PP810 Singapore and HK briefings - Future by krj18645

VIEWS: 4 PAGES: 23

									“Goodbye voice, hello Internet”
The future of voice in the next ten years


Amrish Kacker

March 2010
Ref: 16784-74
Introduction                                                                                               2


    Introduction

        In recent years, a key concern for many incumbent telecom operators – first fixed and
        now, increasingly, mobile as well – has been the decline of revenues from voice
        services
        While fixed and mobile voice ARPMs have indeed come under pressure (primarily
        from price competition), this trend has largely corresponded with growth in voice
        usage, especially in mobile
        The greater fear, however, is that in the medium to long term, voice services will face
        further decline, with the key questions being:
               In terms of usage, will voice traffic diminish as more consumers switch to
               alternative communications, especially Internet-based services such as
               Facebook and Twitter?
               Will the rise of Internet-based VoIP services such as Skype ultimately transform
               voice into ‘just another application’ on a data network?
        In today’s session, Analysys Mason will present our perspectives and insights on this
        issue and how the industry can be expected to respond in the next ten years



                                                                                                  Ref: 16784-74
                                                                                                  Confidential
Introduction                                                                                       3


    Our key messages today…


                             Technological improvements in infrastructure and CPE will
    Voice will remain a      bolster the increasing take-up of Internet-based non-voice
    primary means of         services
    communication            But voice will still remain a mainstay of communications


    Voice revenues will be   However, consumers are becoming less willing to pay for
    affected unless          voice
    operators can respond    Operators are under pressure to respond to this threat to
    effectively              voice revenues

    Industry consolidation   With these developments, operators will need to upgrade
    will be inevitable as    their networks and fend off increasing competition from
    part of operator         service providers and other players…
    strategies               …driving vertical and horizontal consolidation activity



                                                                                          Ref: 16784-74
                                                                                          Confidential
                                                            4


Agenda



         Our perspectives on the future of voice

                          Q&A




                                                   Ref: 16784-74
                                                   Confidential
Our perspectives on the future of voice                                                      5


    Our brief will be driven off changes in
    technology and consumption

                                          Consumption trends
                                          in communications




       Developments in
                                          Industry responses
       technology and                                           Key messages
                                            to developments
      service innovation




                                                                Implications for
                                                               external investors
                                                                 and financiers



                                                                                    Ref: 16784-74
                                                                                    Confidential
Our perspectives on the future of voice • Technology and service innovation                    6


    Infrastructure will improve, facilitating
    faster and greater data traffic
    Recent and impending infrastructure rollouts1




                                                                              3G
                                                                              WiMAX   Ref: 16784-74
                1   Not exhaustive                                            LTE     Confidential
Our perspectives on the future of voice • Technology and service innovation                                    7


    Convergence will be the main theme of
    CPE innovation
                                                                       Apple incorporated mobile voice
                                                                       and Internet access capabilities
                                                                       to its iPod platform with the
                                                                       iPhone
                    Internet access                                    Blackberry has increased its
                         device                                        appeal to the consumer
                                                                       segment with more
                                                                       entertainment functions

                                                                       Google’s foray into the handset
                                        Personal                       space has emulated the iPhone
      Mobile                                                           model
                                   entertainment
      handset
                                          device
                                                                       Motorola has ventured into the
                                                                       Internet access and personal
                                                                       entertainment space with its
                                                                       Droid handset


                                                                                                      Ref: 16784-74
                                                                                                      Confidential
Our perspectives on the future of voice • Technology and service innovation              8


    Better access to the Internet will lead to
    the rise of over-the-top services
    Type of service      Description                                 Examples
    VoIP                 Receive calls from and make voice
                         calls to a PC, handset or landline
                         using the Internet

    Social network       Send status updates and other
                         information to a closed network of
                         ‘friends’/contacts on the Internet

    Instant          Conduct real-time text conversations
    messaging / chat with a closed network of
                     ‘friends’/contacts on the Internet

    Micro-blogging       Post a short message to a public or
                         closed group of Internet users
    Blogging             Post a long text entry to a public or
                         closed group of Internet users

                                                                                Ref: 16784-74
                                                                                Confidential
Our perspectives on the future of voice • Technology and service innovation                                     9


    Facing competition, traditional services
    will evolve as well
                                                                              High-quality voice services
                                            Better                            (HD voice)
                                            quality                           Ability to provide security and
                                                                              other VASes



                                                                              Tariff innovations through
     Evolution of traditional                                                 bundling, ad-funded calls
                                      Greater value
     voice services



                                                                              Ability to provide stronger
                                                                              assurance for service
                                          Availability                        availability
                                                                              Ability to provide stronger
                                                                              assurance for coverage

                                                                                                       Ref: 16784-74
                                                                                                       Confidential
Our perspectives on the future of voice • Technology and service innovation                                    10


    While operators will do what they can to
    constrain the growth of mobile VoIP…
    Limiting strategies       Description                                 Examples
    Blocking the service      Operator imposes a blanket ban on               Operators in most
                              access to third-party VoIP services             markets
                              over its data network
    Allowing only         Operator offers conditional access to               T-Mobile (Germany)
    conditional access to own or third-party VoIP, e.g. only                  Vodafone (Germany)
    VoIP                  subscribers on higher-end or                        KPN (Netherlands)
                          metered tariff plans allowed, only                  Vodafone (Netherlands)
                          international calls allowed                         3-Skype (UK)
    Imposing minimum          Operator allows subscribers to utilise          T-Mobile (Germany)
    spend requirements        own or third-party VoIP only after              Vodafone (Germany)
                              incurring minimum spend
    Capping VoIP usage Operator allows VoIP, but caps                         O2 (Germany) –
                       usage by imposing data or MoU limit                    decreases data speeds
                                                                              once past cap
                                                                              Vodafone (Germany)

                                                                                                       Ref: 16784-74
                                                                                                       Confidential
Our perspectives on the future of voice • Technology and service innovation                              11


    …some will also embrace these new
    services
    Case study: 3 and Skype offer in the UK

    What            Skype and UK operator 3 allows any customer a Skype-enabled 3 SIM
    happened        card, with or without a 3-supplied handset, to access Skype services
                    without paying 3 for the airtime and data usage involved
    Business        The offer allows customers to make free Skype-to-Skype calls, either
    model           from mobile-to-mobile or mobile-to-PC, and Skypeout calls to regular
                    international fixed and mobile numbers via subscriptions or prepaid credit
                    at a low rate
                    However, customers cannot make calls to standard UK lines using
                    Skype. These are offered only as part of 3 call plans
                    The idea is for pull new users in with the free Skype services, and then
                    attract them to pay subscription fees and rates for calls requiring
                    termination
    Impact          At the end of April 2009, the number of regular Skype users on 3’s
                    network stood at around 220 000

                                                                                                 Ref: 16784-74
                                                                                                 Confidential
Our perspectives on the future of voice • Consumption trends                                                                  12


                    The consumption of non-voice
                    communications will grow
                     Time spent by US Internet users on top
                     10 social media sites versus mobile MoU            New contexts for communication
                    250                                                  Non-voice communications such as
                                                            235
                                                                         Twitter and Facebook are opening up
                                                                         new contexts for communications:
                    200                                                      “dead time” communications, e.g.
Minutes (billion)




                                                                             commuting, waiting time
                                    Time spent on                            group communications, e.g. Anwar
                    150         social media already                         court trial on Twitter
                                 almost 10% of time
                                   spent on mobile
                    100                                                 Facebook more effective than voice?
                                                                          In Australia, a family recently learnt of
                                                                          the death of a teenage child in an
                     50                                                   accident via Facebook instead of the
                                             21                           police
                              10
                                                                          Some commentators claimed that this
                      0
                                                                          signaled a shift in the effectiveness of
                          Social media   Social media    Total mobile
                          (April 2008)   (April 2009)   MoU (3Q 2009)     traditional communications

                                                                                                                      Ref: 16784-74
                                                                        Source: Merrill Lynch, AC Nielsen, 2009       Confidential
Our perspectives on the future of voice • Consumption trends                                                      13


    Voice will still retain relevance in
    developed markets…
    Mobile MoU in selected developed                               Industry findings in North America
    Asian markets (minutes)                                        markets
   600
   500                                                             “A survey of 250 North American
   400                                                             mobile device users reveals that
                                                                   although 74% of users want advanced
   300                                                             applications, they still prefer voice as
   200                                                             their main communications media.”

   100                                                                               AppTrigger, end-2008

     0
         2005   2006        2007          2008           2Q        “North American companies… are
                                                                   primarily expecting to hold the line on
                                                        2009
                                                                   voice communications expenses, not
           Australia                       Hong Kong               slash budgets as is feared by many in
           Japan                           New Zealand             the industry.”
           Singapore
                                                                                       Infonetics Research
     MoU levels are relatively stable despite
     more usage of non-voice communications
                                                                                                          Ref: 16784-74
                Note: 2Q 2009 data for Hong Kong not available   Source: TMCNet, Merrill Lynch, 2009      Confidential
Our perspectives on the future of voice • Consumption trends                                                   14


    …and especially in emerging markets
    where there is room for mobile growth
    Mobile penetration in selected                             Mobile MoU in selected developing
    developing Asian markets (%)                               Asian markets (minutes)
   120%                                                        500
   100%                                                        400
    80%
                                                               300
    60%
                                                               200
    40%
    20%                                                        100
      0%                                                         0
        2005     2006     2007     2008     2Q                    2005     2006    2007     2008      2Q
                                           2009                                                      2009
        China           India             Indonesia                  China         India           Indonesia
        Malaysia        Pakistan          Thailand                   Malaysia      Pakistan        Thailand

    Mobile subscribers still on the rise in most               Mobile usage is also significant and on
    emerging markets in Asia                                   the rise (Note: the decline in India is due
                                                               to acquisition of low-end subs)
                                                                                                       Ref: 16784-74
                                                          Source: Merrill Lynch, 2009                  Confidential
Our perspectives on the future of voice • Consumption trends                                                    15


    However, the willingness to pay for
    voice will decline, driving prices down
                                                                 Mobile ARPM in selected
                                                                 developed Asian markets (USD)
                        Partial
                      substitution                               0.4
                     by non-voice
                     alternatives                                0.3

                                                                 0.2
                       Declining
                      consumer                                   0.1
                      willingness
                      to pay for
                                              Continuing         0.0
                         voice
          Price                                   price                2005   2006   2007    2008    2Q
      competition                             competition                                           2009
       from VoIP                               from other
                                                operators                 Japan             Australia
                                                                          New Zealand       Singapore
                                                                          Hong Kong
                                                                 In many markets, ARPM levels are on the
                                                                 decline

                                                                                                        Ref: 16784-74
                Note: 2Q 2009 data for Hong Kong not available                                          Confidential
Our perspectives on the future of voice • Consumption trends                                                                                                                                16


                            In some emerging markets, voice
                            revenues are already declining
                            XL voice revenues versus                                                                                         AIS voice revenues versus
                            subscribers                                                                                                      subscribers
                           2.0                                                            30                                                 70                                        30




                                                                                                                   Voice revenues (THB bn)
Voice revenues (IDR trn)




                                                                                          25                                                 60                                        25
                           1.5                                                                                                               50




                                                                                                                                                                                            Subscribers (m)
                                                                                                 Subscribers (m)
                                                                                          20                                                                                           20
                                                                                                                                             40
                           1.0                                                            15                                                                                           15
                                                                                                                                             30
                                                                                          10                                                                                           10
                                                                                                                                             20
                           0.5
                                                                                          5                                                  10                                        5

                           0.0                                                            0                                                   0                                        0
                                    1Q09             2Q09                3Q09                                                                      4Q08    1Q09     2Q09     3Q09

                                 Average quarterly voice revs1(IDR trn)                                                                           Average quarterly voice revs 1(THB bn)
                                 Subscribers (m)                                                                                                  Subscribers (m)

                                                                                                                                                                                    Ref: 16784-74
                                                                                                                                 Source: XL, AIS quarterly reports
                                        1   Average quarterly voice revenues are calculated using a 4-                                                                              Confidential
                                            quarter moving average
Our perspectives on the future of voice • Industry responses                                      17


    Technology upgrades will drive the
    need for network investments
                                                               China
 India
                                                                 Chinese operators are rolling
   Regional operators in India                                   out 3G networks after
   are looking towards national                                  receiving their licences
   expansion …
   … while impending                                           Regional
   3G/WiMAX licensing will                                       Some players in East and
   trigger further network                                       South East Asia are exploring
   deployment and upgrades                                       regional WiMAX deployments

 Bangladesh                                                    Vietnam
   3G and WiMAX licences are                                     Operators in Vietnam are just
   expected to be issued in 2010                                 beginning to roll out their 3G
                                                                 networks
 Indonesia                                                     Thailand
   Indonesian operators are                                      Operators will be looking to
   pushing forward with WiMAX                                    kickstart 3G deployment
   deployment                                                    when and if the process gets
                                                                 back on track
                                                                                         Ref: 16784-74
                                                                                         Confidential
Our perspectives on the future of voice • Industry responses                                                 18


    Service providers and device vendors
    will have greater ambitions
                                                                       Billing


        Network                                    SIM and CPE
                               Network
     infrastructure                               distributors and                   End-user
                               operator
    and equipment                                     resellers



                       Supply of content,         Supply of handsets
                       applications, etc.         and other CPE


                 Service                    CPE device                          Service providers and
                 provider                     vendor                          device vendors are now
                                                                                addressing end-users
                                                                            directly via the Internet and
                                                                             subverting the traditional
                                                                            billing relationship between
                                                                             operators and end-users


                                                                                                     Ref: 16784-74
                                                                                                     Confidential
Our perspectives on the future of voice • Industry responses                                                  19


    To fend off competition, industry
    consolidation will be inevitable
                Vertical consolidation                              Horizontal consolidation
       Operators will be looking to acquire and                At the same time, operators are
       build up capabilities further down the                  looking to consolidate horizontally, both
       value chain and across subsectors,                      within fragmented markets and
       particularly in terms of content and                    regionally across markets
       application development
                                                               Horizontal consolidation improves
       This will help to neutralise the threat of              competitiveness by achieving greater
       being disintermediated in the value chain               scale and increasing resources to fund
                                                               network expansion or upgrade, etc.
       Examples include:
                                                               Examples include:
           SK Telecom’s acquisition of CyWorld
                                                                  regional acquisitions by groups
           China Mobile’s rumoured acquisition
                                                                  such as Axiata, Telenor, SingTel,
           of Tencent
                                                                  Etisalat
                                                                  potential consolidation within
                                                                  markets like Indonesia, India


                                                                                                      Ref: 16784-74
                                                                                                      Confidential
Our perspectives on the future of voice                                                                    20


    To recap, the changing landscape for
    voice will drive industry changes

                                      Technological improvements in infrastructure and CPE will
    Voice will remain a               bolster the increasing take-up of Internet-based non-voice
    primary means of                  services
    communication                     But voice will still remain a mainstay of communications


    Voice revenues will be            However, consumers are becoming less willing to pay for
    affected unless                   voice
    operators can respond             Operators are under pressure to respond to this threat to
    effectively                       voice revenues

    Industry consolidation            With these developments, operators will need to upgrade
    will be inevitable as             their networks and fend off increasing competition from
    part of operator                  service providers and other players…
    strategies                        …driving vertical and horizontal consolidation activity



                                                                                                   Ref: 16784-74
                                                                                                   Confidential
Our perspectives on the future of voice                                                          21


    This will result in growing opportunities
    for financing and M&A activities
      Network deployments and upgrades
        Operators in the region will be looking for financing
        to support capital-intensive network deployment,
        expansion or upgrade activities

      Industry consolidation                                           Growing
                                                                     opportunity for
        With greater consolidation activity, there will be              financial
        opportunities for PE investors to buy into the sector as   institutions in the
        well as for financiers to fund acquisition activity           TMT space

      New transmission platforms
        Operators will be looking for financing to back
        their forays into new technologies, such as
        WiMAX, LTE or 3G in less developed markets


                                                                                         Ref: 16784-74
                                                                                         Confidential
                                                           22


Agenda



         Our perspectives on the future of voice

                          Q&A




                                                   Ref: 16784-74
                                                   Confidential
                                          23




amrish.kacker@analysysmason.com
     Analysys Mason Pte Ltd
      8 Temasek Boulevard
        Penthouse Level
      Suntec Tower Three
       Singapore 038988


       Tel: +65 6866 3203
      Fax: + 65 6866 3838


    www.analysysmason.com


                                  Ref: 16784-74
                                  Confidential

								
To top