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Mobile VAS in emerging markets what do markets want?

Presentation Singapore, 29th March 2012

Contents

About Value Partners Mobile VAS in emerging markets what do markets want?

Q&A

Value Partners: a global management consultancy

An international player Headquartered in Milan, with offices in 9 countries, including double-digit growth rate markets A strong team of professionals 25 partners, 275 professionals, 23 nationalities An excellent track record Constant growth over the last 18 years A large and loyal customer base Over 350 client served in the past three years, 60% of which have been with us for over 8 years

Globally, Value Partners has advised the leading TMT organizations, regulators and investors
Telecoms clients
Media clients Investment clients in TMT

SouthernCapital

In Asia Pacific we have an unrivalled TMT client base and presence in all major markets
Selected Asia Pacific clients
Office

Japan China Nepal Bangladesh India Macau Taiwan

Hong Kong Vietnam

Philippines

Thailand
Sri Lanka Malaysia Singapore

Indonesia

Australia

New Zealand

VPPD-071126-VaFall-P6

In the VAS and content area, we have supported all the key players across the value chain
Mobile operators: recent project experience
Developing 02s mobile entertainment strategy and positioning in the mobile TV market Supporting Vodafones development of content standards and minor protection policy frameworks Reviewing Telecom Italia Mobiles approach to mobile content and value-added services Mobile content product strategy roadmap; and development of 3G services and supporting infrastructure Reviewing trends and commercial opportunities in the UK mobile market
Asian mobile operator

Enablers: recent project experience

Reviewing the strategy of Fonestarz, a leading mobile content aggregator and service provider as part of a due diligence Developing mobile service offerings for Red Bee (formerly BBC Broadcast) Defined new strategy plan for the client in order to create value Scouting of potential acquisition target Portfolio strategy of B2B revenues Assessment of m-advertising opportunity
European financial institution

Media players: recent project experience

Helping the FA Premier League to package and sell its mobile rights in the UK and international markets Developing a mobile service proposition for Johnston Press that complements its online and print services Business modelling of the mobile broadcasting opportunity for RAI Assessing opportunities to develop new mobile publishing services

Assessment of m-payment opportunity in Bangladesh Business planning

Assessment of M-payment opportunities Identification and assessment different business models Business planning

Prioritising mobile opportunities complementing existing pay TV offerings

* Recent projects experience 6

Contents

About Value Partners Mobile VAS in emerging markets what do markets want?

Q&A

Among the emerging markets where Value Partners has worked on commercial topics, we share VAS findings in a few interesting markets

Vietnam

Nigeria
Analysis of mobile VAS and mobile internet usage as part of commercial improvement program

Analysis of mobile VAS trends as part of market and commercial strategy development
Turkey
Pakistan India Oman China Bangladesh Thailand Taiwan Vietnam Philippines

Nigeria Ghana Cameroon Brazil

Malaysia

India
Analysis of mobile VAS trends as part of a 3G strategy development and launch PMO
Indonesia

Ghana
Chile

Analysis of mobile VAS trends to develop Argentinaofferings targeted at specific user segments

Awareness, usage and intention-to-use of Mobile VAS among mobile users in India
% aware of VAS
Music (including caller tunes, ringtones, etc) News Video RBT & video tones Sports updates Game downloading Astrology Internet on Mobile Voice chat/SMS chat Mobile email Mobile banking Mobile payments Voice search/SMS search Education services Voice karaoke Spoken SMS Voice to text Job services 51% 45% 42% 40% 40% 31% 88% 6% 8% 7% 4% 10% 3%

% have used VAS

36%

% intend to use VAS

34% 8% 11% 8% 6% 10% 9%

Likely trend based on usage and intent

Music VAS still most popular

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27%
24% 24% 21% 21% 16% 16% 14%

7%
1% 1% 6% 1% 2% 2% 2%

6%
6% 5% 7% 4% 3% 4% 3%

Information, games and mobile internet gaining traction

3 Mobile

12%

1%

3%

banking, mobile payments and other services still needs to be promoted

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Source: Consumer survey (India, 15 circles, 2011, n=8216), Value Partners analysis

VAS usage and usefulness among current mobile VAS users (selected segments) in India
% who use the VAS Relative usefulness (on 5-point scale)

All users
Ringtone download Wallpaper/Picture download Audio/Video clips download Games download/ Gaming Web browsing Email Instant messaging Info services (e.g, news, find &buy, etc) Utility aspects of NSE, BSE, NCDEX Rail reservation/ PNR enquiry Happy tune/Reverse tune/Dialer tone 27% 33% 50% 83% 3.2 2.9

Students
88% 56% 34% 39% 3.3 3.0

Working adults
84% 38% 21% 31% 3.2 2.8

Rural working youths

83% 0% 0% 10%

3.6
2.5 2.8 2.6 2.8 2.8 2.4 2.5 3.0

2.7
2.7 2.8 3.1 2.4 2.6 2.4 3.0 2.6 2.4 2.2

2.9
2.9 3.0 3.1 2.4 2.6 2.8 2.9 2.5 2.4 2.3 3%

2.7
2.8 2.9 2.9 2.3 3.5 2.4

16%
25% 13% 15% 4% 17% 12% 3% 2%

25%
17% 16% 15% 3% 14% 15% 3% 2%

14%
29% 12% 26%

11%
13% 0% 12% 0% 20% 0% 0% 0%

26% 13% 4% 1%

2.9 2.5 2.3 2.6

3.7 2.7 2.3 3.0

Voice messaging
Astrology

Source: Consumer survey (India, 15 circles, 2011, n=2160), Value Partners analysis

Key opportunity in VASes rated useful but under or not utilized

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Mobile VAS usage characteristics of mobile users in Vietnam

% subscribers who have performed the following activities on mobile in the last 30 days % of respondents who have performed following activities (past 30 days) by age segment

SMS
Download ringtones Download music Download wallpapers Picture messaging Download pictures Download games Email Mobile Mobile Internet 14%

90%
Teenagers/Young adults (15-24) Adults (25-34)

18% 15% 11% 10% 7% 5% 3% 3%

19%

12%
10% 4% 4% 1% 1% 0%

Mature (35-44)

Middle-aged (45-54)

14% 12% 9%

10% 9% 6% 4% 4% 3% 7%

2% 1% 0% 0%
Download games

1%
Download Picture pictures messaging Download wallpapers Download music Download ringtones

Source: AC Nielsen, Value Partners analysis

Low penetration of games may be an opportunity

Music VASes are the most popular across all age segments
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Mobile VAS and mobile internet usage characteristics in Nigeria

VAS recently used
Consumer survey questions - What value-added services have you recently used?

Freq. of mobile internet usage

Consumer survey questions - How many times a month do you use your mobile phone to access the internet?

Activities through mobile internet

Consumer survey questions - What are your most common activities using the internet via your mobile phone, based on length of time spent?
Social networking (Facebook, Twitter, Web browsing

Social networking
Application downloads Music/video downloads Instant messenger Credit transfer Ringtone downloads Call-back Games News Others None

18% 11% 10% 10% 9% 9% 6%

Never Less than once 1-4 times

33%
4% 8% 5% 4% 5% 42%

23% 16% 15% 12% 12% 9% 5% 3%

Email Downloading (Music, Ebooks, Videos, etc)

News
Web search Instant messenger (MSN, Google Talk) Online reading Others

5-8 times

9-16 times

5% 7% 0.8% 14%
Every day 16-29 times

3%
1% 1% 0%

Gaming Video streaming (Youtube) VoIP (Skype)

~14% of respondents have not recently used a VAS while most VAS have only been used by ~10% of respondents which indicates a strong potential to stimulate usage by inducing trial among subscribers
Source: Consumer survey (Lagos, 2011, n=770), Value Partners analysis

Polarisation of usage may imply: - Many people simply do not have the phone capability, but will use once obtained; or - Once consumers are enticed, could quickly become habitual users
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Comparison of Mobile VAS usage characteristics between 2G and 3G users in Nigeria

Consumer survey question - What value-added services have you recently used?

% 2G subscribers who have recently used VAS Social networking Application downloads Music/video downloads Instant messenger Credit transfer Ringtone downloads Call-back Games News Others None 7% 11% 8% 7% 6% 5% 0.4% 27% 5% 10%

% 3G subscribers who have recently used VAS

21%
22% 17% 19% 14% 11% 9% 9% 10% 0.6% 9%

29%

VAS usage significantly increased in social networking, applications and music/video categories but not games and news/info categories

Source: Consumer survey (Lagos, 2011, n=770), Value Partners analysis

Percentage of mobile users who have not used VAS significantly reduced
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Comparison of Mobile Internet usage characteristics between 2G and 3G users in Nigeria

Consumer survey question - What are your most common activities using the internet via your mobile phone, based on length of time spent?

% 2G subscribers who have recently performed activities Social networking (Facebook, Twitter, Google+, etc) Web browsing Email Downloading (Music, Ebooks, Videos, etc) News Web search Instant messenger (MSN, Google Talk) Online reading Video streaming (Youtube) 7% 6% 29% 25% 20% 15% 15% 38%

% 3G subscribers who have recently performed activities 75% 52% 52% 38% 30% 26% 21% 13% 3G subscribers did significantly more social networking, communication, information gathering activities

3%
4% 1%

5%
4% 1% but not video streaming, gaming and VoIP activities

Gaming
VoIP (Skype) Others

5%

2%

Source: Consumer survey (Lagos, 2011, n=770), Value Partners analysis

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Most popular activities on mobile phone in Ghana

Activities most often performed on mobile phone
Overall Mid and High Value subscribers 22% 19% Mass market subscribers 24%

Web browsing

Chat

18%

20%

18%

Getting information Audio content (e.g., Music) Email Audiovisual content (e.g. Video) Video calling 3%

17%

19%

17%

16%

14%

17%

13%

14%

12% 10% while the mass market subscriber has a preference for web browsing and audio content

10%

10% The mid and high value customer appear to emphasize communication and getting information

3%

3%

Other

1%

1%

0%

Source: Consumer survey (Accra, 2011, n=247), Value Partners analysis

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Most desired activities on mobile phone in Ghana

Activities subscribers would like to perform on mobile phone
Overall Mid and High Value subscribers Mass market subscribers

Mobile TV

24%

27%

23%

Location-based information services

22%

18%

24%

Multi-player gaming

20%

21%

20%

Mobile payments

18%

16%

19%

Music services

15%

18%

14%

Source: Consumer survey (Accra, 2011, n=247), Value Partners analysis

The mid and high value customer wants mobile TV and music services

while the mass market customer wants information services and mobile payments on their phones
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Therefore, the key takeaways are

Within emerging markets, music-related, social networking and information services are still the most relevant VASes emphasizing practicality and fulfilling social needs (as opposed to pure entertainment) More advanced services like mobile banking, payment and commerce will still need to be promoted to improve awareness

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Possible business models Some ideas and examples

Charge consumer for service

1.

Introduce subscription services for music, information and other useful services e.g. Spotify and 3UK

Sell data to access service

1.
2

Use technology to enable Facebook, Twitter, etc on low-end phones and sell data to these users e.g. XL Axiata and Blaast Oy

Charge a third-party advertisers

1.
3

Leverage mobile advertising as new revenue stream, riding on increasing smartphone penetration e.g. SingTel and Amobee

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Contents

About Value Partners Mobile VAS in emerging markets what do markets want?

Q&A

19

Contact Information
www.valuepartners.com cheryl.lim@valuepartners.com

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