PRODATA PARTNERS LTD

1
PRODATA PARTNERS LTD
Market Modelling in Telecoms ICT Markets
   
www.prodata-partners.com
2
Market Forecasting Modelling

• Results orientated advice-
• Identify areas of opportunity threat
• Forecast revenues and cost
• Understand the impact of industry trends
• Target business development, sales marketing
  activity
• Test pricing strategies
• Benchmark operations against industry standards
• Inform investment decisions

3
Prodata Market Modelling Methodologies (1)

• Since the late 1980s, Prodata has advised several
  telecommunications ICT companies/consortia on
  likely demand for new existing products
  services.
• Our clients rely on credible and reliable demand
  forecasts, to ensure that their applications and
  business plans are transparent and robust.
• Clients need to know the expected stream of
  revenue from projected demand, in order to judge
  the value of their investment and customer base.
• In addition to demand modelling, Prodata offers a
  modelling service that ranges from support in
  preparation of business plans or bid documents,
  to the turnkey preparation of models and
  business/marketing plan, including technical and
  financial input.

4
Prodata Market Modelling Methodologies (2)

• Prodata modelling support has been highly
  successful in securing licences business plan
  investment for many clients, varying in value
  from thousands to several hundred millions of
  dollars.
• Prodata models make extensive use of a variety of
  sources, including-
• Our own or the client's primary research data
• Secondary market/demographic data sources
• Client in-house data, e.g. from billing/reporting
  systems.
• Our methodology also embraces techniques such as
  price elasticity of demand, demand adoption
  curves, and market segmentation.

5
Prodata Market Modelling Typical Coverage

• Prodata market modelling forecasting has
  covered a number of business-critical areas for
  our ICT clients, e.g.-
• Potential demand
• Penetration forecast, e.g. product/customer life
  cycle modelling
• Churn, market share of gross additions, market
  share of installed base
• Mobile/fixed subscriber base
• Price elasticity of demand monthly bill
  forecasts, e.g. using price elasticity of demand
• Take-up of new services, e.g. broadband
• Tariff forecasts
• Traffic forecasts
• Incremental revenue from new services
• Cost/ROI modelling
• Customer segmentation

6
Prodata Market Modelling Typical Methodology

• Prodata has produced a wide range of market
  models across several countries worldwide,
  modelling up to e.g. 10 years ahead for by
  market, competitor base, region or country.
• Our models have frequently formed an integral
  part of operator licence applications.
• Such models cover all aspects of marketing
  planning for operators already active in a
  specific market, or a new operator/market
  entrant.
• Forecasts can be developed for the market as a
  whole, and in more detail for a specific venture
  under consideration.
• Modelling methodology often consists of 4 key
  stages-
• Determine the maximum potential demand expressed
  as the percentage of the total population who
  will eventually be subscribers, divided into e.g.
  business and consumer market segments
• Fit product life cycle curves for each market
  segment to forecast the market by segment, and
  calculate the total market
• Develop assumptions as to coverage, churn, and
  market shares, to forecast the market share for
  each competitor in the market
• Forecast the marketing parameters required for
  the business plan of the venture under
  consideration, such as tariff packages, minutes
  of use per customer, traffic by destination
  origin, roaming, interconnect, distribution, etc.

7
Example Outputs Required Telco Models

• Basic Data Requirements
• Penetration total subscribers
• Price elasticity of demand
• Average monthly bill and total revenue
• Minutes of use
• Other
• Coverage
• Churn gross additions
• Market share of gross connections and installed
  base
• Customers by segment/tariff plan
• Take-up of services
• Traffic destinations, origins roaming
• Interconnect
• Distribution channels

8
Example Forecast Model Outline
Market Research, Benchmarks Reasonableness
Checks
Maximum Potential Demand
Product Life Cycle Stage Determination
Historic Data, Shape of Growth Curve Marketing
Indicators
Demand / Penetration Forecast
Curve Fit Consistent With Product Life Cycle
Stage and Price Elasticity of Demand
Market Research, Penetration Forecast,
Reasonableness Checks
Marginal Bill Forecast
Forecast of Average Monthly Bill
Current Average Monthly Bill Plus Sum of Marginal
Bill, Price Elasticity of Demand
Tariffs Against Average Monthly Bill, Benchmarks
for Mobile Terminated Traffic
Minutes of Use Forecast
Market Value Forecast
Average Monthly Bills Total Subscribers
9
Demand Price Elasticity Models Typical
Decision Chain
Total sample
No interest at all
Collect classification data terminate
Reject because of price or coverage
Interested in product / service
Explain price will fall quality will improve in
future
All respondents who continue to main survey
represent the maximum potential demand
Maximum potential demand as of population
limited by willingness to pay a minimum
Determine at what price respondents are willing
to adopt and use product/service
Price elasticity of demand, revenue forecast as a
function of penetration
Collect classification data terminate
Market segmentation of product/service demand
10
Forecast Model Flow Chart Example Mobile Model
Market Survey or Benchmarks
Maximum Potential Demand
Price Elasticity re Monthly Bill for Marginal
Subscribers as Function of Penetration of
Potential Demand
Average Monthly Bill Existing Subscribers
Forecast of Penetration of Maximum Potential Dema
nd
Forecast of Marginal Monthly Bill as a
Function of Penetration
Population Coverage Forecast
Forecast of Gross Adds Installed Base
Venture Tariff Plans
Forecast of Market Average Monthly Bill
Venture Gross Adds by Tariff Plan
Per Operator Gross Adds Installed Base
Per Operator Churn
Compare
Adjust
Venture Installed Base by Tariff Plan
Monthly Minutes of Use by Tariff Plan
Venture Average Monthly Bill Forecast
Market Share of Gross Additions
11
Cost of Adoption vs. Penetration Forecast Example
Handset Cost vs. Price Elasticity of Demand
3,000
35
Penetration of Pops
30
Adoption Price Accepted
2,500
Handset Price
25
2,000
20
Handset Price
1,500
Penetration of Population
15
1,000
10
500
5
0
0
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Western European country - sample 2,000 interviews
12
Forecast Model Flow Chart Example Business
Market for Telecoms Services
Annual UK Global Turnover Data by Company
Av. of turnover spent on ICT (Industry Ests)
Av. of ICT spent on Comms
Weighting Tiered Customer Category
Customer ICT spend split down to Voice, Data
Mobile (Customer Research Spend Ests)
Weighting Av 3-Yr GDP LOB Growth (Natl Office
for Stats)
Spend on ICT Comms by Company
Customer Split by Product Line (Customer
Research)
Weighting LOB Comms Intensity Factor (Industry
Ests)
Intended Increase in ICT Spend (Customer
Research)
Projected Weighted Available Customer ICT Comms
Spend for next year
Projected Customer Turnover, ICT Comms Spend
for next year
Customer potential for current/next year
Weighting Non-Economic LOB Drivers (Industry
Rpts)
Av 3-Yr turnover growth
Back check vs. client billed
13
Prodata Product Service Skills Areas

• Modelling CRM market segmentation by product type
• Prodata constructed a bottom-up model of the
  international CRM market for a leading
  telecommunications company. .
• Dynamic, macro-driven model provided vital
  information on current addressable market and
  future growth of the CRM market by product type.
• Identifying key growth areas in the CRM sector,
  this model was an integral resource enabling the
  client to identify opportunities for market share
  gains, and to maximise returns from the adoption
  of CRM as a key business strategy.

Voice Services Wide area networking Inbound
services Managed services Private circuits IP
Networking/Telephony
Wireless/Mobile Operator Licence Models Market
Pricing Churn Prevention Mobile Data/Fixed-Mobile
Data Services Frame Relay ATM MPLS Broadband
Internet, Intranets Local Area
Networking Optical/Storage Area Networking
Applications  CRM Knowledge management Supply
chain management Outsourcing/BPO E-Business/Conte
nt
Other Networking Equipment Software
Applications Business Continuity/Security
Applications B2E / Enterprise-Based Solutions
14
Prodata Market Modelling Case Studies (1)

• UK MNC Market Sizing Modelling (UK Telco)
• Model of UK multinational business market for
  telecoms services, to give the client a
  multi-dimensional understanding of markets and
  lines of business.
• In-depth analysis of the market sizing
  opportunities for each product/service area,
  broken back by product components for each of the
  clients constituent markets.
• Model data was generated from-
• External primary market research
• Assessment of external factors, e.g. National
  Office of Statistics data on GDP etc
• Secondary market data, e.g. vertical market
  sector reports (Mintel etc)
• Client internal database data, e.g. account
  manager input
• This provided strategic and marketing
  information for the client on opportunities by
  line of business, products and services, customer
  segment/sector etc.
• Reseller Channel Model (UK Telco)
• Database model profiling all resellers,
  distributors and other partners used by the
  client in the telecoms market, together with
  market potential for client products services.
• Model included easy-to-use dropdown menus and
  browser buttons, for client users to view market
  profiles and potential revenues by
  product/channel at a glance.

15
Prodata Market Modelling Case Studies (2)

• CRM Market Modelling Forecasting (European
  Telco)
• In-depth market revenue modelling, covering-
• Potential CRM universe by size of
  business/sector/spend on CRM
• Analysis projection of take-up by
  product/service
• Sensitivity Analysis - modelled scenarios
• Projected future value of different customer
  segments
• ICT Propositions Model (International Telco)
• Prodata generated potential market sizing
  breakdowns for key propositions areas being
  developed in CRM, Organisational Effectiveness,
  Knowledge Management, SCM E-business.
• Output consisted of 5 models, showing potential
  market size for each constituent product within
  product lines across each of the propositions
  areas.
• Each model contained market sizing estimates by
  sectors and lines of business, with estimates of
  potential client market share.
• Further assessment was carried out to identify
  equivalence against client billing and account
  management data.
• Segmentation was carried out by proposition and
  by market. The model segmented down to revenue
  opportunities, by analysing potential market
  share by product line within each proposition
  group.

16
Prodata Market Modelling Case Studies (3)

• Drivers of Customer Satisfaction Models
  (International Telco)
• Key driver satisfaction modelling for several
  client business divisions since 2001.
• Modelled customer satisfaction metrics against
  service and perception measures via external
  customer research, benchmarked against client and
  customer-defined targets.
• Satisfaction driver models use multiple
  regression techniques, including ridge regression
  to remove the effects of correlation between
  predictor variables/ multicollinearity.
• Prodata has also analysed, compared and modelled
  data from the clients employee care and reseller
  surveys.
• Voice Services Market Model (UK Telco)
• Market size and share modelling tool for voice
  related services.
• Data determined from several external internal
  sources, e.g.-
• Desk research e.g. Oftel and analyst reports
• Monthly research interviews with customers
• Products/services modelled included-
• Local, National, IDD, Fixed-Mobile,
  Non-Geographic, Internet Calls
• Analogue/Digital Private Circuits
• PSTN/ISDN Lines
• Centrex Calls Lines
• Switches (lt 100 and gt 100 ports)

17
Prodata Market Modelling Case Studies (4)

• Capacity Resale Market Model (International
  Telecoms Reseller)
• Forecasting model to assess market for dynamic
  resale of excess T-1 capacity, including traffic
  pricing scenarios, customer retention/churn
  analysis, capital outlay, cost components risk
  factors.
• Resulted in successful strategy for marketing
  excess capacity, in line with annual increases in
  T-1 traffic take-up between US and UK.
• Microbusiness Consumer Fixed Mobile Market
  Models (UK MVNO)
• Modelled 12 industry sectors 11 demographic
  segments of fixed mobile universes, analysed by
  calls, equipment, market value and share.
• Model data was generated from Prodata primary
  market research and secondary reports, e.g.
  Oftel, TGI data.
• Model output was used extensively to support
  business case and market planning.
• Operator Licence Models (International
  Telcos/Altnets/Mobcos)
• Prodata has been used extensively since the
  early 1990s to construct operator business case
  licence models, by mobile and fixed licence
  applicants and new market entrants across Europe
  and Asia-Pacific, including Philippines, Taiwan,
  Germany, Netherlands, and several other markets.

18
Prodata Market Modelling Customer Feedback

• "The quality of Prodata's work has surpassed our
  expectations, and given us a rich resource for
  continuing to enhance our understanding of SME
  business needs." 
• Rogers ATT Wireless
• "Prodata's customised mobile market forecast
  proved very effective in meeting our marketing
  planning and management reporting needs."
• Bouygues Telecom

19
Prodata Market Modelling Team

• We work with over 35 consultants based in more
  than 20 countries worldwide
• A virtual team is put together based on the mix
  of deliverables and individual expertise required
  for each project
• All our consultants have had extensive hands-on
  telecoms/ICT experience prior to working in
  market modelling, research and consultancy with
  Prodata

• Angela Dalrymple - Director
• Over 19 years experience in international
  telecommunications
• Business School Lecturer in International
  Marketing (MBA)
• Previously Marketing Director for
  messaging/value-added network services with ATT
  UK
• Board responsibility for market strategy
  formulation, branding, channel strategies,
  product development
• Ex Principal Associate, Communications Division,
  PricewaterhouseCoopers (Strategy Marketing
  Group)
• Ex International Marketing Manager Reuters plc
• Specialist areas include-
• Voice services/data networking equipment
• Telecoms equipment applications
• Mobile solutions

20
Prodata Modelling Specialists - Selection

• Hakan Eriksson Senior Associate
• Highly experienced telecommunications ICT
  modeller
• Specialist in business forecasting and planning,
  utilising linking data from disparate sources
• Skilled in database modelling
• In-depth knowledge of statistics, business
  services and programming
• Key Prodata market modelling projects managed by
  Hank include-
• Complex business market sizing forecasting
  model updated bi-annually for a UK telco,
  covering all telecoms products services
  drawing/linking data from external secondary data
  sources, market research surveys, and the
  client's own billing and reporting systems
• Industry sector market profiling forecasting
  model for a major telco, including analysis of
  demographic database data
• Hank previously developed a number of services
  for Ericsson, e.g. management of writing code
  for Symbian operating system

• Louise Crosby Senior Associate
• Over 18 years experience in telecoms utilities
  market modelling
• Key Prodata market modelling projects managed by
  Louise include-
• Detailed market sizing forecasting model,
  updated quarterly for a UK telco selling to the
  top 2500 UK enterprises, covering all telecoms
  products services
• Market forecasting and profiling model for a
  major telco, covering several industry sectors in
  the medium-large enterprise market
• Previously senior modeller in PriceWaterhouseCoope
  rs telecommunications utilities consulting
  divisions
• Managed complex business planning evaluation
  models, development of corporate guidelines for
  spreadsheet modelling best practice
• Economist to the Government of Botswana,
  including managing large government projects in
  the telecommunications sector

21
Contact us
DIRECTOR Angela Dalrymple Telephone [phone]
1275 (Direct) 07973 821767 (mobile) Email
angela.dalrymple_at_prodata-partners.com
www.prodata-partners.com