Digital Convergence in Asia: Its Role in Regional Growth

1. Digital Convergence in Asia:Its Role in Regional Growth Presenter: Virat Patel Spectrum Value Partners 22nd CACCI Conference Manila, 22-23 October 2008

2. Topics for discussion • What is digital convergence? • Digital convergence developments to date • Becoming ‘digitally converged’

3. "As technology converges, our opportunities expand. This is where we're putting all of our resources.“ Intel Corp. (INTC ) Chief Executive Craig R. Barrett • "Convergence is finally really happening. Digitalization is creating products that can't be categorized as tech or consumer electronics. The walls are coming down." Gottfried Dutiné, an executive vice-president at Philips

4. Digital convergence translates into tangible economic benefits Example Benefit • Information and Communication Technologies (ICTs) in Europe are strong contributors in productivity growth and GDP • Perceived to have ~50% of impact on Europe’s recent productivity growth • 6-8% of the EU’s GDP • Japan and South Korea have the highest digital mobile advertising markets • Earning €11.1b and €2.5b in revenues in 2006 • Compared to European markets ranging from €0.3b (Spain and Russia) to €0.6b (UK) • Australian media revenues are seeing a new revenue stream from digital media • Of the $9.7b forecasted media revenues for 2009, $3.2bn is expected to be generated by new digital media • Analog to digital- technology migration • Distortion free conversations • Clearer TV pictures • Lower costs of bandwidth • Improved signal security/privacy

5. Source (1) e-Business W@tch, Chart Report 2006 Perceived impact of ICTs on European businesses ICT impact across various business functions

6. analogue to digital conversion Analogue Information Digital Information Converged Networks Mobile TV Voice Online Mobile TV Voice Online Converged Devices Source (1)International chamber of Commerce What is digital convergence? Discrete (discontinuous) values representing information for input, processing, transmission, storage eg numbers, letters, icons, sounds, images, and other measurements of continuous systems Continuous values representing any information eg temperature, sound, light, pressure etc

7. In developed countries digital convergence is being driven through mobile & internet usage • In developed countries, increased mobile and internet usage is driving convergence of technologies through the following consumer demand / behaviour: • Digitisation of media • Device and browser development • Online community growth • Globalisation of brands • Formation of new online communities & internet growth Developed Countries

8. In developing countries digital convergence is ‘bridging the digital divide’ • In developing countries there is a focus on empowerment of the individual and ‘bridging the digital divide’ through the following: • Need for practical services • Social or community resources • Affordability • In most developing countries more people own mobile phones than have access to internet and the mobile is not only being used for communication but also for money management: • Micro Lending/Credit • Mobile Banking • transfer money via SMS and does not require users to have bank accounts Developing Countries

9. Source Spectrum Value Partners analysis Digital convergence is fast moving and dynamic which can result in social issues Risks Culture • Risks creating a dual track digital society with different divides: • youth /adult • rich / poor • rural / urban • tech savvy / tech illiterate • Change/loss of regional and community cultural distinction Consumer Behaviour • Consumers are overwhelmed by choice • New technologies that empower individuals can also isolate them: • Tailored services allow individuals to bypass new experiences for what is already familiar • Diminished sense of shared experiences

10. (1)Gartner (2)Screen Digest (3)Spectrum Value Partners analysis Sources Companies considering digital convergence should refer to a growing consumer digital market Broadband penetration in Asia-Pacific (%HHs) South Korea penetration of digital technologies (%HHs)

11. Consumers Business • Electronic commerce • Partnership • Outsourcing • Electronic commerce • Online marketing • Customer service Suppliers Manufacturers Remote Offices • Real time syndication • Group collaboration • Logistics • Just-in-time production • Production planning • Electronic tracking • Supply chain management Source: (1)Pearson Education Canada Digital convergence introduces new options for companies to do business Digital Company

12. Benefits • Simplified process • Improved customer experience • Improved data accuracy • Revenue assurance In the energy sector, digital convergence improved data accuracy & customer experience Mission Achieve process efficiencies through real time meter reading updates, bill payment management and real time information sharing Sweden Before Changes in price of electricity Estimation of invoice Customer Meter Reading Meter Solution Real-time Remote Meter Reading Changes in price of electricity Accurate meter info Accurate Invoice

13. Benefits • Capital savings • Reduced inventory • Greater customer service Source: (1)Vodafone New Zealand Retailers have used digital convergence to implement paperless sales & ordering processes Mission Implement an automated solution to replace paper-based ordering system for nationwide sales team New Zealand Before Customers place orders Sales file invoice Customer receives invoice Wynn’s Sales report Vodafone SalesLink Solution Wynn’s receives real time orders Real time sales report Customers place orders Technology & Device

14. Benefits • 28% reduction in communication costs • Increased functionality • Improved productivity • Staff empowerment Source: (1)Vodafone New Zealand Digital convergence allows companies to improve communications between office & remote staff Mission To transform a disjointed communications system into one where information flows easily among staff and customers New Zealand Before Field staff Customers call field staff Call diverted Completes job Returns to office Info on next job To next job Mobile Enterprise Solution Obtains info on next job Directly to next job Customers call field staff Field staff receives call Technology

15. Benefits • Enhanced operational efficiencies • Greater customer service Source: (1)Samsung Hospital In Korea, a medical centre introduced digital convergence to streamline patient information Mission A converged information system to replace the fragmented medical record and communications system South Korea Phase I – Converged devices Phase II – Converged applications Medical images Paper records Office intercom Cell phone Smartphone Graphical analysis Drug database Walkie Talkie Pager Web Device portal Samsung mSMIS PDA

16. Benefits • Pooled resources • Amortisation of costs = wider array of content economically viable • New advertising revenue streams • ‘One-stop shop’ for customers Source (1)IBM – Spectrum Value Partners analysis Digital convergence in the media industry is driving collaborations to compete & reach new goals Mission Online viewing of TV and video in the UK is increasing with the majority of viewing being free. Broadcasters are looking to a) compete against local and international players, b) drive traffic and c) develop an effective online advertising model to capture new revenues Today Broadcasters Online TV & Video download websites Proposal Joint Venture

17. Challenges Opportunities Digital convergence creates both opportunities & challenges for companies Change Management New Business Model Resource Skills Dynamic Innovation Increased Competition Informed Customers Global Collaboration Economic Efficiency Political & Regulatory Policies New Markets Increased Productivity New Products & Services

18. Source (1)IBM – Enterprise of the Future Digital convergence enables improvement in two ways • Revenue enhancement • Cost optimisation

19. Source Spectrum Value Partners analysis Earlier case studies can be classified into the two different ways of improvement Company Industry Digital Convergence Benefits Revenue Enhancement Cost Optimisation • Energy • Access to real-time meter readings which allowed for more accurate and frequent invoicing a • Automotive • Capital savings as a result of reduced inventory and improved customer service a • Electronics • 28% reduction in communication costs and an increase in both functionality and productivity a a • Health • Enhanced internal communications and customer service a • Media • Partnership resulted in amortised costs allowing more content to be purchased and the addition of new revenue streams a a

20. Source Spectrum Value Partners analysis etc. Strategy, competition & technology will determine the rate at which digital convergence is adopted • A company’s overall strategy will ultimately drive the adoption of a digital convergence solution based on: • Short term vs long term targets • Investment requirements Strategy & ambition Competitive intensity • Digital convergence allows new players to enter markets faster than previously seen • New local players and global competitors • Challenge is to maintain and grow market share through competitive products and services Technological innovation • Digital technology advancements are constantly occurring. Companies need to consider: • Risk of investing now or waiting for the next development • The right technologies for them

21. Summary • Digital convergence is a process whereby information is digitised and shared across networks, devices and applications • Digital convergence in developing and developed countries is being driven by different consumer demands: increased mobile and internet usage and ‘bridging the digital divide’ • The two key ways digital convergence enables companies is either through revenue enhancement or cost optimisation • More and more companies are implementing digital convergence solutions

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