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Digital Europe: How? February 2014 Michael Tsamaz OTE Group Chairman and CEO Alarming trends for the continent's digital econo Declining in whole ICT sector Competitiveness Industry value Eroding market capitalization vs. North America Market structure Fragmentation and lack of scale Revenues Declining vs. growing data traffic Investments 270 bln needed for high-speed NGNs OTT players Additional pressure Regulation Harsh framework Declining revenues IP traffic Western Europe Telecoms revenues -10% +836% 2016e 2008 North America +35% +966% 2008 2016e 2008 2008 Source: European Commission (Sept.2013) 2016e +40% +1006% AsiaPacific 2016e 2008 2016e 2008 2016e Behind in investments Telecommunications investment in EUR per capita EUR 210 US 180 190 170 170 Asia Pacific 150 130 EU 130 110 90 USA EU-15 Asia Pacific 70 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012e2013e Source:Asia OECD Communications Asia: Japan, South Korea, Australia, New Zealand. Data Pacific: Japan, SouthOutlook Korea, 2013. New Zealand, Australia. Source: OECD. estimated for 2012 and 2013. OTTs versus Telcos: No level playing field European employees European investments 11,000 22,000 1.2bn Very low Income taxes in Europe Little or none Source: OTT data for largest EU countries (DE, FR, UK), plus EU HQs (Amazon Luxembourg, Google Ireland) In the next 4 years Only in Greece 1bn (2012) For taxes & other social contributions Only in Greece Regulation stifles growth Return on Capital: Incumbents vs. Unbundlers Favouring noninvesting unbundlers Source: Bernstein Research, BCG. 1 BT, DT, Orange, TEF. 2 BSkyB, Iliad, Jazztel, TalkTalk, United Internet EU regulation complex & intrusive vs. US & AP Source: OECD, McKinsey The myths of • Ladder of investment • Essential facility • Spectrum auction The Greek challenges Challenging macros Challenging telco market Market consolidation/partnering Enhanced FMC offerings Aggressive pricing Incumbent main investor Regulation 2008-2013 • • Private consumption: -30% GDP: -25% The Greek challenges Regulation • Pricing • IP transformation / VoiP • Vectoring • Universal service ICT can lead Europe back to the top ICT = Growth and employment Vision for EU’s ICT • 21% of GDP growth Regain leading position within next 10 years • 10pp up in broadband penetration = 0.9-1.5 pp up in annual pc growth • Telecom network infrastructure (fiber, LTE, Intelligent networks) • Productivity growth: 31% Europe 59% USA • Software and hardware • Internet Services • 2.6 new jobs for every one lost Source: McKinsey, ifo, European Commission. Key priority • EU policies alignment for consistency and credibility of decision-making ICT can lead Europe back to the top Key measures to restore EU competitiveness, investment & growth Digital development Digitalinfrastructure infrastructure development BOOST Digital infrastructure development Regulated telecoms markets DEREGULATE Market and cooperation Digitalconsolidation infrastructure development EASE Spectrum policy Digital infrastructure development HARMONIZE
