International Congress & Convention Association · n Stockmarket value of network operators (Vodafone, Deutsche Telekom ... The Global Telecoms Industry, ICCA Rhodes. 30

www.iccaworld.com

The Global Telecoms Industry 45 th ICCA Congress & Exhibition Monday 30 October 2006

International Congress & Convention Association

Malcolm Ross, Principal, Merlin Consulting Ltd. PO Box 153, 75 Old Bakery Street, CMR 01, Valletta, Malta Tel: +49+177625 2656 Fax: +4917799625 2656 Skype: callmalcolm eMail: [email protected] Web: www.consultmerlin.com

The Global Telecommunications Industry, 11:00 – 12:30

2006 ICCA, Rhodes, Greece 30 th October 2006

What are the big growth sectors? Who are the biggest players?

Which parts of the world will see increased activity that can stimulate meetings?

The Global Telecoms Industry

mailto:[email protected]

The Global Telecoms Industry, ICCA Rhodes. 30 th October, 2006

Malcolm Ross, Merlin Consulting, Valletta, Malta eMail: [email protected] Web: www.consultmerlin.com

3

Telecoms is the biggest share of GDP, but relative to its size produces only a tenth the congresses & meetings of HealthCare

Summary

n Telecoms is a €1,000 B industry, growing twice as fast as GDP

n Telecom is a major source of Congresses and Meetings

àITU Telecom World every four years, is a megaevent: 2006 (Hong Kong): 42k – 57k visitors, of which 2,600 in the Congress

à3GSM Barcelona: 50,000 visitors, of which over 5,000 in the Congress; plus regional events in Asia, Africa, etc.

àGlobalComm (Chicago) 20000 visitors; PTC (Hawaii) 1000 delegate

àOperators and vendors hold many training and promotional events

àCorporate and enduser congresses such as INTAUG etc.

n Positive correlation of travel with telecoms (cause & effect?)

n But is only fourth largest source of megacongresses: 8% (2005) – 10% (2004) of International Congresses in Vienna



4

However, the Telecom industry is halfway through 10 years of crisis fed by 6 paradigm shifts

n Stockmarket value of network operators (Vodafone, Deutsche Telekom, Verizon etc.) and sales of equipment (Nokia, Siemens, Ericsson etc.) halved since 2000; mergers of Siemens/Nokia Networks, Alcatel/Lucent; bankruptcy of MCI; Benq Germany;

n It is assailed simultaneously by many powerful internal and external drivers and paradigm shifts

àFrom the stable monopolies on the 1980, every country now has many operators, fiercely competing

àMarkets, technology, players and rules of the game changing at least as fast as the computer industry.

àNew paradigm shifts continue to change the industry and generate an increasingly dense fog of uncertainty

Summary



5

Will this crisis change where Telecoms congresses and meetings will be held, their number and size and what they will be about? Can we multiply them by ten (to match relative size of HealthCare)?

Wei = „Dangerous“ Ji = „Opportunity“

Chinese character for „Crisis“

Summary



6

We suggest 32 clues and hints ICCA Members look for now in these 6 shifts, to seek out over the next 3 5 years the new telecomrelated congress & meeting business, and to manage the increased dangers 1. The shift of buying power, manufacturing capacity and innovation

to Asia is accelerating – 6 clues and hints

2. Technology change is at least as fast and broad as in IT – 8 clues and hints

3. Even the big directions for the telecoms industry are foggy – 7 clues and hints

4. The financial industry has a strong, growing influence – 4 clues and hints

5. Power is shifting from operators to equipment, device and service vendors – 3 clues and hints

6. Other industry sectors are shifting by embedding telecoms – 3 clues and hints

Summary



7

Possible impact of the shift to Asia in the Telecom sector on the Conference and Congress industry 1. Higher demand in attractive Asian cities for congress center and

meeting capacity of all sizes for telecomrelated meetings

2. Higher demand in “safe” African & MiddleEast cites for capacity for telecomrelated meetings

3. Fewer and smaller megaconferences in telecom in Europe and US

4. More “satellite” conferences regionally to augment global mega events, and some of these will grow bigger than the parents

5. More demand for translation services in events and backoffices (e.g. Mandarin into English)

6. US and Europeanbased Congress Bureaus and Congress Centers sales staff have to travel, as traditional event organisers and association/organisation leaders more often in Asia

1. The shift of buying power, manufacturing capacity and innovation to Asia is accelerating



8

Telecom‘s center of gravity has shifted to Asia, so that Asia will soon become the dominant force driving telecoms

n Telecom is growing faster than GDP everywhere, is growing fastest where penetration is low, with the biggest markets being China and India

n China Telecom (220 M fixedline and 27 M broadband customers) is the world’s biggest fixed operator. China Mobile with 280 Million users rivals Vodafone as biggest mobile operator.

n Developing markets are leaping directly into the latest platforms

n Asian buying power means new products are being launched there first and are influenced more by Asian customer needs

n Telecom manufacturing has already shifted to Asia, and there are signs that innovation and standardssetting will follow

n Bangalore is the world capital of callcenter outsourcing




9

Telecom is growing faster than GDP everywhere, is growing fastest where penetration is low, with the biggest markets being “Chindia”

n The total number of mobile telecom users will rise from 2B to 3B by 2010 (43% of world population). 1.5B fixed phones. Goal 6.5B!

n China and India will make up 30% (370M) of that growth

n MiddleEast and Africa will add 200M by 2010

n Over 50% of telecom infrastructure and mobile handsets sales are to mainland China, so Asia dominates markets

n India commits to the two largest ever network procurements

à Oct 2006 BSNL receives bids for 60 million GSM lines ($4.8B)

à Adding 1.6M users in July 2006 Bharti buys $1B network expansion

n Europe may be 100% penetrated with mobile, but total spend still is rising faster than GDP; broadband still growing fast




10

Western European telecomm market growth is declining

9% 7%

5% 5% 4% 2%

3% 3% 2% 2% 1% 0%

17%

25%

37%

51%

97%

139%

2002 2003 2004 2005E 2006E 2007E 10%

0%

10%

30%

50%

100%

140%

Broadband a

Mobile Voice & Data b

Fixed Voice c




11

Developing markets are leaping directly into the latest platforms

n The vast majority of new users in markets with low telecom penetration go for personal mobile rather shared fixed phones

n Operators in emerging markets have little investment in legacy (previous generation) equipment, so move straight to next generation (Internet Protocol), so are best equipped to offer advanced services, best quality and low cost to build and run

n Korea has the highest broadband penetration in the world

n Japan has high broadband penetration and the fastest widely available broadband anywhere

n Several Taiwanese, Singaporean and Hong Kong operators are building ultrahigh capacity fibercable to every work place and every urban household nationwide, and Taipeiwide next generation wireless broadband




12

Asian buying power means new products are being launched there first and are influenced more by Asian customer needs

n Local script languages need larger displays, touchscreens, stylus writepads and voice response

n Mainland China instigating a project to provide all students with an electronic writingpad based distancelearning computer

n Local content is taking off (e.g. Japanese and Chinese music and video, ringtones)

n iMode (Japanese mobile Internet) is often cited as the model for the West to copy (although its success is based on different cultural environment that doesn’t exist elsewhere)




13

Telecom manufacturing has already shifted to Asia, and there are signs that innovation and standardssetting will follow

n The European GSM standard is used in 80% of all mobile phones and produces the biggest Telecom Congress (3GSM), but Asia buy more than 50% and is producing the next standards!

n The U.S. graduates 70,000 engineers a year vs. 350,000 from India and 600,000 from China (there is dispute over definitions)

n Taiwan (including mainland factories), Korea and Japan dominate supply of IT and telecom components: displays, diskdrives, displays, mother boards, WLAN modules

n Taiwan (and now China) are not just copying, they are innovators for example monopoly suppliers of all next generation wireless and are putting it into digital cameras, game consoles, hifi etc.

n Strong in device software (although still weak in application software)




14

Summary: Possible impact of the shift to Aisa in the Telecom sector on the Conference and Congress industry 1. Higher demand in attractive Asian cities for congress center and

meeting capacity of all sizes for telecomrelated meetings

2. Higher demand in “safe” African & MiddleEast cites for capacity for telecomrelated meetings

3. Fewer and smaller megaconferences in telecom in Europe and US

4. More “satellite” conferences regionally to augment global mega events, and some of these will grow bigger than the parents

5. More demand for translation services in events and backoffices (e.g. Mandarin into English)

6. US and Europeanbased Congress Bureaus and Congress Centers sales staff have to travel, as traditional event organisers and association/organisation leaders more often in Asia




15

Possible impact of fast technological change in the Telecom sector on the Conference and Congress industry 7. Events have to be more often for delegates to keep up with

changes

8. Megaevents fragment into more parallel sessions

9. More events, each more specialised and smaller

10. Peernetworking at events and between events is key

11. More demanding and expensive stateoftheart support facilities are key to selecting Congress location/facilities

12. Telecom and IT services to delegates become a major source of revenue to Congress centers

13. Many more corporate and internal training events

14. Telecom will be a key theme in Congresses in many other sectors

2. Technology change is at least as fast and broad as in IT



16

What is possible will be limited more by our imagination rather than by computer and telecom technology n Performance, cost and pervasiveness of IT/telecom devices and

bandwidth are highly predictable, even if specific products are not

n Moore’s law: computer power/price doubles every 18 – 24 months

n We cannot predict success for specific products, but Moore’s law means ubiquitous and affordable communications devices by 2010

n Advances in price performance of IT/Telecom can provide powerful tools previously limited to very specialised purposes

n Software developments are more difficult to quantify, but some trends are at least qualitatively predictable

n Optical fibre cables offer unlimited bandwidth, eliminating distance and giving advantage to the firsttomarket

n In most urban environments, along roads and in most private and public buildings telecoms capacity will exceed our ability to use it

n High GDP/km 2 countries will signpost the way forward




17

The future is limited by our imagination, not by the performance, cost and pervasiveness of IT/telecom technology – and Congresses are a good way to stimulate our imagination! n Moore’s Law: microchip power doubles every 18 months, and

cost decreases 30% true since 1975 (annual doubling before that) and no barrier over next 10 years

n Data traffic doubles every year (not every 100 days, as in the 1995 – 2000 myth of “Internet Time” that created the bubble)

n Capacity of a fibreoptics cable doubles every 12 – 18 months

n Fibreoptics cost is 90% trenching/ducting which is $80/m – with a budget of $1,200/user, all desks closer than than 15m and 4 person households closer than 60m apart will be served

n Will fibreoptics and next generation wireless be the standard for Congress stands and seats?




18

By 2010 everyone, everywhere will have affordable Telecoms – so it will be a key to all other sectors, so expect a telecom stream in all Congresses?

n 3 – 6 billion mobile phones compared with 1 billion PCs and 0.5 billion cable TV subscribers

n By 2010 a mobile phone the size of a Eurocoin and costs 10 Euro; next generation wireless Bluetooth and WLAN on a chip are already here

n Internet routers the size of a Eurocoin and costs 10 Euro

n At least as ubiquitous as embedded microprocessors today, wirelesslinks will be in consumer electronics, cars, Coke machines, appliances as well as communicators and computers

n Singlechip WLAN soon standard in every PC, mobile phone, PCs, digital cameras, DVD players etc as the “wireless memorystick”

n Every such device will be within 5 metres of at least one other




19

What Telecom devices people wear or carry in 2010 will impact how business and social life is done (and Congresses!) n Microchip and digital storage will be 30 times today’s, and unit

prices will sink to 1/6 th of today’s, so for the same price, a PC has 5 times the performance and 5 times the storage capacity of today

n For the same price a PC would be 1/5 of the size and volume, leading to PDAs with the power of today’s laptops and mobile phones and other personal consumer electronics with the power of highend PDAs

n Increased disc storage density can put 30 times more on a CD or DVD, or 30 feature films could fit on a thumbnailsized microdisc, in a wearable personal entertainment server or mobile phone.

n A businesscard sized memory could carry 100 hours of promotional videos

n Virtual presence, social/business networking via telecoms gives virtual and continuous meetings/Congresses anytime/anywhere




20

Advances in price performance of IT/Telecom can provide powerful tools previously limited to very specialised purposes

n Arcade game computers and highend home computers become 30 times more powerful, opening up potential for virtual reality/simulators for lifelike interactive games.

n Simulators play a major part in the education of airline pilots. Will wide access to PCbased virtualreality simulation and rollplaying lead to their use for à education in Business Studies, Languages, Engineering, Medicine,

etc.?

à entertainment – interaction and involvement in movies

à virtual presence in meetings (Congresses!), soccer matches, rock concerts, massively multiple participant games




21

Software developments are more difficult to quantify, but some trends are at least qualitatively predictable

n You will be able to search sound and video archives such as YouTube, all past BBC TV programmes from your notebook

n Interactive searching, learning, commenting during a Congress! n Digital Copyright and Flickr/Zazzle commercialisation enables

everyone to be an author wherever they are, protection their new intellectualproperty and PayPal ensures you get royalties paid

n Authentication schemes ensure content is going to the intended party and that the response is truly from them

n Studioquality graphics, video and audio production tools are cheap and easy enough for individuals to produce professional material and broadcast it through Internet bypassing the current media sector. Some music artists only commercialize their work through the Internet




22

Optical fibre gives unlimited capacity, eliminating distance and giving advantage to the firsttomarket

n Fibreoptic cable have over 100 fibres, each with 64 laser ”colours”, each colour can carry 5,000 CDquality telephone calls

n Such a cable pays back at 2,000 voice channels (0.001% fill)

n Such a cable offers 10,000 full broadcast quality simultaneous twoway video channels, or 10 million simultaneous video conferences

n Every year advances in the electronic links to the cable doubles the number of laser colours that an existing cable can transmit, growing capacity faster than demand, at negligible extra cost

n This surfeit of capacity may mean late entrants won’t get market or financing: telecom again becomes a “natural monopoly”




23

In most urban environments, along roads and in most private and public buildings telecoms capacity will exceed our ability to use it n Fibre cables economically serve large office buildings along the

main streets of most financial centres in major cities, even in the developing world

n Office workers links to the corporate network are 20 – 50 times faster than DSL – the bottle neck is in the database or terminal

n WLAN “hotspots” in public locations along the fibre cable or DSL branches from it can give 50m circles of 100 Mbps (megabit per sec.) access, 50 times the capacity of DSL at home

n Fon (www.fon.com) is just a few months old, in alpha test, yet has built a community of 100,000 “fonderos” with private wireless access points who allow others to use their spare capacity free

n WLANs chain “peertopeer” can give 100 Mpbs everywhere in urban areas leapfrogging traditional telecom infrastructure




24

Cost reductions and performance enhancements will bring this capacity at much lower costs than voice today e.g. the UK

n UK has 393,000 km of A, B and minor roads. If fibre laid on every, then 393 Million metres at €80/metre = €32 B over 60M pop = €500/pop. A WLAN every 50m = 8Million times €50 = €400M = €7/pop

n Singapore municipal WLAM project: 5,000 hotspots: for $US 63M = $12,000/hot spot = 700km2 = 1 every 300m, 4.5M people = $14/pop

n Today’s telephone network cost around $1,200 per phone to install




25

High GDP/Capita countries enable operators to rollout nationally very high bandwidth services to every office and every urban household: even if only voice services were purchased, revenue covers costs

n These operators can install dense fibre meshes to explore needs of the Information Society, at very low risk, and will discover demand for high speed and advanced services first

n Such operators are lead customers for next generation networks

n There are operators pursuing this strategy at least partially in all the critical markets, but most are holding back to fiber MANs and backbones, or ADSL “try it and see”

n Candidate nationwide “showcases” of this new information centric world include Hong Kong, Singapore, Taiwan, Netherlands, (Malta) – signposts if the broadband future emerges

n US, UK, France, Germany etc. will lag except in small parts of large cities




26

High GDP/km 2 markets are signposts: Hong Kong, Singapore, Taiwan, Netherlands, Malta can put in ubiquitous broadband riskfree so as to experiment with knowledgebased working & the information society

n Massive savings in local loop costs, due to dense populations

n Local loop is 0.5 km, compared to European average of 4km and US 8km; ($70/m trenching costs and $10/m fiber cost local loop)

n The cost of a dense urban mesh wiring up all businesses nation wide pays back with 10 – 20% of today’s voice traffic

n A business customer in these countries has an easy choice:

àADSL from the incumbent, not available everywhere, expensive, subject to poor quality and a delay in installation

àVoice services from the next generation carrier, with ondemand upgrade to 10 MBPS “alwayson” to the desk, or any higher data service up to the fibre limit (10 million simultaneous video conferences), with entry price the same as incumbent’s POTS




27

Summary: Possible impact of fast technological change in the Telecom sector on the Conference and Congress industry 7. Events have to be more often for delegates to keep up with

changes

8. Megaevents fragment into more parallel sessions

9. More events, each more specialised and smaller

10. Peernetworking at events and between events is key

11. More demanding and expensive stateoftheart support facilities are key to selecting Congress location/facilities

12. Telecom and IT services to delegates become a major source of revenue to Congress centers

13. Many more corporate and internal training events

14. Telecom will be a key theme in Congresses in many other sectors




28

Possible impact of fogginess in the Telecom sector on the Conference and Congress industry 15. There is money in journalists and conference organisers who are

early trend spotters/setters, whether right, or more often wrong

16. Telecom decision makers have a herd instinct – are they migrating to new pastures or “5 million Lemmings can’t be wrong”!

17. More shortterm changes in size and nature of congresses

18. More shortterm cancellations, fewer longterm contracts

19. New conferences move in a few years from obscure to fashionable to obsolete

20. Diversify away from dependence on megatelecom conferences, have backup plans and contingencies

21. Get paid in advance!

3. Even the big directions for the telecoms industry are foggy



29

The technology base might be clear, but there is uncertainty in market demand, competitive structure, business models

n Multiple dramatic changes will cloud and confuse the IT, telecoms and content industries for the next five years

n The industry is uncertain about convergence vs divergence, IP vs switched, data/voice, local vs longdistance, optical vs copper, mobile vs fixed, so beware of jumping on the “next big thing”

n The industry did a great job penetrating the global population, but getting overcapacity used is a more fundamental challenge

n When dramatic change hits an industry, who emerges from the chaos as leader often depends on the size of the commercial consequences

n The leaders should prioritise their attention to ensure they are ready for high uncertainty, highimpact drivers




30

Multiple dramatic changes will cloud and confuse the IT, telecoms and content industries for the next five years § Performance, cost and pervasiveness of IT/telecom devices and

bandwidth are highly predictable, even if specific products are not

§ AsiaPacific buying power will influence product and service design

§ The 'ation crisis will continue to destabilise the telecom sector: liberalisation, globalisation, privatisation, reregulation, consolidation .....

§ The financial industry will drive a stronger business culture

§ It is unclear which future structure and winners will emerge from shifting boundaries between IT/content/fixed & mobile telecoms; operators/serviceproviders/vendors/customers; consumer/professional

§ Markets will be driven more by customerneed and less by technology and economics of networks

§ The biggest money and growth is in the businesses that apply Internet and Intranets, rather than in the telecom/IT sector




31

The industry is uncertain about convergence vs divergence, IP vs switched, data/voice, local vs longdistance, optical vs copper, mobile vs fixed, so beware of jumping on “the next big thing”

n Many cases of mobile and fixed diverging in both market and technology, show convergence is not a law of nature

n Convergence of voice and data in technology or market is also not a law of nature

n The myth of „Internet traffic doubling every 100 days“ when in fact it was doubling annually led to five years of overinvestment in capacity, leading to 2 3.65*5 overcapacity that it will take a decade of growth to use up

n ISDN, India, China, ADSL have been hypes that yielded no sustainable profitability for telcos

n So the industry needs to learn: solid research, futureproof planning, fast payback, with conservative demand prognoses




32

The industry did a great job penetrating the global population, but getting overcapacity used is a more fundamental challenge n Got a fixed phone into every (Western) home and office by 1980

n Phase 1: 1978 – 1985: Prove the technology for automatic cellular mobile telephone systems – analogue carphones. Demand many time what expected, despite high prices for service and handsets.

n Phase 2: 1985 – 2000: Digital cellular puts a mobile phone in everyone’s hand. Supply finally catches up demand.

n Phase 3: 2000 – 2010: The quest to fill capacity: how to stimulate consumers to use mobile as their principal communications media

n Broadband will follow this model well within a decade

n Phase 1: growing number of small, specialised congresses

n Phase 2: global megacongresses, promotion, sponsorship

n Phase 3: focussed training, optimisation, costsensitive meetings




33

n Mobile penetration is saturating in terms of % pop with a mobile

n Saturation is unproven in terms of

ànumber of minutes of voice conversation per person

àroles that mobile communications can play in people’s lives

àthe share of wallet 52% of under 16 UK kids are spending less on burgers & chocolate to buy mobile topup cards for chatting and SMS

n Most waking minutes are spent silent. 98% of talking minutes are facetoface. 80% of phone minutes are spent on the fixed phone.

n We don’t need to debate how much of this is realistically available to mobile as just 1% of this potential captured as mobile voice traffic would double mobile voice usage


(Mobile) operators are so focused on desperately seeking revenues from broadband and content, they are overlooking the opportunity to double or more revenues from voice, at low risk and low cost



34

When dramatic change hits an industry, who emerges from the chaos as leader often depends on the size of the commercial consequences

n Minor product performance improvements

n Minor growth in total market size

1970: Swiss rule the watch industry

1997: Swiss almost rule the watch industry

Chaos

Digital Watches =

n Travel speed multiplied by ten

n Total travelling public multiplied by ten

1930: Railways rule long distance

transportation

1997: Airlines almost rule longdistance transportation

Chaos

Airplanes

n Massive R&D costs

n Change in skills required

n No change to operators

1970: 40 telecom

vendors rule the switch industry

1997: 5 telecom vendors rule the switch industry

Chaos

Digitisation




35

Most of the changes facing Telecoms either favour consolidation or newcomers, so it is likely the major customers for meetings and congresses will change dramatically

Paradigm Shift Change In Market

Change In Performance

Who Wins

‘ation Crisis Minor Minor Consolidation

Mobile Growth Major Major New Comers

CustomerDriven Minor Major Uncertain

Data/IP Growth Major Major New Comers

Electronic Commerce Minor Major Consolidation

Asia Markets Key Moderate Minor Consolidation

Distance Eliminated Minor Major New Comers




36

Any one of four extremely different futures is believable so could happen; each would have a different impact on meetings and congresses!

Supply: Few, global players

Dem

and: custom

, intense product / service

Supply: Many, everyone can do it

Dem

and:

si

mpl

e, g

ener

ic,

free

n Telecom seen as flat‐rate monopoly utility bundled with water & power ‐ essential but not valued; mainly voice

n Large communities reject IT/telecom with fear of „big brother“/privacy & technology

n Supply exceeds demand; like airlines, „high tech“/sexy industry still attracts newcomers, but none are profitable

n Slower innovation cycles, longer life of infrastructure and services

n IT, Telecom, content „High priest“ practitioners highly esteemed

n „Unlimited bandwidth, everywhere“ real‐estate has premium price

n Logical rather than geographic „communities“ and „nationalities“; virtual corporations

n Eight global operators who have earned their monopoly: Microsoft, Sony, Citibank, Shell, China Telecom, Carrefour, Hutch

n WLAN embedded in devices (toasters, camera) & services (Banking)

n Peer‐to‐peer meshed networks bring universal broadband; Telecom is ubiquitous;

n „Operators“ only link communities’ wireless access points; Verisign, Macrovision manage content rights and royalties; everyone can author

n “Click to move” if plan extensive mobiliity during a call

n Everyone can create their own network and service mix to match their needs and can dynamically change it; Telecom/IT architecture taught as creative arts not engineering

n Telecom embedded or bundled into customized applications giving specialized benefits with very high value specific to niches

n Thousands of suppliers of specialized devices, installers for specific applications

Information Society Knowledge‐based working

Click To Chat, Anytime, Anywhere

Meshed Community

My Own Network


Functionspecific (e.g. „Association of Wearable Phone

Marketeers“)

Massively multiple small very specialieds

„Artisan“ meetings

More of „sexy technology“ Mega

Congresses

No TelecomSector meetings but

telecomstreams in all meetings



37

Summary: Possible impact of fogginess in the Telecom sector on the Conference and Congress industry 15. There is money in journalists and conference organisers who are

early trend spotters/setters, whether right, or more often wrong

16. Telecom decision makers have a herd instinct – are they migrating to new pastures or “5 million Lemmings can’t be wrong”!

17. More shortterm changes in size and nature of congresses

18. More shortterm cancellations, fewer longterm contracts

19. New conferences move in a few years from obscure to fashionable to obsolete

20. Diversify away from dependence on megatelecom conferences, have backup plans and contingencies

21. Get paid in advance!




38

Possible impact of financial industry influence in the Telecom sector on the Conference and Congress industry 22. Stricter criteria on who and how many can attend meetings, what

value is expected from attendance, where is acceptable

23. Higher pricesensitivity

24. Shift of themes from exciting technology to market needs, optimised operations, business cases, innovative business models, futureproof strategies

25. Opportunity to stimulate “professionalisation” of Telecoms, hence stimulating many new congresses

26. Telecom again becomes a key topic in financial and investor congresses

4. The financial industry has a strong, growing influence



39

The financial industry is seizing control either through Private Equity M&A of telcos or through pressure on incumbent management n Private Equity does not see telecom management maximising

enterprise value by balanced their attention and the companies resources on all the parameters that make up that value

n Measured on the 7 capabilities/functions key to be successful, operators are mediocre compared with leaders in other industries

n 2005 saw $ 200 Billion of M&A activity in Europe telecoms, 20% of all M&A.

n This is only scratching the surface of the potential as most incumbent telcos worldwide share the characteristics that make them so interesting for PE




40

Private Equity does not see telecom management maximising enterprise value by balanced their attention and the companies resources on all the parameters that make up that value: (Illustrative)

Parameter Driving Value Management Attention

Financial Analyst Attention

Interest rate Moderate Low

Financial analyst confidence in industry Moderate High Track record Low High Revenue uncertainty Low High Cost uncertainty Low Moderate Technology uncertainty High High Competitive intensity uncertainty Moderate High No. of customer groups Low Moderate Pop. of customer group High High Market share High Moderate Lifetime of customer Low Moderate Portfolio of product/services High Moderate Value of product/service to customer Low Moderate Unit price High High Intensity of use Low Moderate Capex Moderate High Opex High High Accounting Rules High High

Cost

Discount Rate

Revenue




41

Measured on the 7 capabilities/functions key to be successful, operators are mediocre compared with leaders in other industries such as P&G, Sony, Nokia etc, (scores out of 5)

1 2 12 2 3 3 2

2 2 2 2 2 2 3

3

2

3

2

Operator 3

J&J Visa Postits Dell Dell McD IBM

Coca Cola FedEx Nike Beneton Coke Dior P&G

Avis

Sony

Sony

P&G

Best In Class

2 2 7) Financial predictability – Having clear business model(s) 2 2 6) Partnerships – get and mange partners 12 12 5) Ease of use of services 2 2 4e) Cost efficient 3 3 4d) Provisioning/billing 3 3 4c) Network quality/coverage 3 2 4b) Develop/maintain best in class staff

3 3 4a) Address all customers 3 2 4) Serve customer through operational excellence 2 1 3c) Create emotional relationship to customer 3 2 3b) Create Image and communicate to customers 4 3 3a) Build desirable brand 3 2 3) Acquire and retain the high NPV customers 3 3 2c) Select and develop sales channels

3 3 2b) Customer perceives get the best offer (product, tariff, care”)

2 2 2a) Bring value to customers, value>price, price doesn’t matter

2 2 2) Developing products/services to meet customer needs

3 2 1) Understanding customers and their needs

Operator 2 Operator 1 Capabilities / Functions




42

Executives should balance their attention across all the elements that make up shareholder value (in telecoms as in any business) n Look to match bestinclass benchmarks productivity across all

parts of the Telco

n Pay more attention to discount rate and customer lifetime to balance the recent emphasis on cost and revenue elements that create shareholder value

n Reverse overemphasis of management attention

à Less on customer acquisiton, more on retention and usage

à Less on next generation, more on today‘s services (e.g. Voice)

à Less on „content“, more on „contact“

à Don‘t believe that mediahype correlates with real potential




43

As high margins come under pressure, the Telecom industry must move to optimising each function, and customerspecific which will lead to professional standards, training and so new professional associations & specialised Chapters: analogous to Cardiography, Radiography; Cardiologists; Paediatrics; Pharmacy; examples: n Financial and controlling diagnostics

àRevenue leakage forensics – revenue operators cannot collect

n Understanding customer needs

àFieldsales force application analysts

n Advising the customers on the best solution for them

àTelecoaching customers to upsell mobile + fixed + media + Internet

n Dispencing best solutions for the customer‘s needs

àVenders of custom handsets




44

Telecoms is 20% of mergers & acquisitions (M&A), a big driver of corporate events, to reeducate staff and realign partners/channels. By increasing order of cash available for telecom M&A: n Telcos: “Two dinosaurs do not produce a mammal” but still telcos

buy other telcos: In 2005/6 SBC bought AT&T $ 16 B; Telefonica O2 for GBP 18.5 B and $3.6 Billion for 51% of Cesky; FT paid € 10.6 B for Amena.

n Private Equity: six PE funds clubbed to buy TDC for $12 B. The top 20 PE firms have $300 B to invest.

n MiddleEast: Orascom bought WIND $ 12 B; MTC bought Telecel $3.4 B; Etisalat (Dubai) paid $ 2.9 B for the 3rd Egypt mobile license and has $4 B “to be ready for the 3rd mobile license in Saudi Arabia”; MTN paid $5.5B for Investcom.

n China: Profits far exceeding domestic expansion needs means China Telecom ($ 4 B) and China Mobile ($ 6 B) in the last year. The temptation is to use this to expand globally or risk having their government owners extract the cash




45

This is only scratching the surface of the potential as most incumbent telcos worldwide share the characteristics that make them so interesting for PE: n Massive fixedassets that can be monetised (e.g. sell and lease

back of buildings)

n High and stabile cash flow, with good credit ratings to raise debt

n High potential for productivity improvements

n Out of favour with investment analysts: historically low stock ratings and so cheap(er) to buy

n Many lines of business that can be split and sold separately if possible

n Lots of potential buyers




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Summary: Possible impact of financial industry influence in the Telecom sector on the Conference and Congress industry 22. Stricter criteria on who and how many can attend meetings, what

value is expected from attendance, where is acceptable

23. Higher pricesensitivity

24. Shift of themes from exciting technology to market needs, optimised operations, business cases, innovative business models, futureproof strategies

25. Opportunity to stimulate “professionalisation” of Telecoms, hence stimulating many new congresses

26. Telecom again becomes a key topic in financial and investor congresses




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Possible impact of this power shift to vendors in the Telecom sector on the Conference and Congress industry 27. More megaevents sponsored by specific megavendors and

vendor rather than operator associations

28. More vendor sponsorship in events and more “tradeshow” flavour

29. Telecom seen as an enabler rather than the main theme of events over a wider range of events featuring specific equipment, device and service themes

5. Power is shifting from operators to equipment, device and service vendors



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Dominant for decades, operators are now showing signs of weakness

n The telcom operator sector is very fragmented, with the largest 31 operators making up 30% of the total $US 5,000 Billion stock market valuation, and the largest having just 2.5%

n The vendor sector is highly concentrated, with ongoing consolidation and rising Chinese vendors (HuaWei & ZTE not quoted)

n Telecom operators are valued for their profitability, but Internet e commerce on much higher rated for growth and expectations of future profitability

n Vendors are beginning to demonstrate their power relative to incumbent operators

n New businesses enabled by telecoms emerge suddenly


However, operators have show in the past they can use their size and cash reserves to buy themselves out of trouble



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The telcom operator sector is very fragmented, with the largest 31 operators making up 30% of the total $US 5,000 Billion stock market valuation, and the largest having just 2.5% Rank Telecom Operator $US Billion % of total Rank Telecom Operator $US Billion % of total

1 Vodafone 126 2.53% 18 SingTel 27 0.54% 2 ATT 105 2.11% 19 Etisalat 25 0.50% 3 China Mobile 104 2.09% 20 Alltel 25 0.50% 4 Verizon 100 2.01% 21 KPN 24 0.48% 5 Saudi Telecom 87 1.75% 22 KDDI (Japan) 24 0.48% 6 Telefonica 77 1.55% 23 BCE (Canada) 22 0.44% 7 NTT 76 1.53% 24 Amtel (Mexico) 20 0.40% 8 Sprint 74 1.49% 25 Swisscom 20 0.40% 9 Deutsche Telekom 72 1.45% 26 Telenor 18 0.36% 10 NTT DoCoMo 69 1.39% 27 Chunghwa (Taiwan) 18 0.36% 11 BellSouth 62 1.25% 28 Bharti (India) 18 0.36% 12 France Telecom 58 1.17% 29 MTN (S. Africa) 17 0.34% 13 Telecom Italia 55 1.11% 30 Etihad Etisalat (Saudi Arabia) 16 0.32% 14 America Movile (Mexico) 43 0.86% 31 SK Telecom 16 0.32% 15 Telstra 34 0.68% 16 BT 32 0.64% Others 3481 70.00% 17 TeliaSonera 28 0.56%

Total 4973




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The vendor sector is highly concentrated, with ongoing consolidation and rising Chinese vendors (HuaWei & ZTE not quoted) Rank ITC Vendor $US Billion

Market Cap % of total $US Billion

Sales Rank ITC Vendor $US Billion

Market Cap % of total $US Billion

Sales 1 Microsoft 281 8.57% 39.8 18 Comcast 57 1.74% 22.3 2 Cisco 133 4.06% 24.8 19 e‐Bay 55 1.67% 4.6 3 IBM 129 3.94% 91.1 20 News Corp 54 1.65% 23.9 4 Intel 115 3.49% 38.8 21 Walt Disney 54 1.64% 31.9 5 Samsung 107 3.27% 58.4 22 Apple Computer 53 1.62% 13.9 6 HP 93 2.84% 86.7 23 Texas Instruments 52 1.59% 13.4 7 Nokia 92 2.79% 41.5 24 Taiwan Semiconductor 49 1.49% 8.2 8 Qualcom 84 2.55% 5.7 25 Sony 46 1.41% 55.9 9 Siemens 83 2.53% 91.5 26 Yahoo! 46 1.39% 5.3 10 Google 81 2.46% 6.1 27 Corning 42 1.27% 4.6 11 Time Warner 74 2.26% 43.6 28 Vivendi Universal 40 1.21% 23.6 12 Oracle 71 2.16% 11.8 29 EMC 32 0.99% 9.7 13 Dell 69 2.09% 55.9 30 Softbank 31 0.94% 7.1 14 SAP 69 2.09% 10.3 31 Viacom 28 0.87% 9.6 15 Ericsson 61 1.87% 19.6 16 Canon 59 1.79% 32.0 Others 984 30.00% 398 17 Motorola 57 1.75% 36.8

Total 3280 1326 Source: http://www.ft.com/reports/ft5002006/




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Vendors are beginning to demonstrate their power relative to incumbent operators

n Leading device vendors have global and stronger brand recognition, so higher loyalty, than operators (e.g. Sony, Nokia, Samsung, Apple etc.)

n If embedding telecoms inside devices leads to peertopeer meshed networks, this bypasses the telco networks

n Google, eBay, Skype, Fon, MySpace enabled by telecoms have innovated and grown much faster than telco operators

n Virtual network operators have demonstrated they are much better at capturing customer bases than traditional retail arms of operators (e.g. UK‘s Virgin Mobile rated higher than host TMobile)

n Operators are saddled with debt, are under increasing competitive pressure and are distracted by internal productivity and organisation problems




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New businesses enabled by telecoms emerge suddenly

n Yahoo! 970M streaming video sessions (mainly music) in 3 months

n Korea – TV channels charge $1 to download programmes

n Google launched upload.video.google

n Camera phones 264M sold in 2004

n Digital music 480M iTunes (mid July 2005) (7% of all music sold)

n PayPal 72M accounts, 22M active, 110M payments value $6B (38% of iTunes)

n Online paid content $1.8B US revenue in 2004 per OPA

n 7% of 120M Internet users in USA write blogs

n 25% of searches are local and 10% or these are commercial

n Microsoft reached 1M paid subscribers to XBox live in 1st year; MM player games




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Summary: Possible impact of this power shift to vendors in the Telecom sector on the Conference and Congress industry 27. More megaevents sponsored by specific megavendors and

vendor rather than operator associations

28. More vendor sponsorship in events and more “tradeshow” flavour

29. Telecom seen as an enabler rather than the main theme of events over a wider range of events featuring specific equipment, device and service themes




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Possible impact of embedding Telecoms in other sectors on the Conference and Congress industry 30. Telecoms becomes a theme track in a broader range of

congresses

31. Stateoftheart telecom facilities become an important selection criteria for a wider range of all congresses

32. Providing telecom services becomes an important revenue stream for congress locations (€5 – 20 per delegate per day in mobile phone revenue)

6. Other industry sectors are shifting by embedding telecoms



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As the biggest part of the GDP, telecom growth may only come if it finds ways of getting paid for enabling other big parts of the GDP n Recent successes show there is room for innovative business

models and growth, although maybe under terms different from the old monopolyoriented ones e.g. value added segment focused MVNOs; Skype; Google; etc.

n The range of indirect opportunities is likely to be larger than the direct telecom markets.

n Telecoms brings characteristics that change the rules of many big industries, particularly those based on information

n These trends force Telecom to enable specialisation to better suit fragmented segments which become increasingly different

n Many of the applications of next generation telecom services require skill sets that NetCostyle operators are not well suited for




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The range of indirect opportunities is likely to be larger than the direct telecom markets. nJust like the internal combustion engine and trains.... cars: suburbs, paved roads, vacations, wider range of potential social partners, freedom to live away from work location

àRailways created realestate value (then went bust)!

n .... telecom has potential to change societal structure

àFlexibility to mix work, play location and time

àActivation of ondemand ad hoc parttime work force; intelligent car pooling; selling downtime

àTimeshifting a rainy vacation day

àInstant intelligent dating/matching to partners

àStockless product showrooms




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Telecoms brings characteristics that change the rules of many big industries, particularly those based on information n Logical communities with shared interests or common values replace

physical communities à Peertopeer financing and insurance à Education – Open University à Meetings (and congresses!) à Ethnicity; nationality; Government

n Telecoms decentralisation of activities that have been centralised for physicalproximity reasons à Dating and friendship – MySpace à Retailing – ecommerce replaces physical stores; à Peertopeer commerce – eBay; MyHammer; à Resource sharing – ad hoc carpooling; transportation/delivery à Entertainment and media e.g. No need for record companies;

everyone authors; YouTube; n Enables activities less dependent on time and place

à Mix of work/play/relationship roles; virtual jobs; more roles; à Fragmented/multipleroles teacher/pupil




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So there is likely to be more Congress capacity required for streams discussing telecoms as part of other sectors’ meetings than there will be additional “application” streams in telecom meetings

n Sectors most impacted first by telecoms

àBanking, financial

àRetail and wholesale; trading; commerce

àMedia and entertainment; social networking

àEducation

àCongresses and meetings

n Such streams will require Congress Centers to offer the stateof theart telecom facilities currently needed by ICT congresses




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Many of the applications of next generation telecom services require skill sets that NetCostyle operators are not well suited for n Gaining and serving corporate customers

n Customer care and management

n Marketing (WAP was the industry’s first attempt, and failed)

n Content collection, packaging

n Payment (including micropayment) with low fraud rates

n Partnerships rather than vendor/supplier transactions

n Venturecapital risktaking, assessment, tracking and management

n Logistics (e.g. delivering physical goods)




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Like Sabre had to be armslength to enable the development of the richness of the travel and hospitality industry, will the Telecom Enabler (enableco) be a necessary addition to facilitate the richness of businesses to develop that can serve specific needs of endusers?

Telco

Netco

Enableco

Serveco

B/C end‐users

New USD 500bn

Old USD 1,000bn

Enabled businesses




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Best is enabling with telecoms the existing relationship of a provider with the customer that promotes loyalty, increased use of existing services and introduces them to new services n understands the customer’s needs and the value to them of

satisfying that need (e.g. a football fans need to feel important to his peers by showing off his team’s goal)

n develop an application that meets that need, together with any partners necessary to deliver parts of the service, e.g. so that the customer can share a digital video clip with a peer without piracy

n develop a proposition emphasizing the application, the benefit and the value to the customer

n launch this with representative early adopters to fine tune the proposition and to evolve it to be easy to use for less committed majority in this segment

n develop branding and promotion, distribution and customer care for the proposition




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With over 1M students worldwide, the UK Open University shows IT and telecom for distance learning, make virtual classrooms effective (lessons for Congresses?) n IT, telecom and media technologies expand the richness of

content available to students, and extend the reach of distance learning to open bigger and even more diverse markets

n They enable many "traditional" higher education institutions to provide distance learning and so compete with you globally

n They enable customisation and personalisation, which match changing student needs: shorter career phases, broader spectrum of interests, fragmentation of students’ time/attention, demand for shorter course duration, how often courses need to be updated, needs for continuing education and update

n Interactive learning changes and blurs the relationship between faculty, educator and student with any individual becoming comfortable playing different roles in several/many virtual corporations, institutions, communities, and networks




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Interactive learning changes and blurs the relationship between faculty, educator and student n Telecommuting opens opportunities for an individual to play

different jobs/roles in several/many virtual corporations, institutions, communities, and networks.

n This has major impact on the need for incorporating ethics, standardizing presentation skills, basic skills in running your own business etc. into any educational programme for professionals

n The individual can be a student one part of their life and a teacher in another.

n In these circumstances the learning institutions can play key roles in codifying, qualifying and certifying content and teacher, and authenticating and certifying student performance.




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Example: Media companies have all the factors to control content, so partner with them, not compete: n access to existing content producers, and an efficient scouting

mechanism to identify and capture new sources of content

n established distribution channels and are used to building and exploiting new channels as they arrive

n IPR (intellectual property rights) mechanisms and contract mechanisms for artists and content produces

n track record in adding to their rich portfolio of technical platforms as each new media has emerged

n vast libraries of archived content

n comfort with targeting multiple market niches




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Example: rather than Telcos going for “QuadruplePlay”, media companies know where the new media(s) can be applied effectively

n Media companies know the strengths and weaknesses of existing media

n Advertising is the customer of TV, Radio and print media, and existing players know how to cluster “eyeballs” of particular target groups to a particular sponsor’s ad

n Existing media players are best positioned to discover how the new media can be more effective at manipulating eyeballs

n Existing media players have longstanding relationships with advertisers

n They are also well placed to capture any new revenue streams that might be generated by user’s buying content




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Summary: Possible impact of embedding Telecoms in other sectors on the Conference and Congress industry 30. Telecoms becomes a theme track in a broader range of

congresses

31. Stateoftheart telecom facilities become an important selection criteria for a wider range of all congresses

32. Providing telecom services becomes an important revenue stream for congress locations (€5 – 20 per delegate per day in mobile phone revenue)




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At least six shifts in the Telecom sector might influence the size, frequency, location and themes of meetings and conferences 1. The shift of buying power, manufacturing capacity and innovation

to Asia is accelerating






Summary

www.iccaworld.com

Thank you! 45 th ICCA Congress & Exhibition Monday 30 October 2006

International Congress & Convention Association

Documents

International Congress & Convention Association · n Stockmarket value of network operators (Vodafone, Deutsche Telekom ... The Global Telecoms Industry, ICCA Rhodes. 30