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Presentation by Carlos Barnes at CANTO 2014
Citation preview
Creating valuewith
Network Performance
CANTO @ Bahamas – August, 2014
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 2
2014 FIFA World Cup…
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 3
The Playing Field Continues to be Changing…
?
New Market Dynamics…
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 4
MARKET TRENDS 2014
This slide contains forward-looking statements. Actual result may be materially different.
Digital lifestyle drives the demand for new and innovative apps and devices
Superior network performance is essential for differentiation and value capture
Increased focus on the complete customer experience
A data-centric world is rapidly emerging, bringing new business models
ICT, fueled by mobility, broadband and cloud, transforms industries and creates value
Smartphone intensive markets defined as markets with smartphone penetration above 50 percent in 2013.
>75%Mobile video traffic growth will exceed
75 percent
Data will exceed 50 percent of
revenues globally in
smartphone intensive markets
Every other subscriber will
have a smartphone
1/2
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 5
By 2019…
700 MPCs & Tablets
9.2 BNMobile Subscriptions
5.6 BNSmartphone
Subscriptions
7.6 BNMobile broadband
Subscriptions
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 6
What's driving the growth?› Number, Availability and Price of Smartphones› New connected devices› Better User Interface› Mobile Applications› Laptop Penetration› Cheap Dongles› HSPA Networks› Effective Pricing Plans› Clients Usage Profiles
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 7
Good Start… But tremendous upside.
Source: eMarketer/ Ericsson Research estimates 2014Note: One Subscriber may have more than 1 connection
5.2B
1.56B
2013
CAGR: 20%
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 8
Mobile Traffic Growth
Based on actual measurementsDVB-H, Wi-Fi, and WiMax are not included
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 9
Mobile Penetration
Source: Ericsson Mobility Report 6/14
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 10
Latin America Mobile PENETRATION
Source: Statista 2014
93%
110%
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 11
Subscription density in the Caribbean
Source: ICT Pulse - 2014
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 12
Avg. Subscription Penetration Rates
Source: ITU, 2013
113%
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 13
Data Affordability in the Caribbean
Source: Source: ICT Pulse - 2014
Portion of monthly income consumed by a mobile/cellular data plan with a 1 GB cap in
select Caribbean countries as at July 2014
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 14
Data Revenues latam
4Q134Q12
Latam Latam ArgBrazilBrazil Latam Latam ArgBrazilBrazil
Mobile Voice
Mobile Data
Absolut (Reported Currency) Relative Percentage (100%)
Share of Mobile Data and Movile Voice Revenues (4Q12 to 4Q13)
50%
100%
Source: Ericsson analysis.
Latam Mobile Data Revenues <50% as Smartphone Penetration is Low (~30%)
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 15
Data Consumption per device and Year
13 GB
4.5 GB
2.5 GB
2019
3.3 GB
1 GB
0.65 GB
2013
10Xgrowth in
mobile data traffic
between 2013 and 2019
>50%of TRAFFIC
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 16
Tablets –lots of room to grow
Source: KPCB May 2014
56% of Laptops28% of smartphones
8% of TV´s
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 17
Tablets growing faster than pc´s ever..
Source: KPCB May 2014
52% in 2013
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 18
Media engagement rises with # of screens
Source: KPCB May 2014
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 19
Global Mobile traffic Growing at +1.5X year
Source: KPCB May 2014
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 20
Most Social Networks are mobile first
Source: WSJ, Comscore, Statista 12/13
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 21
+20% of Latam users on LTE in 2019
Source: Ericsson Mobility Report June14
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 22
Traffic mix for applicationsand devices
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 23
Application mix similar on 3g & 4g
Video dominant on 3G and 4GSocial and IM large part of 2GSource: Ericsson Smartphone LAB deep dive
measurements for iPhones, advanced MBB market
elsustainable competitive advantage through quality & performance
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 25
TIME TO CONTENTCRITICAL FOR USER EXPERIeNCE
25%OF Mobile users
ABANDON WEB PAGEAFTER 4 SECONDS
50%OF MOBILE USERS
ABANDON WEB PAGEAFTER 10 SECONDS
”Just a second please”
Commercial in confidence, © Ericsson AB 2013
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 26
Digital Content grew at +50% during 2013
Source: KPCB May 20141Petabyte = 1MM Gbytes; 1 Zetabyte = 1MM Petabytes
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 27
How to cope with traffic growth?
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 28
App coverage: new dimension of performance
Can I watch
the show here?
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 29
Application coverage & Flow of users
Application CoveragePerformance
User perspective
Flow of UsersPerformance
Network perspective
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 30
App coverage
5% 48% 16%
1
100.1
>50%<1%
MBPSDOWNLINK SPEED
Recommended Grade of Service
>95%
Very Average User Throughput comparing to Global Speeds
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 31
RECOMMENDEDGRADE OF SERVICE
Commercial in confidence, © Ericsson AB 2013
La networks among worst performing in the world
>90%DOWNLOADS
< 0.1 MBPSDOWNLOADS
> 1MBPSDOWNLOADS
> 10 MBPS
North America
78%5% 31%Latin America
48%16% 5%
Eastern & Central Europe
55%18% 5%
Western Europe
78%6% 17%
Middle East
77%6% 27%APAC
54%15% 8%Africa
58%10% 7%
App coverage status, H1 2013
1>90%
100.1
>50%<1%
MBPS
DOWNLINK SPEED
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 32
Latin americaBest Operators per CItyDL > 1 Mbps vs. DL > 10 Mbps
January to June 2014 Cellular Data [%]
[%]
Download percentage > 1 Mbps
Dow
nloa
d pe
rcen
tage
> 1
0 M
bps
Oper. BDRClaro DR
0%
5%
10%
15%
20%
25%
30%
35%
40%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Oper. BBuenos Aires
Oper. CBogota
Oper. C Caracas
Oper. C Guatemala
Oper. C Kingston
Oper. B LimaTelcel DF
Claro Sao Paulo
Claro Rio
Oper. CChile
Oper. CCali
Better Operators
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 33
Global BenchmarkDL > 1 Mbps vs. DL > 10 Mbps
Establish, Expand HSPA & Accelerate LTEJanuary to June 2014 Data[%]
[%]
Download percentage > 1 Mbps
Dow
nloa
d pe
rcen
tage
> 1
0 M
bps
Wantedposition
CLARO DR
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 34
Is there a recipe for success?
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 35
CAGR 2009-201312.9 %2.6%
Frontrunners Outperforming revenue growth
80%
90%
100%
110%
120%
130%
140%
150%
160%
170%
180%
190%
201220112010200920082Q07 2013
PeersFrontrunners
Percent of 2Q07 levels
Source : Ericsson analysis – operator reporting (12 leading operators)*) Average CAGR among analyzed operators
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 36
“Streetwise Metrics”Experience-centric KPI:s
“Co-Partnering”Visionary Collaboration
“Unboxing”Redefine Subscription
“Show Casing”Quality-led Marketing
“Ecosystematic”Open-ended Innovation
“Gap Minding”Visionary Investing
Lead by superior network performance
Lead by innovative Marketing & Offering
Six behaviors that set them apart from their peers
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 37
Leading Revenue Growth
Data centricLeadingProfitability
Frontrunners identified
Evaluated and Identified Based on 3 Key Parameters
Reaching towards 10% or higher
25-50% data revenuesGrowing EBITDA
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 38
Causal Relationship between Variables
Source : Ericsson and Telecom Advisory Services LLM 2014Base: Market data from Brazil, Mexico & U.S.
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 39
What is the situation in Latin America?
UsersDevicesTraffic
Capex PerformanceSatisfaction
Profits
The RLAM operator situation 2012-2013
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 40
Finding proof that this virtuous circle is true
Capital expenditures
Operationalperformance
Marketperformance
Financial performance
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 41
Conceptual model
Capital expenditures Operational performance Market performance Financial performance
To find the main drivers of performance the model interlinks the different drivers in
each part of the chain
Capacity upgrades
Network modernization
Product/service development
Accessibility & data completion rate
Percent connections higher than 1 Mbps
Speech call quality index
Market Share
ARPU increase
Churn reduction
Revenues
EBITDA
Free cash flow from operations
Latency reduction
Throughput
Model aimed at defining the causal relationship from capital expenditures to financial performance
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 42
3 markets› Brazil› Mexico› United StatesSelection based on:
– Investment growth forecasted– Good cooperation with
Ericsson– Challenged on quality– Ericsson installed base– All large operators per market
For our analysis We collected historical data from 3 markets
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 43
Descriptive statistics showcorrelation between metrics
y = 0.1011x + 96.983 R² = 0.14301
96.5
97.0
97.5
98.0
98.5
99.0
99.5
0 2 4 6 8 10 12 14 16 18
Speech
Call Q
uality Inde
x
Average Annual CAPEX per Connec on ($R)
CAPEX VS. SPEECH
CALL QUALITY
y = 0.0113x ‐ 0.8086 R² = 0.73436
24%
25%
26%
27%
28%
29%
30%
31%
32%
94.5 95 95.5 96 96.5 97 97.5 98 98.5 99 99.5
Market S
hare
of C
onne
con
s (%)
Speech Call Quality Index
SPEECH CALL
QUALITY VS.
MARKET SHARE
y = 158.08x ‐ 209.43 R² = 0.36229
2,000
2,500
3,000
3,500
4,000
4,500
15 17 19 21 23 25 27
Quarterly
Reven
ues (‘000
’000
R$)
ARPU (R$)
ARPU
VS. REVENUES
CAPEX VS.
LATENCY
LATENCY VS. ARPU
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
80 100 120 140 160 180 200
Quarterly
Reven
ues (‘000’000
MXM
)
ARPU (MXM)
ARPU
VS. REVENUES
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
0.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00
Latency
Average Annual CAPEX per Connec on (MXM)
0
50
100
150
200
250
300
0 100 200 300 400 500 600 700
ARPU
(MXM
)
Latency
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
0 200 400 600 800 1000 1200
Churn (%
)
Latency
LATENCY VS.
CHURN
ARPU
VS. REVENUES
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
1,000.0
0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00
Latency
Average Annual CAPEX per Connec on (MXM)
CAPEX VS.
LATENCY
Brazil Mexico United StatesCapital
expenditures
Operational
performance
Market
performance
Financial
performance
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 44
From correlation to causality; regression analysisCapital
expenditures
Operational
performance
Market
performance
Financial
performance
Example: Impact of 1% improvement of Speech Call Quality on ARPU, Market share and Churn
1 percentage point (p.p.) improvement in Speech Call Quality (e.g. in case of Oi from
97.8037 to 98.8037) decreases churn by 0.2413 p.p. (e.g. in case of Oi from 2.60% to
2.36%);
The positive effect starts directly but reaches maximum impact one quarter after quality
improvement (T+1);
Two stars (**) indicate a statistical significance of 95%; there is a 5% change that the observed effect is not causal but
random
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 45
correlation to causality;regression Analysis
Capital investments
Operational performance
Market performance
Financial performance
Market ShareARPU
(***)
(***)(***)
(***)
$R M
illion
s
Churn
Per
cent
age
poin
ts
0.000
0.100
0.200
0.300
0.400
0.500
ARPU ($R)
Mkt Share (%)
Churn (%)
ARPU ($R)
Mkt Share (%)
Churn (%)
ARPU ($R)
Mkt Share (%)
Churn (%)
ARPU ($R)
Mkt Share (%)
Churn (%)
Samples > 1 Mbps
Data Completion
Data Accessibility
Speech Quality
T+2(***)
(**) T+1(**)
T+2(**)
(***) T+1(**)
T+1(**) (***) T+1
(**)(***)
T+1(**)
T+3(***)
(*) (***)(**)
(***)Per
cent
age
poin
ts
(***) Statistically significant at 99% (**) Significant at 95% (*) Significant at 90%
Source: TAS, Ericsson analysis
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 46
study in 3 American markets confirms a robust relation between investments, performance and financials
How much would a 10% incremental increase in CAPEX impact operational and market performance for an operator in the following markets*?
Accessibility rate increase (same quarter)
Data completion rate increase (same quarter)
Percent connections higher than 1 Mbps (same quarter)
Speech call quality index (same quarter)
Latency reduction (same quarter)
Downlink broadband speed increase (same quarter)
-
-
5.5 %
-
10.9%
-
1.8 %
2.4 %
4.7 %
0.3 %
-
-
-***
-
-
-
53.4%
59.3%
Market Share increase (same quarter)
Churn reduction (after one quarter)
ARPU increase (after one, two or three quarters)
1.7%
3.7%
1.1%
4.0%
12.0%
4.9%
3.0%
-
21.0%
*Statistical simulation model applied to actual operators
**Time lag effects differ between different markets
***No data available
Impact on variable (and time lag to the beginning of observed effect)** Brazil USMexico
Operational
Performance
Market
Performance
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 47
Impact of 10% Capex Increase over 5 years
Source : Ericsson and Telecom Advisory Services LLM 2014Base: Market data from Brazil, Mexico & U.S.
Whatdrivesloyalty?
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 49
Customer experience
Source: Ericsson ConsumerLab
InitialPurchase
Billing& Payment
AccountManagement
Service& Support
Network & ServicePerformance
Tariff plans/Offers
SmartphoneApps/Eco system
Customer Relation
Service Usage
Loyaltybuilding
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 50
what drives loyalty in latam?
MarketingCustomer service Offer Network
Base: Smartphone users in BR, CHL, MXSource: Network Performance study 2013
Shapley regression analysis, showing the relative impact between each driver and loyalty to operator brand (NPS)
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 51
Improving network performance by 10% impacts CTV by 14%
Network Performance Today:
6.43 (Mean)
Promoters
Detractors
Network Performance +5%:
6.75 (Mean)
Network Performance +10%:
7.07 (Mean)
Network satisfaction
CTV $1211 $1325
(+3%)
(-4%)
(+7%)
(-6%)
(+0.2) (+0.4)
(+$53) (+$168)
Improving network performance
(+5%) (+14%)
Source: Network Performance study 2013
$1157
Base: Smartphone Users in BZ, MX, CHL
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 52
Improving data reliability by 10% increases ctv by 14%
Data Reliability Today: 6.40 (Mean)
Promoters
Detractors
Data Reliability +5%: 6.72 (Mean)
Data Reliability +10%: 7.04 (Mean)
Network satisfaction
CTV $1203 $1323
(+3%)
(-3%)
(+7%)
(-6%)
(+0.2) (+0.4)
(+$46) (+$166)
Improving Data Reliability
(+4%) (+14%)
Source: Network Performance study 2013 Base: Smartphone Users in BZ, MX, CHL
$1157
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 53
Better User Experience,Higher Margin
Japan USA South Korea
Softbank NTTDoCoMo
KDDI
21% 18%24%
EBIT / Revenue
AT&T Verizon
26%32%
EBIT / Revenue
-3%
SprintSKT
15%
LGU+
5% 5%
VFE India
Room for Further Fight Very Clear Win-Lose Very Clear Win-Lose
EBIT / Revenue
Source: Speed test Q4 2013 on Median 50% user downlink throughput
Source: Speed test Q4 2013 on Median 50% user downlink throughput
Source: Bench Bee samples on Median 50% user downlink throughput
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 54
LTE Leadership
SMARTPHONE TRAFFICTHROUGH OUR NETWORKS
it is not about the killer application, but the killer experiencE...
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 56
JOIN THE CONVERSATIONEricsson.com/jm
Facebook.com/EricssonCaribbean
Twitter.com/EricssonCarib
YouTube.com/Ericsson
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 57
Q & A
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 58
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