Analyzing the ICT Market : Technology and Trends and the Impact of Technology on the Market Carlo M. Rossotto, Tim Kelly Cairo, March 10, 2009

2 Technology Trends and the ICT Market Main Technology Trends Affecting the ICT Sector  Broadband  Wireless Technologies  Convergence  Handsets  Digital Content How technology is affecting the ICT industry  Revenues and Industry Structure  Business Model  Firm Specialization  Product Differentiation

3 Technology Trends and the ICT Market Main Technology Trends Affecting the ICT Sector  Broadband  Wireless Technologies  Convergence  Handsets  Digital Content

4 Main Technology Trends in ICT Source: Pyramid Research.

5 Main Technology Trends in ICT Source: Pyramid Research. Note: shared throughput

6 Technology Trends and the ICT Market Wireless Technologies: main trends Trend 1. Growth of 3G+  3G+ users to increase at a 38% CAGR from 2008 to 2013 and to account for 46% of all 5.9Bn mobile subscriptions in 2013 (Pyramid Research) Trend 2. Fixed wireless for development  31 African countries have deployed CDMA2000 1X Networks (ITU)  833,000 customers of W-CDMA in Africa (GSM Association) Trend 3. Wireless broadband for development  EVDO growth in Africa Source: ITU CountryOperatorDownload SpeedMonthly Subscription (US$) NigeriaStarcomms kbps124 RwandaRwandatel kbps62 MoroccoWana kbps24 SudanCanarUp to 2 Mbps29 AngolaMovicelUp to 1 Mbps257

7 Technology Trends and the ICT Market Convergence Convergence across technologies: multiple platforms are consolidating into a single IP- based platform, allowing voice, data and video consumption. The same digital content can be accessed and delivered across multiple platforms. Convergence across services: bundles of services, double-play and triple-play (Orange, for example, reported that 11% of its ADSL subscribers were also triple-play subscribers in 2007, up from 2.7% in 2005, Pyramid Research). Convergence across devices: Multiservice connectivity on a single end-user device. Dual- mode (WLAN-mobile) handsets and 3G-embedded computing devices has expanded over the past two years. Operators still look at the bottom line when they consider diversify across technologies and services

8 Technology Trends and the ICT Market Broadband-enabled devices  Dual-mode (WLAN-mobile) Devices  PCs with embedded 3G capabilities  (50% of laptops by 2010; Pyramid Research)  iPhone and Blackberry  Smartphone unit sales globally to grow at a CAGR of 17%, or nearly three times as fast as the total handset market, to reach 313m in Smartphones from 8% of total handsets in 2008 to 18% of total handsets in 2013 (Pyramid Research)

9 Technology Trends and the ICT Market Digital content Source: OECD 2007

10 Technology Trends and the ICT Market Digital content and Internet traffic Global consumer Internet traffic in million terabytes/month Source: OECD 2007

11 Technology Trends and the ICT Market Digital Content and User Created Content  Blogs  Wikis  Photo-sharing  Podcasting  Social Network Sites  Virtual Worlds  File-Sharing P2P

12 How Technology is affecting the Industry Revenues and Industry Structure: A fast-changing picture PSTN revenues sharply down. less in global PSTN revenue down $103bn in 2013 than in 2008 (Pyramid) Mobile subscriber growth rates decelerating in most regions, with penetration rates hovering around the % range (CAGR of 8% for mobile subscriptions in ) (Pyramid) Fixed and mobile broadband lines to increase threefold between 2008 and 2013, from 964m to 3.3bn (Pyramid) Internet access will generate nearly 55% of total fixed revenue in Mobile data to grow at a 16% CAGR from 2008 to 2013, making up 34% of global mobile revenue in Revenue per fixed broadband line, currently at an average of $33, are to decline (CAGR of -5%). FTTx has highest ARPS — 2X cable or DSL in 2008 Source: Pyramid Research

13 Revenues and Industry Structure: A fast-changing picture Egypt is the seventh fastest growing broadband market in the world, with over 30% compounded growth rate Ten fastest growing broadband markets are in Asia, MNA, Latin America and Africa Operators boasting the highest data ARPS are those with the highest percentage of subscribers using 3G-enabled devices. Messaging revenues ( , SMS and MMS) were 58% of mobile data revenues in 2008 (projected 44% in 2013) Web access was 21% of mobile data revenues in 2008 (projected 28% in 2013) The rest is applications : music (high growth rate), games, graphic, ringtones… Source: Pyramid Research How Technology is affecting the Industry

14 Digital content development and on-line business models –Advertisement (e.g. 99% of Google revenues) –Voluntary donations (e.g. blogs) –Pay-per-view and pay-per-item (e.g. IPTV model) –Licensing content to third parties –Online sales (e.g. portals Amazon, eBay) –Sale of user data, clickstream analysis How Technology is affecting the Industry

15 Technology Trends and the ICT Market Convergence may destroy as much value as it creates by bringing in new sources of revenue (Pyramid) Bundles, access to digital content and advertisement are key to the evolving business models Bundles: –fixed offers: bundles are key to customer acquisition and customer retention –mobile offers: increase data usage and ARPS.

16 Technology Trends and the ICT Market How are firms reacting: –New services –Organisational restructuring –Mergers and Acquisitions –Firm Specialisation –New Entry