Trash The Rulebook

TRASHTHE
RULEBOOKThe new rules of engagement are being
written by CommunicationsService
Providers’customers. Embrace new service
models to capture their attention.
#PlayToLead

2Copyright © 2018 Accenture. All rights reserved.
THE INDUSTRY IS BEING
SQUEEZED FROM ALL SIDES
TOP-LINE GROWTH IS STALLING
REVENUES HAVE LEVELED OFF
CUSTOMERS ARE FINDING
NEW WAYS TO ENGAGE,
DIGITALLY
AND DIGITAL DISRUPTORS
ARE UNDERMINING THE
TRADITIONAL BASE OF SERVICES
THERULES
HAVE
CHANGED

The commoditized core business isn’t
profitable and there’s ongoing
substitution with low cost, digital
alternatives. Shareholders are being
kept with dividend yields and share
buybacks.
SHIFT&
DISRUPTION
OFVALUE

Barriers to entry & market boundaries are
collapsing and traditional approaches to
growth are no longer sufficient. Existing
asset values and historic positions of strength
are eroding.
CHANGING
RULESOF
THEGAME

Ongoing reduction of customer
stickiness and loyalty. Incumbency is
no longer an advantage – CSPs are
not an essential part of the users’
daily digital routine.
THELIQUID
CUSTOMER
ISHERE

Infrastructure-bound, with vertical
integration and siloed operating models.
CSPs have un-scalable legacy operating
and technology models and legacy,
engineering-based workforces.
THETELCO
PLAYBOOK
ISOUTDATED
Copyright © 2018 Accenture. All rights reserved.

7
As OTT players free-ride on
CSP networks, the CSPs’ strong
investment in the pipe was one
factor helping OTT services
scale quickly…
15.6%
2013
15.1%
2015
15.8%
20142012
14.5%
2011
14.5%
CAPEX intensity
Source: Reported revenues, Accenture analysis
INVESTMENTISINCREASINGWHILEPERFORMANCE
ISDECREASING
Increasing CAPEX intensity (CAPEX as % of revenues) for
top 50 leading CSPs

8
…..resulting in an ongoing
dilution of customer value
and profitability.
EBIT for Mobile and Fixed as % of revenue
2014
15.1%
17.4%
2012
17.0%
2015
16.3%
2013
16.1%
2011
INVESTMENTISINCREASINGWHILEPERFORMANCE
ISDECREASING
EBIT for Mobile & Fixed for top 50 leading CSPs

Traditional CSP Play resulting in
incremental dividend optimization
Current valueFuture value
US$Bn
-500
0
500
1,000
1,500
2,000
2,500
2012 2013 2014 2015 2016
COMMUNICATIONS
INCUMBENTS ARE DEEPLY TIED TO THEIR
(DECLINING) CORE BUSINESS…
CSPSCANTRYTO
OPTIMIZEA
DIVIDENDPAYING
UTILITYPLAY…
Copyright © 2018 Accenture. All rights reserved. 7

Disruptive investments in options
to ensure high future value
Current valueFuture value
….WHEREAS DIGITAL DISRUPTORS FOCUS
ON FUTURE VALUE CREATION
0
200
400
600
800
1,000
1,200
1,400
2012 2013 2014 2015 2016
DISRUPTERS
US$Bn
…ORESCAPETHE
COMPRESSIONAND
RE-BUILDFUTURE
VALUEONTHE
DIGITALPLAYING
FIELD
8

20.0
8.1
6.2 5.9
5.1
4.4 4.3
3.4
2.8 2.3
1.7
11
DISRUPTIVEBUSINESSESAREBORNDIGITAL
They operate as a platform and have built on a different tech culture
YEARS
Disruptive businesses
have demolished the
time to become a
$1BN DOLLAR
BUSINESS
S&P500
/DAX
Avg
Unicorns
Source: comScore, Traction metrics, The Economist; oneweb.world; Accenture
*$110-120 in cities without Google vs $70 in cities where Google offers its fiber patch.
**Google estimate of $5 per served customer up to 120M served customers.
***Comcast Capex FY15, only Cable Business
* ACCENTURE, 2017 I CMT Connect - Communications & Media Industry Research

DIGITALDISRUPTERS AREENCROACHINGONCSP
CUSTOMERS……….
Subsidizing services to
monetize data
Shifting consumption
away from incumbents
Appropriating future
industry value
Generating new value
for customers: establishing
standards incumbents
cannot easily match or
exceed
Getting “Consumerized” –
serving B2B and B2C with
the same services
Growing asymmetrically
in new customer driven
domains
Using platform and scale to
win
Competing globally with
divergent business models
Driving scale through open-
ness and platform and
ecosystem interoperability
Being customer-centered,
data-driven
Aggressively moving into
ambient devices
BUT CHALLENGED ON
TRUST AND SECURITY

13
Create an ecosystem
of partners, customers &
developers
Own the full digital
experience and engagement
(cloud, network and devices)
Operate as 2-sided platforms
vs focusing on products
Based on data driven
feedback loop
Different business
model, the more you use
the more you grow
Have a different tech culture
(fail fast and learn)
They have no legacy
DISRUPTIVEBUSINESSCHARACTERISTICS
Source: comScore, Traction metrics, The Economist; oneweb.world; Accenture
*$110-120 in cities without Google vs $70 in cities where Google offers its fiber patch.
**Google estimate of $5 per served customer up to 120M served customers. ***Comcast Capex FY15, only Cable Business
* ACCENTURE, 2017 I CMT Connect - Communications & Media Industry Research

14
DISRUPTERSCONTINUOUSLYUNDERMINE
TRADITIONALSOURCESOFSTRENGTH
VOICE & DATA
PRODUCTS
LAST MILE
OPERATORS
HYBRID WIFI/
WIRELESS MODELS
HOME
DEVICES
Structural separation to
provide an open playfield.
Provision of internet
access to remote
populations using
emerging technologies
(e.g. drones)
‘Wi-Fi First’ providers of
connectivity, utilizing
‘freemium’ business
models
High consumer
engagement
for social apps such as
Facebook, WhatsApp,
and YouTube
Home devices designed
to be at the center of any
customer digital need and
powered by AI

BUTWHATIFTHIS
COULDBEFLIPPEDTO
ARACETOTHETOP?
Cost savings are
now re-invested
to fuel future
growth
WITHOUTINVESTING
INAFUTUREGROWTH
MODELIT’SARACETO
THEBOTTOMFORCSPS
CSPs are currently
just surviving by
optimizing their core
business to save
costs and pay
dividends

1. TRANSFORM THE CORE BUSINESS
…by building more competitive cost structures to improve
flexibility, increase profits, and drive up investment capacity.
2. GROW THE CORE BUSINESS
…by redirecting some of that investment capacity
to drive incremental growth in the core business.
3. SCALE NEW BUSINESS
…while identifying new sustainable business models which
leverage and monetize key control points and scale them
(at the risk of core business cannibalization).
4. PIVOT WISELY
…by keeping an eye on pace and balance. The “core” and
“new” businesses usually need to co-exist for a substantial
period of time.
16
SCALINGNEWGROWTHISADELIBERATEAND
PERPETUALCHANGEJOURNEY,NOTASINGLEEVENT

RIDINGONTHEDISRUPTIVE
TRENDS,THECSP CANREINVENT
ITSELFASANESSENTIALPART
OFAUSER’S
DAILYDIGITALROUTINE

Leverage the valuable heritage of telecoms
experience – customers, billing relationships,
networks, security, and trust - to embrace new
competitive advantage.
PLAYTO
YOUR
STRENGTHS

Look for new growth
opportunities
Become embedded in the
digital routine of
consumers, and provide
platforms and vertical
services for enterprises.

Launch a digital
transformation
program
Revisit competitive
positioning, business
models and services in B2C
and B2B markets. Enforce
the rotation to a relevant
platform play.

Move to hyper-
personalization for
customers
Adopt user-centric,
community oriented,
data-driven experience
design. Leverage the
credibility of telcos around
trust, security,
privacy and proximity.

Update technology and operating models
Build software-defined, highly reliable, secure data
highways, specialized network clouds and smart
connectivity, including 5G. Anchor multi-sided, cloud-
based platforms increasingly on edge devices for reliability
and security, allowing telcos presence, proximity and trust
advantage.

PLAY
YOUR
CARDS
RIGHTThere are four different winning
combinations in your hand. Choose one
which will make you aleader.

24
4CSPGROWTHSCENARIOSEMERGE
CUSTOMER BASED ECO
SYSTEM PLAYCONTINUUMOFOPTIONS
INFRASTRUCTURE-BASED
NETWORK PLAY
Multi-sided
platform model
Digital mobile
only attacker
Vertically
integrated
service provider
Pervasive network
platform provider
Establish cloud-platform business,
enriched by OTT/industry partners
Monetizing the core business with digital
services and customer interactions
Monetizing the core business with
differentiated services / content bundles
Managing intelligent, open, self-service
digital networks
Long
Term
Play
Long
Term
Play

Success demands a departure from today’s
models and competencies if CSPs are to
scale new growth models.
PICK
YOUR
PLAY

MULTI-SIDED
PLATFORM MODEL
PERVASIVE NETWORK
PLATFORM PROVIDER
SCALENEWGROWTHBYMAKINGALEAPTONEW
MODELSANDCOMPETENCIES
Each scenario needs
distinctively different
skills and capabilities,
as well as divergent
investment priorities
and value creation logic
KEY
CHARACTERISTICS
SUCCESS
FACTORS
Superior bundling of
mainly self-owned
services, incorporating
acquired rights to high
–demand, exclusive
content at premium
fees.
Secure, reliable and smart
connectivity with open APIs,
digital management and
operations capabilities.
Specialized network
clouds/value added services
supported by real-time AI.
Strong identity
management capabilities,
API driven, agile & open
platform. Subsidising
elements of the service
proposition, open to self
cannibalization.
Exclusive content.
Advanced customer
segmentation & targeting
via content/viewership/
user analytics.
Consolidated, mega-network.
Hyper-lean operating model.
Wholesale & Retail Smart
Connectivity Provider B2B2X
model. Outcome based
connectivity monetization.
Maximize reach via
ecosystem of partners,
customers and
developers.
Digital/Mobile pure
play bringing Digital &
Core together across
products and support
channels.
Mobile focused,
innovative and agile
service factory. Digital-
first care & operating
model.
DIGITAL MOBILE
ONLY ATTACKER
VERTICALLY INTEGRATED
SERVICE PROVIDER

TOROTATETOTHENEWSUCCESSFULLY,CSPS
NEEDTOMODIFYTHEIRDNA
CORE CAPABILITIES
• The future of work evolves from
“jobs” to “roles” in a liquid model
• Workforce development, training
and capability building become
central tasks
• Operating model transformation will
blur traditional foundational models
and establish agile collaboration
• Empowerment is at
the center of future
performance management
OPERATING
MODEL
• Hyper-individualization and
contextualization of services
• Future service models manage the
tradeoff between Revenue Per
Customer and Reach
• Investment and capital allocation
ruled by platform economics and (for
product development and innovation-
related processes) - flexibility over
efficiency
BUSINESS
MODEL
• Customers expect that services
understand them and not the other way
around
• CSPs need to adopt
a more customer-centric, data driven,
experience designed approach
• Channel specificities
and audiences will be managed
consistently through a system
of engagement
• Co-creation and continuous learning
to improve the experience
CUSTOMER
ENGAGEMENT

28
CORE CAPABILITIES
• CSPs will operate software defined
and virtualized pervasive network
stacks
• Key capabilities
are centered around providing digital
highways, specialized network
clouds and smart connectivity
• Network transformation follows a
smart combination
of customer centric and efficiency
driven approaches
NETWORK
• CSPs need to operate
a digital multi-speed IT and network
stacks to get on with the digital
portfolio as soon
as possible
• Federation of decoupled platforms
across IT and Network
• IT and networks will be a central part
of day-to-day value creation, and the
engineering teams will have to become
true business partners
TECH
STACK
NEWGROWTHMODELSNEEDANEWAPPROACH
TOITANDNETWORKINVESTMENT

Unleashing trapped value through
cost optimization is just the first
step. We help you reinvestsmartly
and scalenew growth in a future
business model that stays true to
your core.
TUNEUP

@AccentureComms
VISIT: Accenture.com/PlayToLead
Email: commsindustry@accenture.com
FORMORE
INFORMATION

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