and high competition
Today
Starting point of Information and Communication Technologies convergence
Fixed-Mobile Convergence was already a hot topic a decade ago in the Telco‘s industry,
which was driven more by the network perspective rather than the end-user perspective.
$? „Many lie questions were on the table“ „Business opportunities are available“
?
?
$ € £
¥
฿
¢
‫ﺩ‬.‫ﺇ‬
रुपय
R

Page 5
ICT Convergence Lifecycle - Snapshot 2007
 Take-off phase and Growth
stages include economies of
scale and learning benefits
 Consolidation and shakeout
stages embrace economies of
scope and merger and
acquisition advantages
 During the stabilization phase,
established players perceive
network externalities effects
as well as buyer lock-in
profits
 During these different phases
the product line move from ICT
convergence to multi-sector
convergence
Rationale
The pace of ICT convergence in western European markets tremendously differs with
regard to regulatory framework, competitive edge and market responsiveness.
Western European markets dynamics
Take off Growth Consolidation Shakeout Stabilization
• Germany
• Netherlands
• Switzerland
• Sweden
• Danemark
• Norway
• Portugal
• Greece
• France
• Spain
• Italy
FMS FMC Triple Play Quadruple Play Living cities
• UK
Number of
competitors
Time

Page 6
Positioning paths in the value chain
Taxonomy of ICT Convergence
With respect to local marketing requirements and Telco’s strategies, ICT convergence
initiatives can be realized at different levels across the valued-chain business entities.
Single Number, Voicemail
Bundled Services
Service Delivery Platforms
Single Bill
One End-User Tariff
Convergent Charging
IP Multimedia Subsystem
Multi Access Edge
Metro Aggregation
Network
Convergence
Service
Convergence
Tariff
Convergence
Hybrid Devices
Multifunctional Microchip
Integrated Power Supply
Device
Convergence
Unique Brand, CRM
One POS, Cross-Selling
Common Distribution
Marketing
Convergence
NetCo ServCo SalesCo
1 2 3 4 5

Page 7
 Customer Premises Equipment with Symbian or
Microsoft operation system?
 Standard or proprietary Service Delivery
Platforms?
 IMS versus UMA in the core network?
 Backhaul including metro aggregation and
legacy systems?
Question marks
Value Creation Leads
Technology prism
Technology choice
In the realm of ICT convergence, the Telco player should align its technology strategy
with the predefined business strategy.
 Sustainable CAPEX
 OPEX rationalization
 Churn rate downsize
 Competitive customer acquisition costs
 Technology opportunity costs
 Sunk costs
Economic rents
Value proposition Technology A
Value proposition Technology B

Page 8
Strategic alliance
Strategic alliance framework – Triple Play offering
 Legal Framework
 Incentives
Content Provider function:
 Innovation leadership
 Content creation and protection
 Service branding
 Content licensing
 Ensure interoperability
 User Protection
 Governance
Fixed Operator role:
 Understanding user demands
 Broadband access
 Business model
 Technology choice
 Branding, Pricing, Distribution
Fixed
Operator
Broadcast
Carrier
CPE
Vendor
Content
Provider
CPE Vendor role:
 Terminals readiness
 Fostering standards
 Sharing investments
 Economy of scale
Broadcast Carrier function:
 Content aggregation
 Content transport
 Setting standards
 Business cooperation
Regulatory Bodies
Players in the ICT arena should contractually joint efforts to achieve lasting business
development through synergies, expenses sharing and technology transfer.

Page 9
The stretched-T strategy: slim at the bottom, wide at the top!
Involve the customer in your market lifecycle is the crux of customer advantage. Thus
understand usage, psychographics, culture, purchasing and benefit patterns is key.
SoHo = Small Offices / Home Offices
VSE = Very small Enterprises
SME = Small and medium Enterprises
LE = Large Enterprises
MNC = Multinational Corporations
Differentiation !
Efficiency ! • Optimal OPEX
• Modular platforms
• One network
• Outsourcing
• Tailored segments
• Stickiness creation
• Viable offerings
Consumer Business
Network
Services
Sales and Marketing
Kids Youth Families Seniors SoHo VSE SME LE MNC…
Intrinsic customer segmentation

Page 10
Brand positioning fundamentals
 Brand awareness, point of difference, relation to inherent products and active loyalty should be
continuously managed. Avenue
 Within the context of ICT and multi-sector convergence, it is essential to manage brand as total
customer experience across the psychological benefits, functional and economic benefits.
Bottom line
Levers for Value Capture
Customer perception cues
Brand equity
Building strong brands offers Telco players attractive avenues to insulate themselves from
competition and commoditization pressures.
Relationship
What about you and me?
Response
What about you?
Meaning
What are you?
Identity
Who are you?
1
2
3
4
Resonance
Judgments Feelings
Performance Imagery
Salience
1
2
3
4

Page 11
Orange Livebox versus Neuf Box
 Between Orange Live box and
Neuf box the point of parity
is the functional benefit: both
offers Internet, Telephony and
Television utility
 Orange, key point of
difference, aims at increase
the consumption opportunities
with new livebox releases:
Livebox Pro, Livebox premium
 To gain new market share and
build psychological benefits
, Neuf offers home installation
service and pursue and
aggressive marketing
communication strategy
Analysis
The Telecom French market faces a shakeout stage with regard to ICT convergence, thus
successful players should move from competitive edge to customer advantage…
Pioneer and Follower brand preference -Case study of the French market
Pioneer
Follower
• Co-branding
• France Telecom assets
• Technology innovation
• Psychological benefits
Orange Livebox advantage (France)
• Customer service
• Less sunk costs
• Buyer loyalty
Neuf Box advantage (France)
Market
Share
Dissimilarity of brand Extension

Page 12
Value based pricing
Value Quantification of ICT Convergent Offerings
Numerous players in western Europe and USA tend to reduce the competitive reference
value price, this could lead to significant market failures.
Positive
Differentiation
Value
Competitive
Reference
Value
Negative
Differentiation
Value
Total
Economic
value
 Ease of use
 Cost efficiency
 Always best connected
 Customer education
 After-sales services
 Reliability and security
 Legacy systems
 Emerging competitors
 Technology used
 Standard functions
 Alternative solutions
Willingness
To Pay
 Subsidies
 Switching costs
 Risks (e.g. guarantee)
 …
suitable price
setting zone

Page 13
Raising Price, Increasing Volume, or Lowering Cost?
“Price Volume Cost” impact analysis
Spheres of Action
Analyze the economic value of ICT convergence offerings to the customer and compute
all source of savings or increased revenues is essential to succeed.
Base Case 1% increase in price
(with no loss in volume)
1% increase in volume
(no change in price)
1% decrease in costs
Sales = 100
CGS = 70
Sales = 101
CGS = 70
Sales = 101.0
CGS = 70.7
Sales = 101
CGS = 69.3
GM = 30
SGA = 20
GM = 31
SGA = 20
GM = 30.3
SGA = 20.0
GM = 30.7
SGA = 20.0
Operating profit = 10 Operating profit = 11
10% gain over base case
Operating profit = 10.3
Operating profit = 10.7
Business acumen note
 It is smart to increase price rather than decrease cost and moreover increase volume, however the
customer should be compensated with additional value.
 As long as the costs > 50% of sales, a cost decrease is always better than an equivalent volume increase;
vice versa when the costs < 50% of sales.
CGS: Cost of Good Sold; GM: Gross Margin; SGA: Service, General and Administrative expenses

Page 14
Strategic value disciplines
Spheres of Action
 Provide ICT products or services that uniquely meet
customer needs with constant quick response
 Key benefit: Psychological, 2nd benefit: Functional
 E.g. Video on Demand via IPTV
Customer Intimacy
Points of difference focus
Sustaining and widening customer advantage requires constant search for unique value
proposition and new benefits.
 Provide reliable and convenient ICT products or
services at competitive prices
 Key benefit: Economic, 2nd benefit: Functional
 E.g. Home Zone services
Operation Excellence
 Offer customer cutting-edge ICT products and
services superior to competition and innovative
 Key benefit: Functional, 2nd benefit: Psychological
 E.g. Apple iPhone
Product LeadershipProduct
Leadership
Operation
Excellence
Communication
Provider
Customer
Intimacy

Page 15
In a nutshell
Outlook Notes
Take away
Service bundling is the easy part of the journey toward ICT convergence. The real
transformation lies at regulatory, techno-economic, organizational and marketing level.
1.
Align technology choice with smart business strategy is essential to leverage the economic
return of ICT convergence.
2.
You can not push the pebble with one finger! set up strategic alliances with pioneer partners
to gain customer advantage and focus on your core competences.
3.
Build strong, enduring and profitable brand through the pursue of psychological and functional
benefits. (Competitive advantage = Consideration ; Customer advantage = Commitment)
4.
Close to customer intimacy value discipline, product leadership and operational excellence are
the mix-ingredients for lasting profit.
5.
Nominal price increase and variable costs’ decrease are more powerful than volume based
strategies, especially in mature and saturated western European Telco’s markets.

Page 16
Thank you for your kind attention!
Guy Alain Djopmo Komguep
Competence Practice
Communication Technology
Oberkasseler Str. 2
53227 Bonn (Germany)
Phone +49 228 700 2826
Mobile +49 151 1221 7902
Fax +49 228 700 2107
Djopmo.Komguep@detecon.com

Member of
Oberkasseler Str. 2
53227 Bonn · Germany
Phone (+49 228) 700-0
Frankfurter Str. 27
65760 Eschborn · Germany
Phone (+49 6196) 903-0
www.detecon.com
info@detecon.com
Supervisory Board: Reinhard Clemens (Chair)
Management Board:
Dr. Klaus Hofmann (Chair), Dieter Brücher
Registered at: Court of Bonn HRB 2093
Company location: Bonn
The future‘s looking good

ICT Convergence: Consolidation or Shakeout Stage!

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