IBV Institute for Business Value
Telco 2015
What future in store for
Mobile Communications
Rob van den Dam, Global Telecommunications Sector Leader IBV
3rd Annual China LTE Summit
4G Mobile Broadband: Getting There from Here
May 5 - 6, 2011, Beijing, China © 2010 IBM Corporation

Content
Telco 2015 2011 Consumer Survey
Five telling years, four future scenarios 22 countries surveyed
US
Brazil Poland UAE
Czech 3% 3% 11%
3%
3%
Portugal
3% France
S. Korea 8%
3%
Belgium
3%
Sweden UK
3% 7%
Germany
3%
Australia Spain
4% 7%
Italy
4% China
India 5%
5% Mexico
Russia
5% Netherlands
Greece Japan 5%
5% 5%
5%
• Trends • Spending and Usage patterns for 2011- 2013
• Four contrasting future scenarios • Customer Advocacy
• Revenue and profitability outlooks • Adjacent Market opportunities
2 © 2010 IBM Corporation

The growing role of emerging markets: the mobile industry is
increasingly being driven by emerging countries
Toward a new hierarchy Top 10 mobile markets worldwide
France; 46 (M subs)
UK; 68
1. Mobile Revenue YoY growth 3Q10 Italy; 71
China; 375
– Western Europe: - 1.0% 2005 India; 75
– Japan: - 0.4% Germany; 79
– North America: + 6.3%
– Latin America: + 10.6% Brasil; 86
– Emerging Asia: + 11.3% Japan; 90
– China: + 12.1% USA; 208
Russia; 126
2. The emergence of new giants:
Mexico; Nigeria;
Italy; 90 88 84
Germany;107
2010
Etc….. Japan; 116 China; 833
Q3
And all know how to make profit with ARPU Brasil; 195
< US$ 5
Russia; 217
USA; 297 India; 688
Source: Global Wireless Matrix Q310, Merrill Lynch, IBM
Institute for Business Value (IBV) © 2010 IBM Corporation

Consumer sentiment in emerging countries is much higher than in
developed markets Compared to 2010 and previous years, are you likely to spend less, the
same or more on the following products / services in the next 2-3 years?
electricity, water)
Decrease Spending Increase Spending
Utilities (gas,
Electrical Appliances
Going out (theatre)
Food & Drinks
Mobile Broadband
Mobile Telecom
Transport
Vacation
50%
47%
PayTV Subs
Clothing
45%
42% 42%
38% 38% 39% 40%
33%
Landline
Sports
28%
24%
18%
10% 11% 11% 12%
6% 6% 7% 8%
4% 5% 5%
8% 8%
13% 11% 11%
14% 12% 14% 10%
15% 17% 15% 18% 18%
Mobile Broadband
20%
Landline
19% 19%
21% 20%
Mobile Telecom
21%
electricity, water)
Utilities (gas,
Food & Drinks
Transport
27%
PayTV Subs
Vacation
Clothing
31%
Appliances
Going out (theatre)
Electrical
37% Sports
43%
4
Source: 2011 IBM Global Telecom Consumer Survey, 22 countries, N = 11315 © 2010 IBM Corporation

In Southeast Asian markets, more consumer than less expect to
increase spending on Mobile Broadband usage
India S. Korea
China
SPENDING ON MOBILE BROADBAND USAGE
Q05 Compared to 2010 and previous years, are
Decrease Spending Increase Spending
you likely to spend less, the same or more on
the following products / services in the next 2-3 Brazil
years? 48%
45%
Sweden Poland 42%
Australia
Netherlands 24%
Spain
Portugal US UK France 18% 18%
Czech R. 12%
7% 8% 9%
4% 5% 5% 6%
8% 8%
15% 14% 13% 13% 14% 14% 13%
18% 16%
21% 21%
25%
5
Source: 2011 IBM Global Telecom Consumer Survey, 22 countries, N = 11315 © 2010 IBM Corporation

The Southeast Asian consumers surveyed lead in daily accessing the
Internet via the mobile phone or Laptop/Netbook
China
Through laptop/Netbook Through mobile phone
MOBILE BROADBAND ACCESS S. Korea
India
(daily access)
Australia UK Sweden 51%
Spain Brazil US
Poland France Netherlands 39%
37%
Portugal
Czech R. 19% 19% 19% 20% 21% 21% 21% 23%
18%
9% 11%
8%
15% 14% 13%
15%
21% 20% 19%
24%
27% 27%
34%
43%
46%
Q07 How often do you access the Mobile Internet via either the
Phone or Laptop/Netbook?
6 Source: 2011 IBM Global Telecom Consumer Survey, 22 countries, N = 11315 © 2010 IBM Corporation

An increasing number of mobile consumers use over-the-top services
like mobile email, instant messaging and social networks
97% 97% With 221 million bloggers as of the
100% 95%
87% June 2010 end of December 2009, China had
82% more than twice the number in the
77% 76%
80% U.S.
66%
60%
46% Chinese video-sharing website
40% such as YouKu and social
Percent of Internet users
networking site Qzone are “one
20% visiting Social Networks 100% replacements" for foreign sites
such as YouTube and Facebook
0%
Malaysia
Vietnam
South
Korea
India
Japan
Singapore
Hongkong
Philippines
Indonesia
Youku‟s video
+56% Mobile Social software came
Networking is pre-Installed
on 50% of
Dec „09
Dec „10
the fastest
growing Mobile smart phones
shipped in
USA Content category
2010 in China
Comscore Media Metrix, June 2010 and February 2011
7 © 2010 IBM Corporation

This communication is increasingly augmented with videos, photos &
other multimedia content resulting in phenomenal growth of data traffic
2184
Smart phone Mobile Internet Mobile Internet /Data Traffic
Petabytes/ month 89
615
Middle East & Africa
Latin Amercia
Central and Eastern Europe 1076
Western Europe
37
135%
Asia Pacific CAGR 867
342
North America
483
15
406
The AppStore 158
207
85 182 397
65
34 80 201
41 91
6 17
2008 2009 2010 2011 2012 2013
SOUTHEAST • 2007: 75% of traffic was fixed/mobile voice
ASIA
• 2012: 90% of traffic is fixed/mobile data (2/3 of which is mobile data)
Source: Cisco Visual Networking Index, June 2009, IDATE, IBM institute for Business Value (IBV) Analysis © 2010 IBM Corporation

Telecom revenues do not track the increases in network traffic
anymore
Traffic
Traffic
Volume / Voice
Revenue Dominant Network Cost
(existing
technologies)
Ecosystem Revenue
Value
Opportunity
Telecom Revenue
Network Cost
(future
technologies)
Data Dominant
Time
© 2010 IBM Corporation
Source: Nokia-Siemens; IBM Institute for Business Value (IBV) Analysis

After a decade of massive change what is the future of telecom?
Likely but uncertain trends 1 Telecom industry revenue and
with potentially high profitability outlook for each
scenario by region and access
impact and multiple
(fixed/mobile) for 2015
outcomes
Revenues
2
Determining Trends
5
3
Underlying trends in the evolution of the
communications industry for which
SCENARIO 2008 Survivor
Consolidation
Market
Shakeout
Clashof Giants Generative
Bazaar
there is very high degree of
SYNOPSIS &
certainty and consensus Free Cash Flow
OUTCOME (EBITDA - Capex)
Provide backdrop for the future of
telecommunications in 2015
REALIZATION 2008 Survivor
Consolidation
Market
Shakeout
Clash of Giants Generatiev
Bazaar
PATH
Major economic, competitive
and technological events that
4
trigger each scenario
© 2010 IBM Corporation

The interplay of addressable market growth and the competition/
integration structure produces 4 distinct future industry scenarios
Expanding
CLASH OF GIANTS GENERATIVE BAZAAR
Spectrum Spectrum
Passive
Infrastructure
Passive
Infrastructure
Enabling the two-sided business
Active Active Device Aplication Media Telecom Electric Banking & SERVICE
OTT/ Device Aplication Media Telecom Electric Health Care Banking &
Network Network Manufacturers Developers Organizations Retail Utilities Health Care Finance
Addressable Market Growth
Manufacturers Developers Organizations Retail Utilities Finance PROVIDERS
Support Support $
Telco Infrastructure
Retail
Infrastructure
Retail
OEM $ NET CO-OP
OPEN
ACCESS
Channels Channels NET CO-OP Telco
Devices Devices $
CONSUMERS
CONSUMERS / BUSINESS
Customer Customer
SURVIVOR CONSOLIDATION MARKET SHAKEOUT
Spectrum
Passive Passive Active
Infrastructure Spectrum Infrastructure Network
Active
Declining/ Stagnant
Few large Network
Support
Support
Infrastructure
Devices
Retail
Channels
Infrastructure
players Retail
Channels
dominate Devices
Brand Brand
Market Customer
Customer
Customer
Many players - Fragmented
Competition/Integration Structure
Concentrated / Vertical Fragmented /Horizontal
© 2010 IBM Corporation

Generative Bazaar represents the most optimistic outlook for
telecoms, relative to the IMF’s global GDP forecast for 2011 – 2015
11%
Global GDP vs.. Telecom Services Growth Scenarios
9%
Developing Asia GDP 8,6%
7%
Global Telecom 2010 – 2015 Telecom Growth Scenarios
Growth
Generative Bazaar 5.3%
5%
Global GDP 4.5%
Clash of Giants 3.3%
3%
Market Shakeout 1.8%
1%
Survivor Consolidation 0.2%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-1%
Source: International Monetary Fund (IMF), World Economic Outlook Database, October 2009; http://imf.org/external/pubs/ft/weo/2009/01/weodata/index.aspx, IBM
Institute for Business Value (IBV) and IDATE Analysis, 2004 - 2009 growth forecasts are based on IDATE "World Telecom Service Market", 2008 Edition - January IBM Corporation
© 2010
2009, revision in July 2009. 2010 -2015 are IBM Telecom 2015 scenario forecasts

Strong growth requires the industry to act collectively to create the
necessary conditions for the emergence of more profitable scenarios
Industry Collaboration
to compete against
OTT
Cost-effective Enhance
Role in
Ultra-Fast
Vertical
Broadband Leverage
Markets Analytics for
deployment
Customer
Insight
Stimulate a range of new
and exciting next gen Services
by OPEN INNOVATION
© 2010 IBM Corporation

The race for mobile broadband has been decided in favour
of LTE
Which of the following access technologies are going to be critically
Ultra-fast Broadband
important to the success of your business over the next 5 -10 years?
Critical to Success Neither Not Critical to Success Major operators LTE deployment schedule
FTTx 71% 27% 2%
4G/ LTE 67% 33%
3G 44% 48% 7%
xDSL 43% 48% 9%
Geographical mapping LTE developments
CATV 27% 39% 34%
2G 20% 42% 38%
WiMAX 8% 38% 54%
0% 20% 40% 60% 80% 100%
“WiMAX only relevant if 3G/4G spectrum lacking”
Head of Product-IT Development, European CSP
2009 IBM Institute for Business Value Telecom Industry Survey N=61
© 2010 IBM Corporation

Some national governments fund open access network
infrastructures to spur economic growth
Innovation
A nationwide ultra high speed fibre NBN as „game changer‟ for
access infrastructure and a consumers and international
complementary pervasive wireless competitiveness:
network to support various - Fibre with speeds > 100 Mbps
vertical sector economies - NGN Wireless with speeds > 12
15 © 2010 IBM Corporation

Today’s consumers are getting smarter
– Customer Advocacy is key to retain customers
Customer Insight
Advocates
China has the:
Apathetics • lowest proportion of advocates
• highest proportion of Apathetics
Antagonists
100%
Advocates = customers who :
80% 1.Recommend their Provider to others
2.Increase purchases if their Provider
60%
offered “other provider” products
40% 3.Stay with their Provider if another
provider offered a better price and/or
20%
higher quality service/product
0% Antagonists = customers who say „no‟ to
China
Australia
Spain
Sweden
France
all three statements
US
UK
S. Korea
16 Source: 2011 IBM Global Telecom Consumer Survey, 22 countries, N = 11315 © 2010 IBM Corporation

Consumers now have access to a huge amount of
information and are interconnected
Customer Insight
Q19 What are your preferred sources of information when you are looking for
communications products and services?
Recommendations / advice from friends, 66%
familiy, peers 72%
56%
Internet search on comparison sites 57%
Social Media, blogs, discussion groups, 45%
knowledge sharing web sites 59%
34% All ages
Web sites of communication providers 24%
< 25 year
Emails from communication providers, 20%
including promotional offers 15%
Recommendations from
18%
Traditional advertising 19% friends/ family/peers, Internet
search on comparison sites,
8% and Social Media are the
Shopping portals/auctions 10%
preferred sources of
Retail stores
8% information.
11%
0% 10% 20% 30% 40% 50% 60% 70% 80%
17 Source: 2011 IBM Global Telecom Consumer Survey, 22 countries, N = 11315 © 2010 IBM Corporation

Consumers do not always let their provider know about
problems which is fundamental to their business
Customer Insight
Do you ever complain to your service provider when you are disconnected
from the network during a conversation, a voice call or internet session?
100%
90% 25%
35% 31% No
80%
48% 47%
55% 54%
70% 63%
71% 67% 67%
60%
50% Yes
40% 75%
65% 69%
30%
52% 53%
45% 46%
20% 37%
29% 33% 33%
10%
0%
China
Australia
Brazil
Spain
Sweden
France
Global
UK
USA
India
Korea
18 Source: 2011 IBM Global Telecom Consumer Survey, 22 countries, N = 11315 © 2010 IBM Corporation

But they do tell their friends/family and that can be damaging
What happens when you are disconnected from a mobile, landline
Customer Insight
or broadband during a voice call or when accessing the Internet?
Attempt to re-dial/re-
connect
34% 40% 20% 5% 95%
Attempt Redial/
Reconnect
Tell friends/family about
14% 37% 43% 6%
my poor experience
Avoid providers
friends/family have poor
experiences with
14% 35% 40% 10% 94%
Tell friends/family
Contact customer about their poor
8% 28% 50% 14% experience
service
Switch providers – e.g.
8% 24% 38% 30%
use different SIM
89%
My provider contacts me Avoid Providers with
when I have a poor 9% 26% 31% 33% poor experience
nework experience
Always Most of the time Sometimes Never
19 Source: 2011 IBM Global Telecom Consumer Survey, 22 countries, N = 11315 © 2010 IBM Corporation

Apart from Banks/Government, CSPs are among the more
trusted to manage identity and private/personal information
CSPs using
Vertical Markets
personal
data
for Private data
Banks 48% 45% 7% Customizing 15% 37% 47%
Products
Government 80% don‟t mind/care
33% 52% 15%
Local autorities Online history
CSPs 24% 63% 13% with consent 16% 38% 46%
Healthcare
20% 65% 15% Payments on 17%
organisations 35% 48%
Internet/Mobile
Retail stores 20% 67% 13%
Online history
Online stores 17% 67% 16% without consent 18% 38% 45%
Insurance
companies
15% 59% 26% Managing
19% 35% 46%
identity
ISPs (Google, etc.) 15% 65% 20%
Social Networks 11% 58% 30% Advertising 20% 38% 43%
Most trusted Moderately Least Object Don't Mind Don't Care
20 Source: 2011 IBM Global Telecom Consumer Survey, 22 countries, N = 11315 © 2010 IBM Corporation

Vertical Market opportunities ranked as number one by
consumers surveyed in China
Retail/Shopping Financial Services Healthcare
Vertical Markets
Nbr 1: Receive Mobile Nbr 1: Manage bank account Nbr 1: Reminders for
coupons/Discounts (57%) though mobile (59%) medications/appointments (54%)
Public Services Travel & Transport Utilities
Nbr 1: Authenicate for public/ Nbr 1: Pay for public Nbr 1: Alert when monthly usage
local services (56%) transportation (60%) reach a pre-set threshold (61%)
21 Source: 2011 IBM Global Telecom Consumer Survey, 22 countries, N = 11315 © 2010 IBM Corporation

Mobile network operators face new challenges as data becomes the
majority of the content they deliver
Our world is becoming
INSTRUMENTED
Our world is becoming
INTERCONNECTED
Virtually all things are becoming
INTELLIGENT
... The world need smarter networks
© 2010 IBM Corporation

www.ibm.com/iibv
Thank
謝謝
you!
Rob van den Dam
Global Telecom Industry Lead,
IBM Institute for Business Value
rob_vandendam@nl.ibm.com
© 2010 IBM Corporation