Reinventing the Profit Engine. Telecom & Media Industry Overview and Trends Mark Page

Transcription

1 Reinventing the Profit Engine Telecom & Media Industry Overview and Trends Mark Page

2 In the last 10 years, the global telco, internet and media market grew more strongly than the world economy Industry growth versus GDP growth Percentage points 13% 2% Industry Growth Higher than GDP Growth 1% 0% 2% 4% Industry Growth Lower than GDP Growth 4% -4% 5% Global GDP (nominal) has grown by 7% p.a. this decade our industry by 10% p.a. The global industry grew from 3% to 4% of global GDP (over 2 trillion USD) There was no year when the global industry contracted, in absolute terms (1) Revenues of 358 publicly listed telco, internet and media companies; some 2009 figures extrapolated Source: IMF, Bloomberg, A.T. Kearney analysis 2

3 Value creation within the market has been skewed traditional telecoms and media players have stagnated Large Company Market Capitalisation by Value Chain Segment indexed 500 PC & Devices Online Services 2 Internet Enablers Telco 4 Media (1) Average for Disney, NewsCorp, Time Warner,Warner Music Group, Vivendi & Electronic Arts (2) Average for Amazon, Google, Yahoo, ebay, Baidu, Expedia & Partygaming (3) Average for Akamai, CyberAgent, Google, Valueclick, Verisign & WPP (4) Average for AT&T, Vodafone, NTT, British Telecom, Deutsche Telecom & France Telecom (5) Average for Microsoft, Apple, Dell, Acer, Nokia & McAfee Source: Bloomberg, A.T. Kearney analysis 3

4 Comms Sector Media Sector HT Sector Telefónica Consolidation across borders and sectors has been a key response, with more expected Extensions of Scope and Scale Global TMT European Telecoms Consolidation Trends Sony Ericsson 34% Pure Play 10% 20% Sky Google 12% National F-M Telefónica Vodafone 54% Multinational Fixed-Mobile 70% Local market Regional Market Global market name Indicates starting position Indicates geographical and/or sector expansion Source: Company Reports, Merrill Lynch, A.T. Kearney analysis 4

5 Emerging markets boosted growth, but the Indian wireless market shows the effect of intense competition Mobile Subscribers Millions 26 CAGR +77% 262 CAGR +18% E 40% % 34% EBITDA Top 3 1) RPM USD Cents/ min. 2) Entry of Global Operators In /09 Batelco Etisalat MTS Tata DOCOMO Telenor Currently 13 operators in India, with up to 10 per circle/region (1) Top 3 operators Airtel, Vodafone. Reliance Communications. Blended EBITDA calculated as total EBITDA / total revenues for all 3 operators (2) Rate per minute (@1 INR = 46) = Outgoing revenue / Outgoing MoU. Source: TRAI performance reports, company annual reports, A.T. Kearney analysis 5

6 Voice Revenue per Minute Indexed to 2005 = 100 In European telecoms, fierce price declines have outpaced efforts to cut costs and boost volumes European Wireless Key Economic Trends Opex per Minute Indexed to 2005 = CAGR -15% CAGR -13% Data Revenue per GB Indexed to 2005 = 100 Opex per Air Traffic (voice & data) Indexed to 2005 = CAGR -49% CAGR -23% Source: Global Cost Benchmark, A.T. Kearney analysis 6

7 Greater sophistication in managing customer insight and loyalty can deliver revenue yield uplift Evolution of Sales Models in Print Media Consumer-based Channel-based Integrated Sales and Marketing Subscriber-based Media Sales Event Sales Advertiser Traditional print 1-on-1 sales tactics Title-based salesforce with some corporate support Digital sales (web, mobile) Combination of 1-on-1 and ad networks Digital sales force Direct effectiveness measures Experiential/ Events Sales Social Network Connectivity Integrated marketing effectiveness measures Multi-platform salesforce and marketing team Key Drivers Total Volumes Placement Effectiveness Multi-Platform, Intelligent Access Source: A.T. Kearney analysis 7

8 Broadband promises a new wave of innovation, but the industry must first shift the regulatory mindset FTTH deployment scenarios examples - Years of payback for market leader % Market Potential 1) Scenario 1: Infrastructure-based competition Scenario 2: Single regulated infrastructure, no state funding Market Potential 1) n/a 70% Scenario 3: Single regulated infrastructure, with state funding Market Potential 1) 70% State contrib.: ~ /HH % > % > % > % State contrib.: ~ /HH State contrib.: ~ 200 /HH % >25 > < 10% >25 > % > % >25 State contrib.: ~ 500 /HH Rural Urban / Suburban Dense urban Rural Urban / Suburban Dense Urban Rural Urban / Suburban Mobile Broadband can fill this gap Dense Urban (1) Operator fibre customers/total broadband customers Source: A.T. Kearney analysis 8

9 In addition, broadband markets must see a realignment of value and cost Consumer Internet Traffic & Revenue by Type, Gaming 1) 1% /Gambling Communications Other Online Services 2 6,100 PB 2% 22% $242bn 7% 1% 7% Gaming/Gambling Communications General/Vertical Content Sites File Sharing & VoD: Generate 73% of all consumer traffic......but only 8% of consumer revenues IPTV VoD/MoD 3) File-sharing/ Digital Downloads 3% 18% 54% 14% 60% Search e-retail e-travel e-brokerage 2% 6% 2% IPTV VoD/MoD 3) Digital Music/Video/Book Sales Traffic Revenue (1) Includes Video and Casual Gaming; (2) Includes all General/Vertical Content, Search and e-commerce Online Services; (3) Includes Adult Source: Cisco, Gartner, IAB, IDC, emarketer, Business Insights, JP Morgan, Natixis, PwC, A.T. Kearney analysis 9

10 10 The components of future profit growth are known but most players are too cautious about execution Plenty of room for M&A consolidation but the track record on integration / value creation must improve Expansion into new, adjacent markets can tap growth but not with an incremental, me too strategy Restructuring of core operations has been incremental to date opportunities remain to be more aggressive, for instance in aligning cost to customer value Telecom and media company skills in managing revenue yields are still weaker than other sectors and deserve a much higher priority Regulation has been a value destroyer for the industry in the past decade but there is an opportunity to reverse the situation with a more positive case