Mobility Solutions. IMS Blended Applications Business Case. November 4, 2004 Sachin Doshi Maria Palamara Carlos Urrutia-Valdes Robert Muli

Transcription

1 IMS Blended s Business Case Mobility Solutions November 4, 2004 Sachin Doshi Maria Palamara Carlos Urrutia-Valdes Robert Muli

2 Contents Objective IMS Benefits Overview Business Case Objective Methodology Executive Summary Business Case Assumptions Market Sizing and Revenue Cost of Ownership Analysis Business Model Results 2

3 Objective Voice ARPU s and margins are declining year over year VoIP provides efficiencies to sustain margins, and VoIP-based service enhancements may help diminish Voice ARPU erosion WSP will require strong data strategy to grow ARPU and margins IMS based services will help operator in efficiently deploying new services and providing a platform for blended applications which will enhance voice and data ARPU, and decrease subscriber churn leading to greater subscriber NPV. Develop business case to understand value of blended applications and deploying current and future apps with an IMS architecture 3

4 To Deliver Lifestyle Services, The Approach to Service Delivery Needs to Change How would you send a picture to your PTT Group? Intelligent Blending of Services to create Lifestyle Services Portable Travel Agent LiveWire Activity Agent Family Portal IM PTT LBS Video Services Supported by a Common IMS Architecture IMS IM Server PTT Server MPC/ISG Video Server ISG Presence & Availability Server LSS + MGW emrs Media Resource Server S-DHLR Home Subscriber Server Services Supported by Point Solutions IMS IM PTT LBS Video IM Server PTT Server ISG Presence & Availability Server LSS + MGW MPC/ISG emrs Media Resource Server S-DHLR Home Subscriber Server Video Server Blended Lifestyle Services only possible with an IMS Architecture, e.g. Streamed video to group IM conference IM IM Server (Presence, AAA) Subscriber Database PTT PTT Server emrs Subscriber Database LBS MPC/ISG PDE Subscriber Database Video Video Server Subscriber Database Point Solutions are inefficient and inflexible, e.g. duplicated subscriber databases + no interaction 4

5 Lowering the service viability threshold Service adoption 100% 80% 60% 40% 20% Viability threshold for service offering with vertically integrated platform ILLUSTRATIVE Viability threshold for service offering with IMS platform 0 Mobile voice SMS Service A Service B Service C Service D Service E Unattractive services to a non IMS operator Unattractive service(s) to an IMS operator Blending services with and IMS service architecture enables an operator to cost-effectively build integrated service bundles that more effectively target niche market segments build integrated service bundles that more effectively target niche market segments 5

6 IMS Benefits For End-Users Common contacts across services Enterprise & personal lists, enhanced with capability indicators. Multimedia enriched communication Multimedia information can be sent and received during a voice call. Voice enriched data applications Predictable service interactions Operator can set defaults for service interactions to maximize ease of use and service quality. Subscribers can set policies on how they want their services handled. For Service Providers Retain ownership of the subscriber Provide better quality services than IP today. Avoid migration of value to the client device. Differentiate services from competition and sell more services Choose the applications to create blended services. Home controlsame services even when the user roams. More cost-effectively deliver high value, new lifestyle services to market Minimize client-server airlink traffic by leveraging IMS network information. Reduce costs of new services through common applications infrastructure. Reduced OPEX Centralized data and common functions. Standardized QoS, roaming, billing. Building Blocks for Lifestyle Targeted Blended Services 6

7 Business Case Methodology Gather market data for the ten applications Take Rates Usage ARPU Calculate TCO of IMS solution Increased take rates based on improved feature interoperability which leads to value added blended services CapEx for IMS elements Session Control, Media Gateway, Media Resource Function, HSS, and Presence Server Dimensioning based on improved take rate and usage assumptions CapEx savings Lower application solution pricing Shared architecture for IMS elements Operating Expenses Network IMS, Core/Access, and Solution operations and maintenance Non-Network SG&A, Provisioning, Billing, Customer Care, Bad Debt, and Fraud OpEx savings Services operations Transport, HW/SW maintenance, provisioning, billing and customer care. 7

8 Business Case Assumptions NAR WSP with 5-Year Subscriber Forecast: 10M in 2005 to 12.2M in 2009 Business / Consumer Breakdown: 25%/75% 5-Year ( ) TCO analysis for ten applications Active Phonebook (2005) IM Push-to-Talk ilocator IP Centrex (2006) MMS (2006) Unified Communications (2006) Phonepages (2005) Interactive Gaming (2006) VoIP (2006) 8

9 Revenue Take rates and ARPU for services gathered from various sources: IDC, Yankee Group, Gartner Group, Strategy Analytics Feature interoperability leads to increase in service adoptions within bundled offers (20% greater than market research) 26% 7% 5% 18% 9% 6% IM ilocator IP Centrex Unified Communications VoIP 14% 2% 13% Revenue Breakdown ( ) PTT Interactive Gaming MMS Phonepages $900 $800 $700 $600 $500 $400 $300 $200 $100 $- Revenues above represent market opportunity if all services were billed separately and subscribers paid full monthly subscription rate for each service. Value of IMS is in service and feature interoperability which will lead to bundled service offering, and bundling discounts. Revenue Forecast ($M) $48M (2005)-$821M (2009)

10 Bundling Effect Chart illustrates the % of subscribers with multiple application subscriptions Table 1 below outlines the discount assumption for bundling Total 5-Year Revenues: $1.85B Table 1: Table 2: # of Services Discount 2 14% 3 17% 4 20% 5 22% % of subs 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Blended Services Total Subscribers 10,000,000 10,500,000 11,025,000 11,576,250 12,155,063 IMS Subscribers 1,991,193 3,223,699 4,272,592 4,904,848 5,076,837 ARPU before discount $ 1.99 $ 4.92 $ 6.60 $ $ Savings 1.6% 3.0% 4.9% 7.4% 9.2% ARPU after discount $ 1.96 $ 4.77 $ 6.28 $ 9.39 $ Total Revenue ($M) $ 47 $ 185 $ 322 $ 553 $ 745 ARPU per Wireless Sub $ 0.39 $ 1.47 $ 2.43 $ 3.98 $ Services 1 Service 2 Services 3 Services 4 Services 5 Services 10

11 Capital Investments (CapEx) IMS Elements Session Control Subscriber Database (HSS) Media Gateway (MGW) Media Resource Server Presence Server Network Capacity Core and Access capacity to handle traffic generated by services. Calculated on a $ / Mbyte basis Operator may have required excess capacity, but the allocated cost should be included in the business case regardless Solutions HW, SW, and integration services for each of the ten applications Some of the functionality will migrate to IMS elements 11

12 Sample Network Platform Comparison PMO Services Supported by Point Solutions IM IM Server (Presence AAA) Sub. Database MMS MMS Server (Presence AAA) Sub. Database PTT PTT Server MRS Sub. Database Gaming Content Server MRS Sub. Database IP PBX/CTX IP Centrex Server Session Control MGW MRS Sub. Database FMO Services Supported by a Common IMS Platform IM IM Server MMS MMS Server PTT PTT Server Presence Server Gaming Content Server IP PBX/CTX IP Centrex Feature Server IMS Platform Session Control MGW Media Resource Server HSS (Subscriber Database) 12

13 CapEx Summary $180 $160 $140 $120 $100 $80 $60 $40 $20 $- Total CapEx ($M) $163 $157 $112 $76 $ Core / Access IMS s CapEx ( ) VoIP 26% Phonepage s 16% Unified Communica tions 2% MMS 10% IM 6% PTT 6% IP Centrex 3% ilocator 2% Active Phonebook 26% Interactive Gaming 3% 5-Year Total CAPEX: $560M 43% of CapEx in Network Infrastructure 15% for IMS 57% in Solutions 13

14 Operating Expenses (OpEx) Non-Network Expense Assumptions Marketing & Sales: 10% of revenue decreasing to 2% in 2008 G&A: 5% of revenue Bad Debt: 1% of revenue Fraud: 1% of revenue Billing: $0.35 per monthly bill per subscriber Customer Care: 0.6, 5-minute calls per subscriber per Year Provisioning: 5 minutes per IMS subscriber Customer Care and Provisioning FTE Cost: $75K Working Hours: 7.5 hours per day, 208 days per year Network Expense Assumptions IMS OAM&P 15% of installed CapEx Maintenance/Upgrades 8% of installed CapEx Transport Costs - $0.074 / Mbyte decreasing to $0.05 / MB in 2009 Core/Access OA&M 15% of allocated CapEx 14

15 Operating Expenses Summary $250 $200 $150 Non-Network Network Total OpEx $122 $182 $224 Network OpEx ( ) 24% 16% $100 $50 $42 $80 60% $ IMS OAM&P Transport Costs Network OAM&P Non-Network OpEx ( ) 19% 5-Year OpEx - $723M 21% 43% $267M in network related expenses $383 in non-network related expenses 7% 5% 5% SG&A Bad Debt Fraud Provisioning Billing Customer Care 15

16 Results Summary $800,000 $600,000 5-Year NPV $145M Payback Period 3.3 years $Thousands $400,000 $200,000 $- $(200,000) $(400,000) Revenues $46,847 $184,665 $322,057 $552,518 $745,096 OpEx $(39,686) $(81,834) $(131,589) $(205,158) $(264,719) CapEx $(51,486) $(76,071) $(112,415) $(162,798) $(157,274) Free Cash Flow $(44,324) $1,416 $27,658 $90,122 $188,427 CDCF $(39,575) $(38,447) $(18,761) $38,513 $145,432 5-Year Summary Revenues ($M) OpEx CapEx Total Free Cash Flow CDCF Revenues $ 1,851 Operating Expenses $ (723) Capital Investment $ (560) NPV $ 145 Payback Period 3.33 IMS will provide an efficient architecture for deploying value added IP voice and data services 16

17 Point Solution Business Case Rollout All apps rolled out in 2005, except VoIP in 2006 Revenue Penetration rates for IMS apps are 20% higher than point solution due to advanced application and feature interoperability CapEx OpEx solutions will be more expensive for point solution as various IMS functionality will need to be supported within the solution (Subscriber database, Presence Server) No additional CapEx for IMS elements Customer Provisioning 3 minutes per subscriber per application Customer Care 1 call per subscriber per year Maintenance & Upgrades 15% of HW/SW 17

18 Point Solution Business Case Results $800,000 $600,000 $Thousands $400,000 $200,000 $- $(200,000) $(400,000) Revenues $90,783 $193,969 $324,038 $507,107 $663,391 OpEx $(51,799) $(90,725) $(150,110) $(226,343) $(286,054) CapEx $(36,636) $(67,838) $(107,097) $(152,023) $(155,082) Free Cash Flow $(7,149) $8,503 $21,078 $53,633 $118,359 CDCF $(6,383) $396 $15,399 $49,484 $116,644 5-Year Summary ($M) Point Solution IMS Case Revenues $ 1,779 $ 1,851 Operating Expenses $ (805) $ (723) Capital Investment $ (519) $ (560) NPV $ 117 $ 145 Payback Period For these 10 services, in this timeframe, the value of the blended services is offset by the fact that many of these services can be offered immediately without IMS. IMS based apps would still lead to increase in revenues over 5 years NPV for IMS is 25% greater than PS 18

19 Churn Reduction Blended services will provide compelling logic for subscriber stickiness, and will reduce churn for WSP. Table 1: Table 2: # of Services Churn Reduction 0 0% 1 5% 2 10% 3 14% 4 17% 5 20% Table 1 outlines assumptions for reduction in churn E.g. A subscriber with 2 services is 10% less likely to churn Table 2 shows the effect of the assumptions on yearly churn Table 3 summarizes the savings an operator can expect based on the reduction in churn Total Savings over 5 years: $165M Yearly Churn Point Solution 28.8% 28.8% 28.8% 28.8% 28.8% IMS 28.4% 28.1% 27.7% 27.1% 26.6% Table 3: Reduced Churn (K) CPGA $250 $250 $250 $250 $250 Savings ($M) $ 9 $ 17 $ 29 $ 47 $ 63 Another Perspective: If operator does not deploy blended services, churn may increase to similar financial effect 19

20 Incremental Business Case (IMS Point Solution) $200,000 $150,000 $Thousands $100,000 $50,000 $- $(50,000) Incremental Revenues $(35,164) $7,890 $27,266 $92,485 $144,644 OpEx Savings $12,113 $8,891 $18,521 $21,184 $21,336 CapEx Savings $(14,849) $(8,233) $(5,318) $(10,775) $(2,191) Free Cash Flow $(37,901) $8,548 $30,318 $69,440 $114,126 CDCF $(33,840) $(27,026) $(5,446) $38,684 $103,442 5-Year Summary ($M) Total Revenues $ 72 Savings $ 165 Operating Expenses $ 82 Capital Investment $ (41) NPV $ 103 Payback Period 3.12 NPV of $103M represents an 89% increase in value over Point Solution business case. 20

21 Conclusions Looking at these applications, most of which could be deployed using a point solution in the same time frame if not earlier than IMS does not amplify the full value of IMS. Even these services would generate a 89% increase in value if deployed on IMS as opposed to using the various point solutions. Evaluating various mass market and lifestyle services would show even greater value for IMS over an extended study period. Evaluating the impact of optimized transport (wireless/wireline) for complete coverage would also improve the value of the IMS solution. Lucent can develop customized business cases for specific operator needs using dynamic modeling tools developed by Bell Labs. Deploying IMS in a wireless operator network will enhance the value of VoIP and new voice and data applications 21