TMT Value Chain - Digital Futures 2025

The TMT Value Chain:
A Financial Perspective
Upin Dattani, CFA
Senior Financial Analyst
Ovum

How have equity markets viewed TMT?
• What might £100 invested around five years ago be worth now?
Digital Futures: The World in 2025
© Ovum 2015, Informa Telecoms & Media Ltd
2
Source: Ovum
Chart illustrates share price appreciation (indexed at £100) from 31/12/10 to 25/11/15 without considering dividends, special
corporate actions, or transaction costs. Apple adjusted for stock split.

Comparing Different TMT Financial Profiles
• Newer business models can generate significantly higher growth
3
Source: Ovum

Comparing Different TMT Financial Profiles
• Profitability varies considerably between business models
4
Chart illustrates Earnings Before Interest Tax, Depreciation and Amortisation and Capital Expenditure as a proportion of sales, for
the latest financial year. Operating Free Cash Flow is defined as EBITDA less Capex. Definitions of EBITDA and Capex can vary.
Source: Ovum

The impact of new business models (1)
5
• ‘Over-The-Top’ circumvents traditional telco or media service providers
• Investors have heard of many technologies that failed to ‘kill the telco’
• Where service providers have charged too much, and have not
innovated, new businesses can cannibalise revenues
• Partnerships between network and internet players are emerging
– Revenue sharing or charging OTTs for access is not established
– Often, no money changes hands

The impact of new business models (2)
6
• Telecoms operators have invested in and are at the heart of
communications and connectivity
• OTT operators create demand for fast connectivity and bandwidth
• Content provides an opportunity for distribution networks
– Ovum forecasts annual growth in Telco TV of 8.9% (2015-20)
• Technology presents telecoms operators with tools to better control and
monetize their distribution networks
• Investors have shown strong support for ‘disruptive’ business models

Ovum’s 2015-20 Mobile Subscriptions Forecast
• Ovum forecasts global mobile subscriptions to rise from 7.26bn
in 2015 to 8.53bn in 2020 (3.3% CAGR)
• Over 40% of subscriptions to be on the 4G network by 2020
7
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
2013 2014 2015 2016 2017 2018 2019 2020
Subscriptions(000s)
4G
3G
2G
Source: Ovum

Ovum’s 2015-20 Mobile Service Revenue
Forecast
• Ovum forecasts global mobile service revenues to rise from
$888bn in 2015 to $985bn in 2020 (2.1% CAGR)
• Modest global growth is driven by mobile data and developing markets
8
Source: Ovum

Ovum’s 2015-20 Cellular Traffic Forecast
Over 50% of cellular traffic is now carried by 4G
9
Source: Ovum
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013 2014 2015 2016 2017 2018 2019 2020
Percentageoftotalcellulartraffic
Cellular traffic by generation
Cellular - 2G Cellular - 3G Cellular - 4G

4G will be a profitable enabler
By 2025, 4G will profitably underpin mobile communications
and connectivity (both voice and data)
• Financial investors are conservative, and wary of the hype from 3G
• Initially, network opex and capex from new activities reduces cash flow
• Consolidation will change the landscape of TMT value chain
• Financial expectations are relatively low!
• Service providers need to innovate and respond to the challenges that
new digital business models create
10

Copyright notice and disclaimer
11
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Media Limited.
Whilst reasonable efforts have been made to ensure that the information and content of this product was correct as at the
date of first publication, neither Informa Telecoms and Media Limited nor any person engaged or employed by Informa
Telecoms and Media Limited accepts any liability for any errors, omissions or other inaccuracies. Readers should
independently verify any facts and figures as no liability can be accepted in this regard - readers assume full responsibility
and risk accordingly for their use of such information and content.
Any views and/or opinions expressed in this product by individual authors or contributors are their personal views and/or
opinions and do not necessarily reflect the views and/or opinions of Informa Telecoms and Media Limited.

Thank you. Questions?
+44 (0) 207 551 9223 | upin.dattani@ovum.com
Ovum.com | @OvumTelecoms

TMT Value Chain - Digital Futures 2025

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