Market Driven Service introduction – Strategies for Differentiation and Expansion

1. Market Driven Service introduction – Strategies for Differentiation and Expansion Sofia, 2009-04-02 Wim Ketelbueters Head of Services Solution Sales, WSE, Central East

2. Service providers can use user insights to: Improve business performance Add value in a changing business ecosystem 5 billion people connected User insights drive service provider business 20-30% of users bring 70-80% total value to service providers. Often only 50% of users are profitable.* * Source: Nokia Siemens Networks market research and analysis

3. Service providers fight for market share with high customer acquisition & retention costs Churn has a negative impact on EBITDA margins Reducing churn leads to higher margins EBITDA margin Source: FY 2007 reports for operators with fiscal year ending December; 9m reports for operators with fiscal year ending March [marked A)]; 1H reports for operators with fiscal year ending June [marked B)] – all to the degree reported 28 Mar

4. Putting customers at the heart of business Application-centric Network-centric User-centric Network Features Silo Applications Real time and long term user and business insight Personal, Communities and Converged Services 74% of service providers have started to move to a more customer-focused delivery model over the past 12 months Business competitiveness

5. 87% of CSPs do not possess a unified user data view Key priorities: Real time user profiling Knowledge on Customer Life Time Value through long term user trends analysis 70% 60% 60% 50% 42% 40% 30% 22% 18% 20% 14% 14% 5% 10% 5% 13% 8% 0% Don’t know No plans In next 12 – 24months In next 6 months Already Moving towards a unified customer viewToday 87% of service providers do not have a unified view of user data Do you have plans to have a unified view of customers across the business? Marketing IT source: Loudhouse Market Research Q3/2007, commissioned by Apertio

6. Cost and billing Targeted tariff plans, bonus schemes and hybrid offers help Telkomsel Indonesia improve customer loyalty and increase average revenue per user. € Quality Data revenue increased 5M€ and voice revenue increased by 7M in home environment for a European service provider with 25 M subscribers after applying user insights understanding in service and network optimization. Customer service 15% reduction in help-desk work orders (330 € each), and help desk solved 30% more 2G incidents and 50% more 3G incidents after a European service provider applied user insights to customer care. Estimated OPEX savings: 2.2 M€ pa Right time to launch new products/services and support for business decisions based on device insights – European service provider. Portfolio Brand • 45% reduction in annual OPEX for customer surveys and internal efficiency gain of over 75% in market research in a European service provider’s CMO User insights improve business performance

7. Web 2.0 Broadband bit pipes Terminals Fixed/cable Multiradio Mobile platform Mobilephone POTSphone ISDNphone SIPphone PCClient TV SIP SIP PDA End user insights – Business Ecosystem Will operators loose out on $1 trillion* in Web 2.0? *LIGHTREADING, VOL. 7, NO.6, JUNE 2007 Transform or become a bit pipe?

8. Subscribers Operator Vendors Single product delivery model Business model is changing • Traditional business model • Business model is changing : • Convergence of telecom, broadcasting and internet industry • Role of traditional CSP’s are changing • Partnership between end user, CSP and partners

9. Generic Operator Ecosystem End Users Value Added Service Providers Corporate clients MVNOs Content Producers/Owners Fixedoperators Access Network Operator EquipmentVendors Content Aggregators Network Operator ContentProviders Core Network Operator ServiceOperator Investors Regulator Outsourcing License Owner IT Partners Site landlords

10. Communication Ecosystem – Conceptual Framework • 1. Which ecosystem is it? Operator view High Raft Coral Reef Relationship Complexity River Aquarium Technological Complexity of Offering Low High

11. Communication Ecosystem – Conceptual Framework High Coral Reef Raft Relationship Complexity River Aquarium Low High Technological Complexity of Offering

12. Evolution into different ecosystems emphasises various ”operator” roles High Content Aggregator Service Operator Content Aggregator Service Operator Raft Coral Reef Network Operator Critical/Emphasised Relationship Complexity Evolution trends Service Operator Content Aggregator River Aquarium Network Operator Network Operator Low High Technological Complexity of Offering

13. Evolution drivers External Influencers/Drivers Internal Influencers/Drivers General Influencers/Drivers Complexity Regulatory evolution Collaboration Growth Technology Coordination Ecosystem position Profitability Convergence End-user behaviourand preferences Internalcapabilities Saturation Competition Environment Market foundation(Country and industry macro-economic factors)

14. How to ensure growth? High Segmentation Typically, a Raft operator has to excel at meeting the market demand and its buying criteria Service By offering new services, the Coral Reef operator grows the market and its market share Relationship Complexity Price The River operator ultimately grows by competing on (market) price for network capacity Quality The Aquarium operator grows by offering high quality and extensive service portfolio Technological Complexity of Offering Low High

15. How to ensure profitability? High Operational efficiency & Premium services (Specialisation in operations and/or in market offering) Premium services & Risk distribution (High(er) margin on service offering AND distribution of risk through partner collaboration and coordination) Relationship Complexity Capacity utilisation & Volume (Optimisation of network capacity and maximisation of volumes) All (The Aquarium operator ecosystem implies that an operator excels at everything, unless a regulated monopoly limits the number of operators) Technological Complexity of Offering Low High

16. Risks and barriers High RAFT Dependency on external supply of network capacity reduces the available margin for competition (and error) CORAL REEF The coordination needs may lead to higher costs and slower market response than required Relationship Complexity RIVER The large investments in combination with falling prices risk pushing profitability downwards AQUARIUM A large integrated operation risks being less flexible in a deregulated fast-moving market and may have difficulties staying competitive Technological Complexity of Offering Low High

17. Communication Ecosystem

18. All operators should aim to be in the yellow zone. What can the efficiency calculator show? Highest Output Highly Efficient Telefonica AT&T France Telecom VodafoneGroup Verizon Communications Telstra Deutsche Telekom Telecom Italia NTT DoCoMo BT Group KDDI Least Input TeliaSonera Comcast China Telecom Corporation Highest Input MTN Group KPN Telenor Vodacom Group KT Corp PCCW Group From our analysis there are few if any operators currently in the top left quadrant of the diagram which is the highly efficiency area. ILLUSTRATIVE analysis of the GLOBAL market. This analysis can be created at a regional level Highly inefficient Least Output Efficiency Zone Inefficiency Zone Nokia Siemens Networks analysis on how efficient operators are

19. Nokia Siemens Networks helps to structure our wealth of information to facilitate knowledge sharing, discussions, and the decision-making process • Communications Ecosystem: Position your business in the industry and analyze your options for moving ahead • Differentiation Benchmark: Benchmark your differentiation profile to better understand your current market situation • Community Finder: Discover the best ways to profit by offering new services to communities • Customer Value Indicator: Compare your average customer profits against the regional benchmark. See the impact that loyalty has on your bottom line. • Operational Efficiency Benchmark: Compare your operational efficiency against the top performers in your market • Consumer Total Cost of Ownership: See how much consumers need to spend to be connected in the low income markets • Connectivity Scorecard: Compare how well different countries have put communication technology in use • Business Modeling tools: • Base station energy efficiency comparisons • Hosting (use case: MMS) • Mobile TV • Fixed-Mobile Convergence • Integrated Provisioning • Village Connection / NGM

20. Drawing on our accumulated consumer, operator and market knowledge and research, our Solutioneers are dedicated to understand and find solutions for your changing business needs. All this knowledge has been collected in our unique Fit for Business tool. We can scan and evaluate opportunities together with you for your competitiveness in the areas of both immediate operational effectiveness, and longer-term strategic positioning. Fit for Business – market radarA unique way of looking at the market dynamics

21. Our proven track record More than 360service management CSP installations globally – mobile and fixed Over 45subscriber data management customers HLRs serving more than 1 billion subscribers every day Over 500 systems integration projects globally 250charging CSP customers globally – mobile and fixed More than 200 2G/3G commercial networks optimized, and more than 80 multi-vendor optimization projects More than 160 consulting engagements for over 70 operators globally

22. Thank You !

23. Appendix

24. Relationship complexity Level of dependency on external contributors to deliver its product & service offering to its customer segments: Content creation Service providers Technology platforms: outsourcing Granularity of customer segmentation Technological complexity of offering Technical platforms and; Service platforms in operator network Degree of ownership of technical & service platforms Defining the ecosystem type 1/2: defining factors

25. Technology Operators ownership and attitude towards different technologies. Approach to research and development (in-house or outsourced). % of headcount in network operations & management. Licensing To have the license or not. Content and value-added services (VAS) Operators attitude towards content and VAS creation and delivery. Customer segmentation Number and types of segments addressed. Marketing, retail network and distribution Operators means to approach its customers. % of headcount in M&S. Defining the ecosystem type 2/2: the viewpoints

26. River “Offers an environment (or parts of it) for everyone that is willing and able” River • Technology & Licensing • License/no license • Radio capacity retailer & network manager, or • Radio capacity retailer only, or • Network manager/platform only • Focus on basic-technology core & access networks • Wide coverage • Flexible platform (neutral to access) • Neutral to packet- or circuit switched • Lets customers take care of application layer solutions • Highly adaptive to new access technologies • Content & Value Added Services • No or minimal content & applications • Segmentation • B2B • Marketing, Retail Network & Distribution • B2B • Minimal visibility to individual end-users • Very low personalization Examples: Network providers

27. Raft “No infrastructure, moves easily about its ecosystem ” Raft • Technology & Licensing: • Minimal infrastructure (if any) • No license ownership • Indifferent or adaptive to new disruptive technologies • Content & Value Added Services: • Capacity buyer • Content buyer & provider • Focused on parents brand & customer service (e.g. Wal-Mart) • Segmentation • Highly focused segmentation • Segmentation on distribution (internet users) • Marketing, Retail Network & Distribution • Very aggressive push mode • Maximising visibility to chosen customers segments • Marketing & sales oriented organization • Diverse retail network (or through main business outlets, e.g. Tesco) • Diverse service offering • Moves quickly and easily in the market • High personalization • Internet as distribution channel • Brand Examples: Resellers, service operators, MVNOs & MVNEs

28. Aquarium “Solid infrastructure, sets circumstances for its surroundings” • Technology & Licensing • License owner • Own network • New service platforms • Possibly proprietary solutions • New disruptive technologies threat • Content & Value Added Services • Restricted outsourcing • Own portal • Own content development • “Gatekeeper”: firm control over external content • Segmentation • Volumes to masses: addressing all segments • Marketing, Retail Network & Distribution • Low personalization • Typically firmly integrated subscriber/retailer network Aquarium Examples: Walled-garden

29. Coral Reef “Neutral to infrastructure and highly prospering and colorful ecosystem” Coral Reef • Technology & Licensing • License owner • Neutral to infrastructure & technology • Network/infra outsourcing • Neutral or adaptive to new disruptive technologies • Content & Value Added Services • Has highly advanced & open business network • New innovative cooperation methods • Revenue sharing • Hosting • Managed Services • Content outsourcing • High number of agents in its ecosystem • Segmentation • Focus on key segments • Maybe several brands for different market segments • High personalization • Marketing, Retail Network & Distribution • New & innovative service orientation • Diverse subscriber/retailer network • Few flagship stores • Franchising & partnerships • Very selective on retailers • Brand Examples: Traditional innovators