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Agenda
• Historic overview• Remedies• Fundamental law of pricing• Infrastructure aspects• Commercial aspects• actors and revenues• Partnering models• Warning• Conclusions
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Brief Historic Overview 1
• In telecom the Sky was the limit• Governments want piece of the pie• GSM is success; Internet is success
UMTS will be a success too• € 150 billion license costs• € 2000 per capable head in Europe
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Brief Historic Overview 2
• Infrastructure– Ca. € 125 billion new investments– New handsets– Cell location issues
• End of Hype– Bankruptcies– 550.000 redundancies– Criminal top executives
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The Remedies 1
• Industry must restore credibility in order to find new investors
• “Newest Economy”: no business without profits
• Develop UMTS applications that satisfy customers so that they render profitable revenues
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The Remedies 2• Credibility
– Some operators demonstrated possibility to bounce back and find new funding
• Profitability– Competitive environment killed most competitors
• Prices can be raised to profitable levels
• Services and Applications– ?? No killer application– Multi-media messaging– Market segment specific information
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Fundamental Law of Pricing
• The selling price for any service, goods or application lies between:
– The Minimum level to reach a defined profit to the seller
– The Maximum level being the added business value to the buyer
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Infrastructure aspects
• Cell structure– Density 4 x GSM– Difficult to find locations– People resist placing antennas out of radiation
fear and esthetic reasons
• Handsets– New technology– Wideband– Better and larger screens– Battery life expensive handset
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Commercial aspects
• Can we earn back the € 275 billion ? Quick & Dirty: NPV analysis– Assumptions
• Interest rate 7,5 % • Average annual spend per customer € 1200• Market has 80 million target customers• 1 employee per 10.000 customers € 75.000 p/a• No costs yet for CRM, Billing etc..
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NPV method for UMTSInterest 7,5%Annual turn-over per customer 1200 €
YearInvestments million €
Exploitation million €
Revenues million € Values million €
Number customers
1999 150.000 10 - 150.010 - 2000 - 10 - 10 - 2001 - 20 - 20 - 2002 50.000 40 - 50.040 - 2003 75.000 31 5.000 70.031 4.166.667 2004 5.000 63 10.000 4.938- 8.333.333 2005 1.000 188 30.000 28.813- 25.000.000 2006 1.000 250 40.000 38.750- 33.333.333 2007 1.000 375 60.000 58.625- 50.000.000 2008 1.000 500 80.000 78.500- 66.666.667 2009 1.000 625 100.000 98.375- 83.333.333
Nett Present Value € 70.460
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NPV method for UMTS with first License write-offInterest 7,5%Annual turn-over per customer 1200 €
YearInvestments million €
Exploitation million €
Revenues million € Values million €
Number customers
1999 - 10 - 10 - 2000 - 10 - 10 - 2001 - 20 - 20 - 2002 50.000 40 - 50.040 - 2003 75.000 31 5.000 70.031 4.166.667 2004 5.000 63 10.000 4.938- 8.333.333 2005 1.000 188 30.000 28.813- 25.000.000 2006 1.000 250 40.000 38.750- 33.333.333 2007 1.000 375 60.000 58.625- 50.000.000 2008 1.000 500 80.000 78.500- 66.666.667 2009 1.000 625 100.000 98.375- 83.333.333
Nett Present Value € 69.075-
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Actors and Revenues
• Governments• Licensed Telcos• Telcos with
infrastructure• Application
developers• Hardware
developers• Customers
• Airtime per time unit
• Basic subscriptions
• Service specific subscriptions
• Services pay for use
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Value Chain Model
Total Chain Value = price paid by end user
back-to-back revenues between chain partners
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Meshed Interworking Model
Operator
ServiceProvider
Appl.Prov.
CustomerGroup
Operator
Operator
ServiceProvider
ServiceProvider
ServiceProvider
Appl.Prov.
Appl.Prov.
Appl.Prov.
CustomerGroup
CustomerGroup
CustomerGroup
Operator
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Warning
• We have seen what greed, hype and government forced competition did to the telecom industry
• The power/energy sector is now undergoing the same diseases
• Be aware of your energy supply– If ICT is the oxygen of society than power
supply is the bloodstream• No blood No oxygen !!
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Conclusions
• Greed, Hype and forced competition brought the industry on its knees
• UMTS is not successful by default• All potential users must use it• A meshed co-operation model has
more chances for success than a chain model
• No profits No business