Transcript Revenue sharing

2016/4/12
New Business Model
June 2-3, 2011
Beirut, Lebanon
Tony Huang
Director, CTO Office
Middle East
Huawei Technologies
www.huawei.com
Operators are facing both operational and financial
challenges under the fierce competition environment
 Challenges
 High Debt Ratio
• High finance fee
 High OPEX
• High Operation cost
 Requirements
Balance Sheet Re-engineering
Lower OPEX solution
 High Churn rate
• Intense competition
Faster go-to-market
• Inefficient loyalty program
 High CAPEX
Risk sharing
• High investment on new
services
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Huawei Confidential
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Operators are seeking Vendors to provide Business
solutions to address their Business requirements
Balance Sheet
Reengineering
1
Financing
Solution
√
2
Hosting
Solution
√
3
Revenue
Sharing
√
4
Managed
Services
Lower OPEX
Solution
HUAWEI TECHNOLOGIES CO., LTD.
Faster go-tomarket
Risk sharing
√
√
√
√
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√
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Finance solution helps operator improving its financial
performance in the Capital market
Financing solution
Key
Financial
index
Challenges
Operation
Strategies
Debt / assets, net debt
/ equity, net debt /
EBITDA


Debt Covenants
Leverage Impact
Hosting
solution
EPS and P/E Ratio
compared with the
regional peers


Profitability
Growth
De-leveraging to rebuild
financial strength
Revenue stimulation
and Cost reduction
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Revenue
sharing
Managed services
High CAPEX / Sales
Ratio leads to
Negative FCF


Free Cash Flow
CAPEX Intensity
Transforming CAPEX
structure to reasonable
CAPEX / Sales Ratio
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Operator should work with a vendor who has strong
financing capability to offer customized solutions
Financing solution
Hosting
solution
Revenue
sharing
Managed services
Buyer’s Credit
 Strong
Seller’s Credit
Project Finance
AR Financing
Leasing & Off Balance Sheet
Solutions
support from institution:
a vendor being supported by
powerful finance institutions;
 Respond
quickly and innovative:
drives innovative financing solutions
in line with customer objectives;
 Professional
service:
staffed by professional financing
managers providing a first class
service to customers
Syndicated Loan
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Hosting services helps operators focus on core
business, lower OPEX and improve service offerings
Financing solution
OPEX Split by Network
& Service Area
Network and Services
Maintenance
15-20%
Logistics & Spare parts
10-15%
•
Improves financial and
operation efficiency,
•
Enable operators focusing on
their core business objectives
Increasing
cost
efficiency
•
Shares risk by using “Risk
Sharing” agreements which is
based on the service revenue
Effective
service
aggregation
•
Provides total communication
solution and accelerate the
TTM of new services
Enhanced
Focus
5-10%
5-10%
Core
business
New Services Design
Managed services
20-25%
Network and
Services Operation
Planning
Revenue
sharing
25-30%
Service
Deployment
Systems O&M
Hosting
solution
4-5%
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Hosting services can be sub-divided into 5 layers,
ranging from Network equipment to Operation supports
Financing solution
Hosting
solution
Revenue
sharing
Managed services
Operation
Management
Application
Platform
Network
Provision of
hardware
platform and
software
Running,
maintenance
of service
platform, i.e.
SDP, CDN
HUAWEI TECHNOLOGIES CO., LTD.
Integration of
application
and service
SP / CP
management
and support
Huawei Confidential
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Business
consulting,
and Operation
support
Revenue sharing model helps operators launching new
services quickly and limiting their risk
Financing solution

Revenue sharing

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Max revenue sharing curve:
protect operators’ benefit
Min monthly fee line:
protect vendors’ benefit
Hosting
solution


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$
Revenue
sharing
Business Model Description
Payee Period: usually 3-4 years
Payee Fee is linked to service revenue or
traffic
The detailed covenant is related to
equipment value plus business commitment





Launch
Minimum monthly fee line

Year-1 Year-2 Year-3 Year-4

HUAWEI TECHNOLOGIES CO., LTD.
Managed services
Key Benefits
Faster Time-to-Market
Risk sharing
Align costs with benefits
Improve cash flow and liquidity
Facilitate budgeting control
Off -balance sheet financing
Huawei Confidential
Page 8
Network leasing from third party could reduce large
upfront CAPEX investment for operator
Hosting
solution
Financing solution
Revenue
sharing
Revenue Sharing Model
Leaser
Managed services
Operator
Network User
Network Owner
Right-to-use Network
Equipment Payments
Vendor
Equipment Supply
Network Supplier
Frame Work Agreement
This model is similar to “pay as you grow”
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Managed services business model is well proven
working for many operators for many years
Hosting
solution
Financing solution
Managed services
• Power / Transmission / Site acquisition
• O&M / Spares / Support / Training
Network Operation
Network
Operation
Revenue
sharing
• Network KPI measure and
Scope of Managed
Services
improvement
Network KPI
Strategy and Planning
Finance, G&A
Core
Business Marketing & Sales
VAS
(SDP,
SMS,
WAP...)
Operation
Support
System
Business
Support
Systems
IT (ERP,
OA, etc...)
IT & App.
CRM and CEM
With the managed service, operator can focus on its Core business, Reduce OPEX, Improve
Network Quality thus making Performance Predictable.
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Managed services process can be divided into transition
and operation stages
Financing solution
Due
Diligence
Pre
Transition
Transition
Hosting
solution
Stabilization
Revenue
sharing
Transformation
Transition Phase
Service
Responsibility
Transition
Infrastructure
and Facility
Transition
Managed services
Continuous
Improvement
Operation Phase
Employee
Transition
Service Management
IMS (Infrastructure
Management Services)
Asset
Transition
Service / Help Desk
AMS (Application
Management Services)
Contract
Transition
Solution Evolution
Services
BOS (Business
Operation Services)
•
•
•
•
HUAWEI TECHNOLOGIES CO., LTD.
Focus on the core business;
Manageable & predictable OPEX;
Accelerate technology evolution;
Business Transformation for increasing competitiveness
Huawei Confidential
Page 11
Looking into the Future, We See Beyond Telecom…
Beyond Voice
booming mobile broadband is the next
engine of telecom
Beyond Population
the Internet of Things is creating a large
subscriber base
In the next five years…
2.5 billion MBB users，680 million FBB users
300 million wireless M2M users，
120 million IPTV users
270X MBB traffic，5X FBB traffic
US$ 100 billion data center market
Beyond Bit-pipe
Beyond Telecom
home networks will open new
markets to operators because of
the disruptive user experience
cloud computing brings new
opportunities driven by a new business
model
Source: MBB users is from “Ovum”, FBB users is from “broadband trends”; M2M users is from “berg insight”, IPTV users is from “MRG” ,
Traffic and Data centre market is from IDC
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Highlights of Huawei Technologies
28
21.8
18.3
12.8
8.5
6
2005


2006
2007
2008
2009
2010
We are serving 45 of the top-50 telecom operators worldwide;
We provide end-to-end ICT solutions in Network, Software, Devices and
Professional Services
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Huawei Confidential
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Our Global Presence ensures Supports Everywhere
HUAWEI TECHNOLOGIES (Headquarters)
Huawei Headquarters
R&D center
Technical support center



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
22 regional HQ, 100+ branch offices
17 R&D centers (40,000+ R&D employees), 36 training centers
95,000 employees worldwide
Contract Sales exceeded USD 30 billions (2009)
Global 500 Corporations - ranked 397 in 2009
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Page 14
We achieved Sustainable Growth in Middle East Region
Progressive

Contract sales of US$2.7 Billion (2010)
Responsive


Lebanon
2800+ highly qualified employees, with
60% local staff
Jordan
Kuwait
11 branch offices, serving 13 countries
customers and their business globally
Innovative
Saudi Arabia

Leading Solution Provider in Telecom
Market including Fixed, Mobile and All IP ;

Solutions for Enterprise Market ;
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Our business scope also includes
Software & Applications, Devices &
Terminals, and Professional services
HUAWEI TECHNOLOGIES CO., LTD.
Afghanistan
Iran
Iraq
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Pakistan
Bahrain
Qatar
United
Arab
Emirates
Oman
Page 15
To Enrich Life Through Communications
www.huawei.com
Thank you
www.huawei.com
Copyright©2010 Huawei Technologies Co., Ltd. All Rights Reserved.
The information contained in this document is for reference purpose only,
and is subject
to
HUAWEI
TECHNOLOGIES
CO., LTD.
change or withdrawal according to specific customer requirements and conditions.