Assignment JoaoBaeta v14

Marketing and Business Environment

Joao Baeta - I111719

Marketing andBusiness

Environment

Case StudyPortugal Telecom – Meo Fibra

Fibre Product Leader



Table of Contents

EXECUTIVE SUMMARY ............................................................................................................................... 4

BUSINESS MISSION......................................................................................................................................... 4

EXTERNAL MARKETING AUDIT MACRO ENVIRONMENT ........................................................ 5

PEEST ANALYSIS ............................................................................................................................................................ 5Political........................................................................................................................................................................... 5Economic ....................................................................................................................................................................... 5Ecological ...................................................................................................................................................................... 5Social ............................................................................................................................................................................... 6Technological ............................................................................................................................................................... 6

PORTER´S FIVE FORCES.................................................................................................................................................. 6COMPETITION .................................................................................................................................................................... 7

INTERNAL MARKETING AUDIT............................................................................................................... 8

OPERATING RESULTS ..................................................................................................................................................... 8STRATEGIC ISSUES ANALYSIS .................................................................................................................................. 10

Marketing Objectives ..............................................................................................................................................10Segmentation Approach .........................................................................................................................................11Competitive Advantage ...........................................................................................................................................12Positioning ..................................................................................................................................................................12Portfolio Analysis .....................................................................................................................................................13

MARKETING MIX EFFECTIVENESS......................................................................................................................... 14Product..........................................................................................................................................................................14Promotion ....................................................................................................................................................................14Price ...............................................................................................................................................................................14Place ..............................................................................................................................................................................15

MARKETING STRUCTURES AND SYSTEMS ........................................................................................................... 15SWOT ANALYSIS............................................................................................................................................15

STRENGTHS ....................................................................................................................................................................... 16WEAKNESSES.................................................................................................................................................................... 16OPPORTUNITIES .............................................................................................................................................................. 17THREATS ............................................................................................................................................................................ 19

MARKETING OBJECTIVES .......................................................................................................................20

STRATEGIC THRUST ....................................................................................................................................................... 20STRATEGIC OBJECTIVES............................................................................................................................................... 21

Meo Fibra – Growth Share Matrix....................................................................................................................22

CORE STRATEGY ..........................................................................................................................................23

TARGET MARKET(S) .................................................................................................................................................... 23COMPETITOR TARGETS .............................................................................................................................................. 23COMPETITIVE ADVANTAGE....................................................................................................................................... 24

MARKETING MIX DECISIONS.................................................................................................................24

PRODUCT............................................................................................................................................................................ 25PROMOTION....................................................................................................................................................................... 25PRICE ................................................................................................................................................................................... 26PLACE.................................................................................................................................................................................. 26

BUDGETS/IMPLEMENTATION & CONTROL ....................................................................................27

BUDGETS ........................................................................................................................................................................... 27IMPLEMENTATION......................................................................................................................................................... 27CONTROL .......................................................................................................................................................................... 28

BIBLIOGRAFÍA ...............................................................................................................................................30



List of DiagramsDiagram 1 - PEEST Analysis 5Diagram 2 - Porter's Five Forces Analysis 6Diagram 3 - PT's Triple Play Products Segmentation 11Diagram 4 - Triple-Play Market Perceptual Map 12Diagram 5 - PT Triple-Play Products Grow-Share Matrix 13Diagram 6 - Portugal Telecom’s SWOT Analysis 15

List of FiguresFigure 1 - GDP Map 15Figure 2 - Benfica Home Shirt 16Figure 3 - Benfica Away Shirt 16Figure 4 - PT and Vodafone Triple Play Products Comparison 19Figure 5 - Meo Fibra Ansoff matrix 20Figure 6 – PT’s Centrals Map 21Figure 7 - Meo Fibra Growth Share Matrix for new Deployment 22Figure 8 - Meo Fibra Market Segmentation 23Figure 9 - FTTH Networks 26Figure 10 - Population Density 26Figure 11 - Demographics - Average Age 26Figure 12 - Main Cities 26

List of GraphGraph 1 - Portugal Telecom's 2011 & 2012 Operating Results 8Graph 2 - 2012 Actuation Areas Operation Results 9Graph 3 - Portuguese Market PT's Clients 9Graph 4 - Meo Fibra Life Cycle 13Graph 5 - Meo Fibra Commercial Cost vs Product Revenue 14Graph 6 - Competitors Aggressive Campaign effects in Meo Fibra revenue 14Graph 7 - Network Opex Comparison 18Graph 8 - World Internet Traffic 18Graph 9 - Portuguese GDP vs Unemployment Rate 19Graph 10 - Meo Fibra 5 years Projection 21Graph 11 - Cost per Household Deployed 24Graph 12 - Campaign Targets vs Market Share 28Graph 13 - Capex and Revenue Projection 28

List of TablesTable 1 - Triple Play Products price per Mbps 17Table 2 - Portuguese TV Channels Audience - Top 20 17Table 3 - Cheaper FTTH Prices 18Table 4 - Consumer Segmentation 23Table 5 - Meo Fibra Pricing 26Table 6 - 24 Months Revenue 26Table 7 - Marketing Plan Activities 27Table 8 - Marketing Plan Control 29Table 9 - Marketing Plan Milestones 29



Executive SummaryPortugal has a modern, flexible and diverse telecommunications market. In the TV andInternet subscription market exceeds the European Union average, with a wide spreadFTTH (Fibre To The Home) network. (FTTH Council Europe, 2012)

Although being the main FTTH operator, PT (Portugal Telecom) has three big andpowerful competitors, the multinational Vodafone, Sonaecom, which is a subsidiary ofSonae, the largest Portuguese Private Company, and also Zon Multimedia, the oldsegment of Portugal Telecom for Television and Internet Services.

For IPTV services, Portugal Telecom has a nationwide ADSL Network and 27% of thehouseholds covered by FTTH. Vodafone and SOnae have little FTTH and ADSLnetworks, Zon is unique with a nationwide HFC (Hybrid Fibre Coaxial) Network.

Accomplishing this plan allows Portugal Telecom, to be the market leader for IPTVnetworks in the next five years. For that, PT will need to invest in regions with lesspopulation density, areas where the current product offer is not as good as Meo Fibra.

Business Mission

Provide Telecommunications and Multimedia services, with renowned customer value,through a permanent technology innovation, with qualified resources and highlymotivated with respect with the environment and society.



External Marketing Audit Macro Environment

PEEST Analysis

PoliticalWith the new laws about copyrighting, the need for faster Internet services may bereduce, creating a threat for MEO Fibra product. Also, it is being considered thecreation of new taxes for the telecommunications sector, which would create thepossibility of incrementing the final customer price. (Decreto de Lei, 2013)

EconomicWith the new taxes for the middle class, their purchasing power decreased, creating arisk for commodity products as Meo Fibra. The incrementing of VAT in thetelecommunication market, increased from 16% in 2005 to 23% today combined withthe current high unemployment rate, present new threats for these commodity services.

EcologicalWhile using passive networks, the electrical consumption will drop. PT encourages allof their employees to recycle all the possible goods and waste of their networks.(Portugal Telecom, 2012b)

•Portuguese New Copywriht Lay•Tax Policy over the Telecommunication SectorPolitical•Less Purchasing Power in the Middle Class•Increment of IVA (VAT)•High Unemployment RateEconomic•Energy Saving•Goods RecyclingEcological•Population Aging•Migrattion PatternsSocial•Development of Social Networks•Development of HD and 3D TV ChannelsTechnological

Diagram 1 - PEEST Analysis



SocialPortugal is becoming an aged country, with more than 20% of the population over 65years of age, (INE - Instituto Nacional de Estatistica, 2013), a range that normally doesnot have any interest in such services. In addition, Portugal is experiencing a hugemigration pattern, with young people leaving the country. These factors are assumed asa risk for the services distribution.

Technological

The development of social networks may be seen as an opportunity, as information anddata sharing increases, this creates demand for fast Internet access. Also the growth indemand for HD channels and 3D TV Technologies are seen as opportunities, as onlyreliable and fast networks enable full exploitation of these new technologies.

Porter´s Five Forces

Diagram 2 - Porter's Five Forces Analysis

Threat of new entrants

In the Portuguese IPTV market the threat of new entrants is very low, as it is an industrywith high fixed costs and the time needed to establish a high quality network and itsrelated infrastructure, present a barrier to market entry. Also, the key players of themarket have established strong brands and due to the oligopolistic nature of this market,it is difficult to a new company carve out a profitable market share.



Threat of substitutes

For Portugal Telecom, this is a high threat as there are various alternatives from theircompetitors that consumers may choose. Also the high speed Internet offered is able toprovide cheap or free solutions that can compete with PT products, such as Skype forinstance.

Bargaining Power of Buyers

The Bargaining Power of Buyers is high. The range of products that consumers canchoose from is immense. In addition, due to the globalization and the trending ofPortuguese society, these products are considered a commodity, so there is a pursuit forlower prices and the highest value products.

Bargaining Power of Suppliers

With the current crisis in Portugal, the bargaining power of suppliers is low. Also, thesuppliers and manufactures of equipment have little power in the decision of theproducts to be developed and commercialized, based on this, PT have good negotiationmargins with its suppliers.

Rivalry among Competitors

The competition to gain market share and a customer base is high, new products andservices are developed constantly in order to extend the customer base and decrease thehigh cost involved.

Competition

Part of the Vodafone Group, the company has around 1.3billion euros invoicing yearly. With the FTTH householdsalready deployed exceeding 0,6 million (1.5 millionprojection 2015) they are a key player in the FTTH.(Vodafone Portugal, 2014)

With the new investment and new, aggressive, prices they want to achieve a biggershare of the market.



Originally as part of Portugal Telecom, the brand for Internetand Multimedia, they are well diffused with their cable TVsystem in most of the country.

Although not being a FTTH provider, ZON is capable ofoffering fast services, being still the main triple play providerin Portugal.

Sonaecom has activities in mobile (Optimus) and fixed (Clix)networks, it was the FTTH networks pioneer in Portugal.Although it is a small FTTH network, it maintains theircustomer based through the years mainly because of itsPioneer advantage. (Sonaecom, 2014)

Internal Marketing AuditOperating Results

2012 was a year where the economic crisis was heavily felt in Portugal, GDP decreasedconsiderably and public and private investment was cautious. PT was increased itsrevenue, in around 7.4%, to 6.6 billion Euros, however, the Net Income decreasedaround 32%. This low value was mainly related to new taxes over profits applied bythe Portuguese government. (Portugal Telecom, 2013b)

Graph 1 - Portugal Telecom's 2011 & 2012 Operating Results

20122011Delta€ -€ 1.000,00€ 2.000,00€ 3.000,00€ 4.000,00€ 5.000,00€ 6.000,00€ 7.000,00

Operacional Revenue Operacional Costs EBIDTA Capex Income NetIncome2012 € 6.598,80 € 4.330,10 € 2.268,70 € 1.316,80 € 819,80 € 230,302011 € 6.146,80 € 3.958,90 € 2.188,00 € 1.223,80 € 803,90 € 339,10Delta 7,40% 9,40% 3,70% 7,60% 2,00% -32,10%

6.598,804.330,10 2.268,70 1.316,80 819,80 230,30

6.146,803.958,90 2.188,00 1.223,80 803,90 339,10M

illio

ns

Portugal Telecom Operating Results7,40% 9,40% 3,70% 7,60% 2,00%-32,10%

Source: Portugal Telecom



With operations in all of the CPLP (Community of Portuguese Language Countries),Portugal main operations, around 85% of its revenue is in their two profitable markets,Brazil and Portugal. With the investment on FTTH in Brazil, the PT Brazilianoperations represent the main Capex investment, but also the lower Net Incomepercentage, 3%. (Portugal Telecom, 2012c)

PT with more than 2 million clients without triple-play, represents significant numberof possible clients to upgrade the service within the company, as the Triple Playservices keep following the growth trend. (Portugal Telecom, 2012c)

Graph 2 - 2012 Actuation Areas Operation Results

Graph 3 - Portuguese Market PT's Clients

OperationalRevenue OperationalCosts EBIDTA Capex Income Net IncomeOthers € 856,20 € 697,20 € 159,00 € 131,70 € 90,34 € 36,30Brazil € 3.042,10 € 2.133,10 € 909,00 € 629,60 € 349,26 € 88,00Portugal € 2.700,50 € 1.499,80 € 1.200,70 € 555,50 € 380,20 € 106,000,001.000,002.000,003.000,004.000,005.000,006.000,007.000,00

Mill

ions

Operating Result per Actuation Area


LandLinePhone Internet TVSubscription Triple Play Prepaid PospaidFixed Access Mobile2012 1771 392 390 833 2469 51292011 1968 425 362 680 2378 5066Delta -10,01% -7,76% 7,73% 22,50% 3,83% 1,24%

-10,01% -7,76%7,73%

22,50%3,83% 1,24%

-15,00%-10,00%-5,00%0,00%5,00%10,00%15,00%20,00%25,00%

0100020003000400050006000

tHO

USA

ND

clIE

NTS

PT Clients in Portuguese Market




Strategic Issues Analysis

Marketing ObjectivesAs a multinational company, Portugal Telecom, has established as their objectives:

Scale Growing

Be the Leader for allCommunications andInformations TechnologiesMarkets

Increase InternationalContribution

Top Tier in the Technology,Customer Care and OperationalEfficiency Sectors

Being a Telecom Operator Reference in Sustainability



Segmentation ApproachFor Triple-Play services, PT uses FTTH and ADSL, both technologies are mainlydivided between two Macro Regions

The product direct advertisement is done on micro regions or neighbourhoods, beingadvertised according the area demographics.

PortugalTelecomDenseRegions

Upper ClassNeighbourhood MEOFibra Total 400

Total 200Midle ClassNeighbourhood MEOFibra Total 100

M40 Fibra

Lower ClassNeighbourhoodMEOFibra Total 30

Fibra 30MEOADSL Total 24

Telefone Fixo

ScatteredRegionsUpper ClassNeighbourhood MEOFibra Total 400

Total 200MEOADSL M40 Plus

Midle ClassNeighbourhood MEOADSL M40 ADSL

Total 24Lower ClassNeighbourhood MEOADSL Talk

Telefone Fixo

Company Macro region Micro region TechnologyMain

Product/Service

Diagram 3 - PT's Triple Play Products Segmentation



Competitive Advantage

Differentiation AdvantageWith the FTTH network present in more than 27%of the Portuguese Households (FTTH CouncilEurope, 2012), and having its Competitorspresence in only around 6, PT can offer in 21% ofthe Households, a Unique and Premium Service.

Operational Effectiveness AdvantageWith acquisition of software as Click and Nemesis,Portugal Telecom was allowed to improve itseffectiveness, while automatically allocate servicesto its technicians through their KPIs Results.

Innovation AdvantageThe FTTH Product/Service offered is based on thesame technologies as its competitors, so noneInnovation Advantage for PT.

Cost AdvantageWith aggressive marketing campaigns for similarproduct by PT´s competitors, Portugal Telecom´sdoesn´t have currently a Cost Advantage.

PositioningWhile the PT triple-play products over ADSL are well positioned to face itscompetitors, Meo FTTH 30/100 Mbps need to be repositioned in order to face itscompetitors, mainly Vodafone. The luxury products Meo 200/400 are segmented in aniche of market without competitors.

PT - MEOADSL 12

PT - MEOADSL 24

PT - MEOFTTH 30

PT - MEOFTTH 100

PT - MEOFTTH 200

PT - MEOFTTH 400

VodafoneADSL 24

VodafoneFTTH 50

VodafoneFTTH 100

Optimux ClixADSL 12

Optimux ClixADSL 24 Optimux Clix

FTTH 50 Optimux ClixFTTH 100ZON Multimedia

DOCSIS 30

ZON MultimediaDOCSIS 100

-120

-70

-20

30

80

130

180

230

0 1 2 3 4 5 6 7 8 9 10

PT - MEO Vodafone Optimux Clix ZON Multimedia

High Price

Low Price

FTTHTechnolog

y

OtherTechnologie

s

Portugal Telecom´sCompetetive

Advatage

DifferentiationAdvantage

OperationalEffectiveness Advantage Innovation Advantage Cost Advantage

Diagram 4 - Triple-Play Market Perceptual Map



Portfolio AnalysisWhen evaluating the Triple Play products, the commodity products, although having abig market share, still are present in the High Growth Rate markets.

The product is already in a mature stage, where the investment for growing the networkis small and the main sales period was completed.

Total 400

Total 200

Total 100

Total 30

ADSL 24

0

20

40

60

80

100

01020304050

CashCows

Stars ProblemChildren

Dogs

Low

Hig

h

High

Low

Market Share

Mar

ket G

row

th R

ate

4Q2008

1Q2009

2Q2009

3Q2009

4Q2009

1Q2010

2Q2010

3Q2010

4Q2010

1Q2011

2Q2011

3Q2011

4Q2011

1Q2012

2Q2012

3Q2012

4Q2012

1Q2013

2Q2013

3Q2013

4Q2013

MEO Fibra Life Cycle

Revenue Income

Introduction Stage Growth Stage Maturity Stage

Diagram 5 - PT Triple-Play Products Grow-Share Matrix

Graph 4 - Meo Fibra Life Cycle



Marketing Mix Effectiveness

ProductMeo Fibra is a FTTH product, so capable of providing a better service than oldertechnologies and also allows the operator a reduction in the network Operating Cost.

PromotionThe effectiveness for the promotion/advertisement of Meo Fibra was very successful,as revenues were directly related to the commercial investment as seen in the followinggraph.

Graph 5 - Meo Fibra Commercial Cost vs Product Revenue

PriceCurrently, PT is with elevated prices on its main Meo Fibra products, decreasing its

sales after the new investments and aggressive campaigns made by its competitors.

4Q2008

1Q2009

2Q2009

3Q2009

4Q2009

1Q2010

2Q2010

3Q2010

4Q2010

1Q2011

2Q2011

3Q2011

4Q2011

1Q2012

2Q2012

3Q2012

4Q2012

1Q2013

2Q2013

3Q2013

4Q2013

Revenue

Vodafone new Investment andAggressive Marketing Campaign

Graph 6 - Competitors Aggressive Campaign effects in Meo Fibra revenue



Place

Portugal GDP is concentrated in the centre and northernlittoral, where the main services and industries are located, and alsoin the south of the country, the main tourist region. (INE - InstitutoNacional de Estatistica, 2013)

PT, effectively, did their investment in these areas in orderto get a faster return ROI. Although, the implementation is done inthese main regions, there are still remote areas with high GDP andmarket to sell the product.

.

Marketing Structures and Systems

SWOT Analysis

Diagram 6 - Portugal Telecom’s SWOT Analysis

STRENGTHS W EAKNESSESS

T HREATSS

• Leadership in theLandline and mobilemarkets

• Own Infrastructure• Strong FTTH Rollout• High Innovation Rate• Strong Brand Image

• Shared Infrastructure• Is not redundant• Not National Wide• High price

• Portuguese EconomicEnvironment

• Aggressive MarketingCampaings by thecompetitors

• Powerful Competitors• Regulated Market• Aging Population•

• OPEX Reduction• Increase of worldwide

data consumption• Presence in Overseas

untapped markets• End of the Government

Golden Shares

Negative

InternalFactors

ExternalFactors

Positive

O PPORTUNITIES

Figure 1 - GDP Map



Strengths

Due to fact of being a public-owned company and having the monopoly until the 90´s,PT has and develop a nationwide infrastructure, making it easier to embrace a wide andstrong FTTH deployment, with cheaper Capex costs than its competitors.

PT invests heavily on innovation, having it subsidiary PTIn (Portugal TelecomInnovation) with the main purpose of developing products for PT´s services. One of themost known innovation products was the invention, in 1994, of the concept of prepaidmobile phone (MIMO-TMN), which is currently used in Telecom Operatorsworldwide.

Moreover, PT as a strong company name with an excellent customer relationship, greatbrand names as MEO (IPTV services) or “Moche” (prepaid mobile plan). These brandsare promoted in diverse Portuguese sectors, such as football clubs.

WeaknessesWhile being the legal owner of the infrastructure, PT, is required, due the privatizationagreements, to rent its own cooper infrastructure to its competitor. Also, since April2010 (ITED II), all vertical network, i.e., the network inside the building common areas,needs to be shared by all the operators. (Anacom, 2011)

In common deployed areas, PT faces aggressive campaigns with most valuable price,from his competitors, as can be seen in the following tables.

Figure 2 - Benfica Home Shirt Figure 3 - Benfica Away Shirt



Table 1 - Triple Play Products price per Mbps

Package Internet Speed MonthlyValue

Value per Mbps

Vodafone Casa Casa 50 50 Mbps 24,90 EUR 0,50 EUR/MbpsCasa 100 100 Mbps 35,90 EUR 0,36 EUR/Mbps

Clix Fibra Basic 50 Mbps 43,04 EUR 0,86 EUR/MbpsPower 100 Mbps 51,24 EUR 0,51 EUR/Mbps

Meo Fibra Total 30 30 Mbps 41,12 EUR 1,37 EUR/MbpsTotal 100 100 Mbps 51,12 EUR 0,51 EUR/Mbps

As the telephone service and the TV Channels are similar between the three operators,Internet bandwidth is the main factor that differ services between the competitors.

Table 2 - Portuguese TV Channels Audience - Top 20

Channel Audience Channel AudienceTVI 24,6% Fox 1,3%SIC 21,2% Sic Kids 1,1%RTP 1 13,2% Fox Life 1,0%RTP 2 2,5% Sic Mulher 0,9%Hollywood 2,2% TV Record 0,9%Disney Channel 2,0% RTP Informacao 0,9%Sic Noticias 1,9% Fox Crime 0,8%Panda 1,6% TV Globo 0,7%AXN 1,6% Sic Radical 0,7%TVI 24 1,3% Discovery Channel 0,6%

Total 81,0% Source: GfK- TV Audiences

Opportunities

FTTH/GPON, as an optical passive network, has its maintenance easier and faster,reducing the Opex cost of the network when comparing with copper networks.




Graph 7 - Network Opex Comparison

As can be seen in those graphs the power consumption from a DSL network is morethan 80% of a fibre network, also the network cost per bit is nine times more on a DSLnetwork. (Portugal Telecom, 2012b)

With the currently demand for online contents and with the availability of high qualityservices online, the increment of the online traffic is exponential, also the need forincreasing customers internet speed is the key QoS factor.

Due to the Opex cost reduction, the FTTH networks can have prices similar to ADSLand become cheaper when comparing to HFC products.

Table 3 - Cheaper FTTH Prices

Time taken for download:1 GB

Photo Album4.7 GB

Standard Video25 GB

HD VideoPortuguese Main Operators

Cheaper Package

FTTH 100Mbps 1m 23s 6m 31s 34m 40s35,90 Eur/month(Vodafone Casa)

FTTH 50Mbps 2m 46s 13m021s 1hr 09m24,90 Eur/month(Vodafone Casa)

HFC 30 Mbps 4m 31s 21m 30s 1hr 54m41,49 Eur/month

(Iris ZON)

DSL 8 Mbps 19m 0s 1hr 29m 7hr 55m24,99 Eur/month

(PT - MEO ADSL)

Graph 8 - World Internet Traffic Source: Cisco

Source: Portugal Telecom, Vodafone, Sonaecom and Zon Multimedia

05000100001500020000250003000035000

0,001 0,002 0,004 0,01 0,02 0,17 1,8 5 11 26 75 175 356 681 1267 2055 3339 5219 7639 10676 14929 2068431338

World Wide Fixed Internet Traffic (PB/Month)



ThreatsSince the 2008 global crisis the Portuguese unemployment rate more than doubled,passing from the 7.6% to 15.7% in 2012. Related, de GDP decreased from the 252billion dollars to 212 billion in 2012, a reduction of around 16%. (INE - InstitutoNacional de Estatistica, 2012).

In 2013, Vodafone Group decides to invest more 240 million euros in Portugal, mainlyin the expansion, for more than double, of its FTTH network (Vodafone Portugal,2014). Besides this investment to reach new customers, Vodafone decide to undertakean aggressive marketing campaign to increase and spread its customer.

Graph 9 - Portuguese GDP vs Unemployment Rate

Figure 4 - PT and Vodafone Triple Play Products Comparison Source: Portugal Telecom, Vodafone

Source: National Statists Institute

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014GDP (MM USD) 117 120 132 162 185 192 202 232 252 234 229 238 212 208 209Unemployment rate 3,90% 4,00% 5,00% 6,30% 6,70% 7,60% 7,70% 8,00% 7,60% 9,50% 10,80% 12,70% 15,70% 16,70% 16,10%0,00%2,00%4,00%6,00%8,00%10,00%12,00%14,00%16,00%18,00%

050100150200250300Portuguese FDP comparation with Unemployment Rate



Marketing Objectives

Strategic Thrust

Market Penetration (Low Risk Strategy)With the presence of powerful competitors, an effort needs to be done in order to

win customers from the competitors and also not allow own customers to leave.

Market Expansion (Low Risk Strategy)Although there are few possible new customers, a power Loyalty Marketing

Campaign should be done to attract these possible customers, offering services andmonthly payments in change of contracts with a long (24 moths) minimum subscriptionperiods.

Product Development (Medium Risk Strategy)To be competitive, new products/services need to be innovated and developed

in order to offer a more broad service.

Market Development (Medium Risk Strategy)In regions were there’s no network implemented, a local marketing campaign

needs to be undertook, also should be offer to PT customers a upgrade for a betterservice or a swap between technologies, in order to reduce Opex costs.

Diversification (High Risk Strategy)With the current global economic crises and with a top performance product,

which is still growing in the market, should not be done any investment in new productsfor new markets.

MarketPenetration WinCustomersfromCompetitorsMarketExpansion ConvertNon-Users

ProductDevelopment ProductLineExtension Innovation

MarketDevelopment PromoteNewUsers UpgradeServiceforCurrentUsers

Diversification

NewExisting Products

Exis

ting

New

Mar

kets

Figure 5 - Meo Fibra Ansoff matrix



Strategic Objectives

With a big customer base outside its FTTH network, PT has physicalinfrastructure across the country, so, the advantage of undertakingsmaller investments to deploy its networks.

Although there were massive deployments on dense regions, thescattered regions still without this new technology networks.

Being deployed on 27% households and having the country 66% of itshouseholds in urban areas, according to Census 2011, an investmentstrategy is need to deploy the network in the next 5 years to reach theobjective of 50% of the households served by FTTH networks.

For reaching the objective of spreading its network and double the revenue, a newCapex investment need to be done to deploy the network, although the profit will beaffect during the main investment period, the Sales and the Opex costs reduction willincrease the product profit and revenue during the 5 years investment.

Meo Fibra 5 years Projection

Results Revenue Results Profit Projection Revenue Projection Profit

New Regions MainInvestment

MaturityStageGrowth StageIntroduction

Stage

Figure 6 – PT’s Centrals Map

Graph 10 - Meo Fibra 5 years Projection



Meo Fibra – Growth Share Matrix

Figure 7 - Meo Fibra Growth Share Matrix for new Deployment

Problem Children- Build

o Prioritize and Select the areas for first deployments Most Population Density Age Average between 25 and 60 years Less Infrastructure Investment

- Divesto Withdraw all the investment in other technologies.

Offer technology swapping ADSL/Satellite to FTTH

Stars- Build

o Identify possible regions for the competitors deployment entranceand invest on them, to have pioneer advantage

o Prioritize and Select the areas for new deployments Most Population Density Age Average between 25 and 60 years Less Infrastructure Investment

Cash Cows- Hold

o Decrease Deployment investmento Invest only to maintain market share

LowHigh

CashCows

Stars ProblemChildren

Dogs

Hig

hLo

w

Market Share

Mar

ket G

row

th R

ate NewInvestment

Growth

Maturity012345678910

0246810



Core Strategy

Target Market(s)

Figure 8 - Meo Fibra Market Segmentation

For each of the Triple Play packages a target market is need in order to direct thedeployment and marketing campaigns for the correct market segment.

Table 4 - Consumer Segmentation

Package Geographic Demographics Psychographic Behavioural

Total 30Urban Area Near

PT Central

EmployedAge 25 to 60Middle Class

CommodityServices Consumer

Performance asa Benefit

Brand Loyal

Total 100Urban Area Near

PT CentralMiddle and Upper

ClassPerformance as

a BenefitTotal 200 Urban Area Upper Class

Total 400 Urban Area Upper Class

Although different services are offered, they run over the same network and platform,creating the opportunity of prioritizing the deployment according to the market needs.

Competitor TargetsThe main competitors, due to the lack of infrastructure in the country, target theirproducts only for the main cities, areas with high population density, also middle classneighbourhoods where would be more effective to sell their products.

• Performance as a Benefit• Brand Loyal• Commodity Services Consumer

•Employed•Between 25 and 60•Middle and Upper Class•Urban Area•Near PT's Telecom CentralGeographics Demographics

BehaviouralPsychographic



Competitive Advantage

The scattered areas FTTH investment, givesPT the pioneer advantage, while having thepossibility of easily provide a good servicewithout strong competition.

In the main deployment in dense areasPortugal Telecom was able to spend between3 and 5 times less than its competitors, inthese new areas the metrics will growpositively for Portugal Telecom.

Marketing Mix Decisions

Portugal Telecom | Technology& Innovation Conference | 15

PTISLEADINGTHEFTTHROLLOUTINEUROPE

Mainly urban areas

525

Operator 1 Operator 2

1,000

PT

<200

FTTHcost per home passedEuro

Cheaper labour cost

Broad duct network

Graph 11 - Cost per Household Deployed


TargetMarketProduct

Price

Place

Promotion



Product

As a Triple play product, Meo Fibra will have the following capabilities:

- Interneto 30 Mbps Downlinko 100 Mbps Downlinko 200 Mbps Downlinko 400 Mbps Downlink- Televisiono 120 Channels (10 HD)o 170 Channels (25 HD)- Telephoneo Unlimited National Landline Callso Free Landline Calls from 9 pm to 9 am to more than 50 countries.- Othero Movies on Demando Meo GO (TV Channels Available for PC, Tablet or Smartphone)o Meo Cloud (16 Gb storage free)

Promotion

To promote the product in the new regions, six different advertisementmediums will be used:

- TVo Campaign in Regional TVs, for focused advertisement.o Use the National TV adverts for maintaining the customers also as a

form of a general publicity for the new regions served.- Radioo Use Regional Stations for focused adverts.- Newspapers/Magazineso Regional for focused adverts.- Telephoneo Contact target customers for explain the capabilities of the producto Contact current PT customers offering new service or the technology

SWAP.- Door-two-dooro Before deployment enter the area for explaining the serviceo After Deployment go door-to-door to sell the service.- Shopping’s / Industries / Other areas of population affluenceo Establish selling points



Price

The price is the one already practice.

Table 5 - Meo Fibra Pricing

Total30

Total100

Total200

Total400

First Month 24,99 EUR 34,99 EUR 0 0Between 2nd and 6th month 24,99 EUR 34,99 EUR 109,99 EUR 179,99 EUR

Seven month onwards 46,49 EUR 56,49 EUR 109,99 EUR 179,99 EUR

Table 6 - 24 Months Revenue (Minimum Subscription)

Total30

Total100

Total200

Total400

24 month Contract 986,76 EUR 1226,76 EUR 2529,77 EUR 4139,77 EURMonth Average 41,12 EUR 51,12 EUR 105,41 EUR 172,49 EUR

Where PT ADSL customers do not want to upgrade for a Meo Fibra product, a swap oftechnologies should be done, providing the same package over the FTTH network.

Place

Although the main Portuguese areas have FTTH covered, there aresegmented areas without FTTH, where their main competitors does nothave any physical presence, allowing PT to have pioneer advantage.

Figure 9 - FTTH Networks Figure 10 - Population Density Figure 11 - Demographics -Average Age

Figure 12 - Main Cities

0% - 20% Coverage 1-20 Pop/km2 < 35 years Main Cities21% - 40% Coverage 21-55 Pop/km2 36-40 years41% - 60% Coverage 56-128 Pop/km2 41-45 years

61% - 100% Coverage 129-350 Pop/km2 46-50 years>351 Pop/km2 > 51 years



Budgets/Implementation & Control

BudgetsFor realizing the deployment in 70% of the remaining urban areas households withoutFTTH access, a Capex investment of around 250€ per household is expected, 25% moreexpensive than the Capex for dense areas.

Households Capex Total Capex per Month2 520 000 630 000 000 € 10 500 000 €

With the objective of having 67% of the market share in the end of the 5 yearsinvestment, the following monthly revenue would be achieved:

Market Market Share CustomersProduct

Average PriceMonthlyRevenue

2 520 000 67% 1 688 400 46,50 € 78 510 600 €

ImplementationFor the deployment, a first 2 years Capex investment of 480 million euros is necessaryin order to deploy 1.7 million households, around 70% of the 5 years investment.

A marketing campaign for presenting the product will be undertook during 18 months,from July 2014 to December 2015. After, a cheaper and longer campaign is need tomaintain the “Meo Fibra” Brand Value.

Table 7 - Marketing Plan Activities

Activity Start Date End Date Budget ResponsableDeployment First

Wave01/04/2014 31/12/2016 481.250.000 € Engineering

DepartmentDeployment

Second Wave01/01/2017 30/09/2019 148.750.000 € Engineering

DepartmentMarketing

Product Entry01/07/2014 31/12/2015 120.000.000 € Marketing

DepartmentAdvertisement

Brand Sustenence01/01/2016 31/12/2019 80.000.000 € Marketing

Department



For the product entry, the target of the deployment and the marketing campaigns is towin customers from competitors. After the objective is achieved, the focus would bePT customers from other technologies

ControlAs an important product for the company and also an expensive investment, a veryefficient cost control is need in order to follow the chronogram of the deployment.

The Capex investment will be bigger than the revenue until the end of 2015, when therevenues from product sales will present superior value.

050000010000001500000200000025000003000000

- €10000 000 €20000 000 €30000 000 €40000 000 €50000 000 €60000 000 €70000 000 €80000 000 €90000 000 €

Capex and Revenue ProjectionMontlhy Revenue Montlhy Capex Customers Households

Swap Customers from PTold technologies to FTTHProduct SustenanceMarketing

Marketing Campaign Targets vs Market Share

Win Customersfrom Competitors

Graph 12 - Campaign Targets vs Market Share

Graph 13 - Capex and Revenue Projection



Four main types of controls will be done in order to guarantee the product success,Annual Plan, Profitability, Efficiency and Strategy, all with own responsible for thecontrol and used approaches.

Table 8 - Marketing Plan Control

Type of Control Responsible Approaches

Annual Plan Control Top ManagementSales AnalysisMarket-Share

Financial Analysis

Profitability Control Marketing DepartmentProduct Profit

Profit per Services Packages

Efficiency ControlDeployment DepartmentMarketing Department

Deployment EfficiencySales Efficiency

Strategic Control Top Management Marketing Effectiveness

The following three main milestones need to be followed constantly:

Table 9 - Marketing Plan Milestones

Year Households Connected Customers Market Share2014 125.000 50.400 4%2015 925.000 352.800 17%2016 1.725.000 655.200 26%2017 2.225.000 1.184.400 49%2018 2.415.000 1.562.400 61%2019 2.520.000 1.688.400 67%



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