PRODATA PARTNERS LTD

PRODATA PARTNERS LTD Market Modelling in Telecoms & ICT Markets www.prodata-partners.com

Prodata undertake extensive market modelling and forecasting work for blue chip customers in the international telecoms & ICT marketplace Desk research Primary research Dynamic market models Macro-economic factors Client data Market Forecasting & Modelling • Results orientated advice:- • Identify areas of opportunity & threat • Forecast revenues and cost • Understand the impact of industry trends • Target business development, sales & marketing activity • Test pricing strategies • Benchmark operations against industry standards • Inform investment decisions

Prodata Market Modelling – Methodologies (1) • Since the late 1980s, Prodata has advised several telecommunications & ICT companies/consortia on likely demand for new & existing products & services. • Our clients rely on credible and reliable demand forecasts, to ensure that their applications and business plans are transparent and robust. • Clients need to know the expected stream of revenue from projected demand, in order to judge the value of their investment and customer base. • In addition to demand modelling, Prodata offers a modelling service that ranges from support in preparation of business plans or bid documents, to the turnkey preparation of models and business/marketing plan, including technical and financial input.

Prodata Market Modelling – Methodologies (2) • Prodata modelling support has been highly successful in securing licences & business plan investment for many clients, varying in value from thousands to several hundred millions of dollars. • Prodata models make extensive use of a variety of sources, including:- • Our own or the client's primary research data; • Secondary market/demographic data sources; • Client in-house data, e.g. from billing/reporting systems. • Our methodology also embraces techniques such as price elasticity of demand, demand adoption curves, and market segmentation.

Prodata Market Modelling – Typical Coverage • Prodata market modelling & forecasting has covered a number of business-critical areas for our ICT clients, e.g.:- • Potential demand • Penetration forecast, e.g. product/customer life cycle modelling • Churn, market share of gross additions, market share of installed base • Mobile/fixed subscriber base • Price elasticity of demand & monthly bill forecasts, e.g. using price elasticity of demand • Take-up of new services, e.g. broadband • Tariff forecasts • Traffic forecasts • Incremental revenue from new services • Cost/ROI modelling • Customer segmentation

Prodata Market Modelling – Typical Methodology • Prodata has produced a wide range of market models across several countries worldwide, modelling up to e.g. 10 years ahead for by market, competitor base, region or country. • Our models have frequently formed an integral part of operator licence applications. • Such models cover all aspects of marketing planning for operators already active in a specific market, or a new operator/market entrant. • Forecasts can be developed for the market as a whole, and in more detail for a specific venture under consideration. • Modelling methodology often consists of 4 key stages:- • Determine the maximum potential demand expressed as the percentage of the total population who will eventually be subscribers, divided into e.g. business and consumer market segments; • Fit product life cycle curves for each market segment to forecast the market by segment, and calculate the total market; • Develop assumptions as to coverage, churn, and market shares, to forecast the market share for each competitor in the market; • Forecast the marketing parameters required for the business plan of the venture under consideration, such as tariff packages, minutes of use per customer, traffic by destination & origin, roaming, interconnect, distribution, etc.

Example Outputs Required – Telco Models • Basic Data Requirements • Penetration & total subscribers • Price elasticity of demand • Average monthly bill and total revenue • Minutes of use • Other • Coverage • Churn & gross additions • Market share of gross connections and installed base • Customers by segment/tariff plan • Take-up of services • Traffic destinations, origins & roaming • Interconnect • Distribution channels

Example Forecast Model Outline Market Research, Benchmarks & Reasonableness Checks Maximum Potential Demand Product Life Cycle Stage Determination Historic Data, Shape of Growth Curve Marketing Indicators Demand / Penetration Forecast Curve Fit Consistent With Product Life Cycle Stage and Price Elasticity of Demand Market Research, Penetration Forecast, Reasonableness Checks Marginal Bill Forecast Forecast of Average Monthly Bill Current Average Monthly Bill Plus Sum of Marginal Bill, Price Elasticity of Demand Tariffs Against Average Monthly Bill, Benchmarks for Mobile Terminated Traffic Minutes of Use Forecast Market Value Forecast Average Monthly Bills & Total Subscribers

Demand & Price Elasticity Models – Typical Decision Chain Total sample Reject because of price or coverage No interest at all Collect classification data & terminate Interested in product / service Explain price will fall & quality will improve in future All respondents who continue to main survey represent the maximum potential demand Maximum potential demand as % of population limited by willingness to pay a minimum Determine at what price respondents are willing to adopt and use product/service Price elasticity of demand, revenue forecast as a function of penetration Collect classification data & terminate Market segmentation of product/service demand

Forecast Model Flow Chart Example: Mobile Model Market Survey or Benchmarks Maximum Potential Demand Price Elasticity re Monthly Bill for Marginal Subscribers as Function of Penetration of Potential Demand Average Monthly Bill Existing Subscribers Forecast of Penetration of Maximum Potential Demand Forecast of Marginal Monthly Bill as a Function of Penetration Population Coverage Forecast Forecast of Gross Adds & Installed Base Venture Tariff Plans Forecast of Market Average Monthly Bill Venture Gross Adds by Tariff Plan Per Operator Churn Per Operator Gross Adds & Installed Base Compare Adjust Venture Installed Base by Tariff Plan Monthly Minutes of Use by Tariff Plan Venture Average Monthly Bill Forecast Market Share of Gross Additions

Cost of Adoption vs. Penetration Forecast: Example Handset Cost vs. Price Elasticity of Demand 3,000 35% Penetration of Pops 30% Adoption Price Accepted 2,500 Handset Price 25% 2,000 20% Handset Price 1,500 Penetration of Population 15% 1,000 10% 500 5% 0 0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Western European country - sample 2,000 interviews

Forecast Model Flow Chart Example: Business Market for Telecoms Services Annual UK & Global Turnover Data by Company Av. % of turnover spent on ICT (Industry Ests) Av. % of ICT spent on Comms Weighting: Tiered Customer Category Customer ICT spend split down to Voice, Data & Mobile (Customer Research % Spend Ests) Weighting: Av 3-Yr GDP LOB Growth (Natl Office for Stats) £ Spend on ICT & Comms by Company Customer £ Split by Product Line (Customer Research) Weighting: LOB Comms Intensity Factor (Industry Ests) % Intended Increase in ICT Spend (Customer Research) Projected Weighted Available Customer ICT & Comms Spend for next year Projected Customer Turnover, ICT & Comms Spend for next year Customer £ potential for current/next year Weighting: Non-Economic LOB Drivers (Industry Rpts) Av 3-Yr % turnover growth Back check vs. client billed £

Prodata Product & Service Skills Areas • Modelling CRM market segmentation by producttype • Prodata constructed a bottom-up model of the international CRM market for a leading telecommunications company. . • Dynamic, macro-driven model provided vital information on current addressable market and future growth of the CRM market by product type. • Identifying key growth areas in the CRM sector, this model was an integral resource enabling the client to identify opportunities for market share gains, and to maximise returns from the adoption of CRM as a key business strategy. Voice Services Wide area networking Inbound services Managed services Private circuits IP Networking/Telephony Wireless/Mobile Operator Licence Models Market Pricing Churn Prevention Mobile Data/Fixed-Mobile Data Services Frame Relay ATM MPLS Broadband Internet, Intranets Local Area Networking Optical/Storage Area Networking Applications CRM Knowledge management Supply chain management Outsourcing/BPO E-Business/Content Other Networking Equipment Software Applications Business Continuity/Security Applications B2E / Enterprise-Based Solutions

Prodata Market Modelling – Case Studies (1) • UK MNC Market Sizing Modelling (UK Telco) • Model of UK multinational business market for telecoms services, to give the client a multi-dimensional understanding of markets and lines of business. • In-depth analysis of the market sizing opportunities for each product/service area, broken back by product components for each of the client’s constituent markets. • Model datawas generated from:- • External primary market research • Assessment of external factors, e.g. National Office of Statistics data on GDP etc • Secondary market data, e.g. vertical market sector reports (Mintel etc) • Client internal database data, e.g. account manager input • This provided strategic and marketing information for the client onopportunities by line of business, products and services, customer segment/sector etc. • Reseller Channel Model (UK Telco) • Database model profiling all resellers, distributors and other partners used by the client in the telecoms market, together with market potential for client products & services. • Model included easy-to-use dropdown menus and browser buttons, for client users to view market profiles and potential revenues by product/channel at a glance.

Prodata Market Modelling – Case Studies (2) • CRM Market Modelling & Forecasting (European Telco) • In-depth market & revenue modelling, covering:- • Potential CRM universe by size of business/sector/spend on CRM • Analysis & projection of take-up by product/service • Sensitivity Analysis - modelled scenarios • Projected future value of different customer segments • ICT Propositions Model (International Telco) • Prodata generated potential market sizing breakdowns for key propositions areas being developed in CRM, Organisational Effectiveness, Knowledge Management, SCM & E-business. • Output consisted of 5 models, showing potential market size for each constituent product within product lines across each of the propositions areas. • Each model contained market sizing estimates by sectors and lines of business, with estimates of potential client market share. • Further assessment was carried out to identify equivalence against client billing and account management data. • Segmentation was carried out by proposition and by market. The model segmented down to revenue opportunities, by analysing potential market share by product line within each proposition group.

Prodata Market Modelling – Case Studies (3) • Drivers of Customer Satisfaction Models (International Telco) • Key driver satisfaction modelling for several client business divisions since 2001. • Modelled customer satisfaction metrics against service and perception measures via external customer research, benchmarked against client and customer-defined targets. • Satisfaction driver models use multiple regression techniques, including ridge regression to remove the effects of correlation between predictor variables/ multicollinearity. • Prodata has also analysed, compared and modelled data from the client’s employee care and reseller surveys. • Voice Services Market Model (UK Telco) • Market size and share modelling tool for voice & related services. • Data determined from several external & internal sources, e.g.:- • Desk research e.g. Oftel and analyst reports • Monthly research interviews with customers • Products/services modelled included:- • Local, National, IDD, Fixed-Mobile, Non-Geographic, Internet Calls • Analogue/Digital Private Circuits • PSTN/ISDN Lines • Centrex Calls & Lines • Switches (< 100 and > 100 ports)

Prodata Market Modelling – Case Studies (4) • Capacity Resale Market Model (International Telecoms Reseller) • Forecasting model to assess market for dynamic resale of excess T-1 capacity, including traffic & pricing scenarios, customer retention/churn analysis, capital outlay, cost components & risk factors. • Resulted in successful strategy for marketing excess capacity, in line with annual increases in T-1 traffic take-up between US and UK. • Microbusiness & Consumer Fixed & Mobile Market Models (UK MVNO) • Modelled 12 industry sectors & 11 demographic segments of fixed & mobile universes, analysed by calls, equipment, market value and share. • Model data was generated from Prodata primary market research and secondary reports, e.g. Oftel, TGI data. • Model output was used extensively to support business case and market planning. • Operator Licence Models (International Telcos/Altnets/Mobcos) • Prodata has been used extensively since the early 1990s to construct operator business case licence models, by mobile and fixed licence applicants and new market entrants across Europe and Asia-Pacific, including Philippines, Taiwan, Germany, Netherlands, and several other markets.

Prodata Market Modelling – Customer Feedback "The quality of Prodata's work has surpassed our expectations, and given us a rich resource for continuing to enhance our understanding of SME business needs." Rogers AT&T Wireless "Prodata's customised mobile market forecast proved very effectivein meeting our marketing planning and management reporting needs." Bouygues Telecom

Prodata Market Modelling Team • We work with over 35 consultants based in more than 20 countries worldwide • A virtual team is put together based on the mix of deliverables and individual expertise required for each project • All our consultants have had extensive hands-on telecoms/ICT experience prior to working in market modelling, research and consultancy with Prodata

Prodata Modelling Specialists - Selection • Hakan Eriksson – Senior Associate • Highly experienced telecommunications & ICT modeller • Specialist in business forecasting and planning, utilising & linking data from disparate sources • Skilled in database modelling • In-depth knowledge of statistics, business services and programming • Key Prodata market modelling projects managed by Hank include:- • Complex business market sizing & forecasting model updated bi-annually for a UK telco, covering all telecoms products & services & drawing/linking data from external secondary data sources, market research surveys, and the client's own billing and reporting systems • Industry sector market profiling & forecasting model for a major telco, including analysis of demographic & database data • Hank previously developed a number of services for Ericsson, e.g. management of writing code for Symbian operating system • Louise Crosby – Senior Associate • Over 18 years’ experience in telecoms & utilities market modelling • Key Prodata market modelling projects managed by Louise include:- • Detailed market sizing & forecasting model, updated quarterly for a UK telco selling to the top 2500 UK enterprises, covering all telecoms products & services • Market forecasting and profiling model for a major telco, covering several industry sectors in the medium-large enterprise market • Previously senior modeller in PriceWaterhouseCoopers telecommunications & utilities consulting divisions • Managed complex business planning & evaluation models, development of corporate guidelines for spreadsheet modelling best practice • Economist to the Government of Botswana, including managing large government projects in the telecommunications sector

Contact us DIRECTOR: Sarah Ball Telephone: 01494 717176 07767 477738 (mobile) Email : sarah.ball@prodata-partners.com www.prodata-partners.com

PRODATA PARTNERS LTD