Telco and IT convergence as the future business driver

Tomas Trejbal Head of Corporate Product Marketing,

Barcelona, September 24th, 2008

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Agenda

Why?

How? what is needed to become reality

Conclusions to take away

What? Convergent story

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Who? we are

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Telefónica O2 provides its clients the experience & size of a world leader…

Telefonica‘s Footprint

Dec 2007

…serving 23 countries

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Within the Czech Republic Telefónica O2 has a strong local market footprint

Fully integrated Telco & IT provider

ČESKÝ TELECOM + Eurotel Praha in July 2006:

Offering the most comprehensive portfolio of voice & data services in the Czech Republic

Operating the largest fixed & mobile network

8 Million fixed & mobile lines in operation

8700 employees at your service

Omnicom in 1999 and Deltax Systems in 2007 enable us to offer you information and communication technologies (ICT) services end-to-end

Prague

Czech Republic

2006

2007

Telefónica O2 in the Czech Republic

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5

… and what was the question?

Convergence with

Telefónica O2

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Customer wallet is shifting from traditional telecom products and services to

ICT, creating new opportunities but also a challenge to the existing business

model

• Significant new wallet created in the areas originally dominated by IT firms

• Traditional telco revenues in decline

• ICT providers are also positioning themselves to offer traditional telecom services,

pushing telecom incumbents into becoming wholesale providers and losing the end

customer relationship

As a result, most telcos increasingly successful in penetrating areas originally

dominated by IT firms

• Leading players currently generate up to 20% of revenues in the business segment in

ICT

• Moreover, ICT also contributes to protecting revenues from traditional telco business

TO2‘s Strategic challenge

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Current CIO pains

Source: EUROPEAN CIO SURVEY - views on future IT delivery 2006, Capgemini

* the mix of activities to focus on and their sourcing

The survey is based on one-to-one interviews with over 160 CIOs, across 12 European countries, with representation from all industries

65% of all interviewed CIOs planed changes to their IT delivery models* within the coming two years

The key drivers for changes in delivery model are:

82% Cost reduction 46% Need for increased flexibility 43% Quality increase 42% More time to focus on core business

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Mobile

PC

Telephone

LAN Services

Voice and data

network

Customer environment User devices

PABX/LAN Communications Managed Services and Outsourcing

PABX

Workplaces Premises Data Centres

End to end SLA Security Premium Care Consultancy

Laptop, CDMA, HSDPA

Server Hosting

Data Storage Archiving Services

Video conferencing Audio conferencing

E-mail and SMS platforms

Telefónica O2 – network centric ICT system integrator

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What is needed to become reality?

3. Products

4. Delivery

5. Value Proposit. / Communication 6. Training/ Motivation

e.g. which products will to be delivered, which features are expected by customers etc.

e.g. what has to be the sales support and structure for selling managed services (higher involvement of presales…)

e.g. will be covered by the ICT communication strategy

e.g. what is the best way how the sales has to be trained and motivated

1. M

ark

et

Po

ten

tia

l

2. B

P T

arg

ets

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1. Market potential BCG Survey

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2. BP Targets

Corporate & Government Benefits for you

2006

IT solutions

22,4 M €

Corporate & Government

2007

IT solutions

77 M €

Corporate & Government

2010 BP

IT solutions

104 M €

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3. Products

Managed Services Platform

LAN

Gold MLAN

Silver MLAN

Desktop

WAN

Security

O2 Complete Office

Q3 2008

Q1 2007

Managed Desktop

O2 Computer Solution

Q3 2008 MSS Phase I

MSS SG 1-8

Q4 2008

2009

GOLD MWAN

Silver MWAN

Q3 2008

Q3 2008

Q3 2007

Hosting

Managed Data Storage

Managed Server Hosting

Q3 2007

Q4 2007

Voice

Managed PBX

IP Centrex

Q4 2007

Q1 2008

Service already launched

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3. Products

Managed Hosting

Managed Data Storage

Managed Server Hosting

Q3 2007

Q4 2007

Voice

Managed PBX

IP Centrex

Q4 2007

Q1 2008

Desktop

Managed Desktop

O2 Computer Solution

Q3 2008

Q3 2007

-3 out of 4 total services are launched

Current status:

-Managed PBX is already launched

-IP Centrex will be launched in Q2/2008

-O2 PC Solution was launched in September 07

Managed Archive for Q2 2008

Next steps:

-Managed PBX Phase II

-ad on features to IP Centrex to fit Corporate customers

-Managed Desktop will be launched in Q3/2008

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3. Products

Security

LAN

GOLD MLAN

Silver MLAN

O2 Complete Office

Q3 2008

Q1 2007

WAN

GOLD MWAN

Silver MWAN

Q3 2009

Q3 2009

-Only Service Group I. is going to be launched in 2008 -no revenue is expected from this services.

Current status:

-O2 Complete Office is already launched

-Project based business(only for limited number of customers)

-During 2008 we will offer Silver and Gold Service Desk, which are partly similar to MWAN

-To launch the full scope of services

Next steps:

-Silver and Gold Managed LAN are going to be launched in Q3/2008

-Silver and Gold Managed WAN are going to be launched in Q3/2008

MSS Phase I

MSS SG 1-8

Q4 2008

2009

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… to teams, which are able to do consultative selling

From Telco oriented sales structure

Sales Team

Solution Specialists

Dedicated Key Account

Manager

Dedicated Sales

Support

Presales Team

Nationwide logistic coverage

Nationwide dedicated „Gold“ dealers

• Main purpose of „Managed Service Push Program“ is to define rules, processes and responsible persons in order to significantly improve selling Managed Services

4. Product Delivery „Push Teams“

1. Principles of selling Commodities

- Sales is active in selling, Presales is supporting Sales on Demand

2. Principles of selling Managed Services

- Sales is active in selling, Presales and marketing together with other needed teams creates „push environment" for active selling and solving issue in order to generate new revenue stream

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5. Value proposition Main benefits for customers

Lower TCO • Lower TCO • Better control over CAPEX and OPEX costs

Flexibility

• Investment into new business opportunities instead of infrastructure • Capacity is increased fluently according to the business opportunities • Easy management of seasonal and project based jobs • Investments decrease for finding new business opportunities

People and quality management • Lower internal Headcount • Increased competence • Global SLA from end2end.

Managed

WAN

Managed

LAN

Managed

Desktop

Managed

Voice

Managed

Security

Managed

Hosting

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OPEX

OPEX

CAPEX

Buy

In-house

tech.

Operation

and

Adm. MSH

MDS

MB&R

Conn.

Buy

In-house

tech.

Operation

and

Adm. MSH

MDS

MB&R

Conn.

Real Business case for Retail client with 500 employees

5. Value proposition Lower TCO

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• Pay-per-use concepts • No capex payments • No operational and admin costs

LOWER TCO BETTER CASH FLOW CONTROL

• Managed services don‘t generate any CAPEX

• Services are paid from operational budgets

• Customers don‘t care about the technology lifecycle

Integrated SLA

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5. Value proposition Flexibility

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• You buy only the capacity which you actualy need.

• Increases are fluent according to the requests.

• You always use 100% of the bought capacity.

INVESTMENT INTO NEW BUSINESS OPPORTUNITIES INSTEAD OF

INFRASTRUCTURE

SUPPORTING NEW BUSINESS OPPORTUNITIES

• Service increase is done fluently according to the actual customer requests

• There is no technology or staff unused • No complicated and strategic planning is

necessary

Unused capacity

Real used capacity

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• The needed capacity is easy bought. • Seasonal activity variances are covered

only for the necessary time. • After this period the capacity is decreased

to the bottom level.

EASY MANAGEMENT OF SEASONAL AND PROJECT BASED JOBS

FOLLOW UP THE CYCLES OF BUSINESS

• You decrease the subscribed capacity and power by 20%

• You have no unused technology, or IT staff capacity

5. Value proposition Flexibility

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All the staff costs are included in the service

Technical specialists are shared among more customers = the capacities are used effectively.

Saved internal headcount Additional competence

LESS HR ISSUES GLOBAL SLA FROM END TO END

Service availability and operation are guaranteed

Service has a defined SLA parametersparameters and SLA (Service Level Agreement)

All processes of the delivered services are according to ITIL standards.

5. Value proposition People and Quality management

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5. Communication Current TO2 brand market perception

-Only a very low number of customers is ready to buy IT services from Telefónica O2

-Highest perception is in Hosting services, here we are struggling with space

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2007 2008 2009 • Message

O2 enters IT markets

• Message

O2 is a trusted ICT provider

• Content of message

• Change of strategy towards ICT

• Introducing our plans

• Content of message

• Focus on proper launch of all product groups

• Helping to generate leads

• Content of message

• Focus on multiplication of success stories

• Behaving as established market player

• Real status

10% of products

70% ready through projects

Limited potetial for references

• Real status

70% of products

100% ready through projects

Limited potetial for references

• Real status

100% of products

100% ready through projects

Limited potetial for references

5. Communication Message evolution …

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5. Communication Year 2007 in detail

Conferences PR Case studies

Active start from Feb 07

+15 conferences in 2007

8 product seminars

Weak follow up of leads

• Overall

70%

Active start from Jun 07

+20 articles since Jan

Very low visibility

Long-term projects starting

• Overall

30%

Active start from Apr 07

+15 case studies created in 2007

No mass communication of successes

• Overall

50%

•

• Reasons

• Low investments, no bigger and visible actions

• Inconsistent, more ad-hoc activities

• Low internal communication resulting in no internal alignment and trust

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5. Communication Communication levels of TO2 ICT Portfolio

O2 enters IT markets

Managed Services Professional Services

Network (O2 Complete Office)

Voice (Managed PBX, IP Centrex

IT (Managed Hosting, Managed

Desktop)

TOP GOV (Agricult./Transport)

Telematics (eToll, eCall, Traffic management)

DVB-T (Digital multiplex)

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Strong ATL communication linked with PR activities

Linked ATL with BTL campaign

60% focused on „managed services

40% focused on „professional services“

PR breakfasts

Press conferences

100 articles

40% about „TO2 is ICT operator“

30% about „Managed services“

30% about „Professional services“

10 conferences with ICT subject

1 special TO2 ICT conference

1 government conference with strong ICT image

30 Success stories

20 stories about Managed services

10 stories about Professional services

10% of them as video references

Product oriented seminars

4 seminar for Managed services

Conferences PR Case studies

Customer seminars

ATL BTL

5. Communication Pillars for 2008

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6. Training

eLearning + Self training brochure

Product Seminars

• Together with all product launches

• Mandatory for all sales reps

• Big part based on self study

• Courses finished by eTesting

• Only for selected groups with biggest sales potential

• Full day dedicated for one service

• Regular every quarter

• Limited time scope to introduce the service to all sales reps

• Orientation on description, key benefits and typical sales scenarios

Ad hoc courses

Product launch month +1 month +4 month -3

• After launch training

• Mandatory for all AMs

• Fininhed with face 2 face testing

• Output as certification

Sales Certification

Part of the Sales Excellence Flagship project for 2008!

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6. Motivation

KPI

• Include Managed services in sales KPI‘s • Value of Managed services sales is 5 times higher compared to

Commodities

Special financial bonus

• 1% from new sales on sold managed services for the periond of April – December 2008

Incentives in cooperation with partners/vendors

• Special bonus for 5 first successfully closed cases to each service

Sales Fleet

• Contest for AMs only for Managed services (cooperation with channel marketing

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Steering meetings

Product

Management

Customer

Solution

Shared

responsibility

Marketing

Marketing

- Product have to be launched properly, with right prioritisaton and order according to the revenue potential, strategical importance, TO2 sales potential

- Define the exact role for account managers and presales teams

-Follow up on the Managed Services survey project. Effective usage of the collected data.

- VP implementation and training/Strategic document with detailed communication plan and its improvement in time and approach

- Detailed training plan considering prelaunch, regular and certification seminars / Include services in sales KPIs. Special motivation for sales based on new sales revenue.

1. Market Potential

3. Products

4. Delivery

5, VP/Communication

6. Training/Motivation

Shared

responsibility

- Weekly monitoring of the BP fullfilment and actual pipeline. 2. BP Targets

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Conclusions to take away?

IT and Telco convergence build by a infrastructure operator is an

idea, which is great for (and not only for) Evolving markets…

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1.

…It follows the shift of customers vallet from pure telco services

towards IT…

3. …and supports the launch of new services which are very

complicated to be realized in divergent world.

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Questions ??

Tomas Trejbal

Telefónica O2 Czech republic

Head of Corporate Product Marketing

e. tomas.trejbal@o2.com

m. +420 720 755 506

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