ADVENTIS' Prescriptions for 2005

ADVENTIS today issued its 2005 prescriptions to executives in the global telecom industry. Raul Katz, ADVENTIS President and CEO, commented, "Mergers in 2004 demonstrated that shareholder value creation and top management attention has shifted decisively to wireless. While this shift will continue, we see important developments in broadband markets with video-on-demand now center-of-plate and real opportunities for service providers to retool their infrastructure to compete more effectively." With new entrants abounding, Dr. Katz challenged established telecom companies to step up their level of strategic execution, "Get better fast, or get dead."

1. Break Through the "Glass Ceiling" -- and Be the Disruptor for a Change!

IP networks in enterprise markets are disrupting the resource-intensive, customization-crazy world of the systems integrator. Enterprise-focused service providers must create and deliver innovative off-the-shelf solutions to facilitate plug-and-play implementation of major business applications.

In consumer markets, telcos must seize the upper hand in video on demand. It is common for all manner of content to be digitized, packetized and delivered on demand, so why should video be different? The cable industry is investing in this area, but they are wary of cannibalizing their traditional bundled, broadcast ecosystem. ADVENTIS believes that this leaves open opportunities for the telcos to score strategically.

2. Create New Vehicles for Pan-industry Innovation

The cable industry has organized and put real muscle into negotiations with hardware manufacturers, infrastructure providers and the development of next generation standards. In contrast, the telecom sector is fragmented and only occasionally visionary. Many telcos are on a path to use different video distribution infrastructure designs. How will they achieve the needed scale economies, particularly for home devices?

With telcos all over the world wrestling with similar challenges -- creating a distinctive competence in video content distribution or enabling "plug-and-play" enterprise applications -- there is an opportunity for formal and informal teaming to create scale, set standards and negotiate greater leverage.

3. Cannibalize to Grow

Many service providers look like textbook examples of the hamstrung incumbent, paralyzed in the face of disruptive competition. Each wishes to be all things to all customers. As a result, operating costs are higher, products compete internally driving down margins, inconsistent marketing messages are sent to customers and the customer experience is overly complex and inefficient. Many do not have the detailed cost data or financial suppleness to make good calls on portfolio management. Service providers must adopt clearer product lifecycle strategies and must decide not just what to offer but what not to offer. Don't let competitors cannibalize your business for you.

4. Think Local and Act Local to Grow Global Returns

The next frontier in marketing is to optimize network and marketing investment at the very local level. The data is available to understand each market served at a very granular level and where the next investment dollar should be spent (e.g., whether there is a greater return from opening a new company-owned retail store, expanding network coverage in a specific location or placing additional media or promotional spend). Cable MSOs compete in this way, with light staffing at the corporate level and heavy accountability in the regions.

When fact-based decisions are approached in this manner, step-function improvements in customer acquisition, retention and the efficiency in capex and opex result.

5. Embrace Outsourcing and Partnering

As customer value migrates away from traditional network connectivity and towards content and applications, service providers must evaluate where they can capture the most value. Owning customer touch points such as distribution channels and billing will likely be more valuable in the future than owning rapidly commoditizing network assets.

We believe that under almost all scenarios outsourcing and partnering will be more strategic and central to the success of service providers. Outsourcing enables dramatic reductions in unwieldy cost structures and allows strategic focus on the key sources of future competitive advantage. Partnerships should be used to learn skills and create new content and application-driven business models.

Please visit www.adventis.com to find more on the Major Themes of 2004 and the Prescriptions for 2005.

About ADVENTIS

ADVENTIS is a global management consulting firm serving leading organizations in the telecom, media and technology industries. For over a decade, ADVENTIS has built an outstanding reputation and become the preferred partner for senior executives because of its deep industry expertise; unique intellectual property; extensive network of contacts; bias for pragmatic action and collaborative culture. The company has offices in Boston, New York and London. More information about ADVENTIS is available at www.adventis.com.

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