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www.huawei.com
2011-6-20
New Business Model
June 2-3, 2011Beirut, Lebanon
Tony HuangDirector, CTO Office
Middle EastHuawei Technologies
HUAWEI TECHNOLOGIES CO., LTD. Huawei Confidential Page 2
Operators are facing both operational and financial challenges under the fierce competition environment
High Debt Ratio• High finance fee Balance Sheet Re-engineering
High OPEX• High Operation cost Lower OPEX solution
High Churn rate• Intense competition• Inefficient loyalty program
Faster go-to-market
High CAPEX • High investment on new
servicesRisk sharing
Challenges Requirements
HUAWEI TECHNOLOGIES CO., LTD. Huawei Confidential Page 3
Operators are seeking Vendors to provide Business solutions to address their Business requirements
1
Balance Sheet Reengineering
Lower OPEX Solution
Faster go-to-market
Risk sharing
Financing Solution
2Hosting Solution
3 Revenue Sharing
4Managed Services
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√
√
√
√ √
√
√
HUAWEI TECHNOLOGIES CO., LTD. Huawei Confidential Page 4
Finance solution helps operator improve its financial performance in the Capital market
Key Financialindex
Debt / assets, net debt / equity, net debt / EBITDA
EPS and P/E Ratio compared with the regional peers
High CAPEX / Sales Ratio leads to Negative FCF
Challenges Debt Covenants Leverage Impact Debt Covenants Leverage Impact
Profitability Growth Profitability Growth
Free Cash Flow CAPEX Intensity Free Cash Flow CAPEX Intensity
OperationStrategies
De-leveraging to rebuild financial strength
Revenue stimulation and Cost reduction
Transforming CAPEX structure to reasonable CAPEX / Sales Ratio
Financing solution Hostingsolution Managed servicesRevenue
sharing
HUAWEI TECHNOLOGIES CO., LTD. Huawei Confidential Page 5
Operator should work with a vendor who has strong financing capability to offer customized solutions
Seller’s Credit
Project Finance
AR Financing
Leasing & Off Balance Sheet Solutions
Syndicated Loan
Buyer’s Credit
Strong support from institution: a vendor being supported by powerful finance institutions;
Respond quickly and innovative:drives innovative financing solutions in line with customer objectives;
Professional service: staffed by professional financing managers providing a first class service to customers
Financing solution Hostingsolution Managed servicesRevenue
sharing
HUAWEI TECHNOLOGIES CO., LTD. Huawei Confidential Page 6
Hosting services helps operators focus on core business, lower OPEX and improve service offerings
• Improves financial and operation efficiency,
• Enable operators focusing on their core business objectives
• Shares risk by using “Risk Sharing” agreements which is based on the service revenue
• Provides total communication solution and accelerate the TTM of new services
Network and Services Maintenance
Network and Services Operation
Service Deployment
Systems O&M
Logistics & Spare parts
New Services Design
Planning
25-30%
20-25%
15-20%
10-15%
5-10%
5-10%
4-5%
Core business
OPEX Split by Network & Service Area
Financing solution Hostingsolution Managed servicesRevenue
sharing
HUAWEI TECHNOLOGIES CO., LTD. Huawei Confidential Page 7
Hosting services can be sub-divided into 5 layers, ranging from Network equipment to Operation supports
Provision of hardware platform and software
Running, maintenance of service platform, i.e. SDP, CDN
Integration of application and service
SP / CP management and support
Business consulting, and Operation support
Network
Application
Platform
Management
Operation
Financing solution Hostingsolution Managed servicesRevenue
sharing
HUAWEI TECHNOLOGIES CO., LTD. Huawei Confidential Page 8
Revenue sharing model helps operators launch new services quickly and limit their risk
$
Year-1 Year-2 Year-3 Year-4
Minimum monthly fee line
Assumed Payee Fee curve
Launch
Maximum re
venue sh
aring cu
rve
Revenue sharing Business Model Description
Payee Period: usually 3-4 years Payee Fee is linked to service revenue or
traffic The detailed covenant is related to
equipment value plus business commitment
Faster Time-to-Market Risk sharing Align costs with benefits Improve cash flow and liquidity Facilitate budgeting control Off -balance sheet financing
Key Benefits
Max revenue sharing curve: protect operators’ benefit
Min monthly fee line: protect vendors’ benefit
Financing solution Hostingsolution Managed servicesRevenue
sharing
HUAWEI TECHNOLOGIES CO., LTD. Huawei Confidential Page 9
Network leasing from third party could reduce large upfront CAPEX investment for operator
Right-to-use Network
Revenue Sharing Model
Equipment Payments
Equipment SupplyFrame Work Agreement
VendorNetwork Supplier
LeaserNetwork Owner
OperatorNetwork User
This model is similar to “pay as you grow”This model is similar to “pay as you grow”
Financing solution Hostingsolution Managed servicesRevenue
sharing
HUAWEI TECHNOLOGIES CO., LTD. Huawei Confidential Page 10
Managed services business model is well proven working for many operators for many years
Network Operation
Network OperationNetwork Operation
Network KPINetwork KPI
• Power / Transmission / Site acquisition• O&M / Spares / Support / Training• Power / Transmission / Site acquisition• O&M / Spares / Support / Training
• Network KPI measure and improvement
• Network KPI measure and improvement
With the managed service, operator can focus on its Core business, Reduce OPEX, Improve Network Quality thus making Performance Predictable.
Finance, G&AFinance, G&A
Marketing & SalesMarketing & Sales
Strategy and PlanningStrategy and Planning
CRM and CEMCRM and CEM
Operation Support System
Operation Support System
Business SupportSystems
Business SupportSystems
IT (ERP, OA, etc...)IT (ERP, OA, etc...)
VAS(SDP, SMS, WAP...)
VAS(SDP, SMS, WAP...)
IT & App.CoreBusiness
Financing solution Hostingsolution Managed servicesRevenue
sharing
HUAWEI TECHNOLOGIES CO., LTD. Huawei Confidential Page 11
Managed services process can be divided into transition and operation stages
Service Responsibility
Transition
EmployeeTransition
Asset Transition
Infrastructureand FacilityTransition
Contract Transition
Due Diligence
Pre Transition Transition Stabilization
Transition Phase
Transformation Continuous Improvement
Operation Phase
• Focus on the core business;• Manageable & predictable OPEX;• Accelerate technology evolution;• Business Transformation for increasing competitiveness
Financing solution Hostingsolution Managed servicesRevenue
sharing
HUAWEI TECHNOLOGIES CO., LTD. Huawei Confidential Page 12
Looking into the Future, We See Beyond Telecom…
In the next five years…2.5 billion MBB users,680 million FBB users
300 million wireless M2M users,
120 million IPTV users
270X MBB traffic,5X FBB traffic
US$ 100 billion data center market
Beyond Voice booming mobile broadband is the next engine of telecom
Beyond Population the Internet of Things is creating a large
subscriber base
Beyond Telecom home networks will open new markets to operators because of the disruptive user experience
Beyond Bit-pipe cloud computing brings new
opportunities driven by a new business model
Source: MBB users is from “Ovum”, FBB users is from “broadband trends”; M2M users is from “berg insight”, IPTV users is from “MRG” , Traffic and Data centre market is from IDC
HUAWEI TECHNOLOGIES CO., LTD. Huawei Confidential Page 13
Highlights of Huawei Technologies
2010
28
2005 2006 2007 2008 2009
68.5
12.8
18.3
21.8
CAGR:34%
We are serving 45 of the top-50 telecom operators worldwide; We provide end-to-end ICT solutions in Network, Software, Devices and
Professional Services
HUAWEI TECHNOLOGIES CO., LTD. Huawei Confidential Page 14
HUAWEI TECHNOLOGIES (Headquarters)
R&D centerHuawei Headquarters
Technical support center
22 regional HQ, 100+ branch offices 17 R&D centers (40,000+ R&D employees), 36 training centers 95,000 employees worldwide Contract Sales exceeded USD 30 billions (2009) Global 500 Corporations - ranked 397 in 2009
Our Global Presence ensures Supports Everywhere
HUAWEI TECHNOLOGIES CO., LTD. Huawei Confidential Page 15
We achieved Sustainable Growth in Middle East Region
Progressive Contract sales of US$2.7 Billion (2010)
Responsive 2800+ highly qualified employees, with
60% local staff
11 branch offices, serving 13 countries customers and their business globally
Innovative Leading Solution Provider in Telecom
Market including Fixed, Mobile and All IP ;
Solutions for Enterprise Market ;
Our business scope also includes Software & Applications, Devices & Terminals, and Professional services
Lebanon
Jordan
Kuwait
Iran
Saudi Arabia
Afghanistan
Pakistan
Oman
United Arab
Emirates
QatarBahrain
Iraq
HUAWEI TECHNOLOGIES CO., LTD.
47pt
www.huawei.com
To Enrich Life Through Communications
Thank youwww.huawei.com
Copyright©2010 Huawei Technologies Co., Ltd. All Rights Reserved. The information contained in this document is for reference purpose only, and is subject to
change or withdrawal according to specific customer requirements and conditions.