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Creating Value with Network Performance

Ericsson Latin America, profile picture
Ericsson Latin America

The document discusses trends in mobile network performance and data usage. It notes that data traffic is growing exponentially due to increased smartphone and connected device usage. Superior network performance is critical for operators to capture value through delivering high quality experiences to users. The document analyzes network performance metrics and usage trends in Latin America, finding that most networks lag global benchmarks for download speeds and consistency.

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Creating value with Network Performance CANTO @ Bahamas – August, 2014
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 2 2014 FIFA World Cup…
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 3 The Playing Field Continues to be Changing… ? New Market Dynamics…
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 4 MARKET TRENDS 2014 This slide contains forward-looking statements. Actual result may be materially different. Digital lifestyle drives the demand for new and innovative apps and devices Superior network performance is essential for differentiation and value capture Increased focus on the complete customer experience A data-centric world is rapidly emerging, bringing new business models ICT, fueled by mobility, broadband and cloud, transforms industries and creates value Smartphone intensive markets defined as markets with smartphone penetration above 50 percent in 2013. >75% Mobile video traffic growth will exceed 75 percent Data will exceed 50 percent of revenues globally in smartphone intensive markets Every other subscriber will have a smartphone 1/2
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 5 By 2019… 700 M PCs & Tablets 9.2 BN Mobile Subscriptions 5.6 BN Smartphone Subscriptions 7.6 BN Mobile broadband Subscriptions
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 6 What's driving the growth? › Number, Availability and Price of Smartphones › New connected devices › Better User Interface › Mobile Applications › Laptop Penetration › Cheap Dongles › HSPA Networks › Effective Pricing Plans › Clients Usage Profiles
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 7 Good Start… But tremendous upside. Source: eMarketer/ Ericsson Research estimates 2014Note: One Subscriber may have more than 1 connection 5.2B 1.56B 2013 CAGR: 20%
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 8 Mobile Traffic Growth Based on actual measurements DVB-H, Wi-Fi, and WiMax are not included
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 9 Mobile Penetration Source: Ericsson Mobility Report 6/14
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 10 Latin America Mobile PENETRATION Source: Statista 2014 93% 110%
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 11 Subscription density in the Caribbean Source: ICT Pulse - 2014
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 12 Avg. Subscription Penetration Rates Source: ITU, 2013 113%
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 13 Data Affordability in the Caribbean Source: Source: ICT Pulse - 2014 Portion of monthly income consumed by a mobile/cellular data plan with a 1 GB cap in select Caribbean countries as at July 2014
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 14 Data Revenues latam 4Q134Q12 Latam Latam ArgBrazilBrazil Latam Latam ArgBrazilBrazil Mobile Voice Mobile Data Absolut (Reported Currency) Relative Percentage (100%) Share of Mobile Data and Movile Voice Revenues (4Q12 to 4Q13) 50% 100% Source: Ericsson analysis. Latam Mobile Data Revenues <50% as Smartphone Penetration is Low (~30%)
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 15 Data Consumption per device and Year 13 GB 4.5 GB 2.5 GB 2019 3.3 GB 1 GB 0.65 GB 2013 10X growth in mobile data traffic between 2013 and 2019 >50% of TRAFFIC
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 16 Tablets –lots of room to grow Source: KPCB May 2014 56% of Laptops 28% of smartphones 8% of TV´s
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 17 Tablets growing faster than pc´s ever.. Source: KPCB May 2014 52% in 2013
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 18 Media engagement rises with # of screens Source: KPCB May 2014
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 19 Global Mobile traffic Growing at +1.5X year Source: KPCB May 2014
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 20 Most Social Networks are mobile first Source: WSJ, Comscore, Statista 12/13
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 21 +20% of Latam users on LTE in 2019 Source: Ericsson Mobility Report June14
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 22 Traffic mix for applications and devices
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 23 Application mix similar on 3g & 4g Video dominant on 3G and 4G Social and IM large part of 2GSource: Ericsson Smartphone LAB deep dive measurements for iPhones, advanced MBB market
el sustainable competitive advantage through quality & performance
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 25 TIME TO CONTENT CRITICAL FOR USER EXPERIeNCE 25% OF Mobile users ABANDON WEB PAGE AFTER 4 SECONDS 50% OF MOBILE USERS ABANDON WEB PAGE AFTER 10 SECONDS ”Just a second please” Commercial in confidence, © Ericsson AB 2013
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 26 Digital Content grew at +50% during 2013 Source: KPCB May 20141Petabyte = 1MM Gbytes; 1 Zetabyte = 1MM Petabytes
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 27 How to cope with traffic growth?
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 28 App coverage: new dimension of performance Can I watch the show here?
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 29 Application coverage & Flow of users Application Coverage Performance User perspective Flow of Users Performance Network perspective
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 30 App coverage 5% 48% 16% 1 100.1 >50%<1% MBPS DOWNLINK SPEED Recommended Grade of Service >95% Very Average User Throughput  comparing to Global Speeds
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 31 RECOMMENDED GRADE OF SERVICE Commercial in confidence, © Ericsson AB 2013 La networks among worst performing in the world >90% DOWNLOADS < 0.1 MBPS DOWNLOADS > 1MBPS DOWNLOADS > 10 MBPS North America 78%5% 31% Latin America 48%16% 5% Eastern & Central Europe 55%18% 5% Western Europe 78%6% 17% Middle East 77%6% 27% APAC 54%15% 8% Africa 58%10% 7% App coverage status, H1 2013 1 >90% 100.1 >50%<1% MBPS DOWNLINK SPEED
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 32 Latin america Best Operators per CIty DL > 1 Mbps vs. DL > 10 Mbps January to June 2014 Cellular Data [%] [%] Download percentage > 1 Mbps Downloadpercentage>10Mbps Oper. B DRClaro DR 0% 5% 10% 15% 20% 25% 30% 35% 40% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Oper. B Buenos Aires Oper. C Bogota Oper. C Caracas Oper. C Guatemala Oper. C Kingston Oper. B LimaTelcel DF Claro Sao Paulo Claro Rio Oper. C Chile Oper. C Cali Better Operators
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 33 Global Benchmark DL > 1 Mbps vs. DL > 10 Mbps Establish, Expand HSPA & Accelerate LTEJanuary to June 2014 Data [%] [%] Download percentage > 1 Mbps Downloadpercentage>10Mbps Wanted position CLARO DR
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 34 Is there a recipe for success?
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 35 CAGR 2009-2013 12.9 % 2.6% Frontrunners Outperforming revenue growth 80% 90% 100% 110% 120% 130% 140% 150% 160% 170% 180% 190% 201220112010200920082Q07 2013 Peers Frontrunners Percent of 2Q07 levels Source : Ericsson analysis – operator reporting (12 leading operators) *) Average CAGR among analyzed operators
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 36 “Streetwise Metrics” Experience-centric KPI:s “Co-Partnering” Visionary Collaboration “Unboxing” Redefine Subscription “Show Casing” Quality-led Marketing “Ecosystematic” Open-ended Innovation “Gap Minding” Visionary Investing Lead by superior network performance Lead by innovative Marketing & Offering Six behaviors that set them apart from their peers
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 37 Leading Revenue Growth Data centricLeading Profitability Frontrunners identified Evaluated and Identified Based on 3 Key Parameters Reaching towards 10% or higher 25-50% data revenuesGrowing EBITDA
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 38 Causal Relationship between Variables Source : Ericsson and Telecom Advisory Services LLM 2014 Base: Market data from Brazil, Mexico & U.S.
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 39 What is the situation in Latin America? Users Devices Traffic Capex Performance Satisfaction Profits The RLAM operator situation 2012-2013
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 40 Finding proof that this virtuous circle is true Capital expenditures Operational performance Market performance Financial performance
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 41 Conceptual model Capital expenditures Operational performance Market performance Financial performance To find the main drivers of performance the model interlinks the different drivers in each part of the chain Capacity upgrades Network modernization Product/service development Accessibility & data completion rate Percent connections higher than 1 Mbps Speech call quality index Market Share ARPU increase Churn reduction Revenues EBITDA Free cash flow from operations Latency reduction Throughput Model aimed at defining the causal relationship from capital expenditures to financial performance
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 42 3 markets › Brazil › Mexico › United States Selection based on: – Investment growth forecasted – Good cooperation with Ericsson – Challenged on quality – Ericsson installed base – All large operators per market For our analysis We collected historical data from 3 markets
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 43 Descriptive statistics show correlation between metrics y = 0.1011x + 96.983 R² = 0.14301 96.5 97.0 97.5 98.0 98.5 99.0 99.5 0 2 4 6 8 10 12 14 16 18 SpeechCallQualityIndex Average Annual CAPEX per Connec on ($R) CAPEX VS. SPEECH CALL QUALITY y = 0.0113x ‐ 0.8086 R² = 0.73436 24% 25% 26% 27% 28% 29% 30% 31% 32% 94.5 95 95.5 96 96.5 97 97.5 98 98.5 99 99.5 MarketShareofConnecons(%) Speech Call Quality Index SPEECH CALL QUALITY VS. MARKET SHARE y = 158.08x ‐ 209.43 R² = 0.36229 2,000 2,500 3,000 3,500 4,000 4,500 15 17 19 21 23 25 27 QuarterlyRevenues(‘000’000R$) ARPU (R$) ARPU VS. REVENUES CAPEX VS. LATENCY LATENCY VS. ARPU 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 80 100 120 140 160 180 200 QuarterlyRevenues(‘000’000MXM) ARPU (MXM) ARPU VS. REVENUES 0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 0.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00 Latency Average Annual CAPEX per Connec on (MXM) 0 50 100 150 200 250 300 0 100 200 300 400 500 600 700 ARPU(MXM) Latency 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 0 200 400 600 800 1000 1200 Churn(%) Latency LATENCY VS. CHURN ARPU VS. REVENUES 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 900.0 1,000.0 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 Latency Average Annual CAPEX per Connec on (MXM) CAPEX VS. LATENCY Brazil Mexico United States Capital expenditures Operational performance Market performance Financial performance
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 44 From correlation to causality; regression analysis Capital expenditures Operational performance Market performance Financial performance Example: Impact of 1% improvement of Speech Call Quality on ARPU, Market share and Churn 1 percentage point (p.p.) improvement in Speech Call Quality (e.g. in case of Oi from 97.8037 to 98.8037) decreases churn by 0.2413 p.p. (e.g. in case of Oi from 2.60% to 2.36%); The positive effect starts directly but reaches maximum impact one quarter after quality improvement (T+1); Two stars (**) indicate a statistical significance of 95%; there is a 5% change that the observed effect is not causal but random
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 45 correlation to causality; regression Analysis Capital investments Operational performance Market performance Financial performance Market ShareARPU (***) (***) (***) (***) $RMillions Churn Percentage points 0.000 0.100 0.200 0.300 0.400 0.500 ARPU ($R) Mkt Share (%) Churn (%) ARPU ($R) Mkt Share (%) Churn (%) ARPU ($R) Mkt Share (%) Churn (%) ARPU ($R) Mkt Share (%) Churn (%) Samples > 1 Mbps Data Completion Data Accessibility Speech Quality T+2 (***) (**) T+1 (**) T+2 (**) (***) T+1 (**) T+1 (**) (***) T+1 (**) (***) T+1 (**) T+3 (***) (*) (***) (**) (***) Percentage points (***) Statistically significant at 99% (**) Significant at 95% (*) Significant at 90% Source: TAS, Ericsson analysis
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 46 study in 3 American markets confirms a robust relation between investments, performance and financials How much would a 10% incremental increase in CAPEX impact operational and market performance for an operator in the following markets*? Accessibility rate increase (same quarter) Data completion rate increase (same quarter) Percent connections higher than 1 Mbps (same quarter) Speech call quality index (same quarter) Latency reduction (same quarter) Downlink broadband speed increase (same quarter) - - 5.5 % - 10.9% - 1.8 % 2.4 % 4.7 % 0.3 % - - -*** - - - 53.4% 59.3% Market Share increase (same quarter) Churn reduction (after one quarter) ARPU increase (after one, two or three quarters) 1.7% 3.7% 1.1% 4.0% 12.0% 4.9% 3.0% - 21.0% *Statistical simulation model applied to actual operators **Time lag effects differ between different markets ***No data available Impact on variable (and time lag to the beginning of observed effect)** Brazil USMexico Operational Performance Market Performance
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 47 Impact of 10% Capex Increase over 5 years Source : Ericsson and Telecom Advisory Services LLM 2014 Base: Market data from Brazil, Mexico & U.S.
What drives loyalty?
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 49 Customer experience Source: Ericsson ConsumerLab Initial Purchase Billing & Payment Account Management Service & Support Network & Service Performance Tariff plans/ Offers Smartphone Apps/Eco system Customer Relation Service Usage Loyalty building
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 50 what drives loyalty in latam? MarketingCustomer service Offer Network Base: Smartphone users in BR, CHL, MXSource: Network Performance study 2013 Shapley regression analysis, showing the relative impact between each driver and loyalty to operator brand (NPS)
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 51 Improving network performance by 10% impacts CTV by 14% Network Performance Today: 6.43 (Mean) Promoters Detractors Network Performance +5%: 6.75 (Mean) Network Performance +10%: 7.07 (Mean) Network satisfaction CTV $1211 $1325 (+3%) (-4%) (+7%) (-6%) (+0.2) (+0.4) (+$53) (+$168) Improving network performance (+5%) (+14%) Source: Network Performance study 2013 $1157 Base: Smartphone Users in BZ, MX, CHL
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 52 Improving data reliability by 10% increases ctv by 14% Data Reliability Today: 6.40 (Mean) Promoters Detractors Data Reliability +5%: 6.72 (Mean) Data Reliability +10%: 7.04 (Mean) Network satisfaction CTV $1203 $1323 (+3%) (-3%) (+7%) (-6%) (+0.2) (+0.4) (+$46) (+$166) Improving Data Reliability (+4%) (+14%) Source: Network Performance study 2013 Base: Smartphone Users in BZ, MX, CHL $1157
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 53 Better User Experience, Higher Margin Japan USA South Korea Softbank NTT DoCoMo KDDI 21% 18% 24% EBIT / Revenue AT&T Verizon 26% 32% EBIT / Revenue -3% Sprint SKT 15% LGU+ 5% 5% VFE India Room for Further Fight Very Clear Win-Lose Very Clear Win-Lose EBIT / Revenue Source: Speed test Q4 2013 on Median 50% user downlink throughput Source: Speed test Q4 2013 on Median 50% user downlink throughput Source: Bench Bee samples on Median 50% user downlink throughput
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 54 LTE Leadership SMARTPHONE TRAFFIC THROUGH OUR NETWORKS
it is not about the killer application, but the killer experiencE...
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 56 JOIN THE CONVERSATION Ericsson.com/jm Facebook.com/EricssonCaribbean Twitter.com/EricssonCarib YouTube.com/Ericsson
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 57 Q & A
Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 58

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Creating Value with Network Performance

  • 2. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 2 2014 FIFA World Cup…
  • 3. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 3 The Playing Field Continues to be Changing… ? New Market Dynamics…
  • 4. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 4 MARKET TRENDS 2014 This slide contains forward-looking statements. Actual result may be materially different. Digital lifestyle drives the demand for new and innovative apps and devices Superior network performance is essential for differentiation and value capture Increased focus on the complete customer experience A data-centric world is rapidly emerging, bringing new business models ICT, fueled by mobility, broadband and cloud, transforms industries and creates value Smartphone intensive markets defined as markets with smartphone penetration above 50 percent in 2013. >75% Mobile video traffic growth will exceed 75 percent Data will exceed 50 percent of revenues globally in smartphone intensive markets Every other subscriber will have a smartphone 1/2
  • 5. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 5 By 2019… 700 M PCs & Tablets 9.2 BN Mobile Subscriptions 5.6 BN Smartphone Subscriptions 7.6 BN Mobile broadband Subscriptions
  • 6. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 6 What's driving the growth? › Number, Availability and Price of Smartphones › New connected devices › Better User Interface › Mobile Applications › Laptop Penetration › Cheap Dongles › HSPA Networks › Effective Pricing Plans › Clients Usage Profiles
  • 7. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 7 Good Start… But tremendous upside. Source: eMarketer/ Ericsson Research estimates 2014Note: One Subscriber may have more than 1 connection 5.2B 1.56B 2013 CAGR: 20%
  • 8. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 8 Mobile Traffic Growth Based on actual measurements DVB-H, Wi-Fi, and WiMax are not included
  • 9. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 9 Mobile Penetration Source: Ericsson Mobility Report 6/14
  • 10. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 10 Latin America Mobile PENETRATION Source: Statista 2014 93% 110%
  • 11. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 11 Subscription density in the Caribbean Source: ICT Pulse - 2014
  • 12. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 12 Avg. Subscription Penetration Rates Source: ITU, 2013 113%
  • 13. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 13 Data Affordability in the Caribbean Source: Source: ICT Pulse - 2014 Portion of monthly income consumed by a mobile/cellular data plan with a 1 GB cap in select Caribbean countries as at July 2014
  • 14. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 14 Data Revenues latam 4Q134Q12 Latam Latam ArgBrazilBrazil Latam Latam ArgBrazilBrazil Mobile Voice Mobile Data Absolut (Reported Currency) Relative Percentage (100%) Share of Mobile Data and Movile Voice Revenues (4Q12 to 4Q13) 50% 100% Source: Ericsson analysis. Latam Mobile Data Revenues <50% as Smartphone Penetration is Low (~30%)
  • 15. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 15 Data Consumption per device and Year 13 GB 4.5 GB 2.5 GB 2019 3.3 GB 1 GB 0.65 GB 2013 10X growth in mobile data traffic between 2013 and 2019 >50% of TRAFFIC
  • 16. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 16 Tablets –lots of room to grow Source: KPCB May 2014 56% of Laptops 28% of smartphones 8% of TV´s
  • 17. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 17 Tablets growing faster than pc´s ever.. Source: KPCB May 2014 52% in 2013
  • 18. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 18 Media engagement rises with # of screens Source: KPCB May 2014
  • 19. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 19 Global Mobile traffic Growing at +1.5X year Source: KPCB May 2014
  • 20. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 20 Most Social Networks are mobile first Source: WSJ, Comscore, Statista 12/13
  • 21. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 21 +20% of Latam users on LTE in 2019 Source: Ericsson Mobility Report June14
  • 22. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 22 Traffic mix for applications and devices
  • 23. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 23 Application mix similar on 3g & 4g Video dominant on 3G and 4G Social and IM large part of 2GSource: Ericsson Smartphone LAB deep dive measurements for iPhones, advanced MBB market
  • 25. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 25 TIME TO CONTENT CRITICAL FOR USER EXPERIeNCE 25% OF Mobile users ABANDON WEB PAGE AFTER 4 SECONDS 50% OF MOBILE USERS ABANDON WEB PAGE AFTER 10 SECONDS ”Just a second please” Commercial in confidence, © Ericsson AB 2013
  • 26. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 26 Digital Content grew at +50% during 2013 Source: KPCB May 20141Petabyte = 1MM Gbytes; 1 Zetabyte = 1MM Petabytes
  • 27. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 27 How to cope with traffic growth?
  • 28. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 28 App coverage: new dimension of performance Can I watch the show here?
  • 29. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 29 Application coverage & Flow of users Application Coverage Performance User perspective Flow of Users Performance Network perspective
  • 30. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 30 App coverage 5% 48% 16% 1 100.1 >50%<1% MBPS DOWNLINK SPEED Recommended Grade of Service >95% Very Average User Throughput  comparing to Global Speeds
  • 31. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 31 RECOMMENDED GRADE OF SERVICE Commercial in confidence, © Ericsson AB 2013 La networks among worst performing in the world >90% DOWNLOADS < 0.1 MBPS DOWNLOADS > 1MBPS DOWNLOADS > 10 MBPS North America 78%5% 31% Latin America 48%16% 5% Eastern & Central Europe 55%18% 5% Western Europe 78%6% 17% Middle East 77%6% 27% APAC 54%15% 8% Africa 58%10% 7% App coverage status, H1 2013 1 >90% 100.1 >50%<1% MBPS DOWNLINK SPEED
  • 32. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 32 Latin america Best Operators per CIty DL > 1 Mbps vs. DL > 10 Mbps January to June 2014 Cellular Data [%] [%] Download percentage > 1 Mbps Downloadpercentage>10Mbps Oper. B DRClaro DR 0% 5% 10% 15% 20% 25% 30% 35% 40% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Oper. B Buenos Aires Oper. C Bogota Oper. C Caracas Oper. C Guatemala Oper. C Kingston Oper. B LimaTelcel DF Claro Sao Paulo Claro Rio Oper. C Chile Oper. C Cali Better Operators
  • 33. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 33 Global Benchmark DL > 1 Mbps vs. DL > 10 Mbps Establish, Expand HSPA & Accelerate LTEJanuary to June 2014 Data [%] [%] Download percentage > 1 Mbps Downloadpercentage>10Mbps Wanted position CLARO DR
  • 34. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 34 Is there a recipe for success?
  • 35. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 35 CAGR 2009-2013 12.9 % 2.6% Frontrunners Outperforming revenue growth 80% 90% 100% 110% 120% 130% 140% 150% 160% 170% 180% 190% 201220112010200920082Q07 2013 Peers Frontrunners Percent of 2Q07 levels Source : Ericsson analysis – operator reporting (12 leading operators) *) Average CAGR among analyzed operators
  • 36. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 36 “Streetwise Metrics” Experience-centric KPI:s “Co-Partnering” Visionary Collaboration “Unboxing” Redefine Subscription “Show Casing” Quality-led Marketing “Ecosystematic” Open-ended Innovation “Gap Minding” Visionary Investing Lead by superior network performance Lead by innovative Marketing & Offering Six behaviors that set them apart from their peers
  • 37. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 37 Leading Revenue Growth Data centricLeading Profitability Frontrunners identified Evaluated and Identified Based on 3 Key Parameters Reaching towards 10% or higher 25-50% data revenuesGrowing EBITDA
  • 38. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 38 Causal Relationship between Variables Source : Ericsson and Telecom Advisory Services LLM 2014 Base: Market data from Brazil, Mexico & U.S.
  • 39. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 39 What is the situation in Latin America? Users Devices Traffic Capex Performance Satisfaction Profits The RLAM operator situation 2012-2013
  • 40. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 40 Finding proof that this virtuous circle is true Capital expenditures Operational performance Market performance Financial performance
  • 41. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 41 Conceptual model Capital expenditures Operational performance Market performance Financial performance To find the main drivers of performance the model interlinks the different drivers in each part of the chain Capacity upgrades Network modernization Product/service development Accessibility & data completion rate Percent connections higher than 1 Mbps Speech call quality index Market Share ARPU increase Churn reduction Revenues EBITDA Free cash flow from operations Latency reduction Throughput Model aimed at defining the causal relationship from capital expenditures to financial performance
  • 42. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 42 3 markets › Brazil › Mexico › United States Selection based on: – Investment growth forecasted – Good cooperation with Ericsson – Challenged on quality – Ericsson installed base – All large operators per market For our analysis We collected historical data from 3 markets
  • 43. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 43 Descriptive statistics show correlation between metrics y = 0.1011x + 96.983 R² = 0.14301 96.5 97.0 97.5 98.0 98.5 99.0 99.5 0 2 4 6 8 10 12 14 16 18 SpeechCallQualityIndex Average Annual CAPEX per Connec on ($R) CAPEX VS. SPEECH CALL QUALITY y = 0.0113x ‐ 0.8086 R² = 0.73436 24% 25% 26% 27% 28% 29% 30% 31% 32% 94.5 95 95.5 96 96.5 97 97.5 98 98.5 99 99.5 MarketShareofConnecons(%) Speech Call Quality Index SPEECH CALL QUALITY VS. MARKET SHARE y = 158.08x ‐ 209.43 R² = 0.36229 2,000 2,500 3,000 3,500 4,000 4,500 15 17 19 21 23 25 27 QuarterlyRevenues(‘000’000R$) ARPU (R$) ARPU VS. REVENUES CAPEX VS. LATENCY LATENCY VS. ARPU 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 80 100 120 140 160 180 200 QuarterlyRevenues(‘000’000MXM) ARPU (MXM) ARPU VS. REVENUES 0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 0.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00 Latency Average Annual CAPEX per Connec on (MXM) 0 50 100 150 200 250 300 0 100 200 300 400 500 600 700 ARPU(MXM) Latency 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 0 200 400 600 800 1000 1200 Churn(%) Latency LATENCY VS. CHURN ARPU VS. REVENUES 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 900.0 1,000.0 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 Latency Average Annual CAPEX per Connec on (MXM) CAPEX VS. LATENCY Brazil Mexico United States Capital expenditures Operational performance Market performance Financial performance
  • 44. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 44 From correlation to causality; regression analysis Capital expenditures Operational performance Market performance Financial performance Example: Impact of 1% improvement of Speech Call Quality on ARPU, Market share and Churn 1 percentage point (p.p.) improvement in Speech Call Quality (e.g. in case of Oi from 97.8037 to 98.8037) decreases churn by 0.2413 p.p. (e.g. in case of Oi from 2.60% to 2.36%); The positive effect starts directly but reaches maximum impact one quarter after quality improvement (T+1); Two stars (**) indicate a statistical significance of 95%; there is a 5% change that the observed effect is not causal but random
  • 45. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 45 correlation to causality; regression Analysis Capital investments Operational performance Market performance Financial performance Market ShareARPU (***) (***) (***) (***) $RMillions Churn Percentage points 0.000 0.100 0.200 0.300 0.400 0.500 ARPU ($R) Mkt Share (%) Churn (%) ARPU ($R) Mkt Share (%) Churn (%) ARPU ($R) Mkt Share (%) Churn (%) ARPU ($R) Mkt Share (%) Churn (%) Samples > 1 Mbps Data Completion Data Accessibility Speech Quality T+2 (***) (**) T+1 (**) T+2 (**) (***) T+1 (**) T+1 (**) (***) T+1 (**) (***) T+1 (**) T+3 (***) (*) (***) (**) (***) Percentage points (***) Statistically significant at 99% (**) Significant at 95% (*) Significant at 90% Source: TAS, Ericsson analysis
  • 46. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 46 study in 3 American markets confirms a robust relation between investments, performance and financials How much would a 10% incremental increase in CAPEX impact operational and market performance for an operator in the following markets*? Accessibility rate increase (same quarter) Data completion rate increase (same quarter) Percent connections higher than 1 Mbps (same quarter) Speech call quality index (same quarter) Latency reduction (same quarter) Downlink broadband speed increase (same quarter) - - 5.5 % - 10.9% - 1.8 % 2.4 % 4.7 % 0.3 % - - -*** - - - 53.4% 59.3% Market Share increase (same quarter) Churn reduction (after one quarter) ARPU increase (after one, two or three quarters) 1.7% 3.7% 1.1% 4.0% 12.0% 4.9% 3.0% - 21.0% *Statistical simulation model applied to actual operators **Time lag effects differ between different markets ***No data available Impact on variable (and time lag to the beginning of observed effect)** Brazil USMexico Operational Performance Market Performance
  • 47. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 47 Impact of 10% Capex Increase over 5 years Source : Ericsson and Telecom Advisory Services LLM 2014 Base: Market data from Brazil, Mexico & U.S.
  • 49. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 49 Customer experience Source: Ericsson ConsumerLab Initial Purchase Billing & Payment Account Management Service & Support Network & Service Performance Tariff plans/ Offers Smartphone Apps/Eco system Customer Relation Service Usage Loyalty building
  • 50. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 50 what drives loyalty in latam? MarketingCustomer service Offer Network Base: Smartphone users in BR, CHL, MXSource: Network Performance study 2013 Shapley regression analysis, showing the relative impact between each driver and loyalty to operator brand (NPS)
  • 51. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 51 Improving network performance by 10% impacts CTV by 14% Network Performance Today: 6.43 (Mean) Promoters Detractors Network Performance +5%: 6.75 (Mean) Network Performance +10%: 7.07 (Mean) Network satisfaction CTV $1211 $1325 (+3%) (-4%) (+7%) (-6%) (+0.2) (+0.4) (+$53) (+$168) Improving network performance (+5%) (+14%) Source: Network Performance study 2013 $1157 Base: Smartphone Users in BZ, MX, CHL
  • 52. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 52 Improving data reliability by 10% increases ctv by 14% Data Reliability Today: 6.40 (Mean) Promoters Detractors Data Reliability +5%: 6.72 (Mean) Data Reliability +10%: 7.04 (Mean) Network satisfaction CTV $1203 $1323 (+3%) (-3%) (+7%) (-6%) (+0.2) (+0.4) (+$46) (+$166) Improving Data Reliability (+4%) (+14%) Source: Network Performance study 2013 Base: Smartphone Users in BZ, MX, CHL $1157
  • 53. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 53 Better User Experience, Higher Margin Japan USA South Korea Softbank NTT DoCoMo KDDI 21% 18% 24% EBIT / Revenue AT&T Verizon 26% 32% EBIT / Revenue -3% Sprint SKT 15% LGU+ 5% 5% VFE India Room for Further Fight Very Clear Win-Lose Very Clear Win-Lose EBIT / Revenue Source: Speed test Q4 2013 on Median 50% user downlink throughput Source: Speed test Q4 2013 on Median 50% user downlink throughput Source: Bench Bee samples on Median 50% user downlink throughput
  • 54. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 54 LTE Leadership SMARTPHONE TRAFFIC THROUGH OUR NETWORKS
  • 55. it is not about the killer application, but the killer experiencE...
  • 56. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 56 JOIN THE CONVERSATION Ericsson.com/jm Facebook.com/EricssonCaribbean Twitter.com/EricssonCarib YouTube.com/Ericsson
  • 57. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 57 Q & A
  • 58. Creating Value with Network Performance | Commercial in confidence | © Ericsson AB 2014 | 2014-08-13 | Page 58